As filed with the Securities and Exchange Commission on September 29, 1995
File Nos.
2-72614
811-3193
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. 15 (X)
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 17 (X)
Franklin Tax-Exempt Money Fund
(Exact Name of Registrant as Specified in Charter)
777 Mariners Island Blvd., San Mateo, CA 94404
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (415) 312-2000
Harmon E. Burns, 777 Mariners Island Blvd., San Mateo, CA 94404
(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)
[ ] on (date) pursuant to paragraph (bi)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[X] on December 1, 1995 pursuant to paragraph (a)(i)
[ ] 75 days after filing pursuant to paragraph (a)(i)
[ ] on (date) pursuant to paragraph (a)(ii) of rule 485
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post effective amendment.
Calculation of Registration Fee Under the Securities Act of 1933
Title of Proposed Amount
Securities Amount Maximum Proposed of
Being Being Offering Price Aggregate Offering
Registered Registered* Per Share Price* Fee*
________________________________________________________________
Capital 35,712,710 $1.00 $290,000 $100
Stock shares
*Registrant elects to calculate the maximum aggregate offering price pursuant
to Rule 24e-2. 417,601,002 shares were redeemed during the fiscal year ended
July 31, 1995. 382,178,292 shares were used for reductions pursuant to
Paragraph (d) of Rule 24f-2 during the current year. 35,422,710 shares is the
amount of redeemed shares used for reduction in this amendment. Pursuant to
457(d) under the Securities Act of 1933, the maximum public offering price of
$1.00 per share on September 21, 1995, is the price used as the basis for
these calculations. The maximum public offering price per share varies and,
thus, may be higher or lower than $1.00 in the future. While no fee is
required for the 35,422,710 shares, the registrant has elected to register,
for $100, an additional $290,000 of shares (approximately 290,000 shares at
$1.00 per share).
As part of its initial registration statement, the registrant has elected to
register an indefinite number of shares pursuant to Rule 24f-2 under the
Investment Company Act of 1940, as amended, and hereby continues such
election. The registrant filed the notice required by Rule 24f-2 for its most
recent fiscal year on September 25, 1995.
FRANKLIN TAX-EXEMPT 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 Table
3. Condensed Financial "Financial Highlights",
Information "Performance"
4. General Description "Information About the Fund";
"Investment Objective and Policies
Followed by the Fund"
5. Management of the Fund "Management of the Fund"
5A. Management Discussion of The response to this item is
Fund Performance contained in Registrant's Annual
Report to Shareholders
6. Capital Stock and Other "Distributions to Shareholders"
Securities
7. Purchase of Securities "Taxation of the Fund and Its
Being Offered Shareholders"; "How to Buy Shares
of the Fund"; "Other Programs and
Privileges Available to Fund
Shareholders"
8. Redemption or Repurchase "How to Sell Shares of the Fund";
"Exchange Privilege"; "Telephone
Transactions"; "Valuation of Fund
Shares"; "How to get Information
Regarding an Investment in the
Fund"; "Performance"; "General
Information"; "Account
Registration"; "Important Notice
Regarding Taxpayer IRS
Certifications"
9. Pending Legal Proceedings Not Applicable
Part B: Information Required in
Statement of Additional Information
10. Cover Page Cover Page
11. Table of Contents Contents
12. General Information and "The Fund" (See also the Prospectus
History "Information About the Fund")
13. Investment Objectives "Additional Information Regarding
and Policies the Fund's Investment Objective
and Policies" (See also the
Prospectus "Investment Objective
and Policies Followed by the Fund")
14. Management of the Fund "Officers and Directors"
15. Control Persons and "Officers and Directors"
Principal Holders of
Securities
16. Investment Advisory and "Investment Advisory and Other
Other Services Services"
17. Brokerage Allocation "The Fund's Policies Regarding
Brokers Used on Portfolio
Transactions"
18. Capital Stock and Other "The Fund"
Securities
19. Purchase, Redemptions, and "Determination of Net Asset Value"
Pricing of Securities (See also the Prospectus "Valuation
Being Offered of Fund Shares"); "Additional
Information Regarding Purchase and
Redemption of Shares"
20. Tax Status "Additional Information Regarding
Distributions and Taxes"
21. Underwriters "The Fund's Underwriter"
22. Calculation of Performance "General Information"
Data
23. Financial Statements Financial Statements
FRANKLIN
TAX-EXEMPT
MONEY FUND
PROSPECTUS
DECEMBER 1, 1995
777 MARINERS ISLAND BLVD., P.O. BOX 7777
SAN MATEO, CA 94403-7777 1-800/DIAL BEN
Franklin Tax-Exempt Money Fund (the "Fund") is a no-load, open-end, diversified
management investment company offering banks, corporations, other institutions
and individual investors a convenient way to invest in a diversified,
professionally managed portfolio of high quality short-term municipal
obligations. The Fund seeks to achieve:
* High Current Income Exempt From Federal Income Taxes
* LIQUIDITY
* CAPITAL PRESERVATION
This Prospectus is intended to set forth in a clear and concise manner
information about the Fund that a prospective investor should know before
investing. After reading the Prospectus, it should be retained for future
reference; it contains information about the purchase and sale of shares and
other items which a prospective investor will find useful to have.
AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THERE CAN BE NO ASSURANCE THAT IT WILL BE ABLE TO MAINTAIN A STABLE
NET ASSET VALUE OF $1.00.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK; FURTHER, SUCH SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
SHARES OF THE FUND INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL.
A Statement of Additional Information ("SAI") concerning the Fund, dated
December 1, 1995, as may be amended from time to time, provides a further
discussion of certain areas in this Prospectus and other matters which may be of
interest to some investors. It has been filed with the Securities and Exchange
Commission ("SEC") and is incorporated herein by reference. A copy is available
without charge from the Fund or the Fund's principal underwriter,
Franklin/Templeton Distributors, Inc. ("Distributors") at the address or
telephone number shown above.
THIS PROSPECTUS IS NOT AN OFFERING OF THE SECURITIES HEREIN DESCRIBED IN ANY
STATE IN WHICH THE OFFERING IS NOT AUTHORIZED. NO SALES REPRESENTATIVE, DEALER,
OR OTHER PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS. FURTHER
INFORMATION MAY BE OBTAINED FROM THE UNDERWRITER.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
CONTENTS PAGE
Expense Table
Financial Highlights
Information About the Fund
Investment Objective and
Policies Followed by the Fund
Management of the Fund
Distributions to Shareholders
Taxation of the Fund and
Its Shareholders
How to Buy Shares of the Fund
How to Sell Shares of the Fund
Other Programs and Privileges
Available to Fund Shareholders
Exchange Privilege
Telephone Transactions
Valuation of Fund Shares
How to Get Information Regarding
an Investment in the Fund
Performance
General Information
Account Registrations
Important Notice Regarding
Taxpayer IRS Certifications
EXPENSE TABLE
The purpose of this table is to assist an investor in understanding the various
costs and expenses that a shareholder will bear directly or indirectly in
connection with an investment in the Fund. These figures are based on aggregate
operating expenses of the Fund, before fee waivers and expense reductions, for
the fiscal year ended July 31, 1995.
SHAREHOLDER TRANSACTION EXPENSES
Exchange Fee (per transaction) $5.00*
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees 0.56%**
12b-1 Fees 0.00%
Other Expenses:
Shareholder Servicing Costs 0.12%
Reports to Shareholders 0.07%
Other 0.08%
Total Other Expenses 0.27%
Total Fund Operating Expenses 0.83%**
*$5.00 fee is imposed only on Timing Accounts as described under "Exchange
Privilege." All other exchanges are processed without a fee.
**Represents the amount that would have been payable to the investment manager
absent a fee reduction by the investment manager. The investment manager,
however, has agreed in advance to limit its management fees and to assume
responsibility for making payments to offset certain operating expenses
otherwise payable by the Fund. With this reduction, management fees and total
operating expenses represented .38% and .65%, respectively, of the average net
assets of the Fund. This arrangement may be terminated by the investment manager
at any time.
Investors should be aware that the above table is not intended to reflect in
precise detail the fees and expenses associated with an individual's own
investment in the Fund. Rather the table has been provided only to assist
investors in gaining a more complete understanding of fees, charges and
expenses. For a more detailed discussion of these matters, investors should
refer to the appropriate sections of this Prospectus.
EXAMPLE
As required by SEC regulations, the following example illustrates the expenses
that apply to a $1,000 investment in the Fund over various time periods assuming
(1) a 5% annual rate of return and (2) redemption at the end of each time
period.
1 YEAR 3 YEARS 5 YEARS 10 YEARS
$8 $26 $46 $103
THIS EXAMPLE IS BASED ON THE AGGREGATE ANNUAL OPERATING EXPENSES, BEFORE THE FEE
WAIVER AND EXPENSE REDUCTION, SHOWN ABOVE AND SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES, WHICH MAY BE MORE OR LESS THAN THOSE
SHOWN. The operating expenses are borne by the Fund and only indirectly by
shareholders as a result of their investment in the Fund. In addition, federal
securities regulations require the example to assume an annual return of 5%, but
the Fund's actual return may be more or less than 5%.
FINANCIAL HIGHLIGHTS
Set forth below is a table containing the financial highlights for a share of
capital stock of the Fund throughout the ten fiscal years in the period ended
July 31, 1995. The information for each of the five fiscal years in the period
ended July 31, 1995 has been audited by Coopers & Lybrand L.L.P., independent
auditors, whose audit report appears in the financial statements in the Fund's
Annual Report to Shareholders dated July 31, 1995. The remaining figures, which
are also audited, are not covered by the auditors' current report. See the
discussion "Reports to Shareholders" under "General Information."
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Per Share Operating
Performance*
Net asset value at
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BEGINNING OF YEAR.... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ------------------ ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net investment income. 0.029 0.020 0.021 0.031 0.045 0.056 0.056 0.047 0.041 0.049
Distributions from net
investment income.... (0.029)(.020) (.021) (.031) (.045) (.056) (.056) (.047) (.041) (.049)
Net asset value at
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**........ 2.98% 1.85% 2.08% 3.14% 4.65% 5.81% 5.77% 4.80% 4.20% 4.97%
Ratios/Supplemental Data
Net asset value at end
of year (in 000's)... $173,123 $202,883 $193,565 $207,374 $249,214 $228,001 $188,727 $214,090 $182,018$130,125
Ratio of expenses to
average net assets... 0.65%+ 0.65%+ 0.69%+ 0.70%+ 0.70%+ 0.74% 0.74% 0.71% 0.74% 0.80%
Ratio of net investment in-
come to average net assets 2.65% 1.84% 2.10% 3.15% 4.53% 5.60% 5.67% 4.66% 4.22% 4.79%
</TABLE>
*Selected data for a share of capital stock outstanding throughout the year.
**Total return measures the change in value of an investment over the periods
indicated. It assumes reinvestment of dividends at net asset value.
+Without a fee reduction by the investment Manager, the ratio of operating
expenses to average net assets for fiscal years ended 1991, 1992, 1993, 1994,
and 1995 would have been .71%, .75%, .80%, .81%, and .83% respectively.
INFORMATION ABOUT THE FUND
The Fund, incorporated under the laws of the state of California on March 18,
1980, is an open-end, diversified management investment company, commonly called
a "mutual fund," and has been registered as such with the SEC under the
Investment Company Act of 1940, as amended (the "1940 Act"). The Fund has only
one class of capital shares. The Fund attempts to maintain a stable net asset
value of $1.00 per share (although there is no assurance that this will be
achieved). Although a shareholder may write redemption drafts (similar to
checks) against the account, the purchase of shares of the Fund does not create
a checking or other bank account.
Shares of the Fund may be purchased at net asset value (without a sales charge)
with an initial investment of at least $500 and subsequent investments of $25 or
more. (See "How to Buy Shares of the Fund.")
CERTAIN FUNDS IN THE FRANKLIN TEMPLETON FUNDS, AS THAT TERM IS DEFINED UNDER
"OTHER PROGRAMS AND PRIVILEGES AVAILABLE TO FUND SHAREHOLDERS - RIGHTS OF
ACCUMULATION," CURRENTLY OFFER THEIR SHARES IN TWO "CLASSES," DESIGNATED "CLASS
I" AND "CLASS II." CLASSES OF SHARES REPRESENT PROPORTIONATE INTERESTS IN THE
SAME PORTFOLIO OF INVESTMENT SECURITIES BUT WITH DIFFERENT RIGHTS, PRIVILEGES
AND ATTRIBUTES. SHARES OF THE FUND MAY BE CONSIDERED CLASS I SHARES FOR PURPOSES
OF THE PROGRAMS AND PRIVILEGES DISCUSSED IN THIS PROSPECTUS.
INVESTMENT OBJECTIVE
AND POLICIES OF THE FUND
The investment objective of the Fund is to attain the highest level of current
income that is exempt from federal income taxes, consistent with liquidity and
the preservation of capital. The investment objective is a fundamental policy of
the Fund and may not be changed without shareholder approval.
In accordance with procedures adopted pursuant to Rule 2a-7 under the 1940 Act,
the Fund limits its investments to those U.S. dollar denominated instruments
which the Board of Directors of the Fund determines present minimal credit risks
and which are, as required by the federal securities laws, rated in one of the
two highest rating categories as determined by nationally recognized securities
rating agencies ("NRSROs"), or which are unrated by any NRSRO but are of
comparable quality, with remaining maturities of 397 calendar days or less
("Eligible Securities"). The Fund maintains a dollar weighted average maturity
of the securities in its portfolio of 90 days or less. These procedures are not
fundamental policies of the Fund.
See the SAI for a description of ratings by three NRSROs, Standard and Poor's
Corporation, Moody's Investors Service and Fitch Investor Services, Inc.
The Fund seeks to achieve its objective by investing in a diversified portfolio
of municipal securities which the Manager, under supervision of the Board of
Directors of the Fund, has determined present minimal credit risks. These
securities will be high-quality, short-term debt obligations which are issued by
states, territories and possessions of the U.S., the District of Columbia, and
by their political subdivisions, and duly constituted authorities, the interest
from which is wholly exempt from federal income tax in the opinion of bond
counsel t the issuer. Such securities are generally known as "Municipal Bonds"
or "Municipal Notes." As with any other investment, there is no assurance that
the Fund's objective will be attained.
Because the Fund limits its investments to high quality securities, the Fund's
portfolio will generally earn lower yields than if the Fund purchased securities
with a lower rating and correspondingly greater risk and the yield to
shareholders in the Fund is accordingly likely to be lower.
Where market conditions would cause a serious erosion of portfolio value due to
rapidly rising interest rates or other adverse factors, the Fund may take a
defensive position to preserve net asset value by temporarily investing a
substantial portion of its assets in short-term taxable obligations of the same
type referred to in the preceding paragraph.
The Fund has adopted a fundamental policy which requires that, under normal
conditions, at least 80% of its assets will be invested in obligations, the
income on which will be both exempt from regular federal income tax and not
specifically treated as a tax preference item under the federal alternative
minimum tax.
The interest on bonds issued to finance public purpose state and local
government operations is generally tax-exempt for regular federal income tax
purposes. Interest on certain private activity bonds (including those for
housing and student loans) issued after August 7, 1986, while still tax-exempt,
constitutes a preference item for taxpayers in determining the federal
alternative minimum tax under the Internal Revenue Code of 1986, as amended (the
"Code"), and under the income tax provisions of some states. This interest could
subject a shareholder to, or increase liability under, the federal and state
alternative minimum taxes, depending on the shareholder's tax situation. In
addition, all distributions derived from interest exempt from regular federal
income tax may subject a corporate shareholder to, or increase liability under,
the federal alternative minimum tax, because such distributions are included in
the corporation's "adjusted current earnings." In states with a corporate
franchise tax, distributions of the Fund may also be fully taxable to a
corporate shareholder under the state franchise tax system.
Consistent with the Fund's investment objectives, the Fund may acquire private
activity bonds if, in the Manager's opinion, such bonds represent the most
attractive investment opportunity then available to the Fund. As of July 31,
1995, the Fund derived 5.68% of its income from bonds, the interest on which
constitutes a preference item subject to the federal alternative minimum tax for
certain investors.
The Fund may purchase floating rate and variable rate obligations. These
obligations bear interest at prevailing market rates. The Fund may also purchase
variable or floating rate demand notes ("VRDNs"). VRDNs are tax-exempt
obligations which contain a floating or variable interest rate and a right of
demand, which may be unconditional, to receive payment of the unpaid principal
balance plus accrued interest according to its terms upon a short notice period
(generally up to 30 days) prior to specified dates, either from the issuer or by
drawing on a bank letter of credit, a guarantee or insurance issued with respect
to such instrument. Although it is not a put option in the usual sense, such a
demand feature is sometimes known as a "put". With respect to 75% of the total
value of the Fund's assets, no more than 5% of such value may be in securities
underlying puts from the same institution.
The Fund may invest in floating rate and variable rate obligations carrying
stated maturities in excess of one year at the date of purchase by the Fund if
such obligations carry demand features that comply with the conditions of rules
adopted by the SEC. The Fund will limit its purchase of municipal securities
that are floating rate and variable rate obligations to those meeting the
quality standards set forth above. Frequently such obligations are secured by
letters of credit or other credit support arrangements provided by banks. The
quality of the underlying creditor or of the bank, as the case may be, must, as
determined by the Manager under the supervision of the Board of Directors, also
be equivalent to the quality standards set forth above. In addition, the Manager
monitors the earning power, cash flow and other liquidity ratios of the issuers
of such obligations, as well as the creditworthiness of the institution
responsible for paying the principal amount of the obligations under the demand
feature.
The Fund may invest in municipal lease obligations primarily through
Certificates of Participation ("COPs"). COPs, which are widely used by state and
local governments to finance the purchase of property, function much like
installment purchase agreements. A COP is be created when long-term lease
revenue bonds are issued by a governmental corporation to pay for the
acquisition of property or facilities which are then leased to a municipality.
The payments made by the municipality under the lease are used to repay interest
and principal on the bonds issued to purchase the property. Once these lease
payments are completed, the municipality gains ownership of the property for a
nominal sum. The lessor is, in effect, a lender secured by the property being
leased. This lease format is generally not subject to constitutional limitations
on the issuance of state debt, and COPs enable a governmental issuer to increase
government liabilities beyond constitutional debt limits.
A feature which distinguishes COPs from municipal debt is that the lease which
is the subject of the transaction must contains a "nonappropriation" clause. A
nonappropriation clause provides that, while the municipality will use its best
efforts to make lease payments, the municipality may terminate the lease
annually without penalty if the municipality's appropriating body does not
allocate the necessary funds. Local administrations, when faced with
increasingly tight budgets, have more discretion to curtail payments under COPs
than they do to curtail payments on traditionally funded debt obligations. If
the government lessee does not appropriate sufficient monies to make lease
payments, the lessor or its agent is typically entitled to repossess the
property. In most cases, however, the private sector value of the property may
be more or less than the amount the government lessee was paying.
While the risk of nonappropriation is inherent to COP financing, the Fund
believes that this risk is mitigated by its policy of investing only in COPs
rated within the two highest rating categories of the NRSROs or in COPs unrated
by any NRSRO but believed to be of comparable quality. Criteria considered by
the rating agencies and the Manager in assessing such risk include the issuing
municipality's credit rating, evaluation of how essential the leased property is
to the municipality and the term of the lease compared to the useful life of the
leased property. Such factors include (a) the credit quality of such securities
and the extent to which they are rated or, if unrated, comply with existing
criteria and procedures followed to ensure that they are of quality comparable
to the ratings required for the Fund's investment, including an assessment of
the likelihood that the leases will not be canceled; (b) the size of the
municipal securities market, both in general and with respect to COPs; and (c)
the extent to which the type of COPs held by the Fund trade on the same basis
and with the same degree of dealer participation as other municipal bonds of
comparable credit rating or quality. While there is no limit as to the amount of
assets which the Fund may invest in COPs, as of July 31, 1995, the Fund held
2.43% of the total face amount of the securities in its portfolio in COPs and
other municipal leases.
The Fund may purchase and sell municipal securities on a "when-issued" and
"delayed delivery" basis. These transactions are subject to market fluctuation
and the value at delivery may be more or less than the purchase price. Although
the Fund will generally purchase municipal securities on a when-issued basis
with the intention of acquiring such securities, it may sell such securities
before the settlement date if it is deemed advisable. When the Fund is the buyer
in such a transaction, it will maintain, in a segregated account with its
custodian, cash or high-grade marketable securities having an aggregate value
equal to the amount of such purchase commitments until payment is made. To the
extent the Fund engages in "when-issued" and "delayed delivery" transactions, it
will do so for the purpose of acquiring securities for the Fund's portfolio
consistent with its investment objective and policies and not for the purpose of
investment leverage.
The Fund may borrow from banks for temporary or emergency purposes only and
pledge its assets for such loans, up to 10% of the Fund's total assets. No new
investments will be made by the Fund while any outstanding loans exceed 5% of
its total assets. The Fund may also make loans of its portfolio securities not
in excess of 10% of the value of its total assets. The Fund may enter into
repurchase agreements with government securities dealers recognized by the
Federal Reserve Board or with member banks of the Federal Reserve System;
however, it has no present intention of doing so. For further information on
this investment technique, please see the SAI.
MANAGEMENT OF THE FUND
The Board of Directors (the "Board") has the primary responsibility for the
overall management of the Fund and for electing the officers of the Fund who are
responsible for administering its day-to-day operations.
Franklin Advisers, Inc. ("Advisers" or "Manager"), serves as the Fund's
investment manager. Advisers is a wholly-owned subsidiary of Franklin Resources,
Inc. ("Resources"), a publicly owned holding company, the principal shareholders
of which are Charles B. Johnson and Rupert H. Johnson, Jr., who own
approximately 20% and 16%, respectively, of Resources' outstanding shares.
Resources is engaged in various aspects of the financial services industry
through its various subsidiaries (the "Franklin Templeton Group"). Advisers acts
as investment manager or administrator to 34 U.S. registered investment
companies (114 separate series) with aggregate assets of over $75 billion,
approximately $42 billion of which are in the municipal securities market.
Pursuant to the management agreement, the Manager supervises and implements the
Fund's investment activities and provides certain administrative services and
facilities which are necessary to conduct the Fund's business.
During the fiscal year ended July 31, 1995, fees totaling 0.56% of the average
daily net assets of the Fund would have accrued to Advisers. Total operating
expenses, including management fees, would have represented 0.83% of the average
daily net assets of the Fund. Pursuant to a fee reduction by Advisers, the Fund
paid management fees totaling 0.38% of the average daily net assets of the Fund
and operating expenses totaling 0.65%.
It is not anticipated that the Fund will incur a significant amount of brokerage
expenses because short-term money market instruments are generally traded on a
"net" basis, that is, in principal transactions without the addition or
deduction of brokerage commissions or transfer taxes. To the extent that the
Fund does participate in transactions involving brokerage commissions, it is the
Manager's responsibility to select brokers through which such transactions will
be effected. The Manager tries to obtain the best execution on all such
transactions. If it is felt that more than one broker is able to provide the
best execution, the Manager will consider the furnishing of quotations and of
other market services, research, statistical and other data for the Manager and
its affiliates, as well as the sale of shares of the Fund, as factors in
selecting a broker. Further information is included under "The Fund's Policies
Regarding Brokers Used on Portfolio Transactions" in the SAI.
Shareholder accounting and many of the clerical functions for the Fund are
performed by Franklin/Templeton Investor Services, Inc. ("Investor Services" or
"Shareholder Services Agent"), in its capacity as transfer agent and
dividend-paying agent. Investor Services is a wholly-owned subsidiary of
Resources.
DISTRIBUTIONS TO SHAREHOLDERS
The Fund declares dividends for each day that the Fund's net asset value is
calculated, payable to shareholders of record as of the close of business the
preceding day. The amount of dividends may fluctuate from day to day and
dividends may be omitted on some days, depending on changes in the factors that
comprise the Fund's net investment income. THE FUND DOES NOT PAY "INTEREST" TO
ITS SHAREHOLDERS, NOR IS ANY AMOUNT OF DIVIDENDS OR RETURN GUARANTEED IN ANY
WAY.
Dividends are automatically reinvested daily in the form of additional shares of
the Fund at the net asset value per share at the close of business each day.
The daily dividend includes accrued interest and any original issue and market
discount, plus or minus any gain or loss on the sale of portfolio securities and
changes in unrealized appreciation or depreciation in portfolio securities (to
the extent required to maintain a stable net asset value per share) less
amortization of any premium paid on the purchase of portfolio securities and the
estimated expenses of the Fund.
The Federal income tax treatment of dividends and distributions is the same
whether received in cash or reinvested in Fund shares.
The SAI includes a further discussion of distributions.
DIVIDENDS IN CASH
Shareholders may request to have their dividends paid out monthly in cash by
notifying Investor Services. For such shareholders, the shares reinvested and
credited to their account during the month will be redeemed as of the close of
business on the last business day of the month and the proceeds will be paid to
them in cash. By completing the "Special Payment Instructions for Dividends"
section of the Shareholder Application included with this Prospectus, a
shareholder may direct the selected distributions to another fund in the
Franklin Group of Funds(R) or the Templeton Group, to another person, or
directly to a checking account. If the bank at which the account is maintained
is a member of the Automated Clearing House, the payments may be made
automatically by electronic funds transfer. If this last option is requested,
the shareholder should allow at least 15 days for initial processing. Dividends
which may be paid in the interim will be sent to the address of record.
Additional information regarding automated fund transfers may be obtained from
Franklin's Shareholder Services Department.
TAXATION OF THE FUND AND ITS SHAREHOLDERS
The following discussion reflects some of the tax considerations that affect
mutual funds and their shareholders. Additional information on tax matters
relating to the Fund and its shareholders is included in the section entitled
"Additional Information Regarding Distributions and Taxes" in the SAI.
The Fund intends to continue to qualify for treatment as a regulated investment
company under Subchapter M of the Code. By distributing all of its income and
meeting certain other requirements relating to the sources of its income and
diversification of its assets, the Fund will not be liable for federal income or
excise taxes.
By meeting certain requirements of the Code, the Fund will continue to qualify
to pay exempt-interest dividends to its shareholders. Such exempt-interest
dividends are derived from interest income exempt from regular federal income
tax and are not subject to regular federal income tax for Fund shareholders.
To the extent dividends are derived from taxable income from temporary
investments (including the discount from certain stripped obligations or their
coupons or income from securities loans or other taxable transactions), from the
excess of net short-term capital gain over net long-term capital loss, or from
income derived from the sale or disposition of bonds purchased with market
discount after April 30, 1993, they are treated as ordinary income whether the
shareholder has elected to receive them in cash or in additional shares.
Since the Fund's income is derived from interest and gain on the sale of
portfolio securities rather than dividend income, no portion of the Fund's
distributions will generally be eligible for the corporate dividends-received
deduction. None of the distributions paid by the Fund for the fiscal year ended
July 31, 1995 qualified for this deduction and it is not anticipated that any of
the current year's dividends will so qualify.
The Fund will inform shareholders of the source of their dividends and
distributions at the time they are paid, and will promptly after the close of
each calendar year advise them of the tax status for federal income tax purposes
of such dividends and distributions, including the portion of the dividends on
an average basis which constitutes taxable income or a tax preference item under
the federal alternative minimum tax. Shareholders who have not held shares of
the Fund for a full calendar year may have designated as tax-exempt or as tax
preference income a percentage of income which is not equal to the actual amount
of tax-exempt or tax preference income earned during the period of their
investment in the Fund.
Exempt-interest dividends of the Fund, although exempt from regular federal
income tax in the hands of a shareholder, are includable in the tax base for
determining the extent to which a shareholder's social security or railroad
retirement benefits will be subject to regular federal income tax. Shareholders
are required to disclose their receipt of tax-exempt interest dividends on their
federal income tax returns.
Interest on indebtedness incurred (directly or indirectly) by shareholders to
purchase or carry Fund shares may not be fully deductible for federal income tax
purposes.
Shareholders should consult their tax advisors with respect to the applicability
of state and local intangible property or income taxes to their shares in the
Fund and to distributions and redemption proceeds received from the Fund. For
example, distributions attributable to interest received from, or capital gain
derived from the disposition of, obligations of a given state or its political
subdivisions may be exempt from income taxes in that state.
Shareholders who are not U.S. persons for purposes of federal income taxation
should consult with their financial or tax advisors regarding the applicability
of U.S. withholding or other taxes on distributions received by them from the
Fund and the application of foreign tax laws to these distributions.
HOW TO BUY SHARES OF THE FUND
Shares of the Fund are continuously offered through securities dealers which
execute an agreement with Distributors, the principal underwriter of the Fund's
shares, and by the Fund directly. The use of the term "securities dealer" shall
include other financial institutions which, pursuant to an agreement with
Distributors (directly or through affiliates), handle customer orders and
accounts with the Fund. Such reference, however, is for convenience only and
does not indicate a legal conclusion of capacity. All shares of the Fund are
purchased at the net asset value, without a sales charge, next determined after
receipt of a purchase order in proper form. The minimum initial investment is
$500 and subsequent investments must be $25 or more. These minimums may be
waived when the shares are purchased through plans established by the Franklin
Templeton Group. Purchases in proper form received by the Fund prior to 3:00
p.m. Pacific time will be credited to the shareholder's account on that business
day. If received after 3:00 p.m., the purchase will be credited the following
business day.
Many of the types of instruments in which the Fund invests must be paid for in
federal funds which are monies held by its custodian bank on deposit at the
Federal Reserve Bank of San Francisco and elsewhere. Therefore, the monies paid
by an investor for shares of the Fund generally cannot be invested by the Fund
until they are converted into and are available to the Fund in federal funds,
which may take up to two days. In such cases, purchases by investors may not be
considered in proper form and effective until such conversion and availability.
In the event the Fund is able to make investments immediately (within one
business day), it may accept a purchase order with payment other than in federal
funds; in such event shares of the Fund will be purchased at the net asset value
next determined after receipt of the order and payments.
Shares may be purchased in any of the following ways:
BY MAIL
(1) For an initial investment, include the completed Shareholder Application
contained in this Prospectus. For subsequent investments, the deposit
slips which are included with the shareholder's monthly statement or
checkbook (if one has been requested) may be used, or the shareholder
should reference the account number on the check.
(2) Make the check, Federal Reserve draft or negotiable bank draft payable to
Franklin Tax-Exempt Money Fund. Instruments drawn on other investment
companies may not be accepted.
(3) Send the check, Federal Reserve draft or negotiable bank draft to
Franklin Tax-Exempt Money Fund, 777 Mariners Island Blvd., P.O. Box 7777,
San Mateo, California 94403-7777.
BY WIRE
(1) Call Franklin's Shareholder Services Department at 1-800/632-2301. If
that line is busy, call 415/312-2000 collect, to advise that funds will
be wired for investment. The Fund will supply a wire control number for
the investment. It is necessary to obtain a new wire control number every
time money is wired into an account in the Fund. Wire control numbers are
effective for one transaction only and may not be used more than once.
Shareholders should contact Franklin's Shareholder Services Department at
the above telephone number to obtain a wire control number each time
funds are to be wired for investment to the Fund. Wired money which is
not properly identified with a currently effective wire control number
will be returned to the bank from which it was wired and will not be
credited to the shareholder's account.
(2) Wire funds to Bank of America, ABA routing number 121000358, for credit
to Franklin Tax-Exempt Money Fund, A/C 1493-3-04779. The wire control
number and shareholder's name must be included. Wired funds received by
the Bank and reported by the Bank to the Fund by 3:00 p.m. Pacific time
are normally credited on that day.
Later wires are credited the following business day.
(3) If the purchase is not to an existing account, a completed Shareholder
Application must be sent to Franklin Tax-Exempt Money Fund at 777
Mariners Island Blvd., P.O. Box 7777, San Mateo, California 94403-7777,
to assure proper credit for the wire.
THROUGH SECURITIES DEALERS
Investors may, if they wish, invest in the Fund by purchasing shares through a
securities dealer as noted above. Securities dealers which process orders on
behalf of their customers may charge a reasonable fee for their services.
Investments made directly, without the assistance of a securities dealer, are
without charge. In certain states, shares of the Fund may be purchased only
through registered securities dealers.
AUTOMATIC INVESTMENT PLAN
Under the Automatic Investment Plan, a shareholder may be able to arrange to
make additional purchases of shares automatically on a monthly basis by
electronic funds transfer from a checking account if the bank which maintains
the account is a member of the Automated Clearing House, or by preauthorized
checks drawn on the shareholder's bank account. A shareholder may, of course,
terminate the program at any time. The Automatic Investment Plan Application
included with this Prospectus contains the requirements applicable to this
program.
GENERAL
The Fund and Distributors reserve the right to reject any order for the purchase
of shares of the Fund or to waive the minimum investment requirements when the
shares are being purchased through plans established by the Franklin Templeton
Group. In addition, the offering of shares of the Fund may be suspended by the
Fund at any time and resumed at any time thereafter.
The Fund may impose a $10 charge for each returned item , against any
shareholder account which, in connection with the purchase of Fund shares
submits a check or a draft which is returned unpaid to the Fund.
Securities laws of states in which the Fund's shares are offered for sale may
differ from the interpretations of federal law, and banks and financial
institutions selling Fund shares may be required to register as dealers pursuant
to state law.
If the purchase or sale of Fund shares with the assistance of certain banks were
deemed to be an impermissible activity for such bank under the Glass Steagall
Act or other federal laws, such activities would likely be discontinued by such
bank. Investors utilizing such bank assistance would then be able to seek other
avenues to invest in Fund shares, such as securities dealers registered with the
SEC or from the Fund directly.
HOW TO SELL SHARES OF THE FUND
All or any part of a shareholder's investment may be converted into cash,
without penalty or charge, by redeeming shares in any one of the methods
discussed below on any day the New York Stock Exchange (the "Exchange") is open
for trading. Regardless of the method of redemption, payment for the
shareholder's redeemed shares will be sent within seven days after receipt of
the redemption request in proper form, except that the Fund may delay the
mailing of the redemption check, or a portion thereof, until the clearance of
the check used to purchase fund shares, which may take up to 15 days or more.
Although the use of a certified or cashier's check will generally reduce this
delay, shares purchased with such instruments will also be held pending
clearance. Shares purchased by federal funds wire are available for immediate
redemption. Shareholders are requested to provide a telephone number(s) where
they may be reached during business hours, or in the evening if preferred.
Investor Services' ability to contact a shareholder promptly when necessary will
speed the processing of the redemption.
Shares may be redeemed in any of the following ways:
1. BY CHECK
The Fund will supply redemption drafts (which are similar to checks and are
referred to as checks throughout this Prospectus) to shareholders who have
requested them on the Shareholder Application. The election of the check
redemption procedure does not create a checking account or other bank account
relationship between a shareholder and the Fund or any bank. These checks are
drawn through the Fund's custodian, Bank of America NT & SA (the "Custodian" or
"Bank"). Shareholders will generally not be able to convert a check drawn on the
Fund account into a certified or cashier's check by presentation at the Fund's
Custodian. The shareholder may make checks payable to the order of any person in
any amount not less than $100. There is no charge to the shareholder for this
check redemption procedure.
When such a check is presented for payment, the Fund will redeem a sufficient
number of full and fractional shares in the shareholder's account to cover the
amount of the check. This enables the shareholder to continue earning daily
income dividends until the check has cleared. Shares will be redeemed at their
net asset value next determined after receipt of a check which does not exceed
the collected balance of the account. Only shareholders having accounts in which
no share certificates have been issued will be permitted to redeem shares by
check.
Because the Fund is not a bank, no assurance can be given that stop payment
orders on checks written by shareholders will be effective. The Fund, however,
will use its best efforts to see that such orders are carried out.
Shareholders will be subject to the right of the Bank to return unpaid checks in
amounts exceeding the collected balance of their account at the time the check
is presented for payment. Checks should not be used to close a Fund account
because when the check is written the shareholder will not know the exact total
value of the account on the day the check clears. The Bank reserves the right to
terminate this service at any time upon notice to shareholders.
2. BY TELEPHONE
A shareholder may redeem shares by telephoning the Fund at 1-800/632-2301.
Payment of redemption requests of $1,000 or less (once per business day) will be
sent by mail to the shareholder's address as reflected on the Fund's records.
For payments over $1,000, the shareholder must complete the "Wire Redemptions
Privilege" section of the Shareholder Application. Proceeds will then be wired
directly to the commercial bank or brokerage firm designated by the shareholder.
Wires will not be sent for redemption requests of $1,000 or less. Shareholders
may have redemption proceeds of over $1,000, up to $50,000 per day per Fund
account, sent directly to their address of record by filing a completed Franklin
Templeton Telephone Redemption Authorization Agreement (the "Agreement")
included with this Prospectus. Information may also be obtained by writing to
the Fund or Investor Services at the address shown on the cover or by calling
the number above. The Fund and Investor Services will employ reasonable
procedures to confirm that instructions given by telephone are genuine.
Shareholders, however, bear the risk of loss in certain cases as described under
"Telephone Transactions - Verification Procedures."
Telephone redemption requests received before 3:00 p.m. Pacific time on any
business day will be processed that same day. The redemption check will be sent
within seven days, made payable to all the registered owners on the account, and
will be sent only to the address of record. Wire payments will be transmitted
the next business day following receipt prior to 3:00 p.m. Pacific time of a
request for redemption in proper form. Shareholders may wish to allow for longer
processing time if they want to assure that redemption proceeds will be
available at a specific time for a specific transaction. Shareholders may be
able to have redemption proceeds wired to an escrow account the same day,
provided that the request is received prior to 9:00 a.m. Pacific time.
During periods of drastic economic or market changes, it is possible that the
telephone redemption privilege may be difficult to implement. In this event,
shareholders should follow the other redemption procedures discussed in this
section.
Redemption instructions must include the shareholder's name and account number
and be called to the Fund. No shares for which share certificates have been
issued may be redeemed by telephone instructions. Redemption requests by
telephone will not be accepted within 30 days following an address change by
telephone. In that case, a shareholder should follow the other redemption
procedures set forth in this Prospectus. Institutional accounts which wish to
execute redemptions in excess of $50,000 must complete an Institutional
Telephone Privileges Agreement which is available from the Franklin Templeton
Institutional Services Department by telephoning 1-800/321-8563. The telephone
redemption privilege may be modified or discontinued by the Fund at any time
upon 60 days' notice to shareholders.
3. BY MAIL
A shareholder may redeem all or a portion of the shares owned by sending a
letter to Investor Services, at the address shown on the back cover of this
Prospectus, requesting redemption and surrendering share certificates if any
have been issued.
IMPORTANT THINGS TO REMEMBER
WHEN REDEEMING SHARES
Written requests for redemption must be signed by all registered owners.
Where shares to be redeemed are represented by share certificates, the request
for redemption must be accompanied by the share certificate and a share
assignment form signed by the registered shareholders exactly as the account is
registered, with the signature(s) guaranteed as referenced below. Shareholders
are advised, for their own protection, to send the share certificate and
assignment form in separate envelopes if they are being mailed in for
redemption.
TO BE CONSIDERED IN PROPER FORM, SIGNATURE(S) MUST BE GUARANTEED IF THE
REDEMPTION REQUEST INVOLVES ANY OF THE FOLLOWING:
(1) the proceeds of the redemption are over $50,000;
(2) the proceeds (in any amount) are to be paid to someone other than the
registered owner(s) of the account;
(3) the proceeds (in any amount) are to be sent to any address other than the
shareholder's address of record, preauthorized bank account or brokerage
firm account;
(4) share certificates, if the redemption proceeds are in excess of $50,000; or
(5) the Fund or Investor Services believes that a signature guarantee would
protect against potential claims based on the transfer instructions,
including, for example, when (a) the current address of one or more joint
owners of an account cannot be confirmed, (b) multiple owners have a
dispute or give inconsistent instructions to the Fund, (c) the Fund has
been notified of an adverse claim, (d) the instructions received by the
Fund are given by an agent, not the actual registered owner, (e) the Fund
determines that joint owners who are married to each other are separated
or may be the subject of divorce proceedings, or (f) the authority of a
representative of a corporation, partnership, association, or other
entity has not been established to the satisfaction of the Fund.
Signature(s) must be guaranteed by an "eligible guarantor institution" as
defined under Rule 17Ad-15 under the Securities Exchange Act of 1934. Generally,
eligible guarantor institutions include (1) national or state banks, savings
associations, savings and loan associations, trust companies, savings banks,
industrial loan companies and credit unions; (2) national securities exchanges,
registered securities associations and clearing agencies; (3) securities dealers
which are members of a national securities exchange or a clearing agency or
which have minimum net capital of $100,000; or (4) institutions that participate
in the Securities Transfer Agent Medallion Program ("STAMP") or other recognized
signature guarantee medallion program. A notarized signature will not be
sufficient for the request to be in proper form.
Liquidation requests of corporate, partnership, trust and custodianship
accounts, and accounts under court jurisdiction require the following
documentation to be in proper form:
Corporation - (1) Signature guaranteed letter of instruction from the authorized
officer(s) of the corporation and (2) a corporate resolution.
Partnership - (1) Signature guaranteed letter of instruction from a general
partner and (2) pertinent pages from the partnership agreement identifying the
general partners or a certification for a partnership agreement.
Trust - (1) Signature guaranteed letter of instruction from the trustee(s) and
(2) copy of the pertinent pages of the trust document listing the trustee(s) or
a Certification for Trust if the trustee(s) are not listed on the account
registration.
Custodial - Signature guaranteed letter of instruction from the custodian.
Accounts under court jurisdiction - Check court documents and the applicable
state law since these accounts have varying requirements, depending upon the
state of residence.
For any information required about a proposed liquidation, a shareholder may
call Franklin's Shareholder Services Department or the securities dealer may
call Franklin's Dealer Services Department.
Written requests for redemption, all share certificates, and all certificate
assignment forms should be sent to the Fund or Investor Services at the address
shown on the back cover of this Prospectus.
Payment for written requests for redemption will be sent within seven days after
receipt of the request in proper form. Redemptions will be made in cash at the
net asset value per share next determined after receipt by the Fund of a
redemption request in proper form, including all share certificates,
assignments, signature guarantees and other documentation as may be required by
Investor Services. The amount received upon redemption may be more or less than
the shareholder's original investment. Redemptions may be suspended under
certain limited circumstances pursuant to rules adopted by the SEC.
Wiring of redemption proceeds is a special service made available to
shareholders whenever possible. The offer of this service, however, does not
bind the Fund to meet any redemption request by wire or in less than the
seven-day period prescribed by law. Neither the Fund nor its agents shall be
liable to any shareholder or other person for a redemption payment by wire which
for any reason may not be processed as described in this section.
CONTINGENT DEFERRED SALES CHARGE
The Fund does not impose either a front-end sales charge or a contingent
deferred sales charge. If, however, the shares redeemed were shares acquired by
exchange from another of the Franklin Templeton Funds which would have assessed
a contingent deferred sales charge upon redemption, such charge will be made by
the Fund, as described below. The 12-month contingency period will be tolled (or
stopped) for the period such shares are exchanged into and held in the Fund.
In certain Franklin Templeton Funds, in order to recover commissions paid to
securities dealers on investments of $1 million or more, a contingent deferred
sales charge of 1% applies to certain redemptions made by those investors within
12 months of the calendar month after such investments. The charge is 1% of the
lesser of the value of the shares redeemed (exclusive of reinvested dividends
and capital gain distributions) or the total cost of such shares, and is
retained by Distributors. In determining if a charge applies, shares not subject
to a contingent deferred sales charge are deemed to be redeemed first, in the
following order: (i) Shares representing amounts attributable to capital
appreciation; (ii) shares purchased with reinvested dividends and capital gain
distributions; and (iii) other shares held longer than 12 months; and followed
by any shares held less than 12 months, on a "first in, first out" basis. For
tax purposes, a contingent deferred sales charge is treated as either a
reduction in redemption proceeds or an adjustment to the cost basis of the
shares redeemed.
Requests for redemptions for a SPECIFIED DOLLAR AMOUNT, unless otherwise
specified, will result in additional shares being redeemed to cover any
applicable contingent deferred sales charge while requests for redemption of a
SPECIFIC NUMBER OF SHARES will result in the applicable contingent deferred
sales charge being deducted from the total dollar amount redeemed.
OTHER PROGRAMS AND PRIVILEGES
AVAILABLE TO FUND SHAREHOLDERS
CERTAIN OF THE PROGRAMS AND PRIVILEGES DESCRIBED IN THIS SECTION MAY NOT BE
AVAILABLE DIRECTLY FROM THE FUND TO SHAREHOLDERS WHOSE SHARES ARE HELD, OF
RECORD, BY A FINANCIAL INSTITUTION OR IN A "STREET NAME" ACCOUNT, OR NETWORKED
ACCOUNT THROUGH NATIONAL SECURITIES CLEARING CORPORATION ("NSCC") (SEE THE
SECTION CAPTIONED "ACCOUNT REGISTRATIONS" IN THIS PROSPECTUS).
SHARE CERTIFICATES
Shares for an initial investment, as well as subsequent investments, including
the reinvestment of dividends and any capital gain distributions, are generally
credited to an account in the name of an investor on the books of the Fund,
without the issuance of a share certificate. Maintaining shares in
uncertificated form (also known as "plan balance") minimizes the risk of loss or
theft of a share certificate. A lost, stolen or destroyed certificate cannot be
replaced without obtaining a sufficient indemnity bond. The cost of such a bond,
which is generally borne by the shareholder, can be 2% or more of the value of
the lost, stolen or destroyed certificate. A certificate will be issued if
requested in writing by the shareholder or by his securities dealer.
CONFIRMATIONS
A confirmation statement will be sent to each shareholder monthly to reflect the
daily dividends reinvested, as well as after each transaction which affects the
shareholder's account, except a redemption effected by check. This statement
will also show the total number of Fund shares owned by the shareholder,
including the number of shares in "plan balance" for the account of the
shareholder.
SYSTEMATIC WITHDRAWAL PLAN
A shareholder may establish a Systematic Withdrawal Plan and receive regular
periodic payments from the shareholder's account, provided that the net asset
value of the shares held by the shareholder is at least $5,000. There are no
service charges for establishing or maintaining a Systematic Withdrawal Plan.
The minimum amount which the shareholder may withdraw is $50 per transaction,
although this is merely the minimum amount allowed under the plan and should not
be mistaken for a recommended amount. The plan may be established on a monthly,
quarterly, semiannual or annual basis.
Sufficient shares of the Fund will be liquidated (generally on the first
business day of the month in which the distribution is scheduled) at net asset
value to meet the specified withdrawals, with payment generally received by the
shareholder three to five days after the date of liquidation. By completing the
"Special Payment Instructions for Dividends" section of the Shareholder
Application included with this Prospectus, a shareholder may direct the selected
withdrawals to another fund in the Franklin Group of Funds or the Templeton
Group, to another person, or directly to a checking account. If the bank at
which the account is maintained is a member of the Automated Clearing House, the
payments may be made automatically by electronic funds transfer. If this last
option is requested, the shareholder should allow at least 15 days for initial
processing. Withdrawals which may be paid in the interim will be sent to the
address of record. Liquidation of shares may deplete the investment and
withdrawal payments cannot be considered as actual yield or income since part of
such payments may be a return of capital. If the withdrawal amount exceeds the
total plan balance, the account will be closed and the remaining balance will be
sent to the shareholder. A Systematic Withdrawal Plan may be terminated on
written notice by the shareholder or the Fund, and it will terminate
automatically if all shares are liquidated or withdrawn from the account, or
upon the Fund's receipt of notification of the death or incapacity of the
shareholder. Shareholders may change the amount (but not below the specified
minimum) and schedule of withdrawal payments, or suspend one such payment, by
giving written notice to Investor Services at least seven business days prior to
the end of the month preceding a scheduled payment. Share certificates may not
be issued while a Systematic Withdrawal Plan is in effect.
MULTIPLE ACCOUNTS FOR FIDUCIARIES
Special procedures have been designed for banks and other institutions wishing
to open multiple accounts in the Fund. Further information is included in the
Fund's SAI.
RIGHTS OF ACCUMULATION
The cost or current value (whichever is higher) of the shares in the Fund will
be included in determining the sales charge discount to which an investor may be
entitled when purchasing shares in one or more of the funds in the Franklin
Group of Funds and the Templeton Group of Funds, which are sold with a sales
charge. Included for these aggregation purposes are (a) the mutual funds in the
Franklin Group of Funds except Franklin Valuemark Funds and Franklin Government
Securities Trust (the "Franklin Funds"), (b) other investment products
underwritten by Distributors or its affiliates (although certain investments may
not have the same schedule of sales charges and/or may not be subject to
reduction) and (c) the U.S. mutual funds in the Templeton Group of Funds except
Templeton Capital Accumulator Fund, Inc., Templeton Variable Annuity Fund, and
Templeton Variable Products Series Fund (the "Templeton Funds"). (Franklin Funds
and Templeton Funds are collectively referred to as the "Franklin Templeton
Funds.")
Purchases of Fund shares will also be included toward the completion of a Letter
of Intent with respect to any of the Franklin Templeton Funds which are sold
with a sales charge.
To assist shareholders in obtaining additional information regarding these
programs, a list of telephone numbers is included under "How to Get Information
Regarding an Investment in the Fund."
INSTITUTIONAL ACCOUNTS
There may be additional methods of purchasing, redeeming or exchanging shares of
the Fund available to institutional accounts. For further information, contact
Franklin Templeton Institutional Services Department at 1-800/321-8563.
EXCHANGE PRIVILEGE
The Franklin Templeton Funds consist of a number of mutual funds with various
investment objectives and policies. The shares of most of these mutual funds are
generally offered to the public with a sales charge (which may differ in timing
and/or amount). If a shareholder's investment objective or outlook for the
securities markets changes, the Fund shares may be exchanged for Class I shares
of other Franklin Templeton Funds (as defined in "Rights of Accumulation" )
which are eligible for sale in the shareholder's state of residence and in
conformity with such fund's stated eligibility requirements and investment
minimums. No exchanges between different classes of shares are allowed and,
therefore, shares of the Fund may not be exchanged for Class II shares of other
Franklin Templeton Funds. Shareholders of Class II of the Franklin Templeton
Funds may, however, elect to direct their dividends and capital gain
distributions to the Fund, or to another Franklin Templeton Fund for investment
at net asset value.
Shareholders may choose to redeem shares of the Fund and purchase Class II
shares of other Franklin Templeton Funds but such purchase will be subject to
the Class II sales charges for that Fund which typically will include a front
end and contingent deferred sales charges for the contingency period of 18
months.
Although there are no exchanges between different classes of shares,
shareholders of a Class II Franklin Templeton Fund may, however, elect to direct
their dividends and capital gain distributions to the Fund at net asset value.
Before making an exchange, investors should review the prospectus of the fund
they wish to exchange from and the fund they wish to exchange into for all
specific requirements or limitations on exercising the exchange privilege, for
example, minimum holding periods or applicable sales charges. Exchanges may be
made in any of the following ways:
EXCHANGES BY MAIL
Send written instructions signed by all account owners and accompanied by any
outstanding share certificates properly endorsed. The transaction will be
effective upon receipt of the written instructions together with any outstanding
share certificates.
EXCHANGES BY TELEPHONE
SHAREHOLDERS, OR THEIR INVESTMENT REPRESENTATIVE OF RECORD, IF ANY, MAY EXCHANGE
SHARES OF THE FUND BY TELEPHONE BY CALLING INVESTOR SERVICES AT 1-800/632-2301
OR THE AUTOMATED FRANKLIN TELEFACTS(R) SYSTEM (DAY OR NIGHT) AT 1-800/247-1753.
IF THE SHAREHOLDER DOES NOT WISH THIS PRIVILEGE EXTENDED TO A PARTICULAR
ACCOUNT, THE FUND OR INVESTOR SERVICES SHOULD BE NOTIFIED.
The telephone exchange privilege allows a shareholder to effect exchanges from
the Fund into an identically registered account of Class I shares of the other
available Franklin Templeton Funds. The telephone exchange privilege is
available only for uncertificated shares or those which have previously been
deposited in the shareholder's account. The Fund and Investor Services will
employ reasonable procedures to confirm that instructions communicated by
telephone are genuine. Please refer to "Telephone Transactions - Verification
Procedures."
During periods of drastic economic or market changes, it is possible that the
telephone exchange privilege may be difficult to implement and the TeleFACTS
option may not be available. In this event, shareholders should follow the other
exchange procedures discussed in this section, including the procedures for
processing exchanges through securities dealers.
EXCHANGES THROUGH SECURITIES DEALERS
As is the case with all purchases and redemptions of the Fund's shares, Investor
Services will accept exchange orders from securities dealers who execute a
dealer or similar agreement with Distributors. See also "Exchanges by Telephone"
above. Such a dealer-ordered exchange will be effective only for uncertificated
shares on deposit in the shareholder's account or for which certificates have
previously been deposited. A securities dealer may charge a fee for handling an
exchange.
ADDITIONAL INFORMATION REGARDING EXCHANGES
Shares of the Fund acquired other than pursuant to the exchange privilege or the
reinvestment of dividends with respect to such shares, may be exchanged at the
offering price of other Class I shares of the Franklin Templeton Funds. Such
offering price includes the applicable sales charge of the fund into which the
shares are being exchanged. Exchanges will be effected at the respective net
asset values or offering prices of the funds involved at the close of business
on the day on which the request is received in proper form.
The exchange privilege may be modified or discontinued by the Fund at any time
upon 60 days' written notice to shareholders.
TIMING ACCOUNTS
Accounts which are administered by allocation or market timing services to
purchase or redeem shares based on predetermined market indicators ("Timing
Accounts") will be charged a $5.00 administrative service fee per each such
exchange. All other exchanges are without charge.
RESTRICTIONS ON EXCHANGES
In accordance with the terms of their respective prospectuses, certain funds do
not accept or may place differing limitations than those below on exchanges by
Timing Accounts.
The Fund reserves the right to temporarily or permanently terminate the exchange
privilege or reject any specific purchase order for any Timing Account or any
person whose transactions seem to follow a timing pattern who: (i) makes an
exchange request out of the Fund within two weeks of an earlier exchange request
out of the Fund, or (ii) makes more than two exchanges out of the Fund per
calendar quarter, or (iii) exchanges shares equal in value to at least $5
million, or more than 1% of the Fund's net assets. Accounts under common
ownership or control, including accounts administered so as to redeem or
purchase shares based upon certain predetermined market indicators, will be
aggregated for purposes of the exchange limits.
The Fund reserves the right to refuse the purchase side of exchange requests by
any Timing Account, person, or group if, in the Manager's judgment, the Fund
would be unable to invest effectively in accordance with its investment
objectives and policies, or would otherwise potentially be adversely affected. A
shareholder's purchase exchanges may be restricted or refused if the Fund
receives or anticipates simultaneous orders affecting significant portions of
the Fund's assets. In particular, a pattern of exchanges that coincide with a
"market timing" strategy may be disruptive to the Fund and therefore may be
refused.
The Fund and Distributors also, as indicated in "How to Buy Shares of the Fund,"
reserve the right to refuse any order for the purchase of shares.
TELEPHONE TRANSACTIONS
Shareholders of the Fund and their investment representative of record, if any,
may be able to execute various transactions by calling Investor Services at
1-800/632-2301.
All shareholders will be able to: (i) effect a change in address, (ii) change a
dividend option, (iii) transfer Fund shares in one account to another
identically registered account in the Fund, (iv) request the issuance of
certificates and (v) exchange Fund shares as described in this Prospectus by
telephone. In addition, shareholders who complete and file an Agreement as
described under "How to Sell Shares of the Fund - Redemptions by Telephone" will
be able to redeem shares of the Fund.
VERIFICATION PROCEDURES
The Fund and Investor Services will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine. These will include:
recording all telephone calls requesting account activity by telephone,
requiring that the caller provide certain personal and/or account information
requested by the telephone service agent at the time of the call for the purpose
of establishing the caller's identification, and by sending a confirmation
statement on redemptions to the address of record each time account activity is
initiated by telephone. So long as the Fund and Investor Services follow
instructions communicated by telephone which were reasonably believed to be
genuine at the time of their receipt, neither they nor their affiliates will be
liable for any loss to the shareholder caused by an unauthorized transaction.
The Fund and Investor Services may be liable for any losses due to unauthorized
or fraudulent instructions only if such reasonable procedures are not followed.
Shareholders are, of course, under no obligation to apply for or accept
telephone transaction privileges. In any instance where the Fund or Investor
Services is not reasonably satisfied that instructions received by telephone are
genuine, the requested transaction will not be executed, and neither the Fund
nor Investor Services will be liable for any losses which may occur because of a
delay in implementing a transaction.
GENERAL
During periods of drastic economic or market changes, it is possible that the
telephone transaction privileges will be difficult to execute because of heavy
telephone volume. In such situations, shareholders may wish to contact their
investment representative for assistance, or to send written instructions to the
Fund as detailed elsewhere in this Prospectus.
Neither the Fund nor Investor Services will be liable for any losses resulting
from the inability of a shareholder to execute a telephone transaction.
The telephone transaction privilege may be modified or discontinued by the Fund
at any time upon 60 days' written notice to shareholders.
VALUATION OF FUND SHARES
The net asset value of the shares of the Fund is determined by the Fund at 3:00
p.m. Pacific time each day that the Exchange is open for business. The net asset
value per share is calculated by adding the value of all portfolio holdings and
other assets, deducting its liabilities, and dividing the result by the number
of Fund shares outstanding.
The valuation of the Fund's portfolio securities is based upon their amortized
cost value, which does not take into account unrealized capital gain or loss.
This involves valuing an instrument at its cost and thereafter assuming a
constant amortization to maturity of any discount or premium, regardless of the
impact of fluctuating interest rates on the market value of the instrument. The
Fund's use of amortized cost which facilitates the maintenance of the Fund's per
share net asset value of $1.00 is permitted by Rule 2a-7 under the 1940 Act.
Further information is included under "Determination of Net Asset Value" in the
SAI.
HOW TO GET INFORMATION REGARDING AN INVESTMENT IN THE FUND
Any questions or communications regarding a shareholder's account should be
directed to Investor Services at the address shown on the back cover of this
Prospectus.
From a touch-tone phone, Franklin and Templeton shareholders may access an
automated system (day or night) which offers the following features:
By calling the Franklin TeleFACTS(R) system at 1-800/247-1753, shareholders may
obtain Class I and Class II account information, current price and, if
available, yield or other performance information specific to the Fund or any
Franklin Templeton Fund. In addition, Franklin Class I shareholders may process
an exchange, within the same class, into an identically registered Franklin
account; and request duplicate confirmation or year-end statements, money fund
checks, if applicable, and deposit slips.
Fund information may be accessed by entering Fund Code [] followed by the #
sign. The system's automated operator will prompt the caller with easy to follow
step-by-step instructions from the main menu. Other features may be added in the
future.
To assist shareholders and securities dealers wishing to speak directly with a
representative, the following is a list of the various Franklin departments,
telephone numbers and hours of operation to call. The same numbers may be used
when calling from a rotary phone:
<TABLE>
<CAPTION>
HOURS OF OPERATION
(PACIFIC TIME)
DEPARTMENT NAME TELEPHONE NO. (MONDAY THROUGH FRIDAY)
<S> <C> <C>
Shareholder Services 1-800/632-2301 5:30 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.
8:30 a.m. to 5:00 p.m.
(Saturday)
Retirement Plans 1-800/527-2020 5:30 a.m. to 5:00 p.m.
TDD (hearing
impaired) 1-800/851-0637 5:30 a.m. to 5:00 p.m.
</TABLE>
In order to ensure that the highest quality of service is being provided,
telephone calls placed to or by representatives in Franklin's service
departments may be accessed, recorded and monitored. These calls can be
determined by the presence of a regular beeping tone.
PERFORMANCE
Advertisements, sales literature and communications to shareholders may contain
various measures of the Fund's performance, including quotations of its current,
effective, taxable equivalent yield and taxable equivalent effective yield.
Current yield as prescribed by the SEC is an annualized percentage rate which
reflects the change in value of a hypothetical account based on the income
received from the Fund during a seven-day period. It is computed by determining
the net change, excluding capital changes, in the value of a hypothetical
pre-existing account having a balance of one share at the beginning of the
period. A hypothetical charge reflecting deductions from shareholder accounts
for management fees or shareholder services fees, for example, is subtracted
from the value of the account at the end of the period, and the difference is
divided by the value of the account at the beginning of the base period to
obtain the base period return. The result is then annualized. Effective yield is
computed in the same manner except that the annualization of the return for the
seven-day period reflects the results of compounding (that is, the effect of
reinvesting dividends paid on both the original share and those acquired from
the reinvestment of such dividends). Tax equivalent yield demonstrates the yield
from a taxable investment necessary to produce an after-tax yield equivalent to
that of a fund which invests in tax-exempt obligations. It is computed by
dividing the tax-exempt portion of a fund's yield (calculated as indicated) by
one minus a stated income tax rate and adding the product to the taxable portion
(if any) of the fund's yield.
Tax equivalent effective yield demonstrates the effective yield from a taxable
investment necessary to produce an after-tax effective yield equivalent to that
of a fund which invests in tax-exempt obligations. It is computed in the same
manner as is the fund's tax equivalent yield, except that it is based on the
tax-exempt portion of the fund's effective, rather than its current, yield. The
figure is calculated by dividing the tax-exempt portion of a fund's effective
yield by one minus a stated income tax rate and adding the product to the
taxable portion (if any) of the fund's effective yield.
In each case, performance figures are based upon past performance and will
reflect all recurring charges against Fund income. Such quotations will reflect
the value of any additional shares purchased with dividends from the original
share and any dividends declared on both the original share and such additional
shares. The investment results of the Fund, like all other investment companies,
will fluctuate over time; thus, performance figures should not be considered to
represent what an investment may earn in the future or what the Fund's
performance may be in any future period. Additional information is contained in
the Fund's annual report, which is available without charge upon request at the
telephone number or address listed on the cover of this Prospectus.
GENERAL INFORMATION
REPORTS TO SHAREHOLDERS
The Fund's fiscal year ends July 31. Annual Reports containing audited financial
statements of the Fund, including the auditors' report, and Semi-Annual Reports
containing unaudited financial statements are automatically sent to
shareholders. To reduce the volume of mail sent to one household as well as to
reduce Fund expenses, Investor Services will attempt to identify related
shareholders within a household, and send only one copy of the report.
Additional copies may be obtained, without charge, upon request to the Fund at
the telephone number or address set forth on the cover page of this Prospectus.
Additional information on Fund performance is included in the Fund's Annual
Report to Shareholders and the SAI .
ORGANIZATION AND VOTING RIGHTS
The Fund was organized as a corporation on March 18, 1980. The Fund's authorized
capital stock consists of 5 billion shares of no par value. All shares are of
one class, have one vote and, when issued, are fully paid and nonassessable. All
shares have equal voting, participation and liquidation rights, but have no
subscription, preemptive or conversion rights.
Shares of the Fund have cumulative voting rights, which means that in all
elections of directors each shareholder has the right to cast a number of votes
equal to the number of shares owned multiplied by the number of directors to be
elected at such election, and each shareholder may cast the whole number of
votes for one candidate or distribute such votes among two or more candidates.
The Fund does not intend to hold annual shareholders' meetings. The Fund may,
however, hold a special meeting for such purposes as changing fundamental
investment restrictions, approving a new management agreement or any other
matters which are required to be acted on by shareholders under the 1940 Act. A
meeting may also be called by a majority of the Board or by shareholders holding
at least ten percent of the shares entitled to vote at the meeting. Shareholders
may receive assistance in communicating with other shareholders in connection
with the election or removal of directors such as that provided in Section 16(c)
of the 1940 Act.
REDEMPTIONS BY THE FUND
The Fund reserves the right to redeem, at net asset value, shares of any
shareholder whose account has a value of less than $250, one-half the required
minimum investment, but only where the value of such account has been reduced by
the shareholder's prior voluntary redemption of shares and has been inactive
(except for the reinvestment of distributions) for a period of at least six
months, provided advance notice is given to the shareholder. More information is
included in the SAI.
OTHER INFORMATION
Distribution or redemption checks sent to shareholders do not earn interest or
any other income during the time such checks remain uncashed and neither the
Fund nor its affiliates will be liable for any loss to the shareholder caused by
the shareholder's failure to cash such check(s).
Shares of the Fund may or may not constitute a legal investment for investors
whose investment authority is restricted by applicable law or regulation. SUCH
INVESTORS SHOULD CONSULT THEIR OWN LEGAL ADVISORS TO DETERMINE WHETHER AND TO
WHAT EXTENT THE SHARES OF THE FUND CONSTITUTE LEGAL INVESTMENTS FOR THEM.
Municipal investors considering investment of proceeds of bond offerings into
the Fund should consult with expert counsel to determine the effect, if any, of
various payments made by the Fund or its investment manager on arbitrage rebate
calculations.
"Cash" payments to or from the Fund may be made by check, draft or wire. The
Fund has no facility to receive, or pay out, cash in the form of currency.
ACCOUNT REGISTRATIONS
An account registration should reflect the investor's intentions as to
ownership.
Accounts should not be registered in the name of a minor either as sole or
co-owner of the account. Transfer or redemption for such an account may require
court action to obtain release of the funds until the minor reaches the legal
age of majority. The account should be registered in the name of one "Adult" as
custodian for the benefit of the "Minor" under the Uniform Transfer or Gifts to
Minors Act.
A trust designation such as "trustee" or "in trust for" should only be used if
the account is being established pursuant to a legal, valid trust document. Use
of such a designation in the absence of a legal trust document may cause
difficulties and require court action for transfer or redemption of the funds.
Shares, whether in certificate form or not, registered as joint tenants or "Jt
Ten" shall mean "as joint tenants with rights of survivorship" and not "as
tenants in common."
Except as indicated, a shareholder may transfer an account in the Fund carried
in "street" or "nominee" name by the shareholder's securities dealer to a
comparably registered Fund account maintained by another securities dealer. Both
the delivering and receiving securities dealers must have executed dealer or
similar agreements on file with Distributors. Unless such agreement has been
executed and is on file with Distributors, the Fund will not process the
transfer and will so inform the shareholder's delivering securities dealer. To
effect the transfer, a shareholder should instruct the securities dealer to
transfer the account to a receiving securities dealer and sign any documents
required by the securities dealer(s) to evidence consent to the transfer. Under
current procedures the account transfer may be processed by the delivering
securities dealer and the Fund after the Fund receives authorization in proper
form from the shareholder's delivering securities dealer. In the future it may
be possible to effect such transfers electronically through the services of the
NSCC.
The Fund may conclusively accept instructions from an owner or the owner's
nominee listed in publicly available nominee lists, regardless of whether the
account was initially registered in the name of or by the owner, the nominee, or
both. If a securities dealer or other representative is of record on an
investor's account, the investor will be deemed to have authorized the use of
electronic instructions on the account, including, without limitation, those
initiated through the services of the NSCC, to have adopted as instruction and
signature any such electronic instructions received by the Fund and the
Shareholder Services Agent and to have authorized them to execute the
instructions without further inquiry. At the present time, such services which
are available include the NSCC's "Networking," "Fund/SERV," and "ACATS" systems.
Any questions regarding an intended registration should be answered by the
securities dealer handling the investment, or by calling Franklin's Fund
Information Department.
IMPORTANT NOTICE REGARDING
TAXPAYER IRS CERTIFICATIONS
Pursuant to the Code and U.S. Treasury regulations, the Fund may be required to
report to the IRS any taxable dividend, capital gain distribution, or other
reportable payment and withhold 31% of any such payments made to individuals and
other non-exempt shareholders who have not provided a correct taxpayer
identification number ("TIN") and made certain required certifications that
appear in the Shareholder Application. A shareholder may also be subject to
backup withholding if the IRS or a securities dealer notifies the Fund that the
TIN furnished by the shareholder is incorrect or that the shareholder is subject
to backup withholding for previous under-reporting of interest or dividend
income.
The Fund reserves the right to (1) refuse to open an account for any person
failing to provide a TIN along with the required certifications and (2) close an
account by redeeming its shares in full at the then current net asset value upon
receipt of notice from the IRS that the TIN certified as correct by the
shareholder is in fact incorrect or upon the failure of a shareholder who has
completed an "awaiting TIN" certification to provide the Fund with a certified
TIN within 60 days after opening the account.
FRANKLIN
TAX-EXEMPT
MONEY FUND
STATEMENT OF
ADDITIONAL INFORMATION
DECEMBER 1, 1995
777 MARINERS ISLAND BLVD., P.O. BOX 7777
SAN MATEO, CA 94403-7777 1-800/DIAL BEN
CONTENTS PAGE
The Fund (See also the Prospectus
"Information About the Fund")
Additional Information Regarding
the Fund's Investment Objective and
Policies (See also the Prospectus
"Investment Objective and Policies
Followed by the Fund")
Officers and Directors
Investment Advisory and Other Services
The Fund's Policies Regarding Brokers
Used on Portfolio Transactions
Determination of Net Asset Value
(See also the Prospectus
"Valuation of Fund Shares")
Additional Information Regarding
Purchases and Redemptions of Shares
Additional Information Regarding
Distributions and Taxes
The Fund's Underwriter
General Information
Appendix
Financial Statements
A Prospectus for the Franklin Tax-Exempt Money Fund (the "Fund"), dated December
1, 1995, as may be amended from time to time, provides the basic information a
prospective investor should know before investing in the Fund and may be
obtained without charge from the Fund or the Fund's principal underwriter,
Franklin/Templeton Distributors, Inc. ("Distributors"), at the
address or telephone number shown above.
THIS STATEMENT OF ADDITIONAL INFORMATION (THE "SAI") IS NOT A PROSPECTUS. IT
CONTAINS INFORMATION IN ADDITION TO AND IN MORE DETAIL THAN SET FORTH IN THE
PROSPECTUS. THIS SAI IS INTENDED TO PROVIDE AN INVESTOR WITH ADDITIONAL
INFORMATION REGARDING THE ACTIVITIES AND OPERATIONS OF THE FUND, AND SHOULD BE
READ IN CONJUNCTION WITH THE FUND'S PROSPECTUS.
THE FUND
Franklin Tax-Exempt Money Fund is a diversified, open-end management investment
company or "mutual fund," is registered as such with the Securities and Exchange
Commission ("SEC") under the Investment Company Act of 1940 ("1940 Act"), and
was incorporated under the laws of the state of California on March 18, 1980.
The Fund has only one class of capital stock, without par value. The purchase of
Fund shares does not create a checking or other bank account.
ADDITIONAL INFORMATION REGARDING THE
FUND'S INVESTMENT OBJECTIVE AND POLICIES
INVESTMENT OBJECTIVE AND POLICIES
As stated in the Prospectus, the investment objective of the Fund is to obtain
for its investors the highest level of current income that is exempt from
federal income taxes, consistent with liquidity and the preservation of capital.
The achievement of the Fund's objective will depend on market conditions
generally and on its investment manager's analytical and portfolio management
skills. The value of the securities held will fluctuate inversely with interest
rates, and therefore there is no assurance that the objective will be achieved.
Except as noted, the investment objective and policies of the Fund as set forth
herein are fundamental and may not be changed without the approval of a majority
of the Fund's outstanding shares.
The Fund will seek to achieve its objective by investing in a diversified
portfolio of high quality short-term debt obligations issued by states,
territories and possessions of the United States and by the District of
Columbia, and their political subdivisions and duly constituted authorities, the
interest from which is wholly exempt from federal income tax in the opinion of
bond counsel. Such securities are generally known as "Municipal Bonds" or
"Municipal Notes."
The Municipal Bonds and Municipal Notes in the Fund's portfolio will be invested
in issues which have been rated, at the time of purchase, not lower than Aa
(applicable to Municipal Bonds), MIG-2 (applicable to Municipal Notes), or P-2
(applicable to commercial paper) by Moody's Investors Service ("Moody's"), or AA
(Bonds), SP-2 (Notes) or A-2 (commercial paper) by Standard & Poor's Corporation
("S&P"), or AA (applicable to municipal bonds) or F-2 (applicable to municipal
notes and commercial paper) by Fitch Investors Service, Inc. ("Fitch"), or which
are unrated, but only if the investment manager believes that the financial
condition of such issuers limits the risks to the Fund to a degree comparable to
securities rated at least within the two highest grades by Moody's, S&P or
Fitch. Any Municipal Bond or Note which depends on the credit of the federal
government will be regarded as having a rating of Aaa (Moody's) or AAA (S&P or
Fitch). See the Appendix at the end of this SAI.
Subsequent to its purchase by the Fund, a municipal security may be assigned a
lower rating or cease to be rated. Such an event generally would not require the
elimination of the issue from the portfolio, although it will be taken into
consideration by the Fund's investment manager in determining whether the Fund
should continue to hold the security in its portfolio. In addition to
considering ratings assigned by the rating services in its selection of
portfolio securities for the Fund, the investment manager will consider, among
other things, information concerning the financial history and condition of the
issuer and its revenue and expense prospects and, in the case of revenue bonds,
the financial history and condition of the source of revenue to service the debt
securities.
The Fund may purchase other types of tax-exempt instruments, such as tax-exempt
commercial paper, issued by municipalities. Such investments will be limited to
those obligations which are rated no lower than P-2 (Moody's), A-2 (S&P) or F-2
(Fitch). With respect to short-term discount notes or tax-exempt commercial
paper which are not rated, the Fund may invest only in instruments of issuers
who have an outstanding debt security rated in the two highest grades by S&P,
Moody's or Fitch. The Fund may purchase other types of tax-exempt instruments as
long as, in the opinion of the Fund's investment manager, they are of a quality
equivalent to the debt or commercial paper ratings stated above.
Generally, all of the instruments held by the Fund are offered on the basis of a
quoted yield to maturity and the price of the security is adjusted so that
relative to the stated rate of interest it will return the quoted rate to the
purchaser. The maturities of these instruments at the time of issue will
generally range from three months to 13 months.
Each political subdivision, agency, or instrumentality and each multi-state
agency of which a state is a member, and each public authority which issues
private activity bonds on behalf of a private entity, will be regarded as a
separate issuer for determining the diversification of the Fund's portfolio.
Where securities are backed only by assets and revenues of a particular
instrumentality, facility or subdivision, such entity is considered the issuer.
A bond for which the payments of principal and interest are secured or become
secured by an escrow account of securities backed by the full faith and credit
of the U.S. government ("defeased"), in general, will not be treated as an
obligation of the original municipality for purposes of determining issuer
diversification. Percentage limitations referred to in this paragraph and
elsewhere in the Prospectus and SAI are generally determined at the time an
investment is made.
DESCRIPTION OF MUNICIPAL
AND OTHER SECURITIES
The Prospectus describes the general categories and nature of municipal
securities. Discussed below are the major attributes of the various municipal
and other securities in which the Fund may invest.
TAX ANTICIPATION NOTES are used to finance working capital needs of
municipalities and are issued in anticipation of various seasonal tax revenues
which will be used to pay the notes. They are usually general obligations of the
issuer, secured by the taxing power for the payment of principal and interest.
REVENUE ANTICIPATION NOTES are issued in expectation of other kinds of revenue,
such as federal revenues available under the Federal Revenue Sharing Program.
They are usually general obligations of the issuer.
BOND ANTICIPATION NOTES are normally issued to provide interim financing until
long-term financing can be arranged. Long-term bonds then provide the money for
the repayment of the notes.
CONSTRUCTION LOAN NOTES are sold to provide construction financing for specific
projects. After successful completion and acceptance, many projects receive
permanent financing through the Federal Housing Administration under the Federal
National Mortgage Association or the Government National Mortgage Association.
TAX-EXEMPT COMMERCIAL PAPER typically represents a short-term obligation (270
days or less) issued by a municipality to meet working capital needs.
Municipal Bonds, which meet longer term capital needs and generally have
maturities of more than one year when issued, have two principal
classifications: general obligation bonds and revenue bonds.
1. GENERAL OBLIGATION BONDS. Issuers of general obligation bonds include states,
counties, cities, towns and regional districts. The proceeds of these
obligations are used to fund a wide range of public projects, including
construction or improvement of schools, highways, roads, and water and sewer
systems. The basic security behind general obligation bonds is the issuer's
pledge of its full faith, credit and taxing power for the payment of principal
and interest. The taxes that can be levied for the payment of debt service may
be limited or unlimited as to the rate or amount of special assessments.
2. REVENUE BONDS. A revenue bond is not secured by the full faith, credit and
taxing power of an issuer. Rather, the principal security for a revenue bond is
generally the net revenue derived from a particular facility, group of
facilities, or, in some cases, the proceeds of a special excise or other
specific revenue source. Revenue bonds are issued to finance a wide variety of
capital projects, including: electric, gas, water and sewer systems; highways,
bridges and tunnels; port and airport facilities; colleges and universities; and
hospitals. The principal security behind these bonds may vary. Housing finance
authorities have a wide range of security, including partially or fully insured
mortgages, rent subsidized and/or collateralized mortgages, and/or the net
revenues from housing or other public projects. Many bonds provide additional
security in the form of a debt service reserve fund which may be used to make
principal and interest payments on the issuer's obligations. Some authorities
are provided further security in the form of a state's assurance (although
without obligation) to make up deficiencies in the debt service reserve fund.
INDUSTRIAL DEVELOPMENT REVENUE BONDS which pay tax-exempt interest are in most
cases revenue bonds and are issued by or on behalf of public authorities to
raise money to finance various privately operated facilities for business,
manufacturing, housing, sports, and pollution control. These bonds are also used
to finance public facilities such as airports, mass transit systems, ports, and
parking. The payment of the principal and interest on such bonds is solely
dependent on the ability of the facility's user to meet its financial
obligations and the pledge, if any, of the real and personal property so
financed as security for such payments.
WHEN-ISSUED PURCHASES. Municipal bonds are frequently offered on a "when-issued"
basis. When so offered, the price, which is generally expressed in yield terms,
is fixed at the time the commitment to purchase is made, but delivery and
payment for the when-issued securities take place at a later date. During the
period between purchase and settlement, no payment is made by the Fund to the
issuer and no interest accrues to the Fund. To the extent that assets of the
Fund are held in cash pending the settlement of a purchase of securities, the
Fund would earn no income; however, it is the Fund's intention to be fully
invested to the extent practicable and subject to the policies stated above.
While when-issued securities may be sold prior to the settlement date, the Fund
intends to purchase such securities with the purpose of actually acquiring them,
unless a sale appears desirable for investment reasons. At the time the Fund
makes the commitment to purchase a municipal bond on a when-issued basis, it
will record the transaction and reflect the value of the security in determining
its net asset value. The Fund believes that their net asset value or income will
not be adversely affected by their purchase of municipal bonds on a when-issued
basis. The Fund will establish a segregated account in which it will maintain
cash and marketable securities equal in value to commitments for when-issued
securities.
CALLABLE BONDS. There are municipal bonds which are issued with provisions which
prevent them from being called, typically for periods of 5 to 10 years. During
times of generally declining interest rates, if the call-protection on callable
bonds expires, there is an increased likelihood that a number of such bonds may,
in fact, be called away by the issuers. Based on a number of factors, including
certain portfolio management strategies used by the Fund's investment manager,
the Fund believes it has reduced the risk of adverse impact on net asset value
based on calls of callable bonds. The investment manager may dispose of such
bonds in the years prior to their call dates, if the investment manager believes
such bonds are at their maximum premium potential. In pricing such bonds in the
Fund's portfolio, each callable bond is marked to market daily based on the
bond's call date. Thus, the call of some or all of the Fund's callable bonds may
have an impact on its net asset value. In light of the Fund's pricing policies
and because the Fund follows certain amortization procedures required by the
Internal Revenue Service, the Fund is not expected to suffer any material
adverse impact related to the value at which the Fund has carried the bonds in
connection with calls of bonds purchased at a premium. Notwithstanding such
policies, however, the re-investment of the proceeds of any called bond may be
in bonds which pay a higher or lower rate of return than the called bonds; and,
as with any investment strategy, there is no guarantee that a call may not have
a more substantial impact than anticipated or that the Fund's objective will be
achieved.
ESCROW-SECURED BONDS OR DEFEASED BONDS are created when an issuer refunds in
advance of maturity (or pre-refunds) an outstanding bond issue which is not
immediately callable, and it becomes necessary or desirable to set aside funds
for redemption of the bonds at a future date. In an advance refunding, the
issuer will use the proceeds of a new bond issue to purchase high grade,
interest bearing debt securities which are then deposited in an irrevocable
escrow account held by a trustee bank to secure all future payments of principal
and interest of the advance refunded bond. Escrow-secured bonds will often
receive a triple-A rating from S&P, Moody's and Fitch.
STRIPPED MUNICIPAL SECURITIES. Municipal securities may also be sold in
"stripped" form. Stripped municipal securities represent separate ownership
of interest and principal payments on municipal obligations.
VARIABLE OR FLOATING RATE DEMAND NOTES ("VRDNs") are tax-exempt obligations
which contain a floating or variable interest rate and a right of demand, which
may be unconditional, to receive payment of the unpaid principal balance plus
accrued interest upon a short notice period (generally up to 30 days) prior to
specified dates, either from the issuer or by drawing on a bank letter of
credit, a guarantee or insurance issued with respect to such instrument. The
interest rates are adjustable at intervals ranging from daily up to monthly, and
are calculated to maintain the market value of the VRDN at approximately the par
value upon the adjustment date. The adjustments are typically based upon the
prime rate of a bank or some other appropriate interest rate adjustment index.
CERTIFICATES OF PARTICIPATION. The Fund may also invest in municipal lease
obligations primarily through Certificates of Participation ("COPs"). COPs are
distinguishable from municipal debt in that the lease which is the subject of
the transaction typically contains a "non-appropriation" clause. A
nonappropriation clause provides that, while the municipality will use its best
efforts to make lease payments, the municipality may terminate the lease without
penalty if the municipality's appropriating body does not allocate the necessary
funds.
While the risk of nonappropriation is inherent to COP financing, the Fund
believes that this risk is mitigated by its policy of investing only in COPs
rated within the two highest rating categories of Moody's, S&P or Fitch, or in
unrated COPs believed to be of comparable quality. Criteria considered by the
rating agencies and the investment manager in assessing such risk include the
issuing municipality's credit rating, the essentiality of the leased property to
the municipality and the term of the lease compared to the useful life of the
leased property. The Board of Directors has determined that COPs held in the
Fund's portfolio constitute liquid investments based on various factors reviewed
by the investment manager and monitored by the Board. Such factors include (a)
the credit quality of such securities and the extent to which they are rated;
(b) the size of the municipal securities market for the Fund, both in general
and with respect to COPs; and (c) the extent to which the type of COPs held by
the Fund trade on the same basis and with the same degree of dealer
participation as other municipal bonds or comparable credit rating or quality.
There is no limit as to the amount of assets which the Fund may invest in COPs.
U.S. GOVERNMENT OBLIGATIONS which may be owned by the Fund are issued by the
U.S. Treasury and include bills, certificates of indebtedness, notes and
bonds, or are issued by agencies and instrumentalities of the U.S. government
and backed by the full faith and credit of the U.S. government.
COMMERCIAL PAPER refers to promissory notes issued by corporations in order to
finance their short-term credit needs.
CERTIFICATES OF DEPOSIT are certificates issued against funds deposited in a
commercial bank, are for a definite period of time, earn a specified rate of
return, and are normally negotiable.
BANKERS' Acceptances are short-term credit instruments used to finance the
import, export, transfer, or storage of goods. They are termed "accepted" when a
bank guarantees their payment at maturity.
REPURCHASE AGREEMENTS. The Fund may engage in repurchase transactions, in which
the Fund purchases a U.S. government security subject to resale to a bank or
dealer at an agreed-upon price and date. The transaction requires the
collateralization of the seller's obligation by the transfer of securities with
an initial market value, including accrued interest, equal to at least 102% of
the dollar amount invested by the Fund in each agreement, with the value of the
underlying security marked to market daily to maintain coverage of at least
100%. A default by the seller might cause the Fund to experience a loss or delay
in the liquidation of the collateral securing the repurchase agreement. The Fund
might also incur disposition costs in liquidating the collateral. The Fund,
however, intends to enter into repurchase agreements only with financial
institutions such as broker/dealers and banks which are deemed creditworthy by
the Fund's investment manager. A repurchase agreement is deemed to be a loan by
the Fund under the 1940 Act. The U.S. government security subject to resale (the
collateral) will be held on behalf of the Fund by a custodian approved by the
Fund's Board and will be held pursuant to a written agreement. The period of
these repurchase agreements will usually be short, from overnight to one week,
and at no time will the Fund invest in repurchase agreements with a term of more
than one year. The securities which are subject to repurchase agreements,
however, may have maturity dates in excess of one year from the effective date
of the repurchase agreement. The Fund 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 Fund's total assets would be invested in such repurchase
agreements.
LOANS OF PORTFOLIO SECURITIES. As approved by the Board of Directors and subject
to the following conditions, the Fund may lend its portfolio securities to
qualified securities dealers or other institutional investors, provided that
such loans do not exceed 10% of the value of the Fund's total assets at the time
of the most recent loan. The borrower must deposit with the Fund's custodian
collateral with an initial market value at least 102% of the initial market
value of the securities loaned, including any accrued interest, with the value
of the collateral and loaned securities marked-to-market daily to maintain
collateral coverage of at least 100%. Such collateral shall consist of cash,
securities issued by the U.S. Government, its agencies or instrumentalities, or
irrevocable letters of credit. The lending of securities is a common practice in
the securities industry. The Fund engages in security loan arrangements with the
primary objective of increasing the Fund's income either through investing the
cash collateral in short-term interest bearing obligations or by receiving a
loan premium from the borrower. Under the securities loan agreement, the Fund
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. The Fund will not lend its portfolio securities if such loans are
not permitted by the laws or regulations of any state in which its shares are
qualified for sale. Loans are typically subject to termination by the Fund in
the normal settlement time, currently five business days after notice, or by the
borrower on one day's notice. Borrowed securities must be returned when the loan
is terminated. Any gain or loss in the market price of the borrowed securities
which occurs during the term of the loan inures to the lending Fund and its
shareholders. The Fund may pay reasonable finder's, borrowers', administrative,
and custodial fees in connection with a loan of its securities.
Income derived by the Fund from securities lending transactions, repurchase
transactions, and investments in commercial paper, bankers' acceptances and
certificates of deposit will be taxable for federal personal income tax purposes
when distributed to shareholders. Income derived by the Fund from interest on
direct obligations of the U.S. government will be taxable for federal income tax
purposes when distributed to shareholders.
PRIVATE ACTIVITY BONDS. Interest on obligations which are classified as "private
activity bonds" is not excluded from gross income for federal income tax
purposes under Section 103(b)(1) of the U.S. Internal Revenue Code of 1986, as
amended ("Code"), unless such bonds are registered (Section 149 of the Code) and
certain other requirements are satisfied. If such bonds do not satisfy these
requirements, such bonds are not included in the Fund's definition of "municipal
securities," and the Fund will therefore not invest in them. Section 141(e) of
the Code, however, describes certain private activity bonds the interest on
which is excluded from federal gross income (certain small issues and
obligations to finance certain exempt facilities which may be leased to or used
by persons other than the issuer), except when the bonds are held by
"substantial users" or persons related to substantial users as defined below.
The Fund may invest periodically in private activity bonds described in Section
141 of the Code. Since the Fund's holding of such bonds may be attributed to
such substantial users, the Fund may not be an appropriate investment for
persons or entities which are substantial users of facilities financed by
private activity bonds or for investors who are "related persons." Generally, an
individual will not be a related person under the Code unless such investor or
his immediate family (spouse, brothers, sisters and lineal descendants) own,
directly or indirectly, in the aggregate more than 50% in value of the equity of
a corporation or partnership which is a substantial user of a facility financed
with the proceeds of private activity bonds. A "substantial user" of such
facilities is defined generally by Section 1.103-11(b) of the Treasury
regulations as a "non-exempt person who regularly uses a part of a facility"
financed with the proceeds of a private activity bond.
Interest on private activity bonds, as well as interest on municipal bonds which
are not private activity bonds, may become includable in gross income,
retroactively to the date of issue, if the bonds become "arbitrage bonds" as
defined in Section 148 of the Code or, in the case of private activity bonds,
certain requirements of the Code are not satisfied subsequent to the date of
issue.
Opinions relating to the validity of municipal securities and to the exclusion
from gross income for federal income tax purposes of the interest thereon are
rendered by bond counsel at the time of issuance. The Fund does not review the
proceedings relating to the issuance of municipal securities, the basis for such
opinions, or actions of any of the parties thereto with respect to compliance
with requirements of the Code subsequent to the date of issue to preserve the
exclusion from gross income.
There may, of course, be other types of municipal securities that become
available which are similar to the foregoing described municipal securities, in
which each Fund may also invest, to the extent such investments would be
consistent with the foregoing objectives and policies.
PORTFOLIO MANAGEMENT
The ability of the Fund to achieve its investment goals is dependent on a number
of factors, including the skills of its investment manager in purchasing
municipal obligations whose issuers have the continuing ability to meet their
obligations for the payment of interest and principal when due. The ability to
achieve a high level of income is dependent on the yields of the securities in
the portfolio. Yields on municipal obligations are the product of a variety of
factors, including the general conditions of the money market and of the
municipal bond and municipal note market, the size of a particular offering, the
maturity of the obligation and the rating of the issue. Municipal obligations
with longer maturities tend to produce higher yields and are generally subject
to potentially greater price fluctuations than obligations with shorter
maturities.
The Fund's policy will generally be to hold securities to maturity rather than
to follow a policy of trading. However, due to the short-term nature of the
maturities of the Fund's securities held in its portfolio, it is not expected
that there will be any reportable annual portfolio turnover.
INVESTMENT RESTRICTIONS
The investment restrictions listed below have been adopted by the Fund and may
not be changed without the approval of a majority of the Fund's outstanding
shares. These restrictions reflect self-imposed standards as well as state and
federal requirements. Any investment restriction which involves a maximum
percentage of securities or assets shall not be considered to be violated unless
an excess over the percentage occurs immediately after, and is caused by, an
acquisition or encumbrance of securities or assets of, or borrowings by, the
Fund.
THE FUND MAY NOT:
(1) Purchase the securities of any issuer (except the United States government,
its agencies or instrumentalities or securities which are backed by the full
faith and credit of the United States) if, as a result, more than 5% of its
total assets would be invested in the securities of such issuer or more than 10%
of the outstanding voting securities of any class of any issuer would be held by
the Fund.
(2) Borrow money, except from a bank for temporary or emergency purposes and
not for investment purposes, and then in an amount not exceeding 10% of the
value of the Fund's total assets at the time of borrowing. (No new investments
will be made by the Fund while any outstanding borrowings exceed 5% of its total
assets.) Secured temporary borrowings may take the form of reverse repurchase
agreements, pursuant to which the Fund would sell portfolio securities for cash
and simultaneously agree to repurchase them at a specified date for the same
amount of cash plus an interest component.
(3) Pledge, mortgage, or hypothecate its assets, except that, to secure
borrowings permitted by subparagraph (2) above, it may pledge securities having
a market value at the time of pledge not exceeding 10% of the value of the
Fund's total assets.
(4) Knowingly purchase or otherwise acquire any securities which are subject to
legal or contractual restrictions on resale or for which there is no readily
available market or engage in any repurchase transactions of more than seven
days' duration if, as a result, more than 10% of its total assets would be
invested in all such securities.
(5) Underwrite any issue of securities, except to the extent that the purchase
of municipal obligations in accordance with the Fund's investment objectives,
policies, and restrictions, either directly from the issuer, or from an
underwriter for an issuer, may be deemed to be underwriting.
(6) Purchase or sell real estate, but this shall not prevent the Fund from
investing in municipal obligations secured by real estate or interests therein.
(7) Purchase or sell commodities or commodity contracts or invest in oil, gas
or other mineral exploration or development programs.
(8) Make loans, except (i) by the purchase of a portion of an issue of debt
securities in accordance with its investment objectives, policies, and
restrictions, (ii) by engaging in repurchase transactions, and (iii) by making
loans of portfolio securities not in excess of 10% of the value of the Fund's
total assets.
(9) Make short sales of securities or purchase any securities on margin, except
for such short-term credits as are necessary for the clearance of transactions.
(10) Purchase or retain the securities of any issuer other than the securities
of the Fund, if, to the Fund's knowledge, those directors and officers of the
Fund, or of the investment manager, who individually own beneficially more than
1/2 of 1% of the outstanding securities of such issuer together own beneficially
more than 5% of such outstanding securities.
(11) Invest for the purpose of exercising control or management of another
company.
(12) Write, purchase or sell puts, calls, or combinations thereof, except that
it may obtain rights to resell Municipal Bonds and Notes as set forth under
"Additional Information Regarding the Fund's Investment Objectives and
Policies."
(13) Purchase securities of other investment companies, except in connection
with a merger, consolidation or acquisition of assets.
(14) Purchase securities (other than Municipal Bonds, Notes and obligations
issued or guaranteed by the United States government, its agencies or
instrumentalities) if, as a result, more than 25% of total Fund assets would be
invested in any one industry.
(15) Purchase an industrial revenue bond if, as a result of such purchase, more
than 5% of total Fund assets would be invested in industrial revenue bonds where
the payment of principal and interest are the responsibility of companies with
less than three years of operating history.
OFFICERS AND DIRECTORS
The Board of Directors has the responsibility for the overall management of the
Fund, including general supervision and review of its investment activities. The
directors, in turn, elect the officers of the Fund who are responsible for
administering day-to-day operations of the Fund. The affiliations of the
officers and directors and their principal occupations for the past five years
are listed below. Directors who are deemed to be "interested persons" of the
Fund, as defined in the 1940 Act, are indicated by an asterisk (*).
NAME, AGE POSITIONS AND OFFICES PRINCIPAL OCCUPATIONS
AND ADDRESS WITH THE FUND DURING PAST FIVE YEARS
Frank H. Abbott, III (74)
1045 Sansome St.
San Francisco, CA 94111
Director
President and Director, Abbott Corporation (an investment company); and
director, trustee or managing general partner, as the case may be, of 31 of the
investment companies in the Franklin Group of Funds.
Harris J. Ashton (63)
General Host Corporation
Metro Center, 1 Station Place
Stamford, CT 06904-2045
Director
President, Chief Executive Officer and Chairman of the Board, General Host
Corporation (nursery and craft centers); Director, RBC Holdings, Inc. (a bank
holding company) and Bar-S Foods; and director, trustee or managing general
partner, as the case may be, of 56 of the investment companies in the Franklin
Templeton Group of Funds.
S. Joseph Fortunato (63)
Park Avenue at Morris County
P. O. Box 1945
Morristown, NJ 07962-1945
Director
Member of the law firm of Pitney, Hardin, Kipp & Szuch; Director of General Host
Corporation; director, trustee or managing general partner, as the case may be,
of 58 of the investment companies in the Franklin Templeton Group of Funds.
David W. Garbellano (80)
111 New Montgomery St., #402
San Francisco, CA 94105
Director
Private Investor; Assistant Secretary/Treasurer and Director, Berkeley Science
Corporation (a venture capital company); and director, trustee or managing
general partner, as the case may be, of 30 of the investment companies in the
Franklin Group of Funds.
*Charles B. Johnson (62)
777 Mariners Island Blvd.
San Mateo, CA 94404
Chairman of the Board and Director
President and Director, Franklin Resources, Inc.; Chairman of the Board and
Director, Franklin Advisers, Inc. and Franklin Templeton Distributors, Inc.;
Director, Franklin/Templeton Investor Services, Inc. and General Host
Corporation; and officer and/or director, trustee or managing general
partner, as the case may be, of most other subsidiaries of Franklin
Resources, Inc. and of 57 of the investment companies in the Franklin
Templeton Group of Funds.
*Rupert H. Johnson, Jr. (55)
777 Mariners Island Blvd.
San Mateo, CA 94404
President and Director
Executive Vice President and Director, Franklin Resources, Inc. and Franklin
Templeton Distributors, Inc.; President and Director, Franklin Advisers, Inc.;
Director, Franklin/Templeton Investor Services, Inc.; and officer and/or
director, trustee or managing general partner, as the case may be, of most other
subsidiaries of Franklin Resources, Inc. and of 43 of the investment companies
in the Franklin Templeton Group of Funds.
Frank W. T. LaHaye (66)
20833 Stevens Creek Blvd.
Suite 102
Cupertino, CA 95014
Director
General Partner, Peregrine Associates and Miller & LaHaye, which are General
Partners of Peregrine Ventures and Peregrine Ventures II (venture capital
firms); Chairman of the Board and Director, Quarterdeck Office Systems, Inc.;
Director, FischerImaging Corporation; and director or trustee, as the case may
be, of 26 of the investment companies in the Franklin Group of Funds.
Gordon S. Macklin (67)
8212 Burning Tree Road
Bethesda, MD 20817
Director
Chairman, White River Corporation (information services); Director, Fund
American Enterprises Holdings, Inc., Lockheed Martin Corporation, MCI
Communications Corporation, MedImmune, Inc. (biotechnology), InfoVest
Corporation (information services), and Fusion Systems Corporation (industrial
technology); and director, trustee or managing general partner, as the case may
be, of 53 of the investment companies in the Franklin Templeton Group of Funds;
and formerly held the following positions: Chairman, Hambrecht and Quist Group;
Director, H & Q Healthcare Investors; and President, National Association of
Securities Dealers, Inc..
Harmon E. Burns (50)
777 Mariners Island Blvd.
San Mateo, CA 94404
Vice President
Executive Vice President, Secretary and Director, Franklin Resources, Inc.;
Executive Vice President and Director, Franklin Templeton Distributors, Inc.;
Executive Vice President, Franklin Advisers, Inc.; Director, Franklin/Templeton
Investor Services, Inc.; officer and/or director, as the case may be, of other
subsidiaries of Franklin Resources, Inc.; and officer and/or director or trustee
of 43 of the investment companies in the Franklin Templeton Group of Funds.
Kenneth V. Domingues (63)
777 Mariners Island Blvd.
San Mateo, CA 94404
Vice President - Financial Reporting and Accounting Standards
Senior Vice President, Franklin Resources, Inc., Franklin Advisers, Inc., and
Franklin Templeton Distributors, Inc.; officer and/or director, as the case may
be, of other subsidiaries of Franklin Resources, Inc.; and officer and/or
managing general partner, as the case may be, of 37 of the investment companies
in the Franklin Group of Funds.
Martin L. Flanagan (35)
777 Mariners Island Blvd.
San Mateo, CA 94404
Vice President and Chief Financial Officer
Senior Vice President, Chief Financial Officer and Treasurer, Franklin
Resources, Inc.; Executive Vice President, Templeton Worldwide, Inc.; Senior
Vice President and Treasurer, Franklin Advisers, Inc. and Franklin Templeton
Distributors, Inc.; Senior Vice President, Franklin/Templeton Investor Services,
Inc.; officer of most other subsidiaries of Franklin Resources, Inc.; and
officer of 61 of the investment companies in the Franklin Templeton Group of
Funds.
Deborah R. Gatzek (46)
777 Mariners Island Blvd.
San Mateo, CA 94404
Vice President and Secretary
Senior Vice President - Legal, Franklin Resources, Inc. and Franklin
Templeton Distributors, Inc.; Vice President, Franklin Advisers, Inc. and
officer of 37 of the investment companies in the Franklin Group of Funds.
Thomas J. Kenny (32)
777 Mariners Island Blvd.
San Mateo, CA 94404
Vice President
Senior Vice President, Franklin Advisers, Inc. and officer of eight of the
investment companies in the Franklin Group of Funds.
Diomedes Loo-Tam (56)
777 Mariners Island Blvd.
San Mateo, CA 94404
Treasurer and Principal Accounting Officer
Employee of Franklin Advisers, Inc.; and officer of 37 of the investment
companies in the Franklin Group of Funds.
Edward V. McVey (58)
777 Mariners Island Blvd.
San Mateo, CA 94404
Vice President
Senior Vice President/National Sales Manager, Franklin Templeton Distributors,
Inc.; and officer of 32 of the investment companies in the Franklin Group of
Funds.
Richard C. Stoker (58)
11615 Spring Ridge Rd.
Potomac, Maryland 20854
Vice President
Senior Vice President, Franklin Templeton Distributors, Inc.; Vice President,
Franklin Management, Inc.; and officer of five of the funds in the Franklin
Group of Funds.
R. Martin Wiskemann (68)
777 Mariners Island Blvd.
San Mateo, CA 94404
Vice President
Senior Vice President, Portfolio Manager and Director, Franklin Advisers, Inc.;
Senior Vice President, Franklin Management, Inc.; Vice President, Treasurer and
Director, ILA Financial Services, Inc. and Arizona Life Insurance Company of
America; and officer and/or director, as the case may be, of 20 of the
investment companies in the Franklin Group of Funds.
Directors not affiliated with the Fund's investment manager ("nonaffiliated
directors")are currently paid fees of $100 per month plus $100 per meeting
attended. As indicated above, certain of the Fund's nonaffiliated directors also
serve as directors, trustees or managing general partners of other investment
companies in the Franklin Group of Funds(R) and the Templeton Group of Funds
(the "Franklin Templeton Group of Funds") from which they may receive fees for
their services. The following table indicates the total fees paid to
nonaffiliated directors by the Fund and by other funds in the Franklin Templeton
Group of Funds.
TOTAL FEES NUMBER OF BOARDS
RECEIVED FROM IN THE FRANKLIN
THE FRANKLIN TEMPLETON GROUP ON
TOTAL FEES TEMPLETON GROUP WHICH EACH
RECEIVED FROM OF FUNDS** SERVES***
NAME FUND*
Frank H. Abbott,III $2,400 $176,870 31
Harris J. Ashton $2,400 $319,925 56
S. Joseph Fortunato $2,400 $336,065 58
David W. Garbellano $2,400 $153,300 30
Frank W.T. LaHaye $2,300 $150,817 26
Gordon S. Macklin $2,400 $303,685 53
*For the fiscal year ended July 31, 1995.
**For the calendar year ended December 31, 1994.
***The number of boards is based on the number of registered investment
companies in the Franklin Templeton Group of Funds and does not include the
total number of series or funds within each investment company for which the
directors are responsible. The Franklin Templeton Group of Funds currently
includes 61 registered investment companies, consisting of more than 162 U.S.
based mutual funds or series.
Nonaffiliated directors are reimbursed for expenses incurred in connection with
attending board meetings, paid pro rata by each fund in the Franklin Templeton
Group of Funds for which they serve as director, trustee or managing general
partner. No officer or director received any other compensation directly from
the Fund. Certain officers or directors who are shareholders of Franklin
Resources, Inc. may be deemed to receive indirect remuneration by virtue of
their participation, if any, in the fees paid to its subsidiaries. For
additional information concerning director compensation and expenses, please see
the Fund's Annual Report to Shareholders.
As of September 5, 1995, the directors and officers, as a group, owned of record
and beneficially approximately 53,427 shares, or less than 1% of the total
outstanding shares of the Fund. Many of the Fund's directors also own shares in
other various funds in the Franklin Templeton Group of Funds. Charles B. Johnson
and Rupert H. Johnson, Jr. are brothers.
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.
INVESTMENT ADVISORY AND OTHER SERVICES
The investment manager of the Fund is Franklin Advisers, Inc. ("Advisers" or
"Manager"). Advisers is a wholly-owned subsidiary of Franklin Resources, Inc.
("Resources"), a publicly owned holding company whose shares are listed on the
New York Stock Exchange ("Exchange"). Resources owns several other subsidiaries
which are involved in investment management and shareholder services. The
Manager and other subsidiary companies of Resources currently manage over $125
billion in assets for over 3.8 million shareholder accounts. The preceding table
indicates those officers and directors who are also affiliated persons of
Distributors and Advisers.
Pursuant to the management agreement, the Manager provides investment research
and portfolio management services, including the selection of securities for the
Fund to purchase, hold or sell and the selection of brokers through whom the
Fund's portfolio transactions are executed. The Manager's extensive research
activities include, as appropriate, traveling to meet with issuers and to
scrutinize project sites. The Manager's activities are subject to the review and
supervision of the Fund's Board of Directors to whom the Manager renders
periodic reports of the Fund's investment activities. The Manager, at its own
expense, furnishes the Fund with office space and office furnishings, facilities
and equipment required for managing the business affairs of the Fund; maintains
all internal bookkeeping, clerical, secretarial and administrative personnel and
services; and provides certain telephone and other mechanical services. The
Manager is covered by fidelity insurance on its officers, directors and
employees for the protection of the Fund. The Fund bears all of its expenses not
assumed by the Manager.
See the Statement of Operations in the financial statements included in the
Fund's Annual Report to Shareholders for details of these expenses.
Pursuant to the management agreement, the Fund is obligated to pay the Manager a
daily fee (payable at the request of the Manager) computed at the rate of 1/584
of 1% (approximately 5/8 of 1% per year) of the daily net assets of the Fund at
the close of each business day on net assets up to and including $100 million;
plus 1/730 of 1% (approximately 1/2 of 1% per year) of average daily net assets
over $100 million up to and including $250 million; and 1/811 of 1%
(approximately 45/100 of 1% per year) of average daily net assets over $250
million.
The Manager agreed in advance to Limit its management fees and to assume
responsibility for making payments, is necessary, to offset certain operating
expenses otherwise payable by the Fund. This action by the Manager to limit its
management fees may be terminated by the Manager at any time. The management
agreement specifies that the management fee will be reduced to the extent
necessary to comply with the most stringent limits on the expenses which may be
borne by the Fund as prescribed by any state in which the Fund's shares are
offered for sale. The most stringent current limit requires the Manager to
reduce or eliminate its fee to the extent that aggregate operating expenses of
the Fund (excluding interest, taxes, brokerage commissions and extraordinary
expenses such as litigation costs) would otherwise exceed in any fiscal year
2.5% of the first $30 million of average net assets of the Fund, 2% of the next
$70 million of average net assets of the Fund and 1.5% of average net assets of
the Fund in excess of $100 million. Expense reductions have not been necessary
based on state requirements. For the fiscal years ended 1993, 1994 and 1995, the
management fees the Fund was contractually obligated to pay the Manager were
$1,068,821, $1,250,390 and $1,102,243, respectively, and the management fees
actually paid by the Fund for the same periods were $865,069, $886,611 and
$742,949, respectively.
The management agreement is in effect until February 29, 1996. Thereafter, it
may continue in effect for successive annual periods providing such continuance
is specifically approved at least annually by a vote of the Fund's Board of
Directors or by a vote of the holders of a majority of the Fund's outstanding
voting securities, and in either event by a majority vote of the Fund's
directors who are not parties to the management agreement or interested persons
of any such party (other than as directors of the Fund), cast in person at a
meeting called for that purpose.
The management agreement may be terminated without penalty at any time by the
Fund or by the Manager on 60 days' written notice and will automatically
terminate in the event of its assignment, as defined in the 1940 Act.
Franklin/Templeton Investor Services, Inc. ("Investor Services" or "Shareholder
Services Agent"), a wholly-owned subsidiary of Resources, is the shareholder
servicing agent for the Fund and acts as the Fund's transfer agent and
dividend-paying agent. Investor Services is compensated on the basis of a fixed
fee per account.
Bank of America NT & SA, 555 California Street, 4th Floor, San Francisco,
California, 94104, acts as custodian of the securities and other assets of the
Fund. Citibank Delaware, One Penn's Way, New Castle, Delaware 19720, acts as
custodian in connection with transfer services through bank automated clearing
houses. The custodians do not participate in decisions relating to the purchase
and sale of portfolio securities.
Coopers & Lybrand L.L.P., 333 Market Street, San Francisco, California 94105,
are the Fund's independent auditors. During the fiscal year ended July 31, 1995,
their auditing services consisted of rendering an opinion on the financial
statements of the Fund included in the Fund's Annual Report and this Statement
of Additional Information.
THE FUND'S POLICIES REGARDING
BROKERS USED ON PORTFOLIO TRANSACTIONS
As noted in the Prospectus, since most purchases by the Fund are principal
transactions at net prices, the Fund incurs little or no brokerage costs.
The Manager makes the investment decisions and arranges for the placement of buy
and sell orders and the execution of portfolio transactions for the Fund. In
executing portfolio transactions, the Manager seeks the most favorable prices
consistent with the best execution of the orders. So long as the Manager
believes it is obtaining the best execution, it will give consideration in
placing portfolio transactions to broker-dealers furnishing research,
statistical or factual information or wire or other services to the Fund or the
Manager, including appraisals or valuations of portfolio securities of the Fund.
While the information and services provided by broker-dealers are useful in
varying degrees and would generally reduce the amount of research or services
otherwise performed by the Manager and thus reduce its expenses, they are of
indeterminable value and will not reduce the management fee payable to the
Manager by the Fund.
Depending on the Manager's view of market conditions, the Fund may or may not
purchase securities with the expectation of holding them to maturity, although
its general policy is to hold securities to maturity. The Fund may, however,
sell securities prior to maturity to meet redemptions or as a result of a
revised management evaluation of the issuer. The Fund does not anticipate that
it will incur a significant amount of brokerage expense because brokerage
commissions are not normally incurred on investments in short- term money market
instruments which are generally traded on a "net" basis, that is, in principal
amounts without the addition or deduction of brokerage commissions or transfer
taxes.
Purchases of portfolio securities may be made directly from issuers or from
underwriters. Where possible, purchase and sale transactions will be effected
through dealers (including banks) which specialize in the types of securities
which the Fund will be holding, unless better executions are available
elsewhere. Dealers and underwriters usually act as principal for their own
account. Purchases from underwriters will include a concession paid by the
issuer to the underwriter and purchases from dealers will include the spread
between the bid and the ask price. If the execution and price offered by more
than one dealer or underwriter are comparable, the order may be allocated to a
dealer or underwriter which has provided such research or other services as
mentioned above. No broker or dealer affiliated with the Fund or with the
Manager may purchase securities from, or sell securities to, the Fund.
If purchases or sales of securities of the Fund and one or more other investment
companies or clients supervised by the Manager are considered at or about the
same time, transactions in such securities will be allocated among the several
investment companies and clients in a manner deemed equitable to all by the
Manager, taking into account the respective sizes of the funds and the amount of
securities to be purchased or sold. It is recognized that in some cases this
procedure could possibly have a detrimental effect on the price or volume of the
security so far as the Fund is concerned. In other cases it is possible that the
ability to participate in volume transactions and to negotiate lower brokerage
commissions will be beneficial to the Fund.
During the fiscal years ended July 31, 1993, 1994 and 1995, the Fund paid no
brokerage commissions. As of July 31, 1995 the Fund did not own securities of
its regular broker-dealers.
DETERMINATION OF NET ASSET VALUE
As noted in the Prospectus, the net asset value per share for purposes of both
purchase and redemption of shares is determined by the Fund on each day that the
Exchange is open for business. Valuation is currently made as of 3:00 p.m.
Pacific time. As of the date hereof, the Fund is informed that the Exchange
intends to close in observance of the following holidays: New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. Net asset value per share of the portfolio
is calculated by adding the value of all securities and other assets in the
portfolio, deducting its liabilities, and dividing by the number of shares
outstanding.
The valuation of the Fund's portfolio securities (including any securities held
in the separate account maintained for when-issued securities) is based upon
their amortized cost which does not take into account unrealized capital gains
or losses. This involves valuing an instrument at its cost and thereafter
assuming a constant amortization to maturity of any discount or premium,
regardless of the impact of fluctuating interest rates on the market value of
the instrument. While this method provides certainty in calculation, it may
result in periods during which value, as determined by amortized cost, is higher
or lower than the price the Fund would receive if it sold the instrument. During
periods of declining interest rates, the daily yield on shares of the Fund
computed as described above may tend to be higher than a like computation made
by a fund with identical investments utilizing a method of valuation based upon
market prices and estimates of market prices for all of its portfolio
instruments. Thus, if the use of amortized cost by the Fund resulted in a lower
aggregate portfolio value on a particular day, a prospective investor in the
Fund would be able to obtain a somewhat higher yield than would result from
investment in a fund utilizing solely market values, and existing investors in
the Fund would receive less investment income. The converse would apply in a
period of rising interest rates.
The Fund's use of amortized cost which facilitates the maintenance of the Fund's
per share net asset value of $1.00 is permitted by a Rule adopted by the SEC.
Pursuant to this rule, the Fund must adhere to certain conditions.
The Fund must maintain a dollar-weighted average portfolio maturity of 90 days
or less, only purchase instruments having remaining maturities of 397 calendar
days or less, and invest only in those United States dollar-denominated
instruments that the Board of Directors determines present minimal credit risks
and which are, as required by the federal securities laws, rated in one of the
two highest rating categories as determined by nationally recognized statistical
rating agencies, instruments deemed comparable in quality to such rated
instruments, or instruments, the issuers of which, with respect to an
outstanding issue of short-term debt that is comparable in priority and
protection, have received a rating within the two highest categories of
nationally recognized statistical rating agencies. As discussed in the
Prospectus, securities subject to floating or variable interest rates with
demand features in compliance with applicable rules of the SEC may have stated
maturities in excess of one year. The directors have agreed to establish
procedures designed to stabilize, to the extent reasonably possible, the Fund's
price per share as computed for the purpose of sales and redemptions at $1.00.
Such procedures will include review of the Fund's portfolio holdings by the
directors, at such intervals as they may deem appropriate, to determine whether
the Fund's net asset value calculated by using available market quotations
deviates from $1.00 per share based on amortized cost. The extent of any
deviation will be examined by the directors. If such deviation exceeds 1/2 of
1%, the directors will promptly consider what action, if any, will be initiated.
In the event the directors determine that a deviation exists which may result in
material dilution or other unfair results to investors or existing shareholders,
they will take such corrective action as they regard as necessary and
appropriate, which may include the sale of portfolio instruments prior to
maturity to realize capital gains or losses or to shorten average portfolio
maturity, withholding dividends, redemptions of shares in kind, or establishing
a net asset value per share by using available market quotations.
ADDITIONAL INFORMATION REGARDING
PURCHASES AND REDEMPTIONS OF FUND SHARES
EFFECTIVENESS OF PURCHASE ORDERS
The purchase price for shares of the Fund is the net asset value of such shares
next determined after receipt and acceptance of a purchase order in proper form.
Many of the types of instruments in which the Fund invests must be paid for in
federal funds, which are monies held by the custodian on deposit at the Federal
Reserve Bank of San Francisco and elsewhere. Therefore, the monies paid by an
investor for shares of the Fund generally cannot be invested by the Fund until
they are converted into and are available to the Fund in federal funds, which
may take up to two days. In such cases, purchases by investors may not be
considered in proper form and effective until such conversion and availability.
In the event the Fund is able to make investments immediately (within one
business day), however, it may accept a purchase order with payment other than
in federal funds; in such event shares of the Fund will be purchased at the net
asset value next determined after receipt of the order and payment. Once shares
of the Fund are purchased, they begin earning income immediately, and income
dividends will start being credited to the investor's account on the day
following the effective date of purchase and continue through the day all shares
in the account are redeemed.
Payments transmitted by wire and received by the custodian and reported by the
custodian to the Fund prior to 3:00 p.m. Pacific time on any business day are
normally effective on the same day as received. Wire payments received or
reported by the custodian to the Fund after that time will normally be effective
on the next business day. Payments transmitted by check or other negotiable bank
draft will normally be effective within two business days for checks drawn on a
member bank of the Federal Reserve System and longer for most other checks. All
checks are accepted subject to collection at full face value in United States
funds and must be drawn in United States dollars on a United States bank. Checks
drawn in United States funds on foreign banks will not be credited to the
shareholder's account and dividends will not begin accruing until the proceeds
are collected, which can take a long period of time. The Fund reserves the
right, in its sole discretion, to either (a) reject any order for the purchase
or sale of shares denominated in any other currency, or (b) to honor the
transaction or make adjustments to the shareholder's account for the transaction
as of a date and with a foreign currency exchange factor determined by the
drawee bank.
SHAREHOLDER ACCOUNTING
All purchases of Fund shares will be credited to the shareholder in full and
fractional shares of the Fund (rounded to the nearest 1/1000 of a share) in an
account maintained for the shareholder by the Fund's transfer agent. Share
certificates will not be issued unless requested in writing by the investor, and
no certificates will be issued for fractional shares at any time. No
certificates will be issued to shareholders who have elected redemption by check
or by preauthorized bank or brokerage firm account methods of withdrawing cash
from their accounts. To open an account in the name of a corporation, a
resolution of the corporation's Board of Directors will be required.
The Fund reserves the right to reject any order for the purchase of shares of
the Fund and to waive minimum investment requirements. In addition, the offering
of shares of the Fund may be suspended at any time and resumed at any time
thereafter.
SHAREHOLDER REDEMPTIONS
All requests for redemption, all share certificates and all share assignments
should be sent to the Fund, c/o Franklin/Templeton Investor Services, Inc., 777
Mariners Island Blvd., P.O. Box 7777, San Mateo, California 94403-7777.
Redemptions will be made in cash at the net asset value per share next
determined after receipt by the Fund of a redemption request in proper form,
including all share certificates, share assignments, signature guarantees, and
other documentation as may be required by the transfer agent. The amount
received upon redemption may be more or less than the shareholder's original
investment.
The Fund will make payment for all redemptions within seven days after receipt
of such redemption request in proper form. The Fund reserves the right, however,
to suspend redemptions or postpone the date of payment (1) for any periods
during which the Exchange is closed (other than for the customary weekend and
holiday closings), (2) when trading in the markets the Fund usually utilizes is
restricted or an emergency exists, as determined by the SEC, so that disposal of
the Fund's investments or the determination of the Fund's net asset value is not
reasonably practicable, or (3) for such other periods as the SEC, by order, may
permit for the protection of the Fund's shareholders.
In connection with exchanges (see Prospectus "Exchange Privilege"), it should be
noted that since the proceeds from the sale of shares of an investment company
generally are not available until the fifth business day following the
redemption, the funds into which the Fund shareholders are seeking to exchange
reserve the right to delay issuing shares pursuant to an exchange until said
fifth business day. The redemption of shares of the Fund to complete an exchange
for shares of any of the investment companies will be effected at the close of
business on the day the request for exchange is received in proper form at the
net asset value then effective.
Use of the exchange privilege in conjunction with market timing services offered
through numerous securities dealers has become increasingly popular as a means
of capital management. In the event that a substantial portion of the Fund's
shareholders should, within a short period, elect to redeem their shares of the
Fund pursuant to the exchange privilege, the Fund might have to liquidate
portfolio securities it might otherwise hold and incur the additional costs
related to such transactions.
REDEMPTIONS IN KIND
The Fund has committed itself to pay in cash (by check) all requests for
redemption by any shareholder of record, limited in amount, however, during any
90-day period to the lesser of $250,000 or 1% of the value of the Fund's net
assets at the beginning of such period. Such commitment is irrevocable without
the prior approval of the SEC. In the case of requests for redemption in excess
of such amounts, the directors reserve the right to make payments in whole or in
part in securities or other assets of the Fund from which the shareholder is
redeeming in case of an emergency, or if the payment of such a redemption in
cash would be detrimental to the existing shareholders of the Fund. In such
circumstances, the securities distributed would be valued at the price used to
compute the Fund's net assets. Should the Fund do so, a shareholder may incur
brokerage fees in converting the securities to cash.
REDEMPTIONS BY THE FUND
Due to the relatively high cost of handling small investments, the Fund reserves
the right to redeem, involuntarily, at net asset value, the shares of any
shareholder whose account has a value of less than one-half of the initial
minimum investment required for that shareholder, but only where the value of
such account has been reduced by prior voluntary redemption of shares. Until
further notice, it is the present policy of the Fund not to exercise this right
with respect to any shareholder whose account has a value of $250 or more. In
any event, before the Fund redeems such shares and sends the proceeds to the
shareholder, it will notify the shareholder that the value of the shares in the
account is less than the minimum amount and allow the shareholder 30 days to
make an additional investment in an amount which will increase the value of the
account to at least $500.
REPORTS TO SHAREHOLDERS
The Fund sends annual and semi-annual reports to its shareholders regarding the
Fund's performance and its portfolio holdings. Shareholders who would like to
receive an interim quarterly report may phone Fund Information at 1-800 DIAL
BEN.
SPECIAL SERVICES
The Fund's Shareholder Services Agent may charge separate fees to shareholders,
to be negotiated directly with such shareholders, for providing special services
in connection with their accounts, such as processing a large number of checks
each month. Such fees for special services to such shareholders will not
increase the expenses borne by the Fund.
As noted in the Prospectus, special procedures have been designed for banks and
other institutions wishing to open multiple accounts in the Fund. The
institution may open a single master account by filing one application form with
the Fund, signed by personnel authorized to act for the institution. Individual
sub-accounts may be opened at the time the master account is filed by listing
them or they may be added at a later date by written advice or by filing forms
supplied by the Fund. These sub-accounts may be established by the institution
with registration either by name or number. The investment minimums applicable
to the Fund are applicable to each sub-account. The Fund will provide each
institution with a written confirmation for each transaction in a sub-account
and arrangements may be made at no additional charge for the transmittal of
duplicate confirmations to the beneficial owner of the sub-account. Further, the
Fund will provide to each institution, on a quarterly basis, or more frequently
as requested, a statement which will set forth each sub-account's share balance,
income earned for the period, income earned for the year to date, and total
current market value.
The Franklin Templeton Institutional Services Department provides specialized
services, including recordkeeping, for institutional investors of the Fund.
The cost of these services is not borne by the Fund.
Investor Services may pay certain financial institutions which maintain omnibus
accounts with the Fund on behalf of numerous beneficial owners for recordkeeping
operations performed with respect to such beneficial owners. For each beneficial
owner in the omnibus account, the Fund may reimburse Investor Services an amount
not to exceed the per account fee which the Fund normally pays Investor
Services. Such financial institutions may also charge a fee for their services
directly to their clients.
ADDITIONAL INFORMATION
REGARDING DISTRIBUTIONS AND TAXES
DISTRIBUTIONS
Distributions and distribution adjustments resulting from realized gains and
losses on the sale of portfolio securities or from unrealized appreciation or
depreciation in the value of portfolio securities are required to maintain a
$1.00 net asset value and may result in under or over distributions of
investment company taxable income or net tax-exempt income.
The Fund may derive capital gains and losses in connection with sales or other
dispositions of its portfolio securities. However, because the Fund's portfolio
under normal circumstances is composed of short-term securities, the Fund does
not expect to realize any long-term capital gains or losses. Any net short-term
or long-term capital gains which are realized by the Fund (adjusted for any
daily amounts of unrealized appreciation or depreciation reported above and
taking into account any capital loss carryovers) will generally be distributed
once each year and may be distributed more frequently if necessary in order to
avoid federal excise taxes. Any distribution of capital gains will also be
reinvested in the form of additional shares at net asset value, unless the
shareholder has previously elected on the Shareholder Application or filed
written instructions with the Fund's transfer agent to have them paid in cash.
As noted in the Prospectus, the Fund declares dividends for each day that the
Fund's net asset value is calculated equal to all of its daily net interest
income, payable to shareholders of record as of the close of business the
preceding day.
Shareholders who so request may have their dividends paid out monthly in cash.
The shares reinvested and credited to their account during the month will be
redeemed as of the close of business on the last bank business day of the month
and the proceeds will be paid to them in cash. If a shareholder withdrew the
entire amount in his account at any time during the month, all dividends accrued
with respect to his account during the month to the time of withdrawal would be
paid in the same manner and at the same time as the proceeds of withdrawal. Each
Fund shareholder will receive a monthly summary of his account, including
information as to dividends reinvested or paid.
The Board of Directors reserves the right to revise the above dividend policy or
postpone the payment of dividends, if warranted in their judgment, due to
unusual circumstances such as a large expense, loss or unexpected fluctuation in
net assets.
Dividend checks which are returned to the Fund marked "unable to forward" by the
postal service will be deemed to be a request to change the dividend option and
the proceeds will be reinvested in additional shares until new instructions are
received.
The Fund may deduct from a shareholder's account the costs of its efforts to
locate the shareholder if the shareholder's mail is returned as undeliverable or
the Fund is otherwise unable to locate the shareholder or verify the current
mailing address. These costs may include a percentage of the account when a
search company charges a percentage fee in exchange for its location services.
ADDITIONAL INFORMATION ON TAXATION
As stated in the Prospectus, the Fund has elected to be treated as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986, as
amended ("Code"). The directors reserve the right not to maintain the
qualification of the Fund as a regulated investment company if they determine
such course of action to be beneficial to shareholders. In such case, the Fund
will be subject to federal and possibly state corporate taxes on its taxable
income and gains, to the alternative minimum tax on a portion of its tax-exempt
income, and distributions (including tax-exempt interest dividends) to
shareholders will be taxable to the extent of the Fund's available earnings and
profits.
Distributions derived from the excess of net long-term capital gain over net
short-term capital loss, if any, are treated as long-term capital gain
regardless of the length of time the shareholder has owned Fund shares and
regardless of whether such distributions are received in cash or in additional
shares.
From time to time, the Fund may purchase a tax-exempt obligation with market
discount--that is, for a price that is less than the principal amount of the
bond--or for a price that is less than the principal amount of the bond where
the bond was issued with original issue discount and such discount exceeds a de
minimis amount under the Code. For such obligations purchased after April 30,
1993, with a fixed maturity exceeding one year from the date of issue, a portion
of the gain (not to exceed the accrued portion of market discount as of the time
of sale or disposition) is treated as ordinary income rather than capital gain.
Any distribution by the Fund of such ordinary income to its shareholders will be
subject to regular income tax in the hands of Fund shareholders. In any fiscal
year, the Fund may elect not to distribute to its shareholders its taxable
ordinary income and to instead pay federal income or excise taxes on this income
at the Fund level. The amount of such distributions, if any, is expected to be
small.
Persons who are defined in the Code as "substantial users" (or related persons)
of facilities financed by private activity bonds should consult with their tax
advisors before purchasing shares of the Fund.
The Code requires all funds to distribute at least 98% of their taxable ordinary
income earned during the calendar year and at least 98% of their capital gain
net income earned during the twelve-month period ending October 31 of each year
(in addition to amounts from the prior year that were neither distributed nor
taxed to the Fund) to shareholders by December 31 of each year in order to avoid
the imposition of a federal excise tax. Under these rules, certain distributions
which are declared in October, November or December but which, for operational
reasons, may not be paid to the shareholder until the following January, will be
treated for tax purposes as if paid by the Fund and received by the shareholder
on December 31 of the calendar year in which they are declared. The Fund
intends, as a matter of policy, to declare and pay such dividends, if any, in
December to avoid the imposition of this tax, but does not guarantee that its
distributions will be sufficient to avoid any or all federal excise taxes.
Redemptions and exchanges of Fund shares are taxable events on which a
shareholder may realize a gain or loss. Any loss incurred on sale or exchange of
the Fund's shares, held for six months or less, will be disallowed to the extent
of exempt interest dividends paid with respect to such shares. However, since
the Fund seeks to maintain a constant $1.00 share price for both purchases and
redemptions, shareholders are not expected to realize a capital gain or loss
upon sale.
THE FUND'S UNDERWRITER
Pursuant to an underwriting agreement in effect until February 29, 1996,
Distributors acts as principal underwriter in a continuous public offering for
shares of the Fund.
Distributors pays the expenses of distribution of Fund shares, including
advertising expenses and the costs of printing sales material and prospectuses
used to offer shares to the public. The Fund pays the expenses of preparing and
printing amendments to its registration statements and prospectuses (other than
those necessitated by the activities of Distributors) and of sending
prospectuses to existing shareholders.
The underwriting agreement will continue in effect for successive annual periods
provided that its continuance is specifically approved at least annually by a
vote of the Fund's Board of Directors or by a vote of the holders of a majority
of the Fund's outstanding voting securities, and in either event by a majority
vote of the Fund's directors who are not parties to the underwriting agreement
or interested persons of any such party (other than as directors of the Fund),
cast in person at a meeting called for that purpose. The underwriting agreement
terminates automatically in the event of its assignment and may be terminated by
either party on 90 days' written notice.
GENERAL INFORMATION
PERFORMANCE
As noted in the Prospectus, the Fund may from time to time quote various
performance figures to illustrate the Fund's past performance.
CURRENT YIELD
Current yield reflects the interest income per share earned by the Fund's
portfolio investments.
Current yield is computed by determining the net change, excluding capital
changes, in the value of a hypothetical pre-existing account having a balance of
one share at the beginning of the period, subtracting a hypothetical charge
reflecting deductions from shareholder accounts, and dividing the difference by
the value of the account at the beginning of the base period to obtain the base
period return, and then annualizing the result by multiplying the base period
return by (365/7).
The yield for the Fund for the seven-day period ended on July 31, 1995 was
3.09%.
EFFECTIVE YIELD
Effective yield is computed in the same manner except that the annualization of
the return for the seven-day period reflects the results of compounding by
adding one to the base period return, raising the sum to a power equal to 365
divided by seven, and subtracting one from the result.
Effective yield for the Fund for the seven-day period ended on the July 31, 1995
was 3.14%.
This figure was obtained using the SEC formula:
Effective Yield = [(Base Period Return + 1)365/7]-1
TAX EQUIVALENT YIELD
The Fund may also quote tax equivalent yield and tax equivalent effective yield
which demonstrate the taxable yield necessary to produce an after-tax yield
equivalent to that of a fund which invests in tax-exempt obligations. Such
yields are computed by dividing that portion of the yield of the Fund (computed
as indicated above) which is tax-exempt by one minus the highest applicable
income tax rate and adding the product to that portion of the yield of the Fund
that is not tax-exempt, if any. The tax equivalent yield based on the current
yield of the Fund for the seven-day period ended on July 31, 1995 was 5.12%. The
tax equivalent effective yield based on the effective yield of the Fund for the
seven-day period ended on July 31, 1995 was 5.20%. The advertised tax-equivalent
yield will reflect the most current federal tax rates available to the Fund.
COMPARISONS
To help investors better evaluate how an investment in the Fund might satisfy
their investment objective, advertisements and other materials regarding the
Fund may discuss various measures of Fund performance as reported by various
financial publications. Materials may also compare performance (as calculated
above) to performance as reported by other investments, indices, and averages.
Such comparisons may include, but are not limited to, the following examples:
a) IBC/Donoghue's Money Fund Report(R) - Industry averages for seven-day
annualized and compounded yields of taxable, tax-free, and government money
funds.
b) Bank Rate Monitor - A weekly publication which reports various bank
investments such as CD rates, average savings account rates and average loan
rates.
c) Lipper - Mutual Fund Performance Analysis, Lipper Fixed-Income Fund
Performance Analysis, and Lipper Mutual Fund Yield Survey - measure total return
and average current yield for the mutual fund industry. Rank individual mutual
fund performance over specified time periods assuming reinvestment of all
distributions, exclusive of any applicable sales charges.
d) Salomon Brothers Bond Market Roundup - A weekly publication which reviews
yield spread changes in the major sectors of the money, government agency,
futures, options, mortgage, corporate, Yankee, Eurodollar, municipal, and
preferred stock markets and summarizes changes in banking statistics and reserve
aggregates.
Advertisements or information may also compare the Fund's performance to the
return on certificates of deposit or other investments. Investors should be
aware, however, that an investment in the Fund involves the risk of fluctuation
of principal value, a risk generally not present in an investment in a
certificate of deposit issued by a bank. For example, as the general level of
interest rates rise, the value of the Fund's fixed-income investments, as well
as the value of its shares which are based upon the value of such portfolio
investments, can be expected to decrease. Conversely, when interest rates
decrease, the value of the Fund's shares can be expected to increase.
Certificates of deposit are frequently insured by an agency of the U.S.
government. An investment in the Fund is not insured by any federal, state or
private entity.
In assessing such comparisons of performance, an investor should keep in mind
that the composition of the investments in the reported indices and averages is
not identical to the Fund's portfolio, that the indices and averages are
generally unmanaged, and that the items included in the calculations of such
averages may not be identical to the formula used by the Fund to calculate its
figures. In addition, there can be no assurance that the Fund will continue this
performance as compared to such other averages.
The Fund may include in its advertising or sales material information relating
to investment objectives and performance results of funds belonging to the
Templeton Group of Funds. Resources is the parent company of the advisers and
underwriter of both the Franklin Group of Funds and Templeton Group of Funds.
OTHER FEATURES AND BENEFITS
The Fund may help investors achieve various investment goals such as
accumulating money for retirement, saving for a down payment on a home, college
costs and/or other long-term goals. The Franklin College Costs Planner may
assist an investor in determining how much money must be invested on a monthly
basis in order to have a projected amount available in the future to fund a
child's college education. (Projected college costs estimates are based upon
current costs published by the College Board.) The Franklin Retirement Income
Planning Guide leads an investor through the steps to start a retirement savings
program. Of course, an investment in the Fund cannot guarantee that such goals
will be met.
MISCELLANEOUS INFORMATION
The Fund is a member of the Franklin Group of Funds one of the largest mutual
fund organizations in the United States and may be considered in a program for
diversification of assets. Founded in 1947, Franklin, one of the oldest mutual
fund organizations, has managed mutual funds for over 47 years and now services
more than 2.4 million shareholder accounts. In 1992, Franklin, a leader in
managing fixed-income mutual funds and an innovator in creating domestic equity
funds, joined forces with Templeton Worldwide, Inc., a pioneer in international
investing. Together, the Franklin Templeton Group has over $128 billion in
assets under management for more than 3.8 million shareholder accounts and
offers 114 U.S.-based mutual funds. The Fund may identify itself by its NASDAQ
symbol or CUSIP number.
The Dalbar Surveys, Inc. broker/dealer survey has ranked Franklin number one
in service quality for five of the past seven years.
From time to time advertisements or sales material issued by the Fund may
discuss or be based upon information in a recent issue of the Special Report on
Tax Freedom Day published by the Tax Foundation, a Washington, D.C. based
nonprofit, research and public education organization. The report illustrates,
among other things, the amount of time, on an annual basis, the average taxpayer
works to satisfy his or her tax obligations to the federal, state and local
taxing authorities.
Access persons of the Franklin Templeton Group, as defined in SEC Rule 17(j)
under the 1940 Act, who are employees of Resources or its subsidiaries, are
permitted to engage in personal securities transactions subject to the following
general restrictions and procedures: (1) The trade must receive advance
clearance from a Compliance Officer and must be completed within 24 hours after
this clearance; (2) Copies of all brokerage confirmations must be sent to the
Compliance Officer and within 10 days after the end of each calendar quarter, a
report of all securities transactions must be provided to the Compliance
Officer; (3) In addition to items (1) and (2), access persons involved in
preparing and making investment decisions must file annual reports of their
securities holdings each January and also inform the Compliance Officer (or
other designated personnel) if they own a security that is being considered for
a fund or other client transaction or if they are recommending a security in
which they have an ownership interest for purchase or sale by a fund or other
client.
OWNERSHIP AND AUTHORITY DISPUTES
In the event of disputes involving multiple claims of ownership or authority to
control a shareholder's account, the Fund has the right (but has no obligation)
to: (a) freeze the account and require the written agreement of all persons
deemed by the Fund to have a potential property interest in the account, prior
to executing instructions regarding the account; (b) interplead disputed funds
or accounts with a court of competent jurisdiction; or (c) surrender ownership
of all or a portion of the account to the Internal Revenue Service in response
to a Notice of Levy.
APPENDIX
MUNICIPAL BONDS
MOODY'S INVESTORS SERVICES ("MOODY'S")
AAA: Municipal bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
AA: Municipal bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A: Municipal bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment sometime in the
future.
BAA: Municipal bonds which are rated Baa are considered as medium grade
obligations; i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Note: Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
classification from Aa through B in its municipal bond ratings. The modifier 1
indicates that the security ranks in the higher end of its generic rating
category. The modifier 2 indicates a mid-range ranking; and modifier 3 indicates
that the issue ranks in the lower end of its generic rating category.
STANDARD & POOR'S CORPORATION ("S&P")
AAA: This is the highest rating assigned by S&P to a debt obligation and
indicates an extremely strong capacity to pay principal and interest.
AA: Municipal bonds rated AA also qualify as high quality debt obligations.
Capacity to pay principal and interest is very strong, and in the majority of
instances they differ from AAA issues only in small degree.
A: Municipal bonds rated A have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.
BBB: Municipal bonds rated BBB are regarded as having an adequate capacity to
pay principal and interest. Whereas they normally exhibit protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay principal and interest for bonds in this category
than for bonds in the A category.
NOTE: The S&P ratings may be modified by the addition of a plus (+) or minus (-)
sign to show relative standing within the major rating categories.
FITCH INVESTORS SERVICE ("FITCH")
AAA BONDS: (highest quality) "the obligor has an extraordinary ability to pay
interest and repay principal which in unlikely to be affected by reasonably
foreseeable events."
AA BONDS: (high quality) "the obligor's ability to pay interest and repay
principal, while very strong, is somewhat less than for AAA-rated securities or
more subject to possible change over the term of the issue."
A BONDS: (good quality) "the obligor's ability to pay interest and repay
principal is strong, but may be more vulnerable to adverse changes in economic
conditions and circumstances than bonds with higher ratings."
BBB BONDS: (satisfactory bonds) "the obligor's ability to pay interest and repay
principal is considered to be adequate. Adverse changes in economic conditions
and circumstances, however, are more likely to weaken this ability than bonds
with higher ratings."
MUNICIPAL NOTES
MOODY'S
Moody's ratings for state, municipal and other short-term obligations will be
designated Moody's Investment Grade ("MIG"). This distinction is in recognition
of the differences between short-term credit risk and long-term risk. Factors
affecting the liquidity of the borrower are uppermost in importance in
short-term borrowing, while various factors of the first importance in long-term
borrowing risk are of lesser importance in the short run. Symbols used will be
as follows:
MIG-1: Notes are of the best quality, enjoying strong protection from
established cash flows of funds for their servicing or from established and
broadbased access to the market for refinancing, or both.
MIG-2: Notes are of high quality, with margins of protection ample, although not
so large as in the preceding group.
MIG-3: Notes are of favorable quality, with all security elements accounted for,
but lacking the undeniable strength of the preceding grades. Market access for
refinancing, in particular, is likely to be less well established.
MIG-4: Notes are of adequate quality, carrying specific risk but having
protection and not distinctly or predominantly speculative.
S&P
Until June 29, 1984, S&P used the same rating symbols for notes and bonds. After
June 29, 1984, for new municipal note issues due in three years or less, the
ratings below usually will be assigned. Notes maturing beyond three years will
most likely receive a bond rating of the type recited above.
SP-1: Issues carrying this designation have a very strong or strong capacity to
pay principal and interest. Issues determined to possess overwhelming safety
characteristics will be given a "plus" (+) designation.
SP-2: Issues carrying this designation have a satisfactory capacity to pay
principal and interest.
COMMERCIAL PAPER
MOODY'S
Moody's Commercial Paper ratings, which are also applicable to municipal paper
investments permitted to be made by the Trust, are opinions of the ability of
issuers to repay punctually their promissory obligations not having an original
maturity in excess of nine months. Moody's employs the following designations,
all judged to be investment grade, to indicate the relative repayment capacity
of rated issuers:
P-1 (PRIME-1): Superior capacity for repayment.
P-2 (PRIME-2): Strong capacity for repayment.
S&P
S&P's ratings are a current assessment of the likelihood of timely payment of
debt having an original maturity of no more than 365 days. Ratings are graded
into four categories, ranging from "A" for the highest quality obligations to
"D" for the lowest. Issues within the "A" category are delineated with the
numbers 1, 2, and 3 to indicate the relative degree of safety, as follows:
A-1: This designation indicates the degree of safety regarding timely payment is
very strong. A plus (+) designation indicates an even stronger likelihood of
timely payment.
A-2: Capacity for timely payment on issues with this designation is strong. The
relative degree of safety, however, is not as overwhelming as for issues
designated A-1.
A-3: Issues carrying this designation have a satisfactory capacity for timely
payment. They are, however, somewhat more vulnerable to the adverse effects of
changes in circumstances than obligations carrying the higher designations.
FITCH'S SHORT-TERM AND COMMERCIAL PAPER RATINGS
Fitch's short-term ratings apply to debt obligations that are payable on demand
or have original maturities of generally up to three years, including commercial
paper, certificates of deposit, medium-term notes, and municipal and investment
notes. The short-term rating places greater emphasis than a long-term rating on
the existence of liquidity necessary to meet the issuer's obligations in a
timely manner.
F-1+: Exceptionally strong credit quality. Regarded as having the strongest
degree of assurance for timely payment.
F-1: Very strong credit quality. Reflects an assurance of timely payment only
slightly less in degree than issues rated F-1+.
F-2: Good credit quality. A satisfactory degree of assurance for timely payment,
but the margin of safety is not as great as for issues assigned F-1+ and F-1
ratings.
LOC: The symbol LOC indicates that the rating is based on a letter of credit
issued by a commercial bank.
FINANCIAL STATEMENTS
The financial statements contained in the Annual Report to Shareholders of the
Fund dated July 31, 1995 are incorporated herein by reference.
FRANKLIN TAX-EXEMPT MONEY FUND
File Nos. 2-72614
& 811-3193
FORM N-1A
PART C
Other Information
Item 24 Financial Statements and Exhibits
a) Financial Statements incorporated herein by reference to the Annual
Report to Shareholders dated July 31, 1995, as filed with the SEC
electronically on Form Type N-30D on September 28, 1995.
(i) Report of Independent Auditors - August 31, 1995
(ii) Statement of Investments in Securities and Net Assets, July
31, 1995.
(iii)Statement of Assets and Liabilities - July 31, 1995.
(iv) Statement of Operations - for the year ended July 31, 1995.
(v) Statements of Changes in Net Assets - for the years ended
July 31, 1995 and 1994.
(vi) Notes to Financial Statements
b) Exhibits: The following exhibits are attached herewith, except
exhibit 8(iii) which is incorporated by reference as noted.
(1) copies of the charter as now in effect;
(i) Articles of Incorporation dated March 17, 1980
(ii) Certificate of Amendment to Articles of Incorporation dated
July 14, 1981
(iii)Certificate of Amendment to Articles dated August 27, 1993
(2) copies of the existing By-Laws or instruments corresponding
thereto;
(i) By-Laws
(ii) Amendment to By-Laws dated November 17, 1987
(3) copies of any voting trust agreement with respect to more than
five percent of any class of equity securities of the Registrant;
N/A
(4) specimens or copies of each security issued by the Registrant,
including copies of all constituent instruments, defining the
rights of the shareholders of such securities, and copies of each
security being registered;
N/A
(5) copies of all investment advisory contracts relating to the
management of the assets of the Registrant;
(i) Management Agreement between Registrant and Franklin
Advisers, Inc. dated December 1, 1986
(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) Distribution Agreement between Registrant and
Franklin/Templeton Distributors, Inc. dated August 11, 1993
(ii) Forms of Dealer Agreements between Franklin/Templeton
Distributors, Inc. and Securities Dealers
(7) copies of all bonus, profit sharing, pension or other similar
contracts or arrangements wholly or partly for the benefit of
directors or officers of the Registrant in their capacity as
such; any such plan that is not set forth in a formal document,
furnish a reasonably detailed description thereof;
N/A
(8) copies of all custodian agreements and depository contracts under
Section 17(f) of the 1940 Act, with respect to securities and
similar investments of the Registrant, including the schedule of
renumeration;
(i) Custodian Agreement between Registrant and Bank of America
NT & SA dated December 1, 1982
(ii) Amendment to Custodian Agreement between Registrant and Bank
of America NT & SA dated April 2, 1990
(iii)Copy of Custodian Agreements between Registrant and Citibank
Delaware
1. Citicash Management ACH Customer Agreement
2. Citibank Cash Management Services Master Agreement
3. Short Form Bank Agreement - Deposits and
Disbursements of Funds
Registrant: Franklin Premier Return Fund
Filing: Post-Effective Amendment No. 54 to Registration
Statement on Form N-1A
File No. 2-12647
Filing Date: February 27, 1995
(iv) Amendment to Custodian Agreement between Registrant and Bank
of America NT & SA dated April 12, 1995
(9) copies of all other material contracts not made in the ordinary
course of business which are to be performed in whole or in part
at or after the date of filing the Registration Statement;
N/A
(10) an opinion and consent of counsel as to the legality of the
securities being registered, indicating whether they will when
sold be legally issued, fully paid and nonassessable;
(i) Opinion and Consent of Counsel dated September 21, 1995
(11) copies of any other opinions, appraisals or rulings and consents
to the use thereof relied on in the preparation of this
registration statement and required by Section 7 of the 1933 Act;
(i) Consent of Independent Auditors dated September 27, 1995
(12) all financial statements omitted from Item 23;
N/A
(13) copies of any agreements or understandings made in consideration
for providing the initial capital between or among the
Registrant, the underwriter, adviser, promoter or initial
stockholders and written assurances from promoters or initial
stockholders that their purchases were made for investment
purposes without any present intention of redeeming or reselling;
(i) Letter of Understanding dated July 14, 1981
(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;
N/A
(15) copies of any plan entered into by Registrant pursuant to Rule
12b-1 under the 1940 Act, which describes all material aspects of
the financing of distribution of Registrant's shares, and any
agreements with any person relating to implementation of such
plan.
N/A
(16) schedule for computation of each performance quotation provided
in the registration statement in response to Item 22 (which need
not be audited).
(i) Schedule for computation of performance quotation
(17) Power of Attorney
(i) Power of Attorney dated September 18, 1995
(ii) Certificate of Secretary dated September 18, 1995
(27) Financial Data Schedule Computation
(i) Financial Data Schedule
Item 25 Persons Controlled by or under Common Control with Registrant
None
Item 26 Number of Holders of Securities
As of July 31, 1995, the number of record holders of the only class of
securities of the Registrant was as follows:
Number of
Title of Class Record Holders
Capital Stock 12,929
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 securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court or appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
Notwithstanding the provisions contained in the Registrant's By-Laws,
in the absence of authorization by the appropriate court as set forth in
Section 6(c) of Article VI of said By-Laws, any indemnification under said
Article shall be made by Registrant only if authorized in the manner provided
in either subsection (a) or (d) of said Section 6 of Article VI.
Item 28 Business and Other Connections of Investment Adviser
Certain of the officers and directors of the Registrant's investment
adviser also serve as officers and/or directors for (i) the adviser's
corporate parent, Franklin Resources, Inc., and/or other subsidiaries of
Franklin Resources, Inc., and/or (ii) other investment companies in the
Franklin Group of Funds. In addition, Mr. Charles B. Johnson is a director
of General Host Corporation.
Item 29 Principal Underwriters
a) Franklin/Templeton Distributors, Inc., ("Distributors") also acts as
principal underwriter of shares of Franklin Gold Fund, Franklin Premier
Return Fund, Franklin Equity Fund, AGE High Income Fund, Inc., Franklin
Custodian Funds, Inc., Franklin Money Fund, Franklin Templeton Money Fund
Trust, Franklin California Tax-Free Income Fund, Inc., Franklin Federal Money
Fund, Franklin California Tax-Free Trust, Franklin New York Tax-Free Income
Fund, Inc., Franklin Federal Tax-Free Income Fund, Franklin Tax-Free Trust,
Franklin New York Tax-Free Trust, Franklin Investors Securities Trust,
Institutional Fiduciary Trust, Franklin Balance Sheet Investment Fund,
Franklin Tax-Advantaged International Bond Fund, Franklin Tax-Advantaged U.S.
Government Securities Fund, Franklin Tax-Advantaged High Yield Securities
Fund, Franklin Municipal Securities Trust, Franklin Managed Trust, Franklin
Strategic Series, Franklin International Trust, Franklin Real Estate
Securities Trust, Franklin/Templeton Global Trust, Franklin Templeton Japan
Fund, 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
Growth Fund, Inc., Templeton Income Trust, Templeton Institutional Funds,
Inc., Templeton Real Estate Securities Fund, Templeton Smaller Companies
Growth Fund, Inc., and 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 the Registrant.
Item 31 Management Services
There are no management-related service contracts not discussed in Part
A or Part B.
Item 32 Undertakings
(a) The Registrant hereby undertakes to promptly call a meeting of
shareholders for the purpose of voting upon the question of removal of any
director or directors when requested in writing to do so by the recordholders
of not less than 10 per cent of the Registrant's outstanding shares and to
assist its shareholders in the communicating with other shareholders in
accordance with the requirements of Section 16(c) of the Investment Company
Act of 1940.
(b) The Registrant hereby undertakes to comply with the information
requirement in Item 5A of the Form N-1A by including the required information
in the Fund's annual report and to furnish each person the whom a prospectus
is delivered a copy of the annual report upon request and without charge.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized in the City of San Mateo and the State of
California, on the 29th day of September, 1995.
FRANKLIN TAX-EXEMPT 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.* Principal Executive Officer
Rupert H. Johnson, Jr. and Director
Dated: September 29, 1995
Charles B. Johnson* Director
Charles B. Johnson Dated: September 29, 1995
Kenneth V. Domingues* Principal Accounting Officer
Kenneth V. Domingues and Financial Officer
Dated: September 29, 1995
Frank H. Abbott III* Director
Frank H. Abbott III Dated: September 29, 1995
Harris J. Ashton* Director
Harris J. Ashton Dated: September 29, 1995
S. Joseph Fortunato* Director
S. Joseph Fortunato Dated: September 29, 1995
David W. Garbellano* Director
David W. Garbellano Dated: September 29, 1995
Frank W.T. LaHaye* Director
Frank W.T. LaHaye Dated: September 29, 1995
Gordon Macklin* Director
Gordon Macklin Dated: September 29, 1995
*By /s/ Larry L. Greene
Larry L. Greene, Attorney-in-Fact
(Pursuant to Power of Attorney filed herewith)
FRANKLIN TAX-EXEMPT MONEY FUND
REGISTRATION STATEMENT
EXHIBITS INDEX
EXHIBIT NO. DESCRIPTION LOCATION
EX-99.B1(i) Articles of Incorporation dated Attached
March 17, 1980
EX-99.B1(ii) Certificate of Amendment to Attached
Articles of Incorporation dated
July 14, 1981
EX-99.B1(iii) Certificate of Amendment to Attached
Articles of Incorporation dated
August 27, 1993
EX-99.B2(i) By-Laws Attached
EX-99.B2(ii) Amendment to By-Laws dated November Attached
17, 1987
EX-99.B5(i) Management Agreement between Attached
Registrant and Franklin Advisers,
Inc. dated December 1, 1986
EX-99.B6(i) Distribution Agreement between Attached
Registrant and Franklin/Templeton
Distributors, Inc. dated August 11,
1993
EX-99.B6(ii) Forms of Dealer Agreements between Attached
Franklin/Templeton Distributors,
Inc. and Securities Dealers
EX-99.B8(i) Custodian Agreement between Attached
Registrant and Bank of America NT &
SA dated December 1, 1982
EX-99.B8(ii) Amendment to Custodian Agreement Attached
between Registrant and Bank of
America NT & SA dated April 2, 1990
EX-99B.8(iii) Copy of Custodian Agreements *
between Registrant and Citibank
Delaware
EX-99B.8(iv) Amendment to Custodian Agreement Attached
between Registrant and Bank of
America NT & SA dated April 12, 1995
EX-99B.10(i) Opinion and Consent of Counsel Attached
dated September 21, 1995
EX-99B.11(i) Consent of Independent Auditors Attached
dated September 27, 1995
EX-99B.13(i) Letter of Understanding dated July Attached
14, 1981
EX-99B.16(i) Schedule for computation of Attached
performance quotation
EX-99B.17(i) Power of Attorney dated September Attached
18, 1995
EX-99B.17(ii) Certificate of Secretary dated Attached
September 18, 1995
EX-99B.27(i) Financial Data Schedule Attached
* Incorporated by Reference
ARTICLES OF INCORPORATION
OF FRANKLIN TAX-FREE MONEY FUND
I
The name of this corporation is FRANKLIN TAX-FREE MONEY FUND.
II
The purpose of this corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
California other than the banking business, the trust company business, or the
practice of a profession permitted to be incorporated by the California
Corporations Code.
III
The name and address in the State of California of this corporation's
initial agent for service of process is: HARMON E. BURNS, 155 Bovet Road, San
Mateo, California 94402.
IV
This corporation is authorized to issue only one class of shares of stock,
to wit, common stock, and the total number of shares of common stock which this
corporation is authorized to issue is Five Billion (5,000,000,000).
V
The shares of common stock of the corporation shall be subject to
redemption as hereinafter set forth:
(1) Redemption by Shareholders:
(a) Each shareholder of this corporation at any time may redeem all
or any portion of such shareholder's shares by tendering the shares to be
redeemed in such manner as the Board of Directors of the corporation may
determine, and to receive the redemption price next determined after a proper
tender is made to the corporation. The redemption price shall be determined in
accordance with the provisions set forth in the By-Laws of the corporation, and
shall be paid in cash or in kind in such manner as the Board of Directors shall
determine.
(b) The right of redemption by the shareholders may be suspended (i)
for any periods during which the New York Stock Exchange is closed (other than
for customary weekend and holiday closings), (ii) when trading in the markets
the corporation normally utilizes is restricted or when an emergency exists as
determined by the United States Securities and Exchange Commission as a result
of which disposal of the corporation's portfolio securities or a fair
determination of the value of the corporation's net assets is not reasonably
practicable; or (iii) for such other periods as the United States Securities and
Exchange Commission by order may permit for protection of the corporation's
shareholders.
(2) Redemption by Corporation:
(a) At the option of the corporation, to be exercised at the
discretion of the Board of Directors, the corporation may redeem the shares
owned by a shareholder if at any time the shares of such shareholder do not have
a total value (per share net asset value times the number of shares held) of at
least $1,000. The Board of Directors shall cause written notice to be mailed to
any such shareholder at the address of such shareholder as then reflected on the
books of the corporation of the corporation's intention to exercise its option
of redemption, and, unless such shareholder within 30 days following the mailing
of such notice purchases such additional number of shares so that the value of
all such shares then owned by such shareholder is at least $1,000, the
corporation shall on the date specified in such written notice redeem all shares
owned by such shareholder at the aggregate per share redemption price next
determined as provided in the By-Laws of the corporation. Said redemption price
shall be paid in cash or in kind in such manner as the Board of Directors shall
determine.
(b) At the option of the corporation, to be exercised by the Board of
Directors, the corporation may redeem all or a portion of the shares owned by a
shareholder if at any time in the opinion of the Board of Directors ownership of
the corporation's shares has or may become concentrated to an extent which would
cause the corporation to fail to qualify for tax treatment applicable to a
"regulated investment company" under Subchapter M of the United States Internal
Revenue Code of 1954, as amended, or any successor statute. No shareholder (or
group of shareholders deemed to be a single shareholder under said Subchapter M)
holding less than 5% of the net asset value of the corporation shall be subject
to redemption under this subparagraph. Such option shall be exercised by the
Board of Directors causing written notice to be mailed to such shareholder at
the shareholder's address as then reflected on the books of the corporation of
its intention to redeem all or a portion of such shares, and the corporation
shall redeem such shares upon the date specified in such notice at the
redemption price thereof next determined as provided in the By-Laws of the
corporation.
(3) General:
Upon redemption by the shareholder or by the corporation as provided
hereunder, the shareholder shall have no further rights relative to or interest
in the shares redeemed, including without limitation the right to vote such
shares or to receive further dividends in respect thereto, other than the right
to receive payment of the redemption price on the date and in the manner
specified by the Board of Directors.
DATED: March 17, 1980.
/s/ Murray L. Simpson
Murray L. Simpson, Incorporator
I hereby declare that I am the person who executed the foregoing Articles
of Incorporation, which execution is my act and deed.
/s/ Murray L. Simpson
Murray L. Simpson
CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
FRANKLIN TAX-FREE MONEY FUND
CHARLES B. JOHNSON and HARMON E. BURNS certify that:
1. They are the president and secretary, respectively, of FRANKLIN
TAX-FREE MONEY FUND, a California corporation.
2. Article I of the Articles of Incorporation of this corporation is
amended to read as follows:
"The name of this corporation is FRANKLIN TAX-EXEMPT MONEY FUND".
3. The foregoing Amendment of the Articles of Incorporation has been duly
approved by a majority of the corporation's board of directors.
4. No shares of the corporation have been issued, and this Amendment has
been adopted by the board of directors pursuant to Section 901 of the
Corporations Code.
/s/ Charles B. Johnson
By: Charles B. Johnson
/s/ Harmon E. Burns
By: Harmon E. Burns
The undersigned declare under penalty of perjury that the matters set forth in
the foregoing Certificate are true of their own knowledge.
Executed at San Mateo, California on July 14, 1981.
/s/ Charles B. Johnson
By: Charles B. Johnson
/s/ Harmon E. Burns
By: Harmon E. Burns
CERTIFICATE
I, Larry L. Greene, Assistant Secretary of Franklin Tax-Exempt Money
Fund (the "Fund"), a corporation organized under the laws of the State of
California, do hereby certify that the following resolutions were adopted by
a majority of the directors present at a meeting held at the offices of the
Fund at 777 Mariners Island Boulevard, San Mateo, California, on February 17,
1993.
RESOLVED, that the purchase of the assets of the Templeton Tax-Free
Money Fund series (the "Series") of Templeton Tax-Free Trust (the
"Trust") by Franklin Tax-Exempt Money Fund (the "Fund") is deemed to be
advisable and in the best interest of the stockholders of the Fund and
will not result in any dilution to the interests of the stockholders of
the Fund; and
FURTHER RESOLVED, that the officers of the Fund, in consultation with
counsel, are authorized and directed to begin preparation of the
documents required in connection with such purchase of assets,
including an Agreement and Plan of Reorganization and a registration
statement on Form N-14 to be filed with the U.S. Securities and
Exchange Commission with respect to the shares of the Fund to be issued
in accordance with the purchase of assets.
IN WITNESS WHEREOF, I have subscribed my name this 27th day of August, 1993.
/s/ Larry L. Greene
By: Larry L. Greene
Assistant Secretary
BY-LAWS
OF
FRANKLIN TAX-EXEMPT MONEY FUND,
A California Corporation
ARTICLE I
OFFICES
Section 1. PRINCIPAL OFFICES. The Board of Directors shall fix the
location of the principal executive office of the corporation at any place
within or outside the State of California. If the principal executive office
is located outside this state and the corporation has one or more business
offices in this state, the Board of Directors shall fix and designate a
principal business office in the State of California.
Section 2. OTHER OFFICES. The Board of Directors may at any time
establish branch or subordinate offices at any place or places where the
corporation is qualified to do business.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 1. PLACE OF MEETINGS. Meetings of shareholders shall be held at
any place within or outside the State of California designated by the Board
of Directors. In the absence of any such designation, shareholders' meetings
shall be held at the principal executive office of the corporation.
Section 2. ANNUAL MEETING. The annual meeting of shareholders shall be
held each year at 11:00 a.m. on the last Wednesday of the third month
following the end of the corporation's fiscal year, or at such other date as
the Board of Directors may set by resolution. However, if this day falls on a
legal holiday, then the meeting shall be held at the same time and place on
the next succeeding full business day. At this meeting directors shall be
elected and any other proper business may be transacted.
Section 3. SPECIAL MEETING. A special meeting of the shareholders may
be called at any time by the Board of Directors or by the chairman of the
board or by the president or by one or more shareholders holding shares of
the aggregate entitled to cast not less than ten (10%) percent of the votes
at that meeting.
If a special meeting is called by any person or persons other than the
Board of Directors, the request shall be in writing, specifying the time of
such meeting and the general nature of the business proposed to be transacted
and shall be delivered personally or sent by registered mail or by
telegraphic or other facsimile transmission to the chairman of the board, the
president, any vice president, or the secretary of the corporation. The
officer receiving the request shall cause notice to be promptly given to the
shareholders entitled to vote, in accordance with the provisions of Sections
4 and 5 of this Article II, that a meeting shall be held at the time
requested by the person or persons calling the meeting not less than
thirty-five (35) nor more than sixty (60) days after the receipt of the
request. If the notice is not given within twenty (20) days after receipt of
the request, the person or persons requesting the meeting may give the
notice. Nothing contained in this paragraph of this Section 3 shall be
construed as limiting, fixing or affecting the time when a meeting of the
shareholders called by action of the Board of Directors may be held.
Section 4. NOTICE OF SHAREHOLDERS' MEETING. All notices of meetings of
shareholders shall be sent or otherwise given in accordance with Section 5 of
this Article II not less than ten (10) nor more than sixty (60) days before
the date of the meeting. The notice shall specify the place, date and hour of
the meeting and (i) in the case of a special meeting, the general nature of
the business to be transacted, or (ii) in the case of the annual meeting,
those matters which the Board of Directors at the time of giving the notice,
intends to present for action by the shareholders. The notice of any meeting
at which directors are to be elected shall include the name of any nominee or
nominees whom at the time of the notice management intends to present for
election.
If action is proposed to be taken at any meeting for approval of (i) a
contract or transaction in which a director has a direct or indirect
financial interest, (ii) an amendment of the Articles of Incorporation, (iii)
a reorganization of the corporation, (iv) a voluntary dissolution of the
corporation, or (v) a distribution in dissolution other than in accordance
with the rights of outstanding preferred shares, the notice shall also state
the general nature of that proposal.
Section 5. MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE. Notice of any
meeting of shareholders shall be given either personally or by first-class
mail or telegraphic or other written communication, charges prepaid,
addressed to the shareholder at the address of that shareholder appearing on
the books of the corporation or given by the shareholder to the corporation
for the purpose of notice. If no such address appears on the corporation's
books or is given, notice shall be deemed to have been given if sent to that
shareholder by first-class mail or telegraphic or other written communication
to the corporation's principal executive office, or if published at least
once in a newspaper of general circulation in the county where that office is
located. Notice shall be deemed to have been given at the time when delivered
personally or deposited in the mail or sent by telegram or other means of
written communication.
If any notice addressed to a shareholder at the address of that
shareholder appearing on the books of the corporation is returned to the
corporation by the United States Postal Service marked to indicate that the
United States Postal Service is unable to deliver the notice to the
shareholder at that address, all future notices or reports shall be deemed to
have been duly given without further mailing if these shall be available to
the shareholder on written demand of the shareholder at the principal execute
office of the corporation for a period of one year from the date of the
giving of the notice.
An affidavit of the mailing or other means of giving any notice of any
shareholder's meeting shall be executed by the secretary, assistant secretary
or any transfer agent of the corporation giving the notice and shall be filed
and maintained in the minute book of the corporation.
Section 6. QUORUM. The presence in person or by proxy of the holders of
a majority of the shares entitled to vote at any meeting of shareholders
shall constitute a quorum for the transaction of business. The shareholders
present at a duly called or held meeting at which a quorum is present may
continue to do business until adjournment, notwithstanding the withdrawal of
enough shareholders to leave less than a quorum, if any action taken (other
than adjournment) is approved by at least a majority of the shares required
to constitute a quorum.
Section 7. ADJOURNED MEETING; NOTICE. Any shareholder's meeting, annual
or special, whether or not a quorum is present, may be adjourned from time to
time by the vote of the majority of the shares represented at that meeting,
either in person or by proxy, but in the absence of a quorum no other
business may be transacted at that meeting, except as provided in Section 6
of this Article II.
When any meeting of shareholders, either annual or special, is
adjourned to another time or place, notice need not be given of the adjourned
meeting at which the adjournment is taken, unless a new record date of the
adjourned meeting is fixed or unless the adjournment is for more than
forty-five (45) days from the date set for the original meeting, in which
case the Board of Directors shall set a new record date. Notice of any such
adjourned meeting shall be given to each shareholder of record entitled to
vote at the adjourned meeting in accordance with the provisions of Sections 4
and 5 of this Article II. At any adjourned meeting the corporation may
transact any business which might have been transacted at the original
meeting.
Section 8. VOTING. The shareholders entitled to vote at any meeting of
shareholders shall be determined in accordance with the provisions of Section
11 of this Article II, subject to the provisions of the Corporations Code of
California relating to voting shares held by a fiduciary in the name of a
corporation or in joint ownership. The shareholders' vote may be by voice
vote or by ballot, provided, however, that any election for directors must be
by ballot if demanded by any shareholder before the voting has begun. On any
matter other than elections of directors any shareholder may vote part of the
shares in favor of the proposal and refrain from voting the remaining shares
or vote them against the proposal, but if the shareholder fails to specify
the number of shares which the shareholder is voting affirmatively, it will
be conclusively presumed that the shareholder's approving vote is with
respect total shares that the shareholder is entitled to vote. If a quorum is
present, the affirmative vote of the majority of the shares represented at
the meeting and entitled to vote on any matter (other than the election of
directors) shall be the act of the shareholders, unless the vote of a greater
number or voting by classes is required by the California General Corporation
Law or by the Articles of Incorporation.
At a shareholder's meeting at which directors are to be elected, no
shareholder shall be entitled to cumulate votes (i.e., cast for any one or
more candidates a number of votes greater than the number of the
shareholder's shares) unless the candidates' names have been placed in
nomination prior to commencement of the voting and a shareholder has given
notice prior to commencement of the voting of the shareholder's intention to
cumulate votes. If any shareholder has given such a notice, then every
shareholder entitled to vote may cumulate votes for candidates in nomination
and give one candidate a number of votes equal to the number of directors to
be elected multiplied by the number of votes to which that shareholder's
shares are entitled, or distribute the shareholder's votes on the same
principle among any or all of the candidates as the shareholder thinks fit.
The candidates receiving the highest number of votes up to the number of
directors to be elected shall be elected.
Section 9. WAIVER OF NOTICE OF CONSENT BY ABSENT SHAREHOLDERS. The
transactions of the meeting of shareholders, either annual or special,
however called and noticed and wherever held, shall be as valid as though had
at a meeting duly held after regular call and notice if a quorum be present
either in person or by proxy and if either before or after the meeting, each
person entitled to vote who was not present in person or by proxy signs a
written waiver of notice or a consent to a holding of the meeting or an
approval of the minutes. The waiver of notice or consent need not specify
either the business to be transacted or the purpose of any annual or special
meeting of shareholders, except that if action is taken or proposed to be
taken for approval of any of those matters specified in the second paragraph
of Section 4 of this Article II, the waiver of notice or consent shall state
the general nature of the proposal. All such waivers, consents or approvals
shall be filed with the corporate records or made a part of the minutes of
the meeting.
Attendance by a person at a meeting shall also constitute a waiver of
notice of that meeting, except when the person objects at the beginning of
the meeting to the transaction of any business because the meeting is not
lawfully called or convened and except that attendance at a meeting is not a
waiver of any right to object to the consideration of matters not included in
the notice of the meeting if that objection is expressly made at the meeting.
Section 10. SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING.
Any action which may be taken at any annual or special meeting of
shareholders may be taken without a meeting and without prior notice if a
consent in writing setting forth the action so taken is signed by the holders
of outstanding shares having not less than the minimum number of votes that
would be necessary to authorize or take that action at a meeting at which all
shares entitled to vote on that action were present and voted. In the case of
election of directors, such a consent shall be effective only if signed by
the holder of all outstanding shares entitled to vote for the election of
directors; provided however, that a director may be elected at any time to
fill a vacancy on the Board of Directors that has not been filled by the
directors by the written consent of the holders of a majority of the
outstanding shares entitled to vote for the election of directors. All such
consents shall be filed with the Secretary of the corporation and shall be
maintained in the corporate records. Any shareholder giving a written consent
or the shareholder's proxy holders or a transferee of the shares or a
personal representative of the shareholder or their respective proxy holders
may revoke the consent by a writing received by the Secretary of the
corporation before written consents of the number of shares required to
authorize the proposed action have been filed with the Secretary.
If the consents of all shareholders entitled to vote have not been
solicited in writing and if the unanimous written consent of all such
shareholders shall not have been received, the Secretary shall give prompt
notice of the corporate action approved by the shareholders without a
meeting. This notice shall be given in the manner specified in Section 5 of
this Article II. In the case of approval of (i) contracts or transactions in
which a director has a direct or indirect financial interest, (ii)
indemnification of agents of the corporation, (iii) a reorganization of the
corporation, and (iv) a distribution in dissolution other than in accordance
with the rights of outstanding preferred shares, the notice shall be given at
least ten (10) days before the consummation of any action authorized by that
approval.
Section 11. RECORD DATE FOR SHAREHOLDER NOTICE, VOTING AND GIVING
CONSENTS. For purposes of determining the shareholders entitled to notice of
any meeting or to vote or entitled to give consent to corporate action
without a meeting, the Board of Directors may fix in advance a record date
which shall not be more than sixty (60) days nor less than ten (10) days
before the date of any such meeting nor more than sixty (60) days before such
action without a meeting and in this event only shareholders of record on the
date so fixed are entitled to notice and to vote or to give consents as the
case may be, notwithstanding any transfer of any shares on the books of the
corporation after the record date, except as otherwise provided in the
California General Corporation Law.
If the Board of Directors does not so fix a record date:
(a) The record date for determining shareholders entitled to notice
of or to vote at a meeting of shareholders shall be at the
close of business on the business day next preceding the day on
which notice is given or if notice is waived, at the close of
business on the business day next preceding the day on which
the meeting is held.
(b) The record date for determining shareholders entitled to give
consent to corporate action in writing without a meeting, (i)
when no prior action by the Board of Directors has been taken,
shall be the day on which the first written consent is given,
or (ii) when prior action of the Board of Directors has been
taken, shall be at the close of business on the day on which
the Board of Directors adopts the resolution relating to that
action or the sixtieth day before the date of such other
action, whichever is later.
Section 12. PROXIES. Every person entitled to vote for directors or on
any other matter shall have the right to do so either in person or by one or
more agents authorized by a written proxy signed by the person and filed with
the Secretary of the corporation. A proxy shall be deemed signed if the
shareholder's name is placed on the proxy (whether by manual signature,
typewriting, telegraphic transmission or otherwise) by the shareholder or the
shareholder's attorney-in-fact. A validly executed proxy which does not state
that it is irrevocable shall continue in full force and effect unless (i)
revoked by the person executing it before the vote pursuant to that proxy by
a writing delivered to the corporation stating that the proxy is revoked or
by a subsequent proxy executed by or attendance at the meeting and voting in
person by the person executing that proxy; or (ii) written notice of the
death or incapacity of the maker of that proxy is received by the corporation
before the vote pursuant to that proxy is counted; provided however, that no
proxy shall be valid after the expiration of eleven (11) months from the date
of the proxy unless otherwise provided in the proxy. The revocability of a
proxy that states on its face that it is irrevocable shall be governed by the
provisions of the California General Corporation Law.
Section 13. INSPECTORS OF ELECTION. Before any meeting of shareholders
the Board of Directors may appoint any persons other than nominees for office
to act as inspectors of election at the meeting or its adjournment. If no
inspectors of election are so appointed, the chairman of the meeting may and
on the request of any shareholder or a shareholder's proxy shall, appoint
inspectors of election at the meeting. The number of inspectors shall be
either one (1) or three (3). If inspectors are appointed at a meeting on the
request of one or more shareholders or proxies, the holders of a majority of
shares of their proxies present at the meeting shall determine whether one
(1) or three (3) inspectors are to be appointed. If any person appointed as
inspector fails to appear or fails or refuses to act, the chairman of the
meeting may and on the request of any shareholder or a shareholder's proxy,
shall appoint a person to fill the vacancy.
These inspectors shall:
(a) Determine the number of shares outstanding and the voting power
of each, the shares represented at the meeting, the existence of
a quorum and the authenticity, validity and effect of proxies;
(b) Receive votes, ballots or consents;
(c) Hear and determine all challenges and questions in any way
arising in connection with the right to vote;
(d) Count and tabulate all votes or consents;
(e) Determine when the polls shall close;
(f) Determine the result; and
(g) Do any other acts that may be proper to conduct the election or
vote with fairness to all shareholders.
ARTICLE III
DIRECTORS
Section 1. POWERS. Subject to the provisions of the California General
Corporation Law and any limitations in the Articles of Incorporation and
these By-Laws relating to action required to be approved by the shareholders
or by the outstanding shares, the business and affairs of the corporation
shall be managed and all corporate powers shall be exercised by or under the
direction of the Board of Directors.
Section 2. NUMBER AND QUALIFICATION OF DIRECTORS. The authorized number
of directors shall be not less than five (5) nor more than nine (9), until
changed by a duly adopted amendment to the Articles of Incorporation or by an
amendment to this By-Law adopted by the vote or written consent of holders of
a majority of the outstanding shares entitled to vote; provided however, that
an amendment reducing the number of directors to a fixed number or a minimum
number less than five (5) cannot be adopted if the votes cast against its
adoption at a meeting or the shares not consenting in the case of action by
written consent are equal to more than sixteen and two-thirds (16 2/3%)
percent of the outstanding shares entitled to vote. The Board of Directors
shall by resolution fix the exact number of directors within the limits set
forth herein.
Section 3. ELECTION AND TERM OF OFFICE OF DIRECTORS. Directors shall be
elected at each annual meeting of the shareholders to hold office until the
next annual meeting. Each director, including a director elected to fill a
vacancy, shall hold office until the expiration of the term for which elected
and until a successor has been elected and qualified.
Section 4. VACANCIES. Vacancies in the Board of Directors may be filled
by a majority of the remaining directors, though less than a quorum, or by a
sole remaining director, except that a vacancy created by the removal of a
director by the vote or written consent of the shareholders or by court order
may be filled only by the vote of a majority of the shares entitled to vote
represented at a duly held meeting at which a quorum is present or by the
written consent of holders of a majority of the outstanding shares entitled
to vote. Each director so elected shall hold office until the next annual
meeting of the shareholders and until a successor has been elected and
qualified.
A vacancy or vacancies in the Board of Directors shall be deemed to
exist in the event of the death, resignation or removal of any director, or
if the Board of Directors by resolution declares vacant the office of a
director who has been declared of unsound mind by an order of court or
convicted of a felony or if the authorized number of directors is increased
or if the shareholders fail at any meeting of shareholders at which any
director or directors are elected to elect the number of directors to be
voted for at that meeting.
The shareholders may elect a director or directors at any time to fill
any vacancy or vacancies not filled by the directors, but any such election
by written consent shall require the consent of a majority of the outstanding
shares entitled to vote; provided, however, that any vacancy created by
removal of any director may be filled by written consent only by unanimous
written consent of all shares entitled to vote for the election of directors.
Any director may resign effective on giving written notice to the
chairman of the board, the president, the secretary or the Board of
Directors, unless the notice specifies a later time for that resignation to
become effective. If the resignation of a director is effective at a future
time, the Board of Directors may elect a successor to take office when the
resignation becomes effective.
No reduction of the authorized number of directors shall have the
effect of removing any director before that director's term of office expires.
In the event that at any time less than a majority of the directors of
the corporation holding office at that time were so elected by the holders of
the outstanding voting securities, the Board of Directors of the corporation
shall forthwith cause to be held as promptly as possible, and in any event
within sixty (60) days, a meeting of such holders for the purpose of electing
directors to fill any existing vacancies in the Board of Directors, unless
such period is extended by order of the United States Securities and Exchange
Commission.
Notwithstanding the above, whenever and for so long as the corporation
is a participant in or otherwise has in effect a Plan under which the
corporation may be deemed to bear expenses of distributing its shares as that
practice is described in Rule 12b-1 under the Investment Company Act of 1940,
then the selection and nomination of the directors who are not interested
persons of the corporation (as that term is defined in the Investment Company
Act of 1940) shall be, and is, committed to the discretion of such
disinterested directors.
Section 5. PLACE OF MEETINGS AND MEETINGS BY TELEPHONE. Regular
meetings of the Board of Directors may be held at any place within or outside
the State of California that has been designated from time to time by
resolution of the board. In the absence of such a designation, regular
meetings shall be held at the principal executive office of the corporation.
Special meetings of the board shall be held at any place within or outside
the State of California that has been designated in the notice of the meeting
or if not stated in the notice or there is no notice, at the principal
executive office of the corporation. Any meeting, regular or special, may be
held by conference telephone or similar communication equipment, so long as
all directors participating in the meeting can hear one another and all such
directors shall be deemed to be present in person at the meeting.
Section 6. ANNUAL MEETING. Immediately following each annual meeting of
shareholders, the Board of Directors shall hold a regular meeting of the
purpose of organization, any desired election of officers, and the
transaction of other business. Notice of this meeting shall not be required.
Section 7. OTHER REGULAR MEETINGS. Other regular meetings of the Board
of Directors shall be held without call at such time as shall from time to
time be fixed by the Board of Directors. Such regular meetings may be held
without notice.
Section 8. SPECIAL MEETINGS. Special meetings of the Board of Directors
for any purpose or purposes may be called at any time by the chairman of the
board or the president or any vice president or the secretary or any two (2)
directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail or
telegram, charges prepaid, addressed to each director at that director's
address as it is shown on the records of the corporation. In case the notice
is mailed, it shall be deposited in the United States mail at least four (4)
days before the time of the holding of the meeting. In case the notice is
delivered personally or by telephone or to the telegraph company, it shall be
given at least forty-eight (48) hours before the time of the holding of the
meeting. Any oral notice given personally or by telephone may be communicated
either to the director or to a person at the office of the director who the
person giving the notice has reason to believe will promptly communicate it
to the director. The notice need not specify the purpose of the meeting or
the place if the meeting is to be held at the principal executive office of
the corporation.
Section 9. QUORUM. A majority of the authorized number of directors
shall constitute a quorum for the transaction of business, except to adjourn
as provided in Section 11 of this Article III. Every act or decision done or
made by a majority of the directors present at a meeting duly held at which a
quorum is present shall be regarded as the act of the Board of Directors,
subject to the provisions of the California General Corporation Law relating
to approval of contracts or transactions in which a director has a direct or
indirect material financial interest, to appointment of committee, and to
indemnification of directors. A meeting at which a quorum is initially
present may continue to transact business notwithstanding the withdrawal of
directors if any action taken is approved by a least a majority of the
required quorum for that meeting.
Section 10. WAIVER OF NOTICE. Notice of any meeting need not be given
to any director who either before or after the meeting signs a written waiver
of notice, a consent to holding the meeting or an approval of the minutes.
The waiver of notice or consent need not specify the purpose of the meeting.
All such waivers, consents and approval shall be filed with the corporate
records or made a part of the minutes of the meeting. Notice of a meeting
shall also be deemed given to any director who attends the meeting without
protesting before or at its commencement the lack of notice to that director.
Section 11. ADJOURNMENT. A majority of the directors present, whether
or not constituting a quorum, may adjourn any meeting to another time and
place.
Section 12. NOTICE OF ADJOURNMENT. Notice of the time and place of
holding an adjourned meeting need not be given unless the meeting is
adjourned for more than twenty-four (24) hours, in which case notice of the
time and place shall be given before the time of the adjourned meeting in the
manner specified in Section 8 of this Article III to the directors who were
present at the time of the adjournment.
Section 13. ACTION WITHOUT MEETING. Any action required or permitted to
be taken by the Board of Directors may be taken without a meeting if all
members of the Board of Directors shall individually or collectively consent
in writing to that action. Such action by written consent shall have the same
force and effect as a unanimous vote of the Board of Directors. Such written
consent or consents shall be filed with the minutes of the proceedings of the
Board of Directors.
Section 14. FEES AND COMPENSATION OF DIRECTORS. Directors and members
of committees may receive such compensation, if any, for their services and
such reimbursement of expenses as may be fixed or determined by resolution of
the Board of Directors. This Section 14 shall not be construed to preclude
any director from serving the corporation in any other capacity as an
officer, agent, employee or otherwise and receiving compensation for those
services.
ARTICLE IV
COMMITTEE
Section 1. COMMITTEES OF DIRECTORS. The Board of Directors may by
resolution adopted by a majority of the authorized number of directors
designate one or more committees, each consisting of two (2) or more
directors, to serve at the pleasure of the board. The board may designate one
or more directors as alternate members of any committee who may replace any
absent member at any meeting of the committee. Any committee to the extent
provided in the resolution of the board, shall have the authority of the
board, except with respect to:
(a) the approval of any action which under the California General
Corporation Law also requires shareholders' approval or approval
of the outstanding shares;
(b) the filling of vacancies on the Board of Directors or in any
committee;
(c) the fixing of compensation of the directors for serving on the
Board of Directors or on any committee;
(d) the amendment or repeal of By-Laws or the adoption of new By-Laws;
(e) the amendment or repeal of any resolution of the Board of
Directors which by its express terms is not so amendable or
repealable;
(f) a distribution to the shareholders of the corporation, except at
a rate or in a periodic amount or within a price range determined
by the Board of Directors; or
(g) the appointment of any other committees of the Board of Directors
or the members of these committees.
Section 2. MEETINGS AND ACTION OF COMMITTEES. Meetings and action of
committees shall be governed by and held and taken in accordance with the
provisions of Article III of these By-Laws, Sections 5 (place of meetings), 7
(regular meetings), 8 (special meetings and notice), 9 (quorum), 10 (waiver
of notice), 11 (adjournment), 12 (notice of adjournment), and 13 (action
without meeting), with such changes in the context of those By-Laws as are
necessary to substitute the committee and its members for the Board of
Directors and its members, except that the time of regular meetings of
committees may be determined either by resolution of the Board of Directors
or by resolution of the committee; special meetings of committees may also be
called by resolution of the Board of Directors; and notice of special
meetings of committees shall also be given to all alternate members who shall
have the right to attend all meetings of the committee. The Board of
Directors may adopt rules for the government of any committee not
inconsistent with the provisions of these By-Laws.
ARTICLE V
OFFICERS
Section 1. OFFICERS. The officers of the corporation shall be a
president, a secretary, and a chief financial officer. The corporation may
also have at the discretion of the Board of Directors, a chairman of the
board, one or more vice presidents, one or more assistant secretaries, one or
more assistant treasurers, one or more assistant financial officers and such
other officers as may be appointed in accordance with the provisions of
Section 3 of this Article V. Any number of offices may be held by the same
person.
Section 2. ELECTION OF OFFICERS. The officers of the corporation,
except such officers as may appointed in accordance with the provisions of
Section 3 or Section 5 of this Article V, shall be chosen by the Board of
Directors, and each shall serve at the pleasure of the Board of Directors,
subject to the rights, if any, of an officer under any contract of employment.
Section 3. SUBORDINATE OFFICERS. The Board of Directors may appoint and
may empower the president to appoint such other officers as the business of
the corporation may require, each of whom shall hold office for such period,
have such authority and perform such duties as are provided in the By-Laws or
as the Board of Directors may from time to time determine.
Section 4. REMOVAL AND RESIGNATION OF OFFICERS. Subject to the rights,
if any, of an officer under any contract of employment, any officer may be
removed, either with or without cause, by the Board of Directors at any
regular or special meeting of the Board of Directors or except in the case of
an officer chosen by the Board of Directors, by any officer upon whom such
power or removal may be conferred by the Board of Directors.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and unless
otherwise specified in that notice, the acceptance of the resignation shall
not be necessary to make it effective. Any resignation is without prejudice
to the rights, if any, of the corporation under any contract to which the
officer is a party.
Section 5. VACANCIES IN OFFICES. A vacancy in any office because of
death, resignation, removal, disqualification or other cause shall be filled
in the manner prescribed in these By-Laws for regular appointment to that
office.
Section 6. CHAIRMAN OF THE BOARD. The chairman of the board, if such an
officer is elected, shall if present preside at meetings of the Board of
Directors and exercise and perform such other powers and duties as may be
from time to time assigned to him by the Board of Directors or prescribed by
the By-Laws.
Section 7. PRESIDENT. Subject to such supervisory powers, if any, as
may be given by the Board of Directors to the chairman of the board, if there
be such an officer, the president shall be the chief executive officer of the
corporation and shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and the officers
of the corporation. He shall preside at all meetings of the shareholders and
in the absence of the chairman of the board or if there be none, at all
meetings of the Board of Directors. He shall have the general powers and
duties of management usually vested in the office of president of a
corporation and shall have such other powers and duties as may be prescribed
by the Board of Directors or the By-Laws.
Section 8. VICE PRESIDENTS. In the absence or disability of the
president, the vice presidents, if any, in order of their rank as fixed by
the Board of Directors or if not ranked, a vice president designated by the
Board of Directors, shall perform all the duties of the president and when so
acting shall have all powers of and be subject to all the restrictions upon
the president. The vice presidents shall have such other powers and perform
such other duties as from time to time may be prescribed for them
respectively by the Board of Directors or by the By-Laws and the president or
the chairman of the board.
Section 9. SECRETARY. The secretary shall keep or cause to be kept at
the principal executive office or such other place as the Board of Directors
may direct a book of minutes of all meetings and actions of directors,
committees of directors and shareholders with the time and place of holding,
whether regular or special, and if special, how authorized, the notice given,
the names of those present at directors' meetings or committee meetings, the
number of shares present or represented at shareholders' meetings and the
proceedings.
The secretary shall keep or cause to be kept at the principal executive
office or at the office of the corporation's transfer agent or registrar, as
determined by resolution of the Board of Directors, a share register or a
duplicate share register showing the names of all shareholders and their
addresses, the number and classes of shares held by each, the number and date
of certificates issued for the same and the number and date of cancellation
of every certificate surrendered for cancellation.
The secretary shall give or cause to be given notice of all meetings of
the shareholders and of the Board of Directors required by the By-Laws or by
law to be given and he shall keep the seal of the corporation if one be
adopted in safe custody and shall have such other powers and perform such
other duties as may be prescribed by the Board of Directors or by the By-Laws.
Section 10. CHIEF FINANCIAL OFFICER. The chief financial officer shall
keep and maintain or cause to be kept and maintained adequate and correct
books and records of accounts of the properties and business transactions of
the corporation, including accounts of its assets, liabilities, receipts,
disbursements, gains, losses, capital, retained earnings and shares. The
books of account shall at all reasonable times be open to inspection by any
director.
The chief financial officer shall deposit all monies and other
valuables in the name and to the credit of the corporation with such
depositaries as may be designated by the Board of Directors. He shall
disburse the funds of the corporation as may be ordered by the Board of
Directors, shall render to the president and directors, whenever they request
it, an account of all of his transactions as chief financial officer and of
the financial condition of the corporation and shall have other powers and
perform such other duties as may be prescribed by the Board of Directors or
the By-Laws.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS,
EMPLOYEES AND OTHER AGENTS
Section 1. AGENTS, PROCEEDINGS AND EXPENSES. For the purpose of this
Article, "agent" means any person who is or was a director, officer, employee
or other agent of this corporation or is or was serving at the request of
this corporation as a director, officer, employee or agent of another foreign
or domestic corporation, partnership, joint venture, trust or other
enterprise or was a director, officer, employee or agent of a foreign or
domestic corporation which was a predecessor corporation of this corporation
or of another enterprise at the request of such predecessor corporation;
"proceeding" means any threatened, pending or completed action or proceeding,
whether civil, criminal, administrative or investigative; and "expenses"
includes without limitation attorney's fees and any expenses of establishing
a right to indemnification under this Article.
Section 2. ACTIONS OTHER THAN BY CORPORATION. This corporation shall
indemnify any person who was or is a party or is threatened to be made a
party to any proceeding (other than an action by or in the right of this
corporation) by reason of the fact that such person is or was an agent of
this corporation, against expenses, judgments, fines, settlements and other
amounts actually and reasonably incurred in connection with such proceeding
if that person acted in good faith and in a manner that person reasonably
believed to be in the best interests of this corporation and in the case of a
criminal proceeding, had no reasonable cause to believe the conduct of that
person was unlawful. The termination of any proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendere or its equivalent
shall not of itself create a presumption that the person did not act in good
faith and in a manner which the person reasonably believed to be in the best
interests of this corporation or that the person had reasonable cause to
believe that the person's conduct was unlawful.
Section 3. ACTIONS BY THE CORPORATION. This corporation shall indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action by or in the right of this
corporation to procure a judgment in its favor by reason of the fact that
that person is or was an agent of this corporation, against expenses actually
and reasonably incurred by that person in connection with the defense or
settlement of that action if that person acted in good faith, in a manner
that person believed to be in the best interests of this corporation and with
such care, including reasonable inquiry, as an ordinarily prudent person in a
like position would use under similar circumstances.
Section 4. EXCLUSION OF INDEMNIFICATION. Notwithstanding any provision
to the contrary contained herein, there shall be no right to indemnification
for any liability arising by reason of willful misfeasance, bad faith, gross
negligence, or the reckless disregard of the duties involved in the conduct
of the agent's office with the corporation.
No indemnification shall be made under Sections 2 or 3 of this Article:
(a) In respect of any claim, issue or matter as to which that person
shall have been adjudged to be liable in the performance of that
person's duty to this corporation, unless and only to the extent
that the court in which that action was brought shall determine
upon application that in view of all the circumstances of the
case, that person was not liable by reason of the disabling
conduct set forth in the preceding paragraph and is fairly and
reasonably entitled to indemnity for the expenses which the court
shall determine; or
(b) Of amounts paid in settling or otherwise disposing of a
threatened or pending action, with or without court approval, or
of expenses incurred in defending a threatened or pending action
which is settled or otherwise disposed of without court approval,
unless the required approval set forth in Section 6 of this
Article is obtained.
Section 5. SUCCESSFUL DEFENSE BY AGENT. To the extent that an agent of
this corporation has been successful on the merits in defense of any
proceeding referred to in Sections 2 or 3 of this Article or in defense of
any claim, issue or matter therein, before the court or other body before
whom the proceeding was brought, the agent shall be indemnified against
expenses actually and reasonably incurred by the agent in connection
therewith, provided that the Board of Directors, including a majority who are
disinterested, non-party directors, also determines that based upon a review
of the facts, the agent was not liable by reason of the disabling conduct
referred to in Section 4 of this Article.
Section 6. REQUIRED APPROVAL. Except as provided in Section 5 of this
Article, any indemnification under this Article shall be made by this
corporation only if authorized in the specific case on a determination that
indemnification of the agent is proper in the circumstances because the agent
has met the applicable standard of conduct set forth in Sections 2 or 3 of
this Article and is not prohibited from indemnification because of the
disabling conduct set forth in Section 4 of this Article, by:
(a) A majority vote of a quorum consisting of directors who are not
parties to the proceeding and are not interested persons of the
corporation as defined in the Investment Company Act of 1940;
(b) Approval by the affirmative vote of a majority of the shares of
this corporation entitled to vote represented at a duly held
meeting at which a quorum is present or by the written consent of
holders of a majority of the outstanding shares entitled to vote.
For this purpose the shares owned by the person to be indemnified
shall not be considered outstanding or entitled to vote thereon;
(c) The court in which the proceeding is or was pending, on
application made by this corporation or the agent or the attorney
or other person rendering services in connection with the
defense, whether or not such application by the agent, attorney
or other person is opposed by this corporation; or
(d) A written opinion by an independent legal counsel.
Section 7. ADVANCE OF EXPENSES. Expenses incurred in defending any
proceeding may be advanced by this corporation before the final disposition
of the proceeding on receipt of an undertaking by or on behalf of the agent
to repay the amount of the advance unless it shall be determined ultimately
that the agent is entitled to be indemnified as authorized in this Article,
provided the agent provides a security for his undertaking, or a majority of
a quorum of the disinterested, non-party directors, or an independent legal
counsel in a written opinion, determine that based on a review of readily
available facts, there is reason to believe that said agent ultimately will
be found entitled to indemnification.
Section 8. OTHER CONTRACTUAL RIGHTS. Nothing contained in this Article
shall affect any right to indemnification to which persons other than
directors and officers of this corporation or any subsidiary hereof may be
entitled by contract or otherwise.
Section 9. LIMITATIONS. No indemnification or advance shall be made
under this Article, except as provided in Section 5 or Section 6(c) in any
circumstances where it appears:
(a) That it would be inconsistent with a provision of the Articles of
Incorporation, a resolution of the shareholders or an agreement
in effect at the time of accrual of the alleged cause of action
asserted in the proceeding in which the expenses were incurred or
other amounts were paid which prohibits or otherwise limits
indemnification; or
(b) That it would be inconsistent with any condition expressly
imposed by a court in approving a settlement.
Section 10. INSURANCE. Upon and in the event of a determination by the
Board of Directors of this corporation to purchase such insurance, this
corporation shall purchase and maintain insurance on behalf of any agent of
the corporation against any liability asserted against or incurred by the
agent in such capacity or arising out of the agent's status as such, but only
to the extent that this corporation would have the power to indemnify the
agent against that liability under the provisions of this Article.
Section 11. FIDUCIARIES OF CORPORATE EMPLOYEE BENEFIT PLAN. This
Article does not apply to any proceeding against any trustee, investment
manager or other fiduciary of an employee benefit plan in that person's
capacity as such, even though that person may also be an agent of the
corporation as defined in Section 1 of this Article. Nothing contained in
this Article shall limit any right to indemnification to which such a
trustee, investment manager or other fiduciary may be entitled by contract or
otherwise which shall be enforceable to the extent permitted by applicable
law other than this Article.
ARTICLE VII
RECORDS AND REPORTS
Section 1. MAINTENANCE AND INSPECTION OF SHARE REGISTER. The
corporation shall keep at its principal executive office or at the office of
its transfer agent or registrar, if either be appointed and as determined by
resolution of the Board of Directors, a record of its shareholders, giving
the names and addresses of all shareholders and the number and class of
shares held by each shareholder.
A shareholder or shareholders of the corporation holding at least five
percent (5%) in the aggregate of the outstanding voting shares of the
corporation may (i) inspect and copy the records of shareholders' names and
addresses and shareholdings during usual business hours on five (5) days'
prior written demand on the corporation, and (ii) obtain from the transfer
agent of the corporation, on written demand and on the tender of such
transfer agent's usual charges for such list, a list of the shareholder's
names and addresses who are entitled to vote for the election of directors
and their shareholdings as of the most recent record date for which that list
has been compiled or as of a date specified by the shareholder after the date
of demand. this list shall be made available to any such shareholder by the
transfer agent on or before the later of five (5) days after the demand is
received or the date specified in the demand as the date as of which the list
is to be compiled. The record of shareholders shall also be open to
inspection on the written demand of any shareholder or holder of a voting
trust certificate at any time during usual business hours for a purpose
reasonably related to the holder's interests as a shareholder or as the
holder of a voting trust certificate. Any inspection and copying under this
Section 1 may be made in person or by an agent or attorney of the shareholder
or holder of voting trust certificate making the demand.
Section 2. MAINTENANCE AND INSPECTION OF BY-LAWS. The corporation shall
keep at its principal executive office or if its principal executive office
is not in the State of California, at its principal business office in this
state, the original or a copy of the By-Laws as amended to date, which shall
be open to inspection by the shareholders at all reasonable times during
office hours. If the principal executive office of the corporation is outside
the State of California and the corporation has no principal business office
in this state, the secretary shall upon the written request of any
shareholder furnish to that shareholder a copy of the By-Laws as amended to
date.
Section 3. MAINTENANCE AND INSPECTION OF OTHER CORPORATE RECORDS. The
accounting books and records and minutes of proceedings of the shareholders
and the Board of Directors and any committee or committees of the Board of
Directors shall be kept at such place or places designated by the Board of
Directors or in the absence of such designation, at the principal executive
office of the corporation. The minutes shall be kept in written form and the
accounting books and records shall be kept either in written form or in any
other form capable of being converted into written form. The minutes and
accounting books and records shall be open to inspection upon the written
demand of any shareholder or holder of a voting trust certificate at any
reasonable time during usual business hours for a purpose reasonably related
to the holder's interests as a shareholder or as the holder of a voting trust
certificate. The inspection may be made in person or by an agent or attorney
and shall include the right to copy and make extracts. These rights of
inspection shall extend to the records of each subsidiary corporation of the
corporation.
Section 4. INSPECTION BY DIRECTORS. Every director shall have the
absolute right at any reasonable time to inspect all books, records, and
documents of every kind and the physical properties of the corporation and
each of its subsidiary corporations. This inspection by a director may be
made in person or by an agent or attorney and the right of inspection
includes the right to copy and make extracts of documents.
Section 5. ANNUAL REPORT TO SHAREHOLDERS. The annual report to
shareholders referred to in the California General Corporation Law is
expressly dispensed with, but nothing herein shall be interpreted as
prohibiting the Board of Directors from issuing annual or other periodic
reports to the shareholders of the corporation as they consider appropriate.
Section 6. FINANCIAL STATEMENTS. A copy of any annual financial
statements and any income statement of the corporation for each quarterly
period of each fiscal year and accompanying balance sheet of the corporation
as of the end of each such period that has been prepared by the corporation
shall be kept on file in the principal executive office of the corporation
for twelve (12) months and each such statement shall be exhibited at all
reasonable times to any shareholder demanding an examination of any such
statement or a copy shall be mailed to any such shareholder.
If a shareholder or shareholders holding at least five percent (5%) of
the outstanding shares of any class of stock of the corporation makes a
written request to the corporation for an income statement of the corporation
for the three (3) -month, six (6) -month, or nine (9) -month period of the
then current fiscal year ended more than thirty (30) days before the date of
the request and a balance sheet of the corporation as of the end of that
period, the chief financial officer shall cause that statement to be
prepared, if not already prepared, and shall deliver personally or mail that
statement or statements to the person making the request within thirty (30)
days after the receipt of the request. If the corporation has not sent to the
shareholders its annual report for the last fiscal year, this report shall
likewise be delivered or mailed to the shareholder or shareholders within
thirty (30) days after the request.
The corporation shall also on the written request of any shareholder
mail to the shareholder a copy of the last annual, semi-annual or quarterly
income statement which it has prepared and a balance sheet as of the end of
that period.
The quarterly income statements and balance sheets referred to in this
section shall be accompanied by the report, if any, of any independent
accountants engaged by the corporation or the certificate of an authorized
officer of the corporation that the financial statements were prepared
without audit from the books and records of the corporation.
Section 7. ANNUAL STATEMENT OF GENERAL INFORMATION. The corporation
shall during the month in which the anniversary of its incorporation occurs
in each year, file with the California Secretary of State on the prescribed
form a statement setting forth the authorized number of directors, the names
and complete business or residence addresses of all incumbent directors, the
names and complete business or residence addresses of the chief executive
officer, secretary and chief financial officer, the street address of its
principal executive office or principal business office in this state and the
general type of business constituting the principal business activity of the
corporation, together with a designation of the agent of the corporation for
the purpose of service of process, all in compliance with the California
General Corporation Law.
ARTICLE VIII
GENERAL CORPORATE MATTERS
Section 1. RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING. For
purposes of determining the shareholders entitled to receive payment of any
dividend or other distribution or allotment of any rights or entitled to
exercise any rights in respect of any other lawful action (other than action
by shareholders by written consent without a meeting), the Board of Directors
may fix in advance a record date which shall not be more than sixty (60) days
before any such action and in that case only shareholders of record on the
date so fixed are entitled to receive the dividend, distribution or allotment
of rights or to exercise the rights as the case may be, notwithstanding any
transfer of any shares on the books of the corporation after the record date
so fixed, except as provided in the California General Corporations Law.
If the Board of Directors does not so fix a record date, the record
date for determining shareholders for any such purpose shall be at the close
of business on the day on which the Board of Directors adopts the applicable
resolution or the sixtieth day before the date of that action, whichever is
later.
Section 2. CHECKS, DRAFTS, EVIDENCE OF INDEBTEDNESS. All checks,
drafts, or other orders for payment of money, notes or other evidences of
indebtedness issued in the name of or payable to the corporation shall be
signed or endorsed by such person or persons and in such manner as from time
to time shall be determined by resolution of the Board of Directors.
Section 3. CORPORATE CONTRACTS AND INSTRUMENTS; HOW EXECUTED. The Board
of Directors, except as otherwise provided in these By-Laws, may authorize
any officer or officers, agent or agents, to enter into any contract or
execute any instrument in the name of and on behalf of the corporation and
this authority may be general or confined to specific instances; and unless
so authorized or ratified by the Board of Directors or within the agency
power of an officer, no officer, agent, or employee shall have any power or
authority to bind the corporation by any contract or engagement or to pledge
its credit or to render it liable for any purpose or for any amount.
Section 4. CERTIFICATES FOR SHARES. A certificate or certificates for
shares of the capital stock of the corporation shall be issued to each
shareholder when any of these shares if fully paid and the Board of Directors
may authorize the issuance of certificates or shares as partly paid provided
that these certificates shall state the amount of the consideration to be
paid for them and the amount paid. All certificates shall be signed in the
name of the corporation by the chairman of the board or vice chairman of the
board or the president or vice president and by the chief financial officer
or an assistant treasurer or the secretary or any assistant secretary,
certifying the number of shares and the class or series of shares owned by
the shareholders. Any or all of the signatures on the certificate may be
facsimile. In case any officer, transfer agent, or registrar who has signed
or whose facsimile signature has been placed on a certificate shall have
ceased to be that officer, transfer agent, or registrar before that
certificate is issued, it may be issued by the corporation with the same
effect as if that person were an officer, transfer agent or registrar at the
date of issue. Notwithstanding the foregoing, the corporation may adopt and
use a system of issuance, recordation and transfer of its shares by
electronic or other means as provided in the General Corporation Law.
Section 5. LOST CERTIFICATES. Except as provided in this Section 5, no
new certificates for shares shall be issued to replace an old certificate
unless the latter is surrendered to the corporation and cancelled at the same
time. The Board of Directors may in case any share certificate or certificate
for any other security is lost, stolen, or destroyed, authorize the issuance
of a replacement certificate on such terms and conditions as the Board of
Directors may require, including a provision for indemnification of the
corporation secured by a bond or other adequate security sufficient to
protect the corporation against any claim that may be made against it,
including any expense or liability on account of the alleged loss, theft, or
destruction of the certificate or the issuance of the replacement certificate.
Section 6. REPRESENTATION OF SHARES OF OTHER CORPORATIONS. The chairman
of the board, the president or any vice president or any other person
authorized by resolution of the Board of Directors or by any of the foregoing
designated officers, is authorized to vote on behalf of the corporation any
and all shares of any other corporation or corporations, foreign or domestic,
standing in the name of the corporation. The authority granted to these
officers to vote or represent on behalf of the corporation any and all shares
held by the corporation in any other corporation or corporations may be
exercised by any of these officers in person or by any person authorized to
do so by a proxy duly executed by these officers.
ARTICLE IX
AMENDMENTS
Section 1. AMENDMENT BY SHAREHOLDERS. New By-Laws may be adopted or
these By-Laws may be amended or repealed by the vote or written consent of
holders of a majority of the outstanding shares entitled to vote.
Section 2. AMENDMENT BY DIRECTORS. Subject to the right of shareholders
as provided in Section 1 of this Article IX, By-Laws may be adopted, amended,
or repealed by the Board of Directors.
ARTICLE X
REIMBURSEMENT OF EXPENSES
Section 1. DISALLOWED EXPENSES. Any payments made to or on behalf of an
officer of the corporation, such as salary, bonus, interest, rent, medical,
entertainment or travel expenses, which shall be disallowed in whole or in
part as a deductible expense to the corporation by the Internal Revenue
Service, shall be reimbursed by such officer to the corporation to the full
extent of such disallowance. It shall be the duty of the Board of Directors
to enforce payment of such amount disallowed. In lieu of payment by the
officer, subject to the determination of the Board of Directors,
proportionate amounts may be withheld from such officer's future compensation
payments until the amount owed to the corporation has been recovered.
CERTIFICATE OF SECRETARY
I, Deborah R. Gatzek, Secretary of Franklin Tax-Exempt Money Fund (the
"Fund"), a corporation organized under the laws of the State of California, do
hereby certify that the following resolution was adopted by a majority of the
directors present at a meeting held at the offices of the Fund at 777 Mariners
Island Boulevard, San Mateo, California, on November 17, 1987.
RESOLVED, that Section 2, Article II of the By-Laws of the Fund, be amended to
read as follows:
"Section 2. ANNUAL MEETINGS. The annual meeting of shareholders
shall be held on a date and at a time as the Board of Directors
shall determine, provided that annual meetings of shareholders need
not be held in any year in which such is not required by the
Investment Company Act of 1940."
I declare under penalty of perjury that the matters set forth in this
certificate are true and correct of my own knowledge.
/s/ Deborah R. Gatzek
Dated: 11/17/87 By: Deborah R. Gatzek
Secretary
FRANKLIN TAX-EXEMPT MONEY FUND
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT made between FRANKLIN TAX-EXEMPT MONEY FUND, a
California Corporation, hereinafter called the "Fund" and FRANKLIN ADVISERS,
a California Corporation, hereinafter called the "Manager."
WHEREAS, the Fund has been organized and operates as an investment company
registered under the Investment Company Act of 1940 (the "Act") for the
purpose of investing and reinvesting its assets insecurities, as set forth in
its Articles of Incorporation, its By-Laws and its Registration Statements
under the Act and the Securities Act of 1933, all as heretofore amended and
supplemented; and the Fund desires to avail itself of the services,
information, advice, assistance and facilities of an investment manager and
to have an investment manager perform for its various management,
statistical, research, investment advisory and other services; and,
WHEREAS, the Manager is registered as an investment adviser under the
Investment Advisor's Act of 1940, is engaged in the business of rendering
management, investment advisory, counselling and supervisory services to
investment companies and other investment counselling clients, and desires to
provide these services to the Fund.
NOW THEREFORE, in consideration of the terms and conditions hereinafter set
forth, it is agreed as follows:
1. Employment of the Manager. The Fund hereby employs the Manager to manage
the investment and reinvestment of the Fund's assets and to administer its
affairs, subject to the direction of the Board of Directors and the
officers of the Fund, for the period and on the terms hereinafter set
forth. The Manager hereby accepts such employment and agrees during such
period to render the services and to assume the obligations herein set
forth for the compensation herein provided. The Manager shall for all
purposes herein be deemed to be an independent contractor and shall,
except as expressly provided or authorized (whether herein or otherwise),
have no authority to act for or represent the Fund in any way or otherwise
be deemed an agent of the Fund.
2. Obligations of and Services to be Provided
by the Manager. The Manager undertakes to provide the services hereinafter
set forth and to assume the following obligations:
A. Administrative Services. The Manager shall furnish to the Fund adequate
(i) office space, which may be space within the offices of the Manager
or in such other place as may be agreed upon from time to time, (ii)
office furnishings, facilities and equipment as may be reasonably
required for managing the corporate affairs and conducting the business
of the Fund, including conducting correspondence and other
communications with the shareholders of the Fund, maintaining all
internal bookkeeping, accounting and auditing services and records in
connection with the Fund's investment and business activities. The
Manager shall employ or provide and compensate the executive,
secretarial and clerical personnel necessary to provide such services.
The Manager shall also compensate all officers and employees of the
Fund who are officers or employees of the Manager.
B. Investment Management Services.
(a) The Manager shall manage the Fund's assets and portfolio subject
to and in accordance with the investment objectives and policies
of the Fund and any directions which the Fund's Board of
Directors may issue from time to time. In pursuance of the
foregoing, the Manager shall make all determinations with respect
to the investment of the Fund's assets and the purchase and sale
of portfolio securities, and shall take such steps as may be
necessary to implement the same. Such determinations and services
shall also include determining the manner in which voting rights,
rights to consent to corporate action and any other rights
pertaining to the Fund's portfolio securities shall be exercised.
The Manager shall render regular reports to the Fund, at regular
meetings of the Board of Directors and at such other times as may
be reasonably requested by the Fund's Board of Directors, of (i)
the decisions which it has made with respect to the investment of
the Fund's assets and the purchase and sale of portfolio
securities, (ii) the reasons for such decisions and (iii) the
extent to which those decisions have been implemented.
(b) The Manager, subject to and in accordance with any directions
which the Fund's Board of Directors may issue from time to time,
shall place, in the name of the Fund, orders for the execution of
the Fund's portfolio transactions. When placing such orders the
Manager shall seek to obtain the best net price and execution for
the Fund, but this requirement shall not be deemed to obligate
the Manager to place any order solely on the basis of obtaining
the lowest commission rate if the other standards set forth in
this section have been satisfied. The parties recognize that
there are likely to be many cases in which different brokers are
equally able to provide such best price and execution and that,
in selecting among such brokers with respect to particular
trades, it is desirable to choose those brokers who furnish
research, statistical quotations and other information to the
Fund and the Manager in accord with the standards set forth
below. Moreover, to the extent that it continues to be lawful to
do so and so long as the Board determines that the Fund will
benefit, directly or indirectly, by doing so, the Manager may
place orders with a broker who charges a commission for that
transaction which is in excess of the amount of commission that
another broker would have charged for effecting that transaction,
provided that the excess commission is reasonable in relation to
the value of "brokerage and research services" (as defined in
Section 28(e)(3) of the Securities Exchange Act of 1934) provided
by that broker. Accordingly, the Fund and the Manager agree that
the Manager shall select brokers for the execution of the Fund's
portfolio transactions from among:
(i) Those brokers and dealers who provide quotations and other
services to the Fund, specifically including the quotations
necessary to determine the Fund's net assets, in such
amount of total brokerage as may reasonably be required in
light of such services;
(ii) Those brokers and dealers who supply research, statistical
and other data to the Manager or its affiliates which
relate directly to portfolio securities, actual or
potential, of the Fund or which place the Manager in a
better position to make decisions in connection with the
management of the Fund's assets and portfolio, whether or
not such data may also be useful to the Manager and its
affiliates in managing other portfolios or advising other
clients, in such amount of total brokerage as may
reasonably be required.
When the Manager has determined that the Fund should tender
securities pursuant to a "tender offer solicitation," the Manager
shall designate Franklin Distributors, Inc. ("Distributors") as
the "tendering dealer" so long as it is legally permissible for
Manager to do so, and act in such capacity under the Federal
securities laws and rules thereunder and the rules of any
securities exchange or association of which Distributors may be a
member. Distributors shall not be obligated to make any
additional commitments of capital, expense or personnel beyond
that already committed (other than normal periodic fees or
payments necessary to maintain its corporate existence and
membership in the National Association of Securities Dealers,
Inc.) as of the date of this Agreement. This Agreement shall not
obligate the Manager Distributors (i) to act pursuant to the
foregoing requirement under any circumstances in which they might
reasonably believe that liability might be imposed upon them as a
result of so acting, or (ii) to institute legal or other
proceedings to collect fees which may be considered to be due
from others to it as a result of such a tender, unless the Fund
shall enter into an agreement with the Manager and/or
Distributors to reimburse them for all expenses connected with
attempting to collect such fees including legal fees and expenses
and that portion of the compensation due to their employees which
is attributable to the time involved in attempting to collect
such fees.
The Manager shall render regular reports to the Fund, not more
frequently than quarterly, of how much total brokerage business
has been placed by the Manager with brokers falling into each of
the foregoing categories and the manner in which the allocation
has been accomplished.
The Manager agrees that no investment decision will be made or
influenced by a desire to provide brokerage for allocation in
accordance with the foregoing, and that the right to make such
allocation of brokerage shall not interfere with the Manager's
paramount duty to obtain the best net price and execution for the
Fund.
C. Provision of Information Necessary for Preparation of Securities
Registration Statements, Amendments and Other Materials. The Manager,
its officers and employees will make available and provide accounting
and statistical information required by the Fund in the preparation of
registration statements, reports and other documents required by
Federal and state securities laws and with such information as the Fund
may reasonably request for use in the preparation of such documents or
of other materials necessary or helpful for the offering of the Fund's
shares.
D. Other Obligations and Services. The Manager shall make available its
officers and employees to the Board of Directors and officers of the
Fund for consultation and discussions regarding the administrative
management of the Fund and its investment activities.
3. Expenses of the Fund. It is understood that the Fund will pay all its
expenses other than those expressly assumed by the Manager herein, which
expenses payable by the Fund shall include:
A. Fees to the Manager as provided herein;
B. Expenses of all audits by independent public accountants;
C. Expenses of transfer agent, registrar, custodian, dividend disbursing
agent and shareholder record-keeping services, including the expense of
issue, repurchase or redemption of its shares;
D. Expenses of obtaining quotations for calculating the value of the
Fund's net assets;
E. Salaries and other compensation of any of its executive officers who
are not officers, directors, stockholders or employees of the Manager;
F. Taxes levied against the Fund;
G. Brokerage fees and commissions in connection with the purchase and sale
of portfolio securities for the Fund;
H. Costs, including the interest expense, of borrowing money;
I. Costs incident to corporate meetings of the Fund, reports to the Fund
to its shareholders, the filing of reports with regulatory bodies and
the maintenance of the Fund's corporate existence;
J. Legal fees, including the legal fees related to the registration and
continued qualification of the Fund shares for sale;
K. Costs of printing stock certificates representing shares of the Fund;
L. Directors' fees and expenses to directors who are not directors,
officers, employees or stockholders of the Manager or any of its
affiliates; and
M. Costs and expense of registering and maintaining the registration of
the Fund and its shares under Federal and applicable state laws;
including the printing and mailing of prospectuses to its shareholders;
and
N. Its pro rata portion of the fidelity bond insurance premium.
4. Compensation of the Manager. The Fund shall pay a daily management fee in
cash to the Manager based upon a percentage of the value of the Fund's net
assets, calculated as set forth below, as compensation for the services
rendered and obligations assumed by the Manager payable at the request of
the Manager.
A. For purposes of calculating such fee,-the value of the net assets of
the Fund shall be determined in the same manner as the Fund uses to
compute the value of its net assets in connection with the
determination of the net asset value of Fund shares, all as set forth
more fully in the Fund's current prospectus. The rate of the daily
management fee shall be as follows:
1/584 of 1% of the value of net assets up to and including
$100,000,000; and
1/730 of 1% of the value of net assets over $100,000,000 up to and
including $250,000,000; and
1/811 of 1% of the value of net assets in excess of $250,000,000.
B. The Management fee payable by the Fund shall be reduced or eliminated
to the extent that Distributors has actually received cash payments of
tender offer solicitation fees less certain costs and expenses incurred
in connection therewith; and to the extent necessary to comply with the
limitations on expenses which may be borne by the Fund as set forth in
the laws, regulations and administrative interpretations of those
states in which the Fund's shares are registered. The Manager may, from
time to time, voluntarily reduce or waive any management fee due to it
hereunder.
5. Activities of the Manager. The services of the Manager to the Fund
hereunder are not to be deemed exclusive, and the Manager and any of its
affiliates shall be free to render similar services to others. Subject to
and in accordance with the Articles of Incorporation and By-Laws of the
Fund and to Section 10(a) of the Act, it is understood that directors,
officers, agents and stockholders of the Fund are or may be interested in
the Manager or its affiliates as directors, officers, agents or
stockholders, and that directors, officers, agents or stockholders of the
Manager or its affiliates are or may be interested in the Fund as
directors, officers, agents, stockholders or otherwise, that the Manager
or its affiliates may be interested in the Fund as stockholders or
otherwise; and that the effect of any such interests shall be governed by
said Articles of Incorporation, the By-Laws and the Act.
6. Liabilities of the Manager.
A. In the absence of willful misfeasance, bad faith, gross negligence, or
reckless disregard of obligations or duties hereunder on the part of
the Manager, the Manager shall not be subject to liability to the Fund
or to any shareholder of the Fund for any act or omission in the course
of, or connected with, rendering services hereunder or for any losses
that may be sustained in the purchase, holding or sale of any security
by the Fund.
B. Notwithstanding the foregoing, the Manager agrees to reimburse the Fund
for any and all costs, expenses, and counsel and directors' fees
reasonably incurred by the Fund in the preparation, printing and
distribution of proxy statements, amendments to its Registration
Statement, holdings of meetings of its shareholders or directors, the
conduct of factual investigations, any legal or administrative
proceedings (including any applications for exemptions or
determinations by the Securities and Exchange Commission) which the
Fund incurs as the result of action or inaction of the Manager or any
of its affiliates or any of their officers, directors, employees or
shareholders where the action or inaction necessitating such
expenditures (i) is directly or indirectly related to any transactions
or proposed transaction in the shares or control of the Manager or its
affiliates (or litigation related to any pending or proposed or future
transaction in such shares or control) which shall have been undertaken
without the prior, express approval of the Fund's Board of Directors;
or, (ii) is within the control of the Manager or any of its affiliates
or any of their officers, directors, employees or shareholders. The
Manager shall not be obligated pursuant to the provisions of this
Subsection 6(B), to reimburse the Fund for any expenditures related to
the institution of an administrative proceeding or civil litigation by
the Fund or a Fund shareholder seeking to recover all or a portion of
the proceeds derived by any shareholder of the Manager or any of its
affiliates from the sale of his shares of the Manager, or similar
matters. So long as this Agreement is in effect the Manager shall pay
to the Fund the amount due for expenses subject to this Subsection 6(B)
Agreement within 30 days after a bill or statement has been received by
the Fund therefore. This provision shall not be deemed to be a waiver
of any claim the Fund may have or may assert against the Manager or
others for costs, expenses or damages heretofore incurred by the Fund
or for costs, expenses or damages the Fund may hereafter incur which
are not reimbursable to it hereunder.
C. No provision of this Agreement shall be construed to protect any
director or officer of the Fund, or the Manager, from liability in
violation of Sections 17(h) and (i) of the Act.
7. Renewal and Termination.
A. This Agreement shall become effective on the date written below and
shall continue in effect for one year. The Agreement is renewable
annually thereafter for successive periods not to exceed one year (i)
by a vote of a majority of the outstanding voting securities of the
Fund or by a vote of the Board of Directors of the Fund, and (ii) by a
vote of a majority of the directors of the Fund who are not parties to
the Agreement or interested persons of any parties to the Agreement
(other than as Directors of the Fund) cast in person at a meeting
called for the purpose of voting on the Agreement.
B. This Agreement:
(i) may at any time be terminated without the payment of any penalty
either by vote of the Board of Directors of the Fund or by vote
of a majority of the outstanding voting securities of the Fund,
on 60 days' written notice to the Manager;
(ii) shall immediately terminate in the event of its assignment;
and
(iii)may be terminated by the Manager on 60 days' written notice to the
Fund.
C. As used in this Section the terms "assignment," "interested person" and
"vote of a majority of the outstanding voting securities" shall have
the meanings set forth for any such terms Act.
D. Any notice under this Agreement shall be given in writing addressed and
delivered, or mailed post-paid, to the other party at any office of
such party.
8. Distribution Plan
A. The provisions set forth in this paragraph 8 (hereinafter referred to
as the "Plan") have been adopted pursuant to Rule 12b-1 under the
Investment Company Act of 1940 (the "Act") by the Fund, having been
approved by a majority of the Fund's Board of Directors, including a
majority of the Directors who are not interested persons of the Fund
and who have no direct or indirect financial interest in the operation
of the Plan (the "non-interested directors"), cast in person at a
meeting called for the purpose of voting on such Plan. The Board of
Directors concluded that the existing compensation to the Manager was
fair and not excessive, and that due solely to the uncertainty that may
exist from time to time with respect to whether payments made by the
Fund to the Manager or other firms may be deemed to constitute
distribution expenses, it was determined that adoption of the Plan
would be prudent and in the best interests of the Fund and its
shareholders. The directors' approval included a determination that in
the exercise of their reasonable business judgment and in light of
their fiduciary duties, there is a reasonable likelihood that the Plan
will benefit the Fund and its shareholders. The Plan has also been
approved by a vote of at least a majority of the Fund's outstanding
voting securities.
B. No additional payments are to be made by the Fund as a result of the
Plan other than the compensation the Fund is otherwise obligated to
make (i) to the Manager pursuant to paragraph 4 of this Agreement and
(ii) to its Shareholder Servicing Agent pursuant to their respective
Agreement as in effect at any time. However, to the extent any payments
to or by the Manager or the Fund's Shareholder Servicing Agent which
are deemed to be payments for the financing of any activity primarily
intended to result in the sale of shares issued by the Fund within the
context of Rule 12b-1 under the Act, then such payments shall be deemed
to be made pursuant to the Plan as set forth herein. Such activities,
the payment of which are intended to be within the scope of the Plan,
shall include, but not necessarily be limited to, the following:
(a) the costs of the preparation, printing and mailing of all
required reports and notices to shareholders;
(b) the costs of the preparation, printing and mailing of all
prospectuses;
(c) the costs of preparation, printing and mailing of any proxy
statements and proxies;
(d) all legal and accounting fees relating to the preparation of any
such reports, prospectuses, proxies and proxy statements.
(e) all fees and expenses relating to the qualification of the Fund
and/or its shares under the securities or "Blue Sky" laws of any
jurisdiction;
(f) all fees under the Securities Act of 1933 and the Act, including
fees in connection with any application for exemption relating to
or directed toward the sale of the Fund's shares;
(g) all fees and assessments of the Investment Company Institute or
any successor organization, irrespective of whether some of its
activities are designed to provide sales assistance.
(h) all costs of the preparation and mailing of confirmations of
shares sold or redeemed or share certificates, and reports of
share balances;
(i) all costs of responding to telephone or mail inquiries of
investors or prospective investors; and
(j) payments to dealers, financial institutions, advisers, or other
firms, any one of whom may receive monies in respect of the
Fund's shares owned by shareholders for whom such firm is the
dealer of record or holder of record, or with whom such firm has
a servicing relationship. Servicing may include, among other
things: (i) answering client inquiries regarding the Fund; (ii)
assisting clients in changing dividend options, account
designations and addresses; (iii) performing sub-accounting; (iv)
establishing and maintaining shareholder accounts and records;
(v) processing purchase and redemption transactions; (vi)
automatic investment in Fund shares of client cash account
balances; (vii) providing periodic statements showing a client's
account balance and integrating such statements with those of
other transactions and balances in the client's other accounts
serviced by such firm; (viii) arranging for bank wires; and (ix)
such other services as the Fund may request, to the extent such
firms are permitted by applicable statute, rule or regulation.
C. The terms and provisions of the Plan are as follows:
(a) The Manager shall report to the Board of Directors of the Fund at
least quarterly on payments for any of the activities in
subparagraph B of this paragraph 8, and shall furnish the Board
of Directors of the Fund with such other information as the Board
may reasonably request in connection with such payments in order
to enable the Board to make an informed determination of whether
the Plan should be continued.
(b) The Plan shall continue in effect for a period of more than one
year from the date written below only so long as such continuance
is specifically approved at least annually by the Fund's Board of
Directors, including the non-interested directors, cast in person
at a meeting called for the purpose of voting on the Plan.
(c) The Plan may be terminated at any time by vote of a majority of
the non-interested directors or by vote of a majority of the
Fund's outstanding voting securities on not more than sixty (60)
days' written notice to any other party to the Plan, and shall
terminate automatically in the event of any act that constitutes
an assignment of this Management Agreement.
(d) The Plan may not be amended to increase materially the amount
deemed to be spent for distribution without approval by the
Fund's shareholders, and all material amendments to the Plan
shall be approved by the non-interested directors cast in person
at a meeting called for the purpose of voting on such amendment.
(e) So long as the Plan is in effect, the selection and nomination of
the Fund's non-interested directors shall be committed to the
discretion of such non-interested directors.
9. Severability. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby.
10. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed the 1st day of December, 1986.
FRANKLIN TAX-EXEMPT MONEY FUND
/s/ Charles B. Johnson
By: Charles B. Johnson
FRANKLIN ADVISERS, INC.
/s/ Rupert H. Johnson, Jr.
By: Rupert H. Johnson, Jr.
FRANKLIN TAX-EXEMPT MONEY FUND
777 Mariners Island Blvd.
San Mateo, California 94404
Franklin/Templeton Distributors, Inc.
777 Mariners Island Blvd.
San Mateo, California 94404
Re: Distribution Agreement
Gentlemen:
We are a California corporation operating as an open-end management
investment company (hereinafter referred to as the "Fund"). As such, the Fund
is registered under the Investment Company Act of 1940, as amended (the" 1940
Act"), and its shares are registered under the Securities Act of 1933, as
amended (the "1933 Act"). We desire to offer and sell shares of the Fund
("Shares") to the public in accordance with the applicable federal, state and
foreign securities laws.
You have informed us that your company is registered as a broker-dealer under
the provisions of the Securities Exchange Act of 1934 and that your company
is a member of the National Association of Securities Dealers, Inc. You have
indicated your desire to act as the exclusive selling agent and distributor
for the Shares. We have been authorized to execute and deliver this Agreement
to you by a resolution of our Board of Directors passed at a meeting at which
a majority of our directors, including a majority who are not otherwise
interested persons of the Fund and who are not interested persons of our
investment adviser, its related organizations or with you or your related
organizations, were present and voted in favor of the said resolution
approving this Agreement.
1. Appointment of Underwriter. Upon the execution of this Agreement
and in consideration of the agreements on your part herein expressed and upon
the terms and conditions set forth herein, we hereby appoint you as the
exclusive sales agent for our Shares and agree that we will deliver such
Shares as you may sell. You agree to use your best efforts to promote the
sale of Shares, but are not obligated to sell any specific number of Shares.
You agree to promote such sales solely as agent and not as principal of the
Fund.
2. Independent Contractor. You will undertake and discharge your
obligations hereunder as an independent contractor and shall have no
authority or power to obligate or bind us by your actions, conduct or
contracts except that you are authorized to accept orders for the purchase or
repurchase of Shares as our agent. You may appoint sub-agents or distribute
through dealers or otherwise as you may determine from time to time, but this
Agreement shall not be construed as authorizing any dealer or other person to
accept orders for sale or repurchase on our behalf or otherwise act as our
agent for any purpose.
3. Offering Price. The Shares of the Fund shall be offered for sale
at a price equivalent to their net asset value. On each business day on which
the New York Stock Exchange is open for business, we will furnish you with
the net asset value of the Shares which shall be determined in accordance
with our then effective prospectus. All Shares will be sold in the manner set
forth in our then effective prospectus.
4. Terms and Conditions of Sales. Shares of the Fund shall be
offered for sale only in those jurisdictions where they have been properly
registered or are exempt from registration, and only to those groups of
people which the Board of Directors may from time to time determine to be
eligible to purchase such shares.
5. Payment of Shares. At or prior to the time of delivery of any of
our Shares you will pay or cause to be paid to our custodian or its
successor, for our account, an amount in cash equal to the net asset value of
such Shares. In the event that you pay for Shares sold by you prior to your
receipt of payment from purchasers you are authorized to reimburse yourself
for the net asset value of such Shares.
6. Purchases for Your own Account. You shall not purchase our Shares
for your own account for purposes of resale to the public, but you may
purchase Shares for your own investment account upon your written assurance
that the purchase is for investment purposes and that the Shares will not be
resold except through redemption by us.
7. Allocation of Expenses. We will pay the expenses:
(a) Of the preparation of the audited and certified financial
statements of our company to be included in any
Post-Effective Amendments ("Amendments") to our
Registration Statement under the 1933 Act or 1940 Act,
including the prospectus and statement of additional
information included therein;
(b) Of the preparation, including legal fees, and of printing
all Amendments or supplements filed with the Securities and
Exchange Commission, including the copies of the
prospectuses included in the Amendments and the first 10
copies of the definitive prospectuses or supplements
thereto, other than those necessitated by your (including
your "Parent's") activities or Rules and Regulations
related to your activities where such Amendments or
supplements result in expenses which we would not otherwise
have incurred;
(c) Of the preparation, printing and distribution of any
reports or communications which we send to our existing
shareholders; and
(d) Of filing and other fees to federal and state securities
regulatory authorities necessary to continue offering our
Shares of the Fund.
You will pay the expenses:
(a) Of printing the copies of the prospectuses and any
supplements thereto and statements of additional
information which are necessary to continue to offer our
Shares;
(b) Of the preparation, excluding legal fees, and printing of
all Amendments and supplements to our prospectuses and
statements of additional information if the Amendment or
supplement arises from your (including your "Parent's")
activities or Rules and Regulations related to your
activities and those expenses would not otherwise have been
incurred by us;
(c) Of printing additional copies, for use by you as sales
literature, of reports or other communications which we
have prepared for distribution to our existing
shareholders; and
(d) Incurred by you in advertising, promoting and selling our
Shares.
8. Furnishing of Information. We will furnish to you such
information with respect to the Fund and its Shares, in such form and signed
by such of our officers as you may reasonably request, and we warrant that
the statements therein contained when so signed will be true and correct. We
will also furnish you with such information and will take such action as you
may reasonably request in order to qualify our Shares for sale to the public
under the Blue Sky Laws of jurisdictions in which you may wish to offer them.
We will furnish you with annual audited financial statements of our books and
accounts certified by independent public accountants, with semi-annual
financial statements prepared by us, and, from time to time, with such
additional information regarding our financial condition as you may
reasonably request.
9. Conduct of Business. Other than our currently effective
prospectus, you will not issue any sales material or statements except
literature or advertising which conforms to the requirements of federal and
state securities laws and regulations and which have been filed, where
necessary, with the appropriate regulatory authorities. You will furnish us
with copies of all such materials prior to their use and no such material
shall be published if we shall reasonably and promptly object.
You shall comply with the applicable federal and state laws and
regulations where our Shares are offered for sale and conduct your affairs
with us and with dealers, brokers or investors in accordance with the Rules
of Fair Practice of the National Association of Securities Dealers, Inc.
10. Other Activities. Your services pursuant to this Agreement shall
not be deemed to be exclusive, and you may render similar services and act as
an underwriter, distributor or dealer for other investment companies in the
offering of their shares.
11. Term of Agreement. This Agreement shall become effective on the
date of its execution, and shall remain in effect for a period of two (2)
years. The Agreement is renewable annually thereafter with respect to the
Fund for successive periods not to exceed one year (i) by a vote of a
majority of the outstanding voting securities of the Fund or by a vote of the
Board of Directors of the Fund, and (ii) by a vote of a majority of the
Directors of the Fund who are not parties to the Agreement or interested
persons of any parties to the Agreement (other than as directors of the
Fund), cast in person at a meeting called for the purpose of voting on the
Agreement.
This Agreement may at any time be terminated by the Fund without
the payment of any penalty, (i) either by vote of the Board of Directors of
the Fund or by vote of a majority of the outstanding voting securities of the
Fund, on 90 days' written notice to you; or (ii) by you on 90 days' written
notice to the Fund; and shall immediately terminate with respect to the Fund
in the event of its assignment.
12. Suspension of Sales. We reserve the right at all times to suspend
or limit the public offering of the Shares of the Fund upon two days' written
notice to you.
13. Miscellaneous. This Agreement shall be subject to the laws of the
State of California and shall be interpreted and construed to further promote
the operation of the Fund as an open-end investment company. As used herein
the terms "Net Asset Value", "Investment Company", "Open-End Investment
Company", "Assignment", "Principal Underwriter", "Interested Person",
"Parents", "Affiliated Person", and "Majority of the Outstanding Voting
Securities" shall have the meanings set forth in the 1933 Act or the 1940 Act
and the Rules and Regulations thereunder.
Nothing herein shall be deemed to protect you against any liability to us or
to our securities holders to which you would otherwise be subject by reason
of willful misfeasance, bad faith or gross negligence in the performance of
your duties hereunder, or by reason of your reckless disregard of your
obligations and duties hereunder.
If the foregoing meets with your approval, please acknowledge your acceptance
by signing each of the enclosed copies, whereupon this will become a binding
agreement as of the date set forth below.
Very truly yours,
FRANKLIN TAX-EXEMPT MONEY FUND
/s/ Rupert H. Johnson, Jr.
By: Rupert H. Johnson, Jr.
Accepted: /s/ Charles B. Johnson
By: Charles B. Johnson
FRANKLIN/TEMPLETON DISTRIBUTORS, INC.
DATED: August 11, 1993
DEALER AGREEMENT
Effective: May 1, 1995
Dear Securities Dealer:
Franklin/Templeton Distributors, Inc. ("we" or "us") invites you to participate
in the distribution of shares of the Franklin and Templeton mutual funds (the
"Funds") for which we now or in the future serve as principal underwriter,
subject to the terms of this Agreement. We will notify you from time to time of
the Funds which are eligible for distribution and the terms of compensation
under this Agreement. This Agreement supersedes any prior dealer agreements
between us, as stated in paragraph 18, below.
1. Licensing.
(a) You represent that you are a member in good standing of the
National Association of Securities Dealers, Inc. ("NASD") and are presently
licensed to the extent necessary by the appropriate regulatory agency of each
state in which you will offer and sell shares of the Funds. You agree that
termination or suspension of such membership with the NASD, or of your license
to do business by any state or federal regulatory agency, at any time shall
terminate or suspend this Agreement forthwith and shall require you to notify us
in writing of such action. If you are not a member of the NASD but are a dealer
subject to the laws of a foreign country, you agree to conform to the rules of
fair practice of such association. This Agreement is in all respects subject to
Rule 26 of the Rules of Fair Practice of the NASD which shall control any
provision to the contrary in this Agreement.
(b) You agree to notify us immediately in writing if at any time you
are not a member in good standing of the Securities Investor Protection
Corporation ("SIPC").
2. Sales of Fund Shares. You may offer and sell shares of each Fund and class
only at the public offering price which shall be applicable to, and in effect at
the time of, each transaction. The procedures relating to all orders and the
handling of them shall be subject to the terms of the then current prospectus
and statement of additional information (hereafter, the "prospectus") and new
account application, including amendments, for each such Fund, and our written
instructions from time to time. This Agreement is not exclusive, and either
party may enter into similar agreements with third parties.
3. Duties of Dealer: In General. You agree:
(a) To act as principal, or as agent on behalf of your customers, in
all transactions in shares of the Funds except as provided in paragraph 4
hereof. You shall not have any authority to act as agent for the issuer (the
Funds), for the Principal Underwriter, or for any other dealer in any respect,
nor will you represent to any third party that you have such authority or are
acting in such capacity.
(b) To purchase shares only from us or from your customers.
(c) To enter orders for the purchase of shares of the Funds only from
us and only for the purpose of covering purchase orders you have already
received from your customers or for your own bona fide investment.
(d) To maintain records of all sales and redemptions of shares made
through you and to furnish us with copies of such records on request.
(e) To distribute prospectuses and reports to your customers in
compliance with applicable legal requirements, except to the extent that we
expressly undertake to do so on your behalf.
(f) That you will not withhold placing customers' orders for shares so
as to profit yourself as a result of such withholding or place orders for shares
in amounts just below the point at which sales charges are reduced so as to
benefit from a higher sales charge applicable to an amount below the breakpoint.
(g) That if any shares confirmed to you hereunder are repurchased or
redeemed by any of the Funds within seven business days after such confirmation
of your original order, you shall forthwith refund to us the full concession
allowed to you on such orders. We shall forthwith pay to the appropriate Fund
our share, if any, of the "charge" on the original sale and shall also pay to
such Fund the refund from you as herein provided. We shall notify you of such
repurchase or redemption within a reasonable time after settlement. Termination
or cancellation of this Agreement shall not relieve you or us from the
requirements of this subparagraph.
(h) That if payment for the shares purchased is not received within the
time customary or the time required by law for such payment, the sale may be
canceled forthwith without any responsibility or liability on our part or on the
part of the Funds, or at our option, we may sell the shares which you ordered
back to the Funds, in which latter case we may hold you responsible for any loss
to the Funds or loss of profit suffered by us resulting from your failure to
make payment as aforesaid. We shall have no liability for any check or other
item returned unpaid to you after you have paid us on behalf of a purchaser. We
may refuse to liquidate the investment unless we receive the purchaser's signed
authorization for the liquidation.
(i) That you shall assume responsibility for any loss to the Funds
caused by a correction made subsequent to trade date, provided such correction
was not based on any error, omission or negligence on our part, and that you
will immediately pay such loss to the Funds upon notification.
(j) That if on a redemption which you have ordered, instructions in
proper form, including outstanding certificates, are not received within the
time customary or the time required by law, the redemption may be canceled
forthwith without any responsibility or liability on our part or on the part of
any Fund, or at our option, we may buy the shares redeemed on behalf of the
Fund, in which latter case we may hold you responsible for any loss to the Fund
or loss of profit suffered by us resulting from your failure to settle the
redemption.
4. Duties of Dealer: Retirement Accounts. In connection with orders for the
purchase of shares on behalf of an Individual Retirement Account, Self-Employed
Retirement Plan or other retirement accounts, by mail, telephone, or wire, you
shall act as agent for the custodian or trustee of such plans (solely with
respect to the time of receipt of the application and payments), and you shall
not place such an order until you have received from your customer payment for
such purchase and, if such purchase represents the first contribution to such a
plan, the completed documents necessary to establish the plan. You agree to
indemnify us and Franklin Templeton Trust Company and/or Templeton Funds Trust
Company as applicable for any claim, loss, or liability resulting from incorrect
investment instructions received from you which cause a tax liability or other
tax penalty.
5. Conditional Orders; Certificates. We will not accept from you any conditional
orders for shares of any of the Funds. Delivery of certificates for shares
purchased shall be made by the Funds only against constructive receipt of the
purchase price, subject to deduction for your concession and our portion of the
sales charge, if any, on such sale. No certificates will be issued unless
specifically requested.
6. Dealer Compensation.
(a) On each purchase of shares by you from us, the total sales charges
and your dealer concessions shall be as stated in each Fund's then current
prospectus, subject to NASD rules and applicable state and federal laws. Such
sales charges and dealer concessions are subject to reductions under a variety
of circumstances as described in the Funds' prospectuses. For an investor to
obtain these reductions, we must be notified at the time of the sale that the
sale qualifies for the reduced charge. If you fail to notify us of the
applicability of a reduction in the sales charge at the time the trade is
placed, neither we nor any of the Funds will be liable for amounts necessary to
reimburse any investor for the reduction which should have been effected.
(b) In accordance with the Funds' prospectuses, we or our affiliates
may, but are not obligated to, make payments to dealers from our own resources
as compensation for certain sales which are made at net asset value and are not
subject to any contingent deferred sales charges ("Qualifying Sales"). If you
notify us of a Qualifying Sale, we may make a contingent advance payment up to
the maximum amount available for payment on the sale. If any of the shares
purchased in a Qualifying Sale are redeemed within twelve months of the end of
the month of purchase, we shall be entitled to recover any advance payment
attributable to the redeemed shares by reducing any account payable or other
monetary obligation we may owe to you or by making demand upon you for repayment
in cash. We reserve the right to withhold advances to any dealer, if for any
reason we believe that we may not be able to recover unearned advances from such
dealer. In addition, dealers will generally be required to enter into a
supplemental agreement with us with respect to such compensation and the
repayment obligation prior to receiving any payments.
7. Redemptions. Redemptions or repurchases of shares will be made at the net
asset value of such shares, less any applicable deferred sales or redemption
charges, in accordance with the applicable prospectuses. Except as permitted by
applicable law, you agree not to purchase any shares from your customers at a
price lower than the redemption or repurchase prices then computed by the Funds.
You shall, however, be permitted to sell shares for the account of the record
owner to the Funds at the repurchase price then currently in effect for such
shares and may charge the owner a fair commission for handling the transaction.
8. Exchanges. Telephone exchange orders will be effective only for shares in
plan balance (uncertificated shares) or for which share certificates have been
previously deposited and may be subject to any fees or other restrictions set
forth in the applicable prospectuses. You may charge the shareholder a fair
commission for handling an exchange transaction. Exchanges from a Fund sold with
no sales charge to a Fund which carries a sales charge, and exchanges from a
Fund sold with a sales charge to a Fund which carries a higher sales charge may
be subject to a sales charge in accordance with the terms of each Fund's
prospectus. You will be obligated to comply with any additional exchange
policies described in each Fund's prospectus, including without limitation any
policy restricting or prohibiting "Timing Accounts" as therein defined.
9. Transaction Processing. All orders are subject to acceptance by us and by the
Fund or its transfer agent, and become effective only upon confirmation by us.
If required by law, each transaction shall be confirmed in writing on a fully
disclosed basis and if confirmed by us, a copy of each confirmation shall be
sent simultaneously to you if you so request. All sales are made subject to
receipt of shares by us from the Funds. We reserve the right in our discretion,
without notice, to suspend the sale of shares or withdraw the offering of shares
entirely. Telephone orders will be effected at the price(s) next computed on the
day they are received from you if, as set forth in each Fund's current
prospectus, they are received prior to the time the price of its shares is
calculated. Orders received after that time will be effected at the price(s)
computed on the next business day. All orders must be accompanied by payment in
U.S. dollars. Orders payable by check must be drawn payable in U.S.
dollars on a U.S. bank, for the full amount of the investment.
10. Multiple Classes. We may from time to time provide to you written compliance
guidelines or standards relating to the sale or distribution of Funds offering
multiple classes of shares with different sales charges and distribution-related
operating expenses. In addition, you will be bound by any applicable rules or
regulations of government agencies or self-regulatory organizations generally
affecting the sale or distribution of mutual funds offering multiple classes of
shares.
11. Rule 12b-1 Plans. You are also invited to participate in all Plans adopted
by the Funds (the "Plan Funds") pursuant to Rule 12b-1 under the 1940 Act.
To the extent you provide administrative and other services, including, but not
limited to, furnishing personal and other services and assistance to your
customers who own shares of a Plan Fund, answering routine inquiries regarding a
Fund, assisting in changing account designations and addresses, maintaining such
accounts or such other services as a Fund may require, to the extent permitted
by applicable statutes, rules, or regulations, we shall pay you a Rule 12b-1
servicing fee. To the extent that you participate in the distribution of Fund
shares which are eligible for a Rule 12b-1 distribution fee, we shall also pay
you a Rule 12b-1 distribution fee. All Rule 12b-1 servicing and distribution
fees shall be based on the value of shares attributable to customers of your
firm and eligible for such payment, and shall be calculated on the basis and at
the rates set forth in the compensation schedule then in effect. Without prior
approval by a majority of the outstanding shares of a Fund, the aggregate annual
fees paid to you pursuant to each Plan shall not exceed the amounts stated as
the "annual maximums" in each Fund's prospectus, which amount shall be a
specified percent of the value of the Fund's net assets held in your customers'
accounts which are eligible for payment pursuant to this Agreement (determined
in the same manner as each Fund uses to compute its net assets as set forth in
its effective Prospectus).
You shall furnish us and each Fund with such information as shall reasonably be
requested by the Boards of Directors, Trustees or Managing General Partners
(hereinafter referred to as "Directors") of such Funds with respect to the fees
paid to you pursuant to the Schedule. We shall furnish to the Boards of
Directors of the Plan Funds, for their review on a quarterly basis, a written
report of the amounts expended under the Plans and the purposes for which such
expenditures were made.
The Plans and provisions of any agreement relating to such Plans must be
approved annually by a vote of the Plan Funds' Directors, including such persons
who are not interested persons of the Plan Funds and who have no financial
interest in the Plans or any related agreement ("Rule 12b-1 Directors"). The
Plans or the provisions of this Agreement relating to such Plans may be
terminated at any time by the vote of a majority of the Plan Funds' Boards of
Directors, including Rule 12b-1 Directors, or by a vote of a majority of the
outstanding shares of the Plan Funds, on sixty (60) days' written notice,
without payment of any penalty. The Plans or the provisions of this Agreement
may also be terminated by any act that terminates the Underwriting Agreement
between us and the Plan Funds, and/or the management or administration agreement
between Franklin Advisers, Inc. or Templeton Investment Counsel, Inc. or their
affiliates and the Plan Funds. In the event of the termination of the Plans for
any reason, the provisions of this Agreement relating to the Plans will also
terminate.
Continuation of the Plans and provisions of this Agreement relating to such
Plans are conditioned on Rule 12b-1 Directors being ultimately responsible for
selecting and nominating any new Rule 12b-1 Directors. Under Rule 12b-1,
Directors of any of the Plan Funds have a duty to request and evaluate, and
persons who are party to any agreement related to a Plan have a duty to furnish,
such information as may reasonably be necessary to an informed determination of
whether the Plan or any agreement should be implemented or continued. Under Rule
12b-1, Plan Funds are permitted to implement or continue Plans or the provisions
of this Agreement relating to such Plans from year-to-year only if, based on
certain legal considerations, the Boards of Directors are able to conclude that
the Plans will benefit the Plan Funds. Absent such yearly determination the
Plans and the provisions of this Agreement relating to the Plans must be
terminated as set forth above. In addition, any obligation assumed by a Fund
pursuant to this Agreement shall be limited in all cases to the assets of such
Fund and no person shall seek satisfaction thereof from shareholders of a Fund.
You agree to waive payment of any amounts payable to you by us under a Fund's
Plan of Distribution pursuant to Rule 12b-1 until such time as we are in receipt
of such fee from the Fund.
The provisions of the Rule 12b-1 Plans between the Plan Funds and us, insofar as
they relate to Plans, shall control over the provisions of this Agreement in the
event of any inconsistency.
12. Registration of Shares. Upon request, we shall notify you of the states or
other jurisdictions in which each Fund's shares are currently registered or
qualified for sale to the public. We shall have no obligation to register or
qualify, or to maintain registration or qualification of, Fund shares in any
state or other jurisdiction. We shall have no responsibility, under the laws
regulating the sale of securities in any U.S. or foreign jurisdiction, for the
qualification or status of persons selling Fund shares or for the manner of sale
of Fund shares. Except as stated in this paragraph, we shall not, in any event,
be liable or responsible for the issue, form, validity, enforceability and value
of such shares or for any matter in connection therewith, and no obligation not
expressly assumed by us in this Agreement shall be implied. Nothing in this
Agreement, however, shall be deemed to be a condition, stipulation or provision
binding any person acquiring any security to waive compliance with any provision
of the Securities Act of 1933, or of the rules and regulations of the Securities
and Exchange Commission, or to relieve the parties hereto from any liability
arising under the Securities Act of 1933.
13. Additional Registrations. If it is necessary to register or qualify the
shares in any foreign jurisdictions in which you intend to offer the shares of
any Funds, it will be your responsibility to arrange for and to pay the costs of
such registration or qualification; prior to any such registration or
qualification, you will notify us of your intent and of any limitations that
might be imposed on the Funds, and you agree not to proceed with such
registration or qualification without the written consent of the Funds and of
ourselves.
14. Fund Information. No person is authorized to give any information or make
any representations concerning shares of any Fund except those contained in the
Fund's current prospectus or in materials issued by us as information
supplemental to such prospectus. We will supply prospectuses, reasonable
quantities of supplemental sale literature, sales bulletins, and additional
information as issued. You agree not to use other advertising or sales material
relating to the Funds except that which (a) conforms to the requirements of any
applicable laws or regulations of any government or authorized agency in the
U.S. or any other country, having jurisdiction over the offering or sale of
shares of the Funds, and (b) is approved in writing by us in advance of such
use. Such approval may be withdrawn by us in whole or in part upon notice to
you, and you shall, upon receipt of such notice, immediately discontinue the use
of such sales literature, sales material and advertising. You are not authorized
to modify or translate any such materials without our prior written consent.
15. Indemnification. You further agree to indemnify, defend and hold harmless
the Principal Underwriter, the Funds, their officers, directors and employees
from any and all losses, claims, liabilities and expenses arising out of (1) any
alleged violation of any statute or regulation (including without limitation the
securities laws and regulations of the United States or any state or foreign
country) or any alleged tort or breach of contract, in or related to the offer
and sale by you of shares of the Funds pursuant to this Agreement (except to the
extent that our negligence or failure to follow correct instructions received
from you is the cause of such loss, claim, liability or expense), (2) any
redemption or exchange pursuant to telephone instructions received from you or
your agent or employees, or (3) the breach by you of any of the terms and
conditions of this Agreement.
16. Termination; Succession; Amendment. Each party to this Agreement may cancel
its participation in this Agreement by giving written notice to the other
parties. Such notice shall be deemed to have been given and to be effective on
the date on which it was either delivered personally to the other parties or any
officer or member thereof, or was mailed postpaid or delivered to a telegraph
office for transmission to the other parties' Chief Legal Officers at the
addresses shown herein or in the most recent NASD Manual. This Agreement shall
terminate immediately upon the appointment of a Trustee under the Securities
Investor Protection Act or any other act of insolvency by you. The termination
of this Agreement by any of the foregoing means shall have no effect upon
transactions entered into prior to the effective date of termination. A trade
placed by you subsequent to your voluntary termination of this Agreement will
not serve to reinstate the Agreement. Reinstatement, except in the case of a
temporary suspension of a dealer, will only be effective upon written
notification by us. Unless terminated, this Agreement shall be binding upon each
party's successors or assigns. This Agreement may be amended by us at any time
by written notice to you and your placing of an order or acceptance of payments
of any kind after the effective date and receipt of notice of any such Amendment
shall constitute your acceptance of such Amendment.
17. Setoff; Dispute Resolution. Should any of your concession accounts with us
have a debit balance, we may offset and recover the amount owed from any other
account you have with us, without notice or demand to you. In the event of a
dispute concerning any provision of this Agreement, either party may require the
dispute to be submitted to binding arbitration under the commercial arbitration
rules of the NASD or the American Arbitration Association. Judgment upon any
arbitration award may be entered by any state or federal court having
jurisdiction. This Agreement shall be construed in accordance with the laws of
the State of California, not including any provision which would require the
general application of the law of another jurisdiction.
18. Acceptance; Cumulative Effect. This Agreement is cumulative and supersedes
any agreement previously in effect. It shall be binding upon the parties hereto
when signed by us and accepted by you. If you have a current dealer agreement
with us, your first trade or acceptance of payments from us after receipt of
this Agreement, as it may be amended pursuant to paragraph 16, above, shall
constitute your acceptance of its terms. Otherwise, your signature below shall
constitute your acceptance of its terms.
FRANKLIN/TEMPLETON DISTRIBUTORS, INC.
By:
Greg Johnson, President
777 Mariners Island Blvd. San Mateo, CA 94404 Attention: Chief Legal Officer
(for legal notices only) 415/312-2000
700 Central Avenue St. Petersburg, Florida 33701-3628 813/823-8712
Dealer: If you have not previously signed a Dealer Agreement with us, please
complete and sign this section and return the original to us.
DEALER NAME
By:
(Signature)
Name:
Title:
Address:
Telephone:
NASD CRD #
Franklin Templeton Dealer #
(Internal Use Only)
95.89/104 (05/95)
MUTUAL FUND PURCHASE AND SALES AGREEMENT
FOR ACCOUNTS OF BANK AND TRUST COMPANY CUSTOMERS
Effective: July 1, 1995
1. INTRODUCTION
The parties to this Agreement are a bank or trust company ("Bank") and
Franklin/Templeton Distributors, Inc. ("FTDI"). This Agreement sets forth the
terms and conditions under which FTDI will execute purchases and redemptions of
shares of the Franklin or Templeton mutual funds for which FTDI now or in the
future serves as principal underwriter ("Funds"), at the request of the Bank
upon the order and for the account of Bank's customers ("Customers"). In this
Agreement, "Customer" shall include the beneficial owners of an account and any
agent or attorney-in-fact duly authorized or appointed to act on the owners'
behalf with respect to the account. FTDI will notify Bank from time to time of
the Funds which are eligible for distribution and the terms of compensation
under this Agreement. This Agreement is not exclusive, and either party may
enter into similar agreements with third parties. This Agreement supersedes any
prior agreements between the parties, as stated in paragraph 6(j), below.
2. REPRESENTATIONS AND WARRANTIES OF BANK
Bank warrants and represents to FTDI and the Funds that:
a) Bank is a "bank" as defined in Section 3(a)(6) of the Securities and Exchange
Act of 1934, as amended (the "34 Act"):
"The term 'bank' means (A) a banking institution organized under the
laws of the United States, (B) a member bank of the Federal Reserve System, (C)
any other banking institution, whether incorporated or not, doing business under
the law of any State or of the United States, a substantial portion of the
business of which consists of receiving deposits or exercising a fiduciary power
similar to those permitted to national banks under the authority of the
Comptroller of the Currency pursuant to the first section of Public Law 87-722
(12 U.S.C. 92a), and which is supervised and examined by State or Federal
authority having supervision over banks, and which is not operated for the
purpose of evading the provisions of this title, and (D) a receiver,
conservator, or other liquidating agent of any institution or firm included in
clauses (A), (B) or (C) of this paragraph."
b) Bank is authorized to enter into this Agreement, and Bank's performance of
its obligations and receipt of consideration under this Agreement will not
violate any law, regulation, charter, agreement, or regulatory restriction to
which Bank is subject.
c) Bank has received all regulatory agency approvals and taken all legal and
other steps necessary for offering the services Bank will provide to Customers
in connection with this Agreement.
3. REPRESENTATIONS AND WARRANTIES OF THE PRINCIPAL UNDERWRITER
FTDI warrants and represents to Bank that:
a) FTDI is a broker/dealer registered under the '34 Act.
b) FTDI is the principal underwriter of the Funds.
4. COVENANTS OF BANK
For each Transaction under this Agreement, Bank will:
a) be authorized to engage in the Transaction;
b) act as agent for the Customer;
c) act solely at the request of and for the account of the Customer;
d) not submit an order unless Bank has already received the order
from the Customer;
e) not submit a purchase order unless Bank has already delivered to the
Customer a copy of the then current prospectus for the Fund(s) whose shares
are to be purchased;
f) not withhold placing any Customer's order for the purpose of profiting
from the delay;
g) have no beneficial ownership of the securities in any purchase Transaction
(the Customer will have the full beneficial ownership), unless Bank is the
Customer (in which case, Bank will not engage in the Transaction unless the
Transaction is legally permissible for Bank); and
h) not accept or withhold any Fee otherwise allowed under Sections 5(d) and (e)
of this Agreement, if prohibited by the Employee Retirement Income Security Act
("ERISA") or trust or similar laws to which Bank is subject, in the case of
purchases or redemptions (hereinafter, "Transactions") of Fund shares involving
retirement plans, trusts, or similar accounts.
i) maintain records of all sales and redemptions of shares made through
Bank and to furnish FTDI with copies of such records on request.
j) distribute prospectuses, statements of additional information and
reports to Bank's customers in compliance with applicable legal requirements,
except to the extent that FTDI expressly undertakes to do so on behalf of Bank.
While this Agreement is in effect, Bank will:
k) not purchase any shares from any person at a price lower than the
redemption price then quoted by the applicable Fund;
l) repay FTDI the full Fee received by Bank under Sections 5(d) and (e) of this
Agreement, for any shares purchased under this Agreement which are repurchased
by the Fund within 7 business days after the purchase; in turn, FTDI shall pay
to the Fund the amount repaid by Bank and will notify Bank of any such
repurchase within a reasonable time;
m) in connection with orders for the purchase of shares on behalf of an
Individual Retirement Account, Self-Employed Retirement Plan or other retirement
accounts, by mail, telephone, or wire, Bank shall act as agent for the custodian
or trustee of such plans (solely with respect to the time of receipt of the
application and payments) and shall not place such an order until Bank has
received from its customer payment for such purchase and, if such purchase
represents the first contribution to such a plan, the completed documents
necessary to establish the plan. Bank agrees to indemnify FTDI and Franklin
Templeton Trust Company and/or Templeton Funds Trust Company as applicable for
any claim, loss, or liability resulting from incorrect investment instructions
received from Bank which cause a tax liability or other tax penalty.
n) be responsible for compliance with all laws and regulations, including
those of the applicable federal and state bank regulatory authorities, with
regard to Bank and Bank's Customers; and
o) immediately notify FTDI in writing at the address given below, should
Bank cease to be a bank as set forth in Section 2(a) of this Agreement.
5. TERMS AND CONDITIONS FOR TRANSACTIONS
a) Price
Transaction orders received from Bank will be accepted only at the
public offering price and in compliance with procedures applicable to each order
as set forth in the then current prospectus and statement of additional
information (hereinafter, collectively, "prospectus") for the applicable Fund.
All orders must be accompanied by payment in U.S. dollars. Orders payable by
check must be drawn payable in U.S. dollars on a U.S. bank, for the full amount
of the investment. All sales are made subject to receipt of shares by FTDI from
the Funds. FTDI reserves the right in its discretion, without notice, to suspend
the sale of shares or withdraw the offering of shares entirely.
b) Orders and Confirmations
All purchase orders are subject to acceptance or rejection by FTDI and
by the Fund or its transfer agent at their sole discretion, and become effective
only upon confirmation by FTDI. Transaction orders shall be made using the
procedures and forms required by FTDI from time to time. Orders received on any
business day after the time for calculating the price of Fund shares as set
forth in each Fund's current prospectus will be effected at the price determined
on the next business day. A written confirming statement will be sent to Bank
and to Customer upon settlement of each Transaction.
c) Multiple Class Guidelines
FTDI may from time to time provide to Bank written compliance guidelines
or standards relating to the sale or distribution of Funds offering multiple
classes of shares with different sales charges and distribution-related
operating expenses. In addition, Bank will be bound by any applicable rules or
regulations of government agencies or self-regulatory organizations generally
affecting the sale or distribution of mutual funds offering multiple classes of
shares.
d) Payments by Bank for Purchases
On the settlement date for each purchase, Bank shall either (i) remit
the full purchase price by wire transfer to an account designated by FTDI, or
(ii) following FTDI's procedures, wire the purchase price less the Fee allowed
by Section 5(e) of this Agreement. Twice monthly, FTDI will pay Bank Fees not
previously paid to or withheld by Bank. Each calendar month, FTDI, as
applicable, will prepare and mail an activity statement summarizing all
Transactions.
e) Fees and Payments
Where permitted by the prospectus for each Fund, a charge, concession,
or fee ("Fee") may be paid to Bank, related to services provided by Bank in
connection with Transactions. The amount of the Fee, if any, is set by the
relevant prospectus. Adjustments in the Fee are available for certain purchases,
and Bank is solely responsible for notifying FTDI when any purchase order is
qualified for such an adjustment. If Bank fails to notify FTDI of the
applicability of a reduction in the sales charge at the time the trade is
placed, neither FTDI nor any of the Funds will be liable for amounts necessary
to reimburse any investor for the reduction which should have been effected.
In accordance with the Funds' prospectuses, FTDI or its affiliates may,
but are not obligated to, make payments from their own resources to banks or
dealers as compensation for certain sales which are made at net asset value and
are not subject to any contingent deferred sales charges ("Qualifying Sales").
If Bank notifies FTDI of a Qualifying Sale, FTDI may make a contingent advance
payment up to the maximum amount available for payment on the sale. If any of
the shares purchased in a Qualifying Sale are redeemed within twelve months of
the end of the month of purchase, FTDI shall be entitled to recover any advance
payment attributable to the redeemed shares by reducing any account payable or
other monetary obligation FTDI may owe to Bank or by making demand upon Bank for
repayment in cash. FTDI reserves the right to withhold advances to any bank or
dealer, if for any reason it believes that it may not be able to recover
unearned advances from such bank or dealer. In addition, banks and dealers will
generally be required to enter into a supplemental agreement with FTDI with
respect to such compensation and the repayment obligation prior to receiving any
payments.
f) Rule 12b-1 Plans
Bank is also invited to participate in all Plans adopted by the Funds
(the "Plan Funds") pursuant to Rule 12b-1 under the 1940 Act.
To the extent Bank provides administrative and other services,
including, but not limited to, furnishing personal and other services and
assistance to Bank's customers who own shares of a Plan Fund, answering routine
inquiries regarding a Fund, assisting in changing account designations and
addresses, maintaining such accounts or such other services as a Fund may
require, to the extent permitted by applicable statutes, rules, or regulations,
FTDI shall pay Bank Rule 12b-1 fees. All Rule 12b-1 fees shall be based on the
value of shares attributable to customers of Bank and eligible for such payment,
and shall be calculated on the basis and at the rates set forth in the
compensation schedule then in effect. Without prior approval by a majority of
the outstanding shares of a Fund, the aggregate annual fees paid to Bank
pursuant to each Plan shall not exceed the amounts stated as the "annual
maximums" in each Fund's prospectus, which amount shall be a specified percent
of the value of the Fund's net assets held in Bank's customers' accounts which
are eligible for payment pursuant to this Agreement (determined in the same
manner as each Fund uses to compute its net assets as set forth in its effective
Prospectus).
Bank shall furnish FTDI and each Fund with such information as shall
reasonably be requested by the Board of Directors, Trustees or Managing General
Partners (hereinafter referred to as "Directors") of such Funds with respect to
the fees paid to Bank pursuant to the Schedule. FTDI shall furnish to the Boards
of Directors of the Plan Funds, for their review on a quarterly basis, a written
report of the amounts expended under the Plans and the purposes for which such
expenditures were made.
The Plans and provisions of any agreement relating to such Plans must be
approved annually by a vote of the Plan Funds' Directors, including such persons
who are not interested persons of the Plan Funds and who have no financial
interest in the Plans or any related agreement ("Rule 12b-1 Directors"). The
Plans or the provisions of this Agreement relating to such Plans may be
terminated at any time by the vote of a majority of the Plan Funds' Boards of
Directors, including Rule 12b-1 Directors, or by a vote of a majority of the
outstanding shares of the Plan Funds, on sixty (60) days' written notice,
without payment of any penalty. The Plans or the provisions of this Agreement
may also be terminated by any act that terminates the Underwriting Agreement
between FTDI and the Plan Funds, and/or the management or administration
agreement between Franklin Advisers, Inc. or Templeton Investment Counsel, Inc.
or their affiliates and the Plan Funds. In the event of the termination of the
Plans for any reason, the provisions of this Agreement relating to the Plans
will also terminate.
Continuation of the Plans and provisions of this Agreement relating to
such Plans are conditioned on Rule 12b-1 Directors being ultimately responsible
for selecting and nominating any new Rule 12b-1 Directors. Under Rule 12b-1,
Directors of any of the Plan Funds have a duty to request and evaluate, and
persons who are party to any agreement related to a Plan have a duty to furnish,
such information as may reasonably be necessary to an informed determination of
whether the Plan or any agreement should be implemented or continued. Under Rule
12b-1, Plan Funds are permitted to implement or continue Plans or the provisions
of this Agreement relating to such Plans from year-to-year only if, based on
certain legal considerations, the Boards of Directors are able to conclude that
the Plans will benefit the Plan Funds. Absent such yearly determination, the
Plans and the provisions of this Agreement relating to the Plans must be
terminated as set forth above. In addition, any obligation assumed by a Fund
pursuant to this Agreement shall be limited in all cases to the assets of such
Fund and no person shall seek satisfaction thereof from shareholders of a Fund.
Bank agrees to waive payment of any amounts payable to Bank by FTDI under a
Fund's Plan of Distribution pursuant to Rule 12b-1 until such time as FTDI is in
receipt of such fee from the Fund.
The provisions of the Rule 12b-1 Plans between the Plan Funds and FTDI,
insofar as they relate to Plans, shall control over the provisions of this
Agreement in the event of any inconsistency.
g) Other Distribution Services
From time to time, FTDI may offer telephone and other augmented services
in connection with Transactions under this Agreement. If Bank uses any such
service, Bank will be subject to the procedures applicable to the service,
whether or not Bank has executed any agreement required for the service.
h) Conditional Orders; Certificates
FTDI will not accept any conditional Transaction orders. Delivery of
certificates or confirmations for shares purchased shall be made by the Fund
conditional upon receipt of the purchase price, subject to deduction of any Fee.
No certificates will be issued unless specifically requested.
i) Cancellation of Orders
If payment for shares purchased is not received within the time
customary or the time required by law for such payment, the sale may be canceled
without notice or demand, and neither FTDI nor the Fund(s) shall have any
responsibility or liability for such a cancellation; alternatively, the unpaid
shares may be sold back to the Fund, and Bank shall be liable for any resulting
loss to FTDI or to the Fund(s). FTDI shall have no liability for any check or
other item returned unpaid to Bank after Bank has paid FTDI on behalf of a
purchaser. FTDI may refuse to liquidate the investment unless it receives the
purchaser's signed authorization for the liquidation.
j) Order Corrections
Bank shall assume responsibility for any loss to a Fund(s) caused by a
correction made subsequent to trade date, provided such correction was not based
on any error, omission or negligence on FTDI's part, and Bank will immediately
pay such loss to the Fund(s) upon notification.
k) Redemptions; Cancellation
Redemptions or repurchases of shares will be made at the net asset value
of such shares, less any applicable deferred sales or redemption charges, in
accordance with the applicable prospectuses. As agent, Bank may sell shares for
the account of the record owner to the Funds at the repurchase price then
currently in effect for such shares and may charge the owner a fair fee for
handling the transaction. If on a redemption which Bank has ordered,
instructions in proper form, including outstanding certificates, are not
received within the time customary or the time required by law, the redemption
may be canceled forthwith without any responsibility or liability on the part of
FTDI or any Fund, or at its option FTDI may buy the shares redeemed on behalf of
the Fund, in which latter case it may hold Bank responsible for any loss to the
Fund or loss of profit suffered by FTDI resulting from Bank's failure to settle
the redemption.
l) Exchanges
Telephone exchange orders will be effective only for shares in plan
balance (uncertificated shares) or for which share certificates have been
previously deposited and may be subject to any fees or other restrictions set
forth in the applicable prospectuses. Bank may charge the shareholder a fair fee
for handling an exchange transaction. Exchanges from a Fund sold with no sales
charge to a Fund which carries a sales charge, and exchanges from a Fund sold
with a sales charge to a Fund which carries a higher sales charge may be subject
to a sales charge in accordance with the terms of each Fund's prospectus. Bank
will be obligated to comply with any additional exchange policies described in
each Fund's prospectus, including without limitation any policy restricting or
prohibiting "Timing Accounts" as therein defined.
m) Qualification of Shares; Indemnification
Upon request, FTDI shall notify Bank of the states or other
jurisdictions in which each Fund's shares are currently registered or qualified
for sale to the public. FTDI shall have no obligation to register or qualify, or
to maintain registration or qualification of, Fund shares in any state or other
jurisdiction. FTDI shall have no responsibility, under the laws regulating the
sale of securities in any U.S. or foreign jurisdiction, for the qualification or
status of persons selling Fund shares or for the manner of sale of Fund shares.
Except as stated in this paragraph, FTDI shall not, in any event, be liable or
responsible for the issue, form, validity, enforceability and value of such
shares or for any matter in connection therewith, and no obligation not
expressly assumed by FTDI in this Agreement shall be implied. If it is necessary
to register or qualify shares of any Fund in any foreign jurisdictions in which
Bank intends to offer such shares, it will be Bank's responsibility to arrange
for and to pay the costs of such registration or qualification; prior to any
such registration or qualification Bank will notify FTDI of its intent and of
any limitations that might be imposed on the Funds and Bank agrees not to
proceed with such registration or qualification without the written consent of
the Funds and of FTDI.
Bank further agrees to indemnify, defend and hold harmless the Principal
Underwriter, the Funds, their officers, directors and employees from any and all
losses, claims, liabilities and expenses, arising out of (1) any alleged
violation of any statute or regulation (including without limitation the
securities laws and regulations of the United States or any state or foreign
country) or any alleged tort or breach of contract, in or related to the offer
and sale by Bank of shares of the Funds pursuant to this Agreement (except to
the extent that FTDI's negligence or failure to follow correct instructions
received from Bank is the cause of such loss, claim, liability or expense), (2)
any redemption or exchange pursuant to telephone instructions received from Bank
or its agents or employees, or (3) the breach by Bank of any of the terms and
conditions of this Agreement.
However, nothing in this Agreement shall be deemed to be a condition,
stipulation, or provision binding any person acquiring any security to waive
compliance with any provision of the Securities Act of 1933, or of the rules and
regulations of the Securities and Exchange Commission, or to relieve the parties
hereto from any liability arising under the Securities Act of 1933.
n) Prospectus and Sales Materials; Limit on Advertising
No person is authorized to give any information or make any
representations concerning shares of any Fund except those contained in the
Fund's current prospectus or in materials issued by FTDI as information
supplemental to such prospectus. FTDI will supply prospectuses, reasonable
quantities of supplemental sale literature, sales bulletins, and additional
information as issued. Bank agrees not to use other advertising or sales
material relating to the Funds except that which (a) conforms to the
requirements of any applicable laws or regulations of any government or
authorized agency in the U.S. or any other country, having jurisdiction over the
offering or sale of shares of the Funds, and (b) is approved in writing by FTDI
in advance of such use. Such approval may be withdrawn by FTDI in whole or in
part upon notice to Bank, and Bank shall, upon receipt of such notice,
immediately discontinue the use of such sales literature, sales material and
advertising. Bank is not authorized to modify or translate any such materials
without the prior written consent of FTDI.
o) Customer Information
(1) Definition. For purposes of this paragraph 5(h)(iv), 'Customer
Information' means customer names and other identifying information pertaining
to Bank's mutual fund customers which is furnished by Bank to FTDI in the
ordinary course of business under this Agreement. Customer Information shall not
include any information obtained from other sources.
(2) Permitted Uses. FTDI may use Customer Information to fulfill its
obligations under this Agreement, the Distribution Agreements between the Funds
and FTDI, the Funds' prospectuses, or other duties imposed by law. In addition,
FTDI or its affiliates may use Customer Information in communications to
shareholders to market the Funds or other investment products or services,
including without limitation variable annuities, variable life insurance, and
retirement plans and related services. FTDI may also use Customer Information if
it obtains Bank's prior written consent.
(3) Prohibited Uses. Except as stated above, FTDI shall not disclose
Customer Information to third parties, and shall not use Customer Information in
connection with any advertising, marketing or solicitation of any products or
services, provided that Bank offers or soon expect to offer comparable products
or services to mutual fund customers and have so notified FTDI.
(4) Survival; Termination. The agreements described in this paragraph
5(h)(iv) shall survive the termination of this Agreement, but shall terminate as
to any account upon FTDI's receipt of valid notification of either the
termination of that account with Bank or the transfer of that account to another
bank or dealer.
6. GENERAL
a) Successors and Assignments
This Agreement binds Bank and FTDI and their respective heirs,
successors and assigns. Bank may not assign its right and duties under this
Agreement without the advance, written authorization of FTDI.
b) Paragraph Headings
The paragraph headings of this Agreement are for convenience only, and
shall not be deemed to define, limit, or describe the scope or intent of this
Agreement.
c) Severability
Should any provision of this Agreement be determined to be invalid or
unenforceable under any law, rule, or regulation, that determination shall not
affect the validity or enforceability of any other provision of this Agreement.
d) Waivers
There shall be no waiver of any provision of this Agreement except a
written waiver signed by Bank and FTDI. No written waiver shall be deemed a
continuing waiver or a waiver of any other provision, unless the waiver
expresses such intention.
e) Sole Agreement
This Agreement is the entire agreement of Bank and FTDI and supersedes
all oral negotiations and prior writings.
f) Governing Law
This Agreement shall be construed in accordance with the laws of the
State of California, not including any provision which would require the general
application of the law of another jurisdiction, and shall be binding upon the
parties hereto when signed by FTDI and accepted by Bank, either by Bank's
signature in the space provided below or by Bank's first trade entered after
receipt of this Agreement.
g) Arbitration
Should any of Bank's concession accounts with FTDI have a debit balance,
FTDI may offset and recover the amount owed from any other account Bank has with
FTDI, without notice or demand to Bank. Either party may submit any dispute
under this Agreement to binding arbitration under the commercial arbitration
rules of the American Arbitration Association. Judgment upon any arbitration
award may be entered by any state or federal court having jurisdiction.
h) Amendments
FTDI may amend this Agreement at any time by depositing a written notice
of the amendment in the U.S. mail, first class postage pre-paid, addressed to
Bank's address given below. Bank's placement of any Transaction order or
acceptance of any payments after the effective date and receipt of notice of any
such amendment shall constitute Bank's acceptance of the amendment.
i) Term and Termination
This Agreement shall continue in effect until terminated. FTDI or Bank
may terminate this Agreement at any time by written notice to the other, but
such termination shall not affect the payment or repayment of Fees on
Transactions prior to the termination date. Termination also will not affect the
indemnities given under this Agreement.
j) Acceptance; Cumulative Effect
This Agreement is cumulative and supersedes any agreement previously in
effect. It shall be binding upon the parties hereto when signed by FTDI and
accepted by Bank. If Bank has a current agreement with FTDI, Bank's first trade
or acceptance of payments from FTDI after receipt of this Agreement, as it may
be amended pursuant to paragraph 6(h), above, shall constitute Bank's acceptance
of the terms of this Agreement. Otherwise, Bank's signature below shall
constitute Bank's acceptance of these terms.
FRANKLIN/TEMPLETON DISTRIBUTORS, INC.
By:
Greg Johnson, President
777 Mariners Island Blvd. San Mateo, CA 94404 Attention: Chief Legal Officer
(for legal notices only)
415/312-2000
700 Central Avenue St. Petersburg, Florida 33701-3628
813/823-8712
To the Bank or Trust Company: If you have not previously signed an agreement
with us for the sale of mutual fund shares to your customers, please complete
and sign this section and return the original to us.
BANK or TRUST COMPANY
(Firm's name)
By:
(Signature)
Name:
Title:Address:
Telephone:
AGREEMENT
AGREEMENT, made as of December 1, 1982, between Franklin Tax-Exempt
Money Fund a California corporation (hereinafter called the "Fund") and Bank
of America NT & SA, a national banking association (hereinafter called the
"Custodian").
WITNESSETH:
WHEREAS, the Fund is registered as an investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"), as a
diversified, open-end management company and desires that its securities and
cash shall be held and administered by the Custodian pursuant to the terms of
this Agreement; and
WHEREAS, the Custodian has an aggregate capital, surplus, and undivided
profits in excess of Two Million Dollars ($2,000,000), and has its functions
and physical facilities supervised by federal authority and is ready and
willing to serve pursuant to and subject to the terms of this Agreement:
NOW, THEREFORE, in consideration of the mutual agreements herein made,
the Fund, and Custodian agree as follows:
Sec. 1. Definitions:
The word "securities" as used herein includes stocks, shares, bonds,
debentures, notes, mortgages and other obligations and any certificates,
receipts, warrants or other instruments representing rights to receive,
purchase, or subscribe for the same, or evidencing or representing any other
rights or interests therein, or in any property or assets.
The term "proper instructions" shall mean a request or direction by
telephone or any other communication device from an authorized Fund designee
to be followed by a certification in writing signed in the name of the Fund
by any two of the following persons: the Chairman of the Executive Committee,
the President, a Vice-President, the Secretary and Treasurer of the
Corporation, or any other persons duly authorized to sign by the Board of
Directors of the Fund and for whom authorization has been communicated in
writing to the Custodian. The term "proper officers" shall mean the officers
authorized above to give proper instructions.
Sec. 2. Names, Titles and Signatures of Authorized Signers:
An officer of the Corporation will certify to Custodian the names and
signatures of those persons authorized to sign in accordance with Sec. 1
hereof, and on a timely basis, of any changes which thereafter may occur.
Sec. 3. Receipt and Disbursement of Money:
A. Custodian shall open and maintain a separate account or accounts in
the name of the Fund, subject only to draft or order by Custodian acting
pursuant to the terms of this Agreement, ("Direct Demand Deposit Account").
Custodian shall hold in such account or accounts, subject to the provisions
hereof, all cash received by it from or for the accounts of the Fund. This
shall include, without limitation, the proceeds from the sale of shares of
the capital stock of the Fund which shall be received along with proper
instructions from the Fund. All such payments received by Custodian shall be
converted to Federal Funds no later than the day after receipt and deposited
to such Direct Demand Deposit Account.
B. Custodian shall make payments of cash to, or for the account of, the
Fund from such cash or Direct Demand Deposit Account only (a) for the
purchase of securities for the portfolio of the Fund upon the delivery of
such securities to Custodian registered in the name of the Custodian or of
the nominee or nominees thereof, in the proper form for transfer, (b) for the
redemption of shares of the capital stock of the Fund, (c) for the payment of
interest, dividends, taxes, management or supervisory fees or any operating
expenses (including, without limitations thereto, fees for legal, accounting
and auditing services), (d) for payments in connection with the conversion,
exchange or surrender of securities owned or subscribed to by the Fund held
by or to be delivered to Custodian; or (e) for other proper corporate
purposes. Before making any such payment Custodian shall receive and may rely
upon, proper instructions requesting such payment and setting forth the
purposes of such payment.
Custodian is hereby authorized to endorse and collect for the account
of the Fund all checks, drafts or other orders for the payment of money
received by Custodian for the account of the Fund.
Sec. 4. Holding of Securities:
Custodian shall hold all securities received by it for the account of
the Fund, pursuant to the provisions hereof, in accordance with the
provisions of Section 17(f) of the Investment Company Act of 1940 and the
regulations thereunder. All such securities are to be held or disposed of by
the Custodian for, and subject at all times to the proper instructions of,
the Fund, pursuant to the terms of this Agreement. The Custodian shall have
no power of authority to assign, hypothecate, pledge or otherwise dispose of
any such securities and investments, except pursuant to the proper
instructions of the Fund and only for the account of the Fund as set forth in
Sec. 5 of this Agreement.
Sec. 5. Transfer, Exchange or Delivery, of Securities:
Custodian shall have sole power to release or to deliver any securities
of the Fund held by it pursuant to this Agreement. Custodian agrees to
transfer, exchange, or deliver securities held by it hereunder only (a) for
the sales of such securities for the account of the Fund upon receipt by
Custodian of payment therefor, (b) when such securities are called, redeemed
or retired or otherwise become payable, (c) for examination by any broker
selling any such securities in accordance with "street delivery" custom, (d)
in exchange for or upon conversion into other securities alone or other
securities and cash whether pursuant to any plan or merger, consolidation,
reorganization, recapitalization or readjustment, or otherwise, (e) upon
conversion of such securities pursuant to their terms into other securities,
(f) upon exercise of subscription, purchase or other similar rights
represented by such securities, (g) for the purpose of exchanging interim
receipts or temporary securities for definitive securities, (h) for the
purpose of redeeming in kind shares of capital stock of the Fund upon
delivery thereof to Custodian, or (i) for other proper corporate purposes.
Any securities or cash receivable in exchange for such deliveries made by
Custodian, shall be deliverable to Custodian. Before making any such
transfer, exchange or delivery, the Custodian shall receive, and may rely
upon, proper instructions authorizing such transfer, exchange or delivery and
setting forth the purpose thereof.
Sec. 6. Other Actions of Custodians:
(a) The Custodian shall collect, receive and deposit income dividends,
interest and other payments or distribution of cash or property of whatever
kind with respect to the securities held hereunder; receive and collect
securities received as a distribution upon portfolio securities as a result
of a stock dividend, share split-up, reorganization, recapitalization,
consolidation, merger, readjustment, distribution of rights and other items
of like nature, or otherwise, and execute ownership and other certificates
and affidavits for all federal and state tax purposes in connection with the
collection of coupons upon corporate securities, setting forth in any such
certificate or affidavit the name of the Fund as owner of such securities;
and do all other things necessary or proper in connection with the
collection, receipt and deposit of such income and securities, including
without limiting the generality of the foregoing, presenting for payment all
coupons and other income items requiring presentation and presenting for
payment all securities which may be called, redeemed, retired or otherwise
become payable. Amounts to be collected hereunder shall be credited to the
account of the Fund according to the following formula:
(1) Periodic interest payments and final payments on maturities of
Federal instruments such as U.S. Treasury bills, bonds and notes; interest
payments and final payments on maturities of other money market instruments
including tax-exempt money market instruments payable in federal or
depository funds; and payments on final maturities of GNMA instruments, shall
be credited to the account of the Fund on payable or maturity date.
(2) Dividends on equity securities and interest payments, and
payments on final maturities of municipal bonds (except called bonds) shall
be credited to the account of the Fund on payable or maturity date plus one.
(3) Payments for the redemption of called bonds, including called
municipal bonds shall be credited to the account of the Fund on the payable
date except that called municipal bonds paid in other than Federal or
depository funds shall be credited on payable date plus one.
(4) Periodic payments of interest and/or of partial principal on
GNMA instruments (other than payments on final maturity) shall be credited to
the account of the Fund on payable date plus three.
(5) Should the Custodian fail to credit the account of the Fund on
the date specified in paragraphs (1) - (4) above, the Fund may at its option,
require compensation from the Custodian of foregone interest (at the rate of
prime plus one) and for damages, if any.
(b) Payments to be received or to be paid in connection with purchase
and sale transactions shall be debited or credited to the account of the Fund
on the contract settlement date with the exception of "when-issued" municipal
bonds. Payments to be made for purchase by the Fund of when-issued municipal
bonds shall be debited to the account of the Fund on actual settlement date.
(1) In the event a payment is wrongfully debited to the account of
the Fund due to an error by the Custodian, the Custodian will promptly credit
such amount to the Fund, plus interest (prime plus one) and damages, if any.
(2) In the event a payment is credited to the account of the Fund
and the Custodian is unable to deliver securities being sold due to an error
on the part of the Fund, such payment shall be debited to the account of the
Fund, and an appropriate charge for costs of the transaction may be sent by
the Custodian to the Fund.
Sec. 7. Reports by Custodian:
Custodian shall each business day furnish the Fund with a statement
summarizing all transactions and entries for the account of the Fund for the
preceding day. At the end of every month Custodian shall furnish the Fund
with a list of the portfolio securities showing the quantity of each issue
owned, the cost of each issue and the market value of each issue at the end
of each month. Such monthly report shall also contain separate listings of
(a) unsettled trades and (b) when-issued securities. Custodian shall furnish
such other reports as may be mutually agreed upon from time-to-time.
Sec. 8. Compensation:
Custodian shall be paid as compensation for its services pursuant to
this Agreement such compensation as may from time-to-time be agreed upon in
writing between the two parties.
Sec. 9. Liabilities and Indemnifications:
(a) Custodian shall not be liable for any action taken in good faith
upon any proper instructions herein described or certified copy of any
resolution of, the Board of Directors, and may rely on the genuineness of any
such document which it may in good faith believe to have been validly
executed.
(b) The Fund agrees to indemnify and hold harmless the Custodian and
its nominee from all taxes, charges, expenses assessments, claims and
liabilities (including counsel fees) incurred or assigned against it or its
nominee in connection with the performance of this Agreement, except such as
may arise from negligent action, negligent failure to act or willful
misconduct of Custodian or its nominee.
Sec. 10. Records:
The Custodian hereby acknowledges that all of the records it shall
prepare and maintain pursuant to this Agreement shall be the property of the
Fund and, if and to the extent applicable, of the principal underwriter of
the shares of the Fund, and that upon proper instructions of the Fund or such
principal underwriter, if any, or both, it shall:
(a) Deliver said records to the Fund, principal underwriter or a
successor custodian, as appropriate:
(b) Provide the auditors of the Fund or principal underwriter or any
securities regulatory agency with a copy of such records without charge; and
provide the Fund and successor custodian with a reasonable number of reports
and copies of such records at a mutually agreed upon charge appropriate to
the circumstances.
(c) Permit any securities regulatory agency to inspect or copy during
normal business hours of the Custodian any such records.
Sec. 11. Appointment of Agents:
(a) The Custodian shall have the authority, in its discretion, to
appoint an agent or agents to do and perform any acts or things for and on
behalf of the Custodian, pursuant at all times to its instructions, as the
Custodian is permitted to do under this Agreement.
(b) Any agent or agents appointed to have physical custody of
securities held under this Agreement or any part thereof must be: (1) a bank
or banks, as that term is defined in Section 2(a)(5) of the 1940 Act, having
an aggregate, surplus and individual profits of not less than $2,000,000 (or
such greater sum as may then be required by applicable laws), or (2) a
securities depository, (the "Depository") as that term is defined in Rule
17f-4 under the 1940 Act, upon proper instructions from the Fund and subject
to any applicable regulations, or (3) the book-entry system of the U.S.
Treasury Department and Federal Reserve Board, (the "System") upon proper
instructions and subject to any applicable regulations.
(c) With respect to portfolio securities deposited or held in the
System or the Depository, Custodian shall:
1) hold such securities in a nonproprietary account which shall
not include securities owned by Custodian;
2) on each day on which there is a transfer to or from the Fund
in such portfolio securities, send a written confirmation to
the Fund;
3) upon receipt by Custodian, send promptly to Fund (i) a copy of
any reports Custodian receives from the System or the
Depository concerning internal accounting controls, and (ii) a
copy of such reports on Custodian's systems of internal
accounting controls as Fund may reasonably request.
(d) The delegation of any responsibilities or activities by the
Custodian to any agent or agents shall not relieve the Custodian from any
liability which would exist if there were no such delegation.
Sec. 12. Assignment and Termination:
(a) This Agreement may not be assigned by the Fund or the Custodian
without written consent of the other party.
(b) Either the Custodian or the Fund may terminate this Agreement
without payment of any penalty, at any time upon one hundred twenty (120)
days written notice thereof delivered by the one to the other, and upon the
expiration of said one hundred twenty (120) days, this Agreement shall
terminate; provided, however, that this Agreement shall continue thereafter
for such period as may be necessary for the complete divestiture of all
assets held hereinunder, as next herein provided. In the event of such
termination, the Custodian will immediately upon the receipt or transmittal
of such notice, as the case may be, commence and prosecute diligently to
completion the transfer of all cash and the delivery of all portfolio
securities, duly endorsed, to the successor of the Custodian when appointed
by the Fund. The Fund shall select such successor custodian within sixty (60)
days after the giving of such notice of termination, and the obligation of
the Custodian named herein to deliver and transfer over said assets directly
to such successor custodian shall commence as soon as such successor is
appointed and shall continue until completed, as aforesaid. At any time after
termination hereof the Fund may have access to the records of the
administration of this custodianship whenever the same may be necessary.
(c) If, after termination of the services of the Custodian, no
successor custodian has been appointed within the period above provided, the
Custodian may deliver the cash and securities owned by the Fund to a bank or
trust company of its own selection having an aggregate capital, surplus and
undivided profits of not less than Two Million Dollars ($2,000,00) (or such
greater sum as may then be required by the laws and regulations governing the
conduct by the Fund of its business as an investment company) and having its
functions and physical facilities supervised by federal or state authority,
to be held as the property of the Fund under the terms similar to those on
which they were held by the retiring Custodian, whereupon such bank or trust
company so selected by the Custodian shall become the successor custodian
with the same effect as though selected by the Board of Directors of the Fund.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement.
Franklin Tax-Exempt Money Fund
/s/ Harmon E. Burns
By: Harmon E. Burns
Attest:
Bank of America. NT & SA By
/s/ Paul Fitzpatrick
By: Paul Fitzpatrick
Attest: /s/ S. Koznell
April 2, 1990
Lee D. Harbert, Vice President & Mgr.
Bank of America NT & SA
555 California St. 4th Floor
San Francisco, CA 94104
Dear Lee:
This will confirm our agreement to modify the Custodian Agreement for the
funds listed below as follows:
Section 6(a) (4) will be modified to read: "Periodic payments of
interest and/or of partial principal on GNMA instruments (other than
payments on final maturity) shall be credited to the account of the Fund
on payable date plus two."
FRANKLIN GROUP OF FUNDS
Franklin Investors Securities Trust
Franklin Tax-Free Trust
Franklin California Tax-Free Income Fund, Inc.
Franklin Federal Tax-Free Income Fund
AGE High Income Fund, Inc.
Franklin New York Tax-Free Income Fund, Inc.
Franklin Equity Fund
Franklin California Tax-Free Trust
Institutional Fiduciary Trust
Franklin Gold Fund
Franklin Tax-Exempt Money Fund
Franklin Pennsylvania Investors Fund
Franklin Money Fund
Franklin Federal Money Fund
Franklin Custodian Funds, Inc.
Franklin Option Fund
Franklin Tax-Advantaged U.S. Government Securities Fund
Franklin Tax-Advantaged High Yield Securities Fund
Franklin Managed Trust
Franklin Valuemark Funds
Franklin Government Securities Trust
Franklin New York Tax-Exempt Money Fund
Franklin Balance Sheet Investment Fund
Please sign the enclosed copy of this letter in the space indicated and
return it to me. If you have any questions, please call me.
Sincerely,
/s/ Deborah R. Gatzek
By: Deborah R. Gatzek
Approved and agreed:
/s/ Lee D. Harbert
By: Lee D. Harbert
(Franklin logo)
FRANKLIN
RESOURCES, INC.
777 Mariners Island Blvd.
San Mateo, CA 94404
415/312-5818
FAX 415/312-3528
Martin L. Flanagan CPA, CFA
Senior Vice President
Chief Financial Officer
April 12, 1995
Mr. Stephen H. Kilbuck
Vice President Corporate Banking
Bank of America, NT & SA
555 California Street, 41st Floor
San Francisco, CA 94104
Dear Steve:
Various Franklin Funds/Portfolios (the "Funds") and Bank of America,
National Trust and Savings Association ("Bank") are parties to custody
agreements (the "Agreements") as well as separate cash management and deposit
services arrangements.
By this Letter Agreement, each of the Funds and Bank desire to establish
the cash compensation to be paid by each Fund for services rendered to it by
Bank.
Effective April 1, 1995, commencing with the first statement prepared
thereafter each Fund will pay to Bank a monthly fee in cash equal to an annual
rate of 87.5/100 ths. (.875) basis points of the net asset value of each such
Funds domestic portfolios held in custody by Bank and nine and three-tenths
(9.3) basis points of the net asset value of each such Funds international
portfolios held in custody by Bank or held by foreign sub-custodians calculated
as of the last business day of the month. For purposes of calculating the
monthly fee, 000007291 will be used as the monthly factor for the domestic
portfolio and .0000775 will be used as the monthly factor for the international
portfolio. The obligation of each Fund is separate from the obligation of any
other Fund.
The purpose of this Letter of Agreement is to provide for a fair level of
compensation to Bank for its service. The fee is based on the assumption that
each Fund will continue to use services of a type and volume comparable to the
services currently used. The parties agree that any party may initiate
discussions concerning revisions to the terms of this Letter Agreement at any
time it believes the level of compensation to be inappropriate. The parties
further agree that any party may, upon at least sixty (60) days' written notice,
terminate this Letter Agreement with respect to that party. Upon its
termination, if the parties have not agreed to a substitute fee arrangement, any
party may also terminate all or some of the service provided by Bank upon
additional sixty (60) days' written notice.
On an ongoing basis, Bank will continue to prepare the monthly corporate
account analysis statements on behalf of each Fund, which estimates all revenues
and expenses for the parties' relationship. From time to time, Bank and any
Fund(s) may renegotiate the estimated "prices" used in the account analysis
process. The account analysis statement will provide a basis for any
negotiations between the parties on the appropriateness of the fee agreement as
embodied in this Letter Agreement. However, no payment of any kind shall be due
on account of any shortfall on the account analysis statement.
Sincerely,
Authorized Officer for Each Trust/Franklin
Fund Portfolio (List Attached)
By /s/ Martin L. Flanagan
Martin L. Flanagan
Executive Financial Officer
ACCEPTED AND AGREED TO BY:
BANK OF AMERICA, NT & SA
By /s/ Stephen H. Kilbuck
Title: Vice President
FRANKLIN GROUP OF FUNDS
FUND # FUND INIT NAME OF FUND
022 FUT FRANKLIN UNIVERSAL TRUST - (closed-end)
033 FPMT FRANKLIN PRINCIPAL MATURITY TRUST - (closed-end)
024 FMIT FRANKLIN MULTI-INCOME TRUST - (closed-end)
101 FGF FRANKLIN GOLD FUND
102 FPRF FRANKLIN PREMIER RETURN FUND
(Franklin Option Fund until April 30, 1991)
103 FEF FRANKLIN EQUITY FUND
105 AGE AGE HIGH INCOME FUND, INC.
FCF FRANKLIN CUSTODIAN FUNDS, INC.
106 GROWTH SERIES
107 UTILITIES SERIES
108 DYNATECH SERIES
109 INCOME SERIES
110 U.S. GOVERNMENT SECURITIES SERIES
111* FMF FRANKLIN MONEY FUND (MMP feeder as of 8/1/94)
112 FCTFIF FRANKLIN CALIFORNIA TAX-FREE INCOME FUND, INC.
113* FFMF FRANKLIN FEDERAL MONEY FUND (USGSMMP feeder as of 8/1/94)
114 FTEMF FRANKLIN TAX-EXEMPT MONEY FUND
115 FNYTFIF FRANKLIN NEW YORK TAX-FREE INCOME FUND, INC.
116 FFTFIF FRANKLIN FEDERAL TAX-FREE INCOME FUND
FTFT FRANKLIN TAX-FREE TRUST
118 FRANKLIN MASSACHUSETTS INSURED TAX-FREE INCOME FUND
119 FRANKLIN MICHIGAN INSURED TAX-FREE INCOME FUND
120 FRANKLIN MINNESOTA INSURED TAX-FREE INCOME FUND
121 FRANKLIN INSURED TAX-FREE INCOME FUND
122 FRANKLIN OHIO INSURED TAX-FREE INCOME FUND
123 FRANKLIN PUERTO RICO TAX-FREE INCOME FUND
126 FRANKLIN ARIZONA TAX-FREE INCOME FUND
127 FRANKLIN COLORADO TAX-FREE INCOME FUND
128 FRANKLIN GEORGIA TAX-FREE INCOME FUND
129 FRANKLIN PENNSYLVANIA TAX-FREE INCOME FUND
130 FRANKLIN HIGH YIELD TAX-FREE INCOME FUND
160 FRANKLIN MISSOURI TAX-FREE INCOME FUND
161 FRANKLIN OREGON TAX-FREE INCOME FUND
162 FRANKLIN TEXAS TAX-FREE INCOME FUND
163 FRANKLIN VIRGINIA TAX-FREE INCOME FUND
164 FRANKLIN ALABAMA TAX-FREE INCOME FUND
165 FRANKLIN FLORIDA TAX-FREE INCOME FUND
166 FRANKLIN CONNECTICUT TAX-FREE INCOME FUND
167 FRANKLIN INDIANA TAX-FREE INCOME FUND
168 FRANKLIN LOUISIANA TAX-FREE INCOME FUND
169 FRANKLIN MARYLAND TAX-FREE INCOME FUND
170 FRANKLIN NORTH CAROLINA TAX-FREE INCOME FUND
171 FRANKLIN NEW JERSEY TAX-FREE INCOME FUND
172 FRANKLIN KENTUCKY TAX-FREE INCOME FUND
174 FRANKLIN FEDERAL INTERMEDIATE-TERM TAX-FREE INCOME FUND
177 FRANKLIN ARIZONA INSURED TAX-FREE INCOME FUND
178 FRANKLIN FLORIDA INSURED TAX-FREE INCOME FUND
FCTFT FRANKLIN CALIFORNIA TAX-FREE TRUST
124 FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND
125 FRANKLIN CALIFORNIA TAX-EXEMPT MONEY FUND
152 FRANKLIN CALIFORNIA INTERMEDIATE-TERM TAX-FREE INCOME
FUND
FNYTFT FRANKLIN NEW YORK TAX-FREE TRUST
(Franklin New York-Tax Exempt Money Fund until 1/91)
131 FRANKLIN NEW YORK TAX-EXEMPT MONEY FUND
153 FRANKLIN NEW YORK INTERMEDIATE-TERM TAX-FREE INCOME FUND
181 FRANKLIN NEW YORK INSURED TAX-FREE INCOME FUND
FIST FRANKLIN INVESTORS SECURITIES TRUST
135 FRANKLIN GLOBAL GOVERNMENT INCOME FUND
(formerly Franklin Global Opportunity Income Fund)
136 FRANKLIN SHORT-INTERMEDIATE U.S. GOVERNMENT
SECURITIES FUND
137 FRANKLIN CONVERTIBLE SECURITIES FUND
138* FRANKLIN ADJUSTABLE U.S. GOVERNMENT SECURITIES FUND
(formerly Franklin Adjustable Rate Mortgage Fund)
(USGARMP feeder)
139 FRANKLIN EQUITY INCOME FUND
(Franklin Special Equity Income Fund until 8/17/93)
151* FRANKLIN ADJUSTABLE RATE SECURITIES FUND
(ARSP retail feeder)
IFT INSTITUTIONAL FIDUCIARY TRUST
140* MONEY MARKET PORTFOLIO (MMP feeder)
141* FRANKLIN LATE DAY MONEY MARKET PORTFOLIO
(Franklin Government Investors Money Market
Portfolio until 6/15/93)
142* FRANKLIN U.S. GOVERNMENT SECURITIES MONEY MARKET
PORTFOLIO (USGSMMP feeder)
143* FRANKLIN U.S. TREASURY MONEY MARKET PORTFOLIO
144* FRANKLIN INSTITUTIONAL ADJUSTABLE U.S. GOVERNMENT
SECURITIES FUND (USGARMP feeder)
145* FRANKLIN INSTITUTIONAL ADJUSTABLE RATE SECURITIES FUND
(ARSP feeder)
146* FRANKLIN U.S. GOVERNMENT AGENCY MONEY MARKET FUND
147* AEA CASH MANAGEMENT FUND (MMP feeder)
(formerly Franklin Star MOney Market Portfolio)
149* FRANKLIN CASH RESERVES FUND (MMP feeder)
150 FBSIF FRANKLIN BALANCE SHEET INVESTMENT FUND
154 FTAIBF FRANKLIN TAX-ADVANTAGED INTERNATIONAL BOND FUND
155 FTAUSGSF FRANKLIN TAX-ADVANTAGED U.S. GOVERNMENT SECURITIES FUND
156 FTAHYSF FRANKLIN TAX-ADVANTAGED HIGH YIELD SECURITIES FUND
FMT FRANKLIN MANAGED TRUST
117 FRANKLIN CORPORATE QUALIFIED DIVIDEND FUND
(Franklin Corporate Cash Portfolio until 5/31/91)
158 FRANKLIN RISING DIVIDENDS FUND
159 FRANKLIN INVESTMENT GRADE INCOME FUND
- ---- FRANKLIN INSTITUTIONAL RISING DIVIDENDS FUND (PT feeder)
(not yet filed)
157 FSMP FRANKLIN STRATEGIC MORTGAGE PORTFOLIO (effective 2/1/93)
FMST FRANKLIN MUNICIPAL SECURITIES TRUST
173 FRANKLIN HAWAII MUNICIPAL BOND FUND
175 FRANKLIN CALIFORNIA HIGH YIELD MUNICIPAL FUND
176 FRANKLIN WASHINGTON MUNICIPAL BOND FUND
220 FRANKLIN TENNESSEE MUNICIPAL BOND FUND
221 FRANKLIN ARKANSAS MUNICIPAL BOND FUND
FSS FRANKLIN STRATEGIC SERIES (changed from Cal 250)
194 FRANKLIN STRATEGIC INCOME FUND
195 FRANKLIN MIDCAP GROWTH FUND (filed - not yet being sold)
196 FRANKLIN INSTITUTIONAL MIDCAP GROWTH FUND
(formerly FISCO MidCap Growth Fund)
197 FRANKLIN GLOBAL UTILITIES FUND
198 FRANKLIN SMALL CAP GROWTH FUND
199 FRANKLIN GLOBAL HEALTH CARE FUND
ARSP ADJUSTABLE RATE SECURITIES PORTFOLIOS (THE PARENT)
182 U.S. GOVERNMENT ADJUSTABLE RATE MORTGAGE PORTFOLIO
(master fund)
183 ADJUSTABLE RATE SECURITIES PORTFOLIO (filed under 1940
Act Only) (master fund)
MMP THE MONEY MARKET PORTFOLIOS (master fund parent)
(filed under 1940 Act only)
184* THE MONEY MARKET PORTFOLIO (master fund)
186* THE U.S. GOVERNMENT SECURITIES MONEY MARKET PORTFOLIO
(master fund)
187 MGP MIDCAP GROWTH PORTFOLIO (master fund) (1940 Act filing only
- not yet being sold)
PT THE PORTFOLIOS TRUST (master fund parent) (1940 Act filing
only - not yet being sold)
188 THE RISING DIVIDENDS PORTFOLIO (master fund)
FIT FRANKLIN INTERNATIONAL TRUST
190 FRANKLIN PACIFIC GROWTH FUND
191 FRANKLIN INTERNATIONAL EQUITY FUND
FREST FRANKLIN REAL ESTATE SECURITIES TRUST
192 FRANKLIN REAL ESTATE SECURITIES FUND
FTGT FRANKLIN TEMPLETON GLOBAL TRUST (formerly Huntington Funds)
210* FRANKLIN TEMPLETON GERMAN GOVERNMENT BOND FUND
211* FRANKLIN TEMPLETON GLOBAL CURRENCY FUND
212* FRANKLIN TEMPLETON HARD CURRENCY FUND
213* FRANKLIN TEMPLETON HIGH INCOME CURRENCY FUND
FVF FRANKLIN VALUEMARK FUNDS (ALLIANZ)
821 MONEY MARKET FUND
822 EQUITY GROWTH FUND
823 PRECIOUS METALS FUND
824 REAL ESTATE SECURITIES FUND
825 UTILITY EQUITY FUND
826 HIGH INCOME FUND
827 GLOBAL INCOME FUND
828 INVESTMENT GRADE INTERMEDIATE BOND FUND
829 INCOME SECURITIES FUND
830 U.S. GOVERNMENT SECURITIES FUND
831 ZERO COUPON FUND - 1995
832 ZERO COUPON FUND - 2000
833 ZERO COUPON FUND - 2005
834 ZERO COUPON FUND - 2010
835 ADJUSTABLE U.S. GOVERNMENT FUND
836 RISING DIVIDENDS FUND
837 TEMPLETON PACIFIC GROWTH FUND (Pacific Growth Fund
until 10/15/93)
838 TEMPLETON INTERNATIONAL EQUITY FUND (International
Equity Fund until 10/15/93)
839 TEMPLETON DEVELOPING MARKETS EQUITY FUND
840 TEMPLETON GLOBAL GROWTH FUND
841 TEMPLETON WORLDWIDE ASSET ALLOCATION FUND
(not yet effective)
891 FGST FRANKLIN GOVERNMENT SECURITIES TRUST (AETNA)
193 FRANKLIN STABLE VALUE FUND
511 FRANKLIN TEMPLETON MONEY FUND II (expected effective
date: 05/01/95)
Stradley Ronon Stevens & Young
2600 One Commerce Square
Philadelphia, Pennsylvania 19103-7098
Direct Dial:
(215) 564-8101
September 21, 1995
Franklin Tax Exempt Money Fund
777 Mariners Island Boulevard
San Mateo, Ca 94404
Re: FRANKLIN TAX EXEMPT MONEY FUND
Gentlemen:
We have examined the Articles of Incorporation of Franklin Tax
Exempt Money Fund ("Fund"), a corporation organized under California law, the
Bylaws of the Fund, and its form of Share Certificate, all as amended to
date, and the various pertinent corporate documents and proceedings we deem
material. We have also examined the Notification of Registration and the
Registration Statements filed under the Investment Company Act of 1940
("Investment Company Act") and the Securities Act of 1933 ("Securities Act"),
all as amended to date, as well as other items we deem material to this
opinion.
You have indicated that, pursuant to Section 24(e)(1) of the
Investment Company Act, the Fund intends to file Post-Effective Amendment No.
15 to its registration statement under the Securities Act to register
35,712,710 additional shares for sale pursuant to its currently effective
registration statement under the Securities Act.
Based upon the foregoing information and examination, it is our
opinion that the Fund is a valid and subsisting corporation organized under
the laws of the State of California and that the proposed registration of the
35,712,710 shares is proper and such shares, when issued for a consideration
deemed by the Board of Directors to be consistent with the Articles of
Incorporation, and as described in the Fund's prospectus contained in its
Securities Act registration statement, will be legally outstanding,
fully-paid and non-assessable shares, and the holders of such shares will
have all the rights provided for with respect to such holding by the Articles
of Incorporation and the laws of the State of California.
We hereby consent to the use of this opinion as an exhibit to
Post-Effective Amendment No. 15 to be filed by the Fund, covering the
registration of the said shares under the Securities Act and the applications
and registration statements, and amendments thereto, filed in accordance with
the securities laws of the several states in which shares of the Fund are
offered, and we further consent to reference in the Prospectus and Statement
of Additional Information of the Fund to the fact that this opinion
concerning the legality of the issue has been rendered by us.
Very truly yours,
STRADLEY, RONON, STEVENS & YOUNG
By:/s/ Audrey C. Talley
Audrey C. Talley
ACT/pj
CONSENT OF INDEPENDENT AUDITORS
To the Board of Directors of
Franklin Tax-Exempt Money Fund:
We consent to the incorporation by reference in Post-Effective Amendment No. 15
to the Registration Statement of Franklin Tax-Exempt Money Fund on Form N-1A
(File No. 2-72614 & 811-3193) of our report dated August 31, 1995 on our audit
of the financial statements and financial highlights of the Fund, which report
is included in the Annual Report to Shareholders for the year ended July 31,
1995, which is incorporated by reference in the Registration Statement.
/s/ Coopers and Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
San Francisco, California
September 27, 1995
Franklin Tax-Exempt Money Fund
155 Bovet Road
San Mateo, California 94402
Gentlemen:
The undersigned hereby subscribes for the purchase of 125,000 shares of
common stock of Franklin Tax-Exempt Money Fund, a California corporation
(hereinafter referred to as the "Fund"), at a price of $1.00 per share for a
total investment of $125,000 (hereinafter referred to as the "Shares"). In
connection with said subscription, the undersigned hereby represents that:
1. There is no present reason to anticipate any change in circumstances or
any other occasion or event which would cause the undersigned to sell
or redeem the Shares;
2. There are no agreements or arrangements between the undersigned and the
Fund, or any of its officers, directors, employees or its investment
manager or any affiliated persons thereof with respect to the resale,
future distribution or redemption of the Shares;
3. The undersigned is fully aware that the organization expenses of the
Fund, including the costs and expenses of registration of the Fund, are
being charged to the operation of the Fund over a period of three years
commencing from the effective date of the Fund's Registration Statement
under the Securities Act of 1933, and that in the event the undersigned
redeems any portion of these Shares and the remaining balance in the
account of the undersigned would thereafter be less than the
unamortized expenses, or the Fund is liquidated during said three-year
period, the pro rata share of the then unamortized expenses will be
deducted from the redemption price paid to the undersigned.
4. The undersigned is aware that in issuing and selling these Shares, the
Fund is relying upon the aforementioned representations.
Franklin Resources, Inc.
Name of Investor
155 Bovet Road
Address
San Mateo, CA 94402
City, State, Zip Code
/s/ Charles B. Johnson
By: Charles B. Johnson
Signature
Dated: July 14, 1981
BASE PERIOD RETURN = Ending value - beginning value
------------------------------
Beginning value
= 1,000829 - 1.00
------------------------------
1.00
= 0.000829
= 0.0829%
CURRENT YIELD = Base period return x 365/7
= 0.000829 X 52.1428571
= 0.04322643
= 4.3226%
EFFECTIVE YIELD = (Base period return + 1) -1
------------------------------
365/7
= 0.000829 +1 -1
------------------------------
365/7
= 1.000829 -1
------------------------------
365/7
= 1.04415560 -1
= 0.04415560
= 4.42%
FRANKLIN TAX-EXEMPT MONEY FUND #114
FYE 7/31/95
TAXABLE YIELD= Tax-exempt current yield
------------------------
1-[f + (s x (1 - f) ]
WHERE:
f= federal income tax rate
s= state and local income tax rate
yield = 3.09%
f = 39.60%
s = 0.00%
TAXABLE EQUIVALENT YIELD = 3.09%
-------------------
1-[.396 + (0 x (1-.396))]
= 3.09%
--------------------
1-(.396 + 0
= 3.09%
--------------------
0.604
= 5.12
POWER OF ATTORNEY
The undersigned officers and directors of Franklin Tax-Exempt 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 18th day of September 1995.
/s/ Rupert H. Johnson, Jr. /s/ David E. Garbellano
Rupert H. Johnson, Jr., David W. Garbellano,
Principal Executive Officer Director
and Director
/s/ Frank H. Abbott, III /s/ Charles B. Johnson
Frank H. Abbott, III, Charles B. Johnson,
Director Director
/s/ Harris J. Ashton /s/ Frank W. T. LaHaye
Harris J. Ashton, Frank W. T. LaHaye,
Director Director
/s/ S. Joseph Fortunato /s/ Gordon S. Macklin
S. Joseph Fortunato, Gordon S. Macklin,
Director Director
/s/ Martin L. Flanangan /s/ Diomedes Loo-Tam
Martin L. Flanagan, Diomedes Loo-Tam,
Principal Financial Officer Principal Accounting Officer
CERTIFICATE OF SECRETARY
I, Deborah R. Gatzek, certify that I am Secretary of Franklin
Tax-Exempt 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 September 18,
1995.
RESOLVED, that a Power of Attorney, substantially in the form of
the Power of Attorney presented to this Board, appointing Harmon
E. Burns, Deborah R. Gatzek, Karen L. Skidmore, Larry L. Greene
and Mark H. Plafker as attorneys-in-fact for the purpose of
filing documents with the Securities and Exchange Commission, be
executed by each Director and designated officer.
I declare under penalty of perjury that the matters set forth in this
certificate are true and correct of my own knowledge.
/s/ Deborah R. Gatzek
Dated: September 18, 1995 Deborah R. Gatzek
Secretary
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FRANKLIN TAX-EXEMPT MONEY FUND JULY 31, 1995 ANNUAL REPORT AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1995
<PERIOD-END> JUL-31-1995
<INVESTMENTS-AT-COST> 171,388,294
<INVESTMENTS-AT-VALUE> 171,388,294
<RECEIVABLES> 747,055
<ASSETS-OTHER> 1,656,452
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 173,791,801
<PAYABLE-FOR-SECURITIES> 501,927
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 167,258
<TOTAL-LIABILITIES> 669,185
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 173,122,616
<SHARES-COMMON-PRIOR> 202,882,808
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 173,122,616
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 6,974,353
<OTHER-INCOME> 0
<EXPENSES-NET> (1,286,128)
<NET-INVESTMENT-INCOME> 5,688,225
<REALIZED-GAINS-CURRENT> (9,193)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 5,679,032
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (5,679,032)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 382,178,293
<NUMBER-OF-SHARES-REDEEMED> (417,601,005)
<SHARES-REINVESTED> 5,662,520
<NET-CHANGE-IN-ASSETS> (29,760,192)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (742,949)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (1,286,128)
<AVERAGE-NET-ASSETS> 214,292,429
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> .029
<PER-SHARE-GAIN-APPREC> (.000)
<PER-SHARE-DIVIDEND> (.029)
<PER-SHARE-DISTRIBUTIONS> .000
<RETURNS-OF-CAPITAL> .000
<PER-SHARE-NAV-END> 1.000
<EXPENSE-RATIO> .650
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> .000
</TABLE>
