As filed with the Securities and Exchange Commission on August 27, 1999.
File Nos.
2-55029
811-2605
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. 32 (X)
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 24 (X)
FRANKLIN MONEY FUND
(Exact Name of Registrant as Specified in Charter)
777 MARINERS ISLAND BLVD., SAN MATEO, CALIFORNIA 94404
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (650) 312-2000
DEBORAH R. GATZEKS, 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 (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[x] on November 1, 1999 pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a) (2)
[ ] on (date) pursuant to paragraph (a)(2) of rule 485
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment
The Money Market Portfolios (the Master Fund) has executed this registration
statement.
Prospectus
Franklin Money Fund
INVESTMENT STRATEGY Income
NOVEMBER 1, 1999
[Insert Franklin Templeton Ben Head]
The SEC has not approved or disapproved these securities or passed upon the
adequacy of this prospectus. Any representation to the contrary is a criminal
offense.
CONTENTS
THE FUND
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INFORMATION ABOUT THE FUND YOU SHOULD KNOW BEFORE INVESTING
[End callout]
[insert page #] Goal and Strategies
[insert page #] Main Risks
[insert page #] Performance
[insert page #] Fees and Expenses
[insert page #] Management
[insert page #] Distributions and Taxes
[insert page #] Financial Highlights
YOUR ACCOUNT
[Begin callout]
INFORMATION ABOUT ACCOUNT TRANSACTIONS AND SERVICES
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[insert page #] Buying Shares
[insert page #] Investor Services
[insert page #] Selling Shares
[insert page #] Account Policies
[insert page #] Questions
FOR MORE INFORMATION
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WHERE TO LEARN MORE ABOUT THE FUND
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Back Cover
THE FUND
[Insert graphic of bullseye and arrows] GOAL AND STRATEGIES
GOAL The fund's investment goal is to provide investors with as high a level
of current income as is consistent with the preservation of shareholders'
capital and liquidity. The fund also tries to maintain a stable $1 share
price.
PRINCIPAL INVESTMENTS
The fund normally invests in high-quality, short-term money market securities
of domestic and foreign issuers, including U.S. government securities,
repurchase agreements, bank obligations and commercial paper.
U.S. GOVERNMENT SECURITIES include marketable fixed, floating and variable
rate securities issued or guaranteed by the U.S. government or its agencies,
or by various instrumentalities that have been established or sponsored by
the U.S. government.
A REPURCHASE AGREEMENT is an agreement to buy a security and then to sell the
security back after a short period of time (generally, less than seven days)
at a higher price.
BANK OBLIGATIONS, and instruments secured by bank obligations, include fixed,
floating or variable rate certificates of deposit, letters of credit, time
deposits, bank notes and bankers' acceptances.
COMMERCIAL PAPER typically refers to short-term obligations of banks,
corporations and other borrowers with maturities of up to 270 days.
The fund maintains a dollar-weighted average portfolio maturity of 90 days or
less and only buys securities:
o with remaining maturities of 397 days or less, and
o that the manager determines present minimal credit risks and are rated in
the top two short-term ratings by U.S. nationally recognized rating
services (or comparable unrated securities).
[Insert graphic of chart with line going up and down] MAIN RISKS
INCOME Since the fund can only distribute what it earns, the fund's
distributions to shareholders may decline when interest rates fall. Because
the fund limits its investments to high-quality, short-term securities, its
portfolio generally will earn lower yields than a portfolio with
lower-quality, longer-term securities subject to more risk.
[Begin callout]
Income risk is the risk that a fund's income will decrease due to falling
interest rates.
[End callout]
CREDIT There is the possibility that an issuer will be unable to make
interest payments and repay principal. Changes in an issuer's financial
strength or in a security's credit rating may affect a security's value.
INTEREST RATE When interest rates rise, security prices fall. The opposite is
also true: security prices rise when interest rates fall. In general,
securities with longer maturities are more sensitive to these price changes.
MARKET A security's value may be reduced by market activity or the results
of supply and demand. This is a basic risk associated with all securities.
When there are more sellers than buyers, prices tend to fall. Likewise, when
there are more buyers than sellers, prices tend to rise.
YEAR 2000 When evaluating current and potential portfolio positions, Year
2000 is one of the factors the manager considers.
The manager will rely upon public filings and other statements made by
issuers about their Year 2000 readiness. The manager, of course, cannot audit
each issuer and its major suppliers to verify their Year 2000 readiness.
If an issuer in which the fund is invested is adversely affected by Year 2000
problems, it is likely that the price of its securities also will be
adversely affected. Please see page [#] for more information.
More detailed information about the fund, its policies, risks and short-term
debt ratings can be found in the fund's Statement of Additional Information
(SAI).
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Mutual fund shares are not deposits or obligations of, or guaranteed or
endorsed by, any bank, and are not federally insured by the Federal Deposit
Insurance Corporation, the Federal Reserve Board, or any other agency of the
U.S. government. Although the fund tries to maintain a $1 share price, it is
possible to lose money by investing in the fund.
[End callout]
MASTER/FEEDER STRUCTURE The fund seeks to achieve its investment goal by
investing all of its assets in shares of The Money Market Portfolio
(Portfolio). The Portfolio has the same investment goal and substantially
similar investment policies as the fund. The fund buys shares of the
Portfolio at net asset value. An investment in the fund is an indirect
investment in the Portfolio.
It is possible that the fund may have to withdraw its investment in the
Portfolio if the Portfolio changes its investment goal or if the fund's Board
of Directors, at any time, considers it to be in the fund's best interest.
[Insert graphic of a bull and a bear] PERFORMANCE
This bar chart and table show the volatility of the fund's returns, which is
one indicator of the risks of investing in the fund. The bar chart shows
changes in the fund's returns from year to year over the past 10 calendar
years. The table shows the fund's average annual total returns. Of course,
past performance cannot predict or guarantee future results.
ANNUAL TOTAL RETURNS 1
[Insert bar graph]
8.71% 7.64% 5.39% 2.97% 2.35% 3.47% 5.32% 4.85% 4.98% 5.04%
89 90 91 92 93 94 95 96 97 98
YEAR
[Begin callout]
BEST QUARTER:
Q2 '89 2.25%
WORST QUARTER:
Q2 '93 0.57%
[End callout]
AVERAGE ANNUAL TOTAL RETURNS
For the periods ended December 31, 1998
1 YEAR 5 YEARS 10 YEARS
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Franklin Money Fund 5.04% 4.73% 5.06%
1. As of September 31, 1999, the fund's year-to-date return was []%.
All fund performance assumes reinvestment of dividends.
To obtain the fund's current yield information, please call 1-800/DIAL BEN(R).
[Insert graphic of percentage sign] FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and
hold shares of the fund.
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
- -----------------------------------------------------------
Maximum sales charge (load) on purchases None
Exchange fee None
Please see "Selling Shares" on page [#] for an explanation of how and when
the deferred sales charge applies.
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)1
- -----------------------------------------------------------
Management and administration fees2 0.44%
Other expenses 0.23%
----------------
Total annual fund operating expenses2 0.67%
================
1. The annual fund operating expenses shown and included in the example below
reflect the expenses of both the fund and the Money Market Portfolio.
2. For the fiscal year ended June 30, 1999, the manager had agreed in advance
to limit its management fees. With this reduction, management fees were 0.15%
and total annual fund operating expenses were 0.67%. The manager may end this
arrangement at any time upon notice to the fund's Board of Directors.
EXAMPLE
This example can help you compare the cost of investing in the fund with the
cost of investing in other mutual funds.
The example assumes you invest $10,000 for the periods shown and then sell
all of your shares at the end of those periods. The example also assumes your
investment has a 5% return each year and the fund's operating expenses remain
the same. Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
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$68 $214 $373 $835
[Insert graphic of briefcase] MANAGEMENT
Franklin Advisers, Inc. (Advisers), 777 Mariners Island Blvd., San Mateo, CA
94404, is the Money Market Portfolio's investment manager and the fund's
administrator. Together, Advisers and its affiliates manage over $225 billion
in assets.
For the fiscal year ended June 30, 1999, the fund's share of the Portfolio's
management fees, before any advance waiver, was 0.15% of the fund's average
daily net assets. Under an agreement by the manager to limit its fees, the
fund's share was 0.15% of its average daily net assets. The manager may end
this arrangement at any time upon notice to the fund's Board of Directors.
YEAR 2000 PROBLEM The fund's business operations depend on a worldwide
network of computer systems that contain date fields, including securities
trading systems, securities transfer agent operations and stock market links.
Many of the systems currently use a two digit date field to represent the
date, and unless these systems are changed or modified, they may not be able
to distinguish the Year 1900 from the Year 2000 (commonly referred to as the
Year 2000 problem). In addition, the fact that the Year 2000 is a leap year
may create difficulties for some systems.
When the Year 2000 arrives, the fund's operations could be adversely affected
if the computer systems used by the manager, its service providers and other
third parties it does business with are not Year 2000 ready. For example, the
fund's portfolio and operational areas could be impacted, including
securities trade processing, interest and dividend payments, securities
pricing, shareholder account services, reporting, custody functions and
others.
The manager and its affiliated service providers are making a concerted
effort to take steps they believe are reasonably designed to address their
Year 2000 problems. Of course, the fund's ability to reduce the effects of
the Year 2000 problem is also very much dependent upon the efforts of third
parties over which the fund and the manager may have no control.
[Insert graphic of dollar
signs and stacks of coins] DISTRIBUTIONS AND TAXES
INCOME DISTRIBUTIONS The fund typically pays income dividends each day that
its net asset value is calculated. Your account may begin to receive
dividends on the day after we receive your investment and will continue to
receive dividends through the day we receive a request to sell your shares.
The amount of these dividends will vary and there is no guarantee the fund
will pay dividends.
TAX CONSIDERATIONS In general, fund distributions are taxable to you as ordinary
income. This is true whether you reinvest your distributions in additional fund
shares or receive them in cash.
[Begin callout]
BACKUP WITHHOLDING
By law, the fund must withhold 31% of your taxable distributions and proceeds
if you do not provide your correct social security or taxpayer identification
number, or if the IRS instructs the fund to do so.
[End callout]
Every January, you will receive a statement that shows the tax status of
distributions you received for the previous year. Distributions declared in
December but paid in January are taxable as if they were paid in December.
For tax purposes, an exchange of your fund shares for shares of a different
Franklin Templeton Fund is the same as a sale. Because the fund expects to
maintain a $1.00 net asset value per share, you should not have any gain or
loss on the sale of your fund shares.
Fund distributions generally will be subject to state and local income tax.
Non-U.S. investors may be subject to U.S. withholding and estate tax. You
should consult your tax advisor about federal, state, local or foreign tax
consequences of your investment in the fund.
[Insert graphic of a dollar bill] FINANCIAL HIGHLIGHTS
This table presents the fund's financial performance for the past five years.
This information has been audited by PricewaterhouseCoopers LLP.
YEAR ENDED JUNE 30,
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1999 1998 1997 1996 1995 1
- --------------------------------------------------------------------------------
PER SHARE DATA ($)
Net asset value,
beginning of year 1.00 1.00 1.00 1.00 1.00
------------------------------------------------
Net investment income .046 .050 .048 .049 .030
Distributions from net
investment income (.046) (.050) (.048) (.049) (.030)
------------------------------------------------
Net asset value, end of year 1.00 1.00 1.00 1.00 1.00
================================================
Total return (%) 2 4.66 5.10 4.88 4.99 3.07
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year
($ x 1 million) 1,969 1,722 1,498 1,172 1,018
Ratios to average net
assets: (%)
Expenses 3 .67 .68 .73 .75 .80 4
Expenses excluding waiver
and payments by affiliate 3 .67 .69 .74 .76 .82 4
Net investment income 4.54 4.99 4.78 4.86 5.19 4
1. For the period December 1, 1994 to June 30, 1995
2. Total return is not annualized.
3. The expense ratio includes the fund's share of the Portfolio's allocated
expenses.
4. Annualized
YOUR ACCOUNT
[Insert graphic of a paper with lines
and someone writing] BUYING SHARES
MINIMUM INVESTMENTS
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INITIAL ADDITIONAL
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Regular accounts $1,000 $50
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UGMA/UTMA accounts $100 $50
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Retirement accounts (other than IRAs, IRA no minimum no minimum
rollovers, Education IRAs or Roth IRAs)
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IRAs, IRA rollovers, Education IRAs or Roth
IRAs $250 $50
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Broker-dealer sponsored wrap account
programs $250 $50
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Full-time employees, officers, trustees and
directors of Franklin Templeton entities,
and their immediate family members
$100 $50
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The FRANKLIN TEMPLETON FUNDS include all of the Franklin Templeton U.S.
registered mutual funds, except Franklin Templeton Variable Insurance
Products Trust, Templeton Capital Accumulator Fund, Inc., and Templeton
Variable Products Series Fund.
[End callout]
Certain Franklin Templeton Funds offer multiple share classes not offered by
this fund. Please note that for selling or exchanging your shares, or for
other purposes, the fund's shares are considered Class A shares. Before
January 1, 1999, the fund's shares were considered Class I shares.
Many of the fund's investments, through the Money Market Portfolio, must be
paid for in federal funds, which are monies held by the fund's custodian on
deposit at the Federal Reserve Bank of San Francisco and elsewhere. The fund
generally cannot invest money it receives from you until it is available to
the fund in federal funds, which may take up to two days. Until then, your
purchase may not be considered in proper form. If the fund is able to make
investments within one business day, it may accept your order with payment in
other than federal funds.
ACCOUNT APPLICATION If you are opening a new account, please complete and
sign the enclosed account application. To save time, you can sign up now for
services you may want on your account by completing the appropriate sections
of the application (see the next page).
BUYING SHARES
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OPENING AN ACCOUNT ADDING TO AN ACCOUNT
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[Insert graphic of
hands shaking]
Contact your investment Contact your investment
THROUGH YOUR representative representative
INVESTMENT
REPRESENTATIVE
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Make your check, Federal Make your check payable to
[Insert graphic of Reserve Draft or negotiable Franklin Money Fund. Include
envelope] bank draft payable to your account number on the
Franklin Money Fund. check.
BY MAIL Instruments drawn on other
mutual funds may not be Fill out the deposit slip
accepted. from your account statement
or checkbook. If you do not
Mail the check or draft and have a slip, include a note
your signed application to with your name, the fund
Investor Services. name, and your account
number.
Mail the check and deposit
slip or note to Investor
Services.
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[Insert graphic of Call to receive a wire Call to receive a wire
three lightning control number and wire control number and wire
bolts] instructions. instructions.
BY WIRE Wire the funds and mail your To make a same day wire
signed application to investment, please make sure
1-800/632-2301 Investor Services. we receive your order by
(or 1-650/312-2000 Please include the wire 3:00 p.m. pacific time.
collect) control number or your new
account number on the
application.
To make a same day wire
investment, please make sure
we receive your order by
3:00 p.m. pacific time.
- -------------------------------------------------------------------------------
[Insert graphic of Call Shareholder Services at Call Shareholder Services at
two arrows pointing the number below, or send the number below or our
in opposite signed written instructions. automated TeleFACTS system,
directions] The TeleFACTS system cannot or send signed written
be used to open a new instructions.
BY EXCHANGE account.
(Please see page # for (Please see page # for
TeleFACTS(R) information on exchanges.) information on exchanges.)
1-800/247-1753
(around-the-clock
access)
- -------------------------------------------------------------------------------
FRANKLIN TEMPLETON INVESTOR SERVICES P.O. BOX 997151,
SACRAMENTO, CA 95899-9983
CALL TOLL-FREE: 1-800/632-2301
(MONDAY THROUGH FRIDAY 5:30 A.M. TO 5:00 P.M., PACIFIC TIME
SATURDAY 6:30 A.M. TO 2:30 P.M., PACIFIC TIME)
[Insert graphic of person with a headset] INVESTOR SERVICES
AUTOMATIC INVESTMENT PLAN This plan offers a convenient way for you to
invest in the fund by automatically transferring money from your checking or
savings account each month to buy shares. The minimum investment to open an
account with an automatic investment plan is $50 ($25 for an Education IRA).
To sign up, complete the appropriate section of your account application.
AUTOMATIC PAYROLL DEDUCTION You may be able to invest automatically in
shares of the fund by transferring money from your paycheck to the fund by
electronic funds transfer. If you are interested, indicate on your
application that you would like to receive an Automatic Payroll Deduction
Program kit.
DISTRIBUTION OPTIONS You may reinvest distributions you receive from the
fund in an existing account in the fund or in the same share class of another
Franklin Templeton Fund. Any initial sales charges or contingent deferred
sales charges (CDSCs) will not apply if you reinvest your distributions
within 365 days. You can also have your distributions deposited in a bank
account, or mailed by check. Deposits to a bank account may be made by
electronic funds transfer.
[Begin callout]
For Franklin Templeton Trust Company retirement plans, special forms may be
needed to receive distributions in cash. Please call 1-800/527-2020 for
information.
[End callout]
Please indicate on your application the distribution option you have chosen,
otherwise we will reinvest your distributions in the fund. If you choose not
to reinvest your distributions, the fund will distribute distributions paid
during the month as directed on the last business day of each month.
RETIREMENT PLANS Franklin Templeton offers a variety of retirement plans for
individuals and businesses. These plans require separate applications and
their policies and procedures may be different than those described in this
prospectus. For more information, including a free retirement plan brochure
or application, please call Retirement Plan Services at 1-800/527-2020.
TELEFACTS(R) Our TeleFACTS system offers around-the-clock access to
information about your account or any Franklin Templeton Fund. This service
is available from touch-tone phones at 1-800/247-1753. For a free TeleFACTS
brochure, call 1-800/DIAL BEN.
CHECK WRITING PRIVILEGES You may request redemption drafts (checks) free of
charge on your account application or, for an existing account, by calling
our TeleFACTS system. Check writing privileges allow you to write checks
against your account and are available unless you hold share certificates.
For security reasons and reasons related to the requirements of check
processing systems, the fund can only accept checks ordered from the fund.
The fund cannot be responsible for any check not ordered from the fund that
is returned unpaid to the payee.
TELEPHONE PRIVILEGES You will automatically receive telephone privileges
when you open your account, allowing you and your investment representative
to sell or exchange your shares and make certain other changes to your
account by phone.
For accounts with more than one registered owner, telephone privileges also
allow the fund to accept written instructions signed by only one owner for
transactions and account changes that could otherwise be made by phone. For
all other transactions and changes, all registered owners must sign the
instructions.
As long as we take certain measures to verify telephone requests, we will not
be responsible for any losses that may occur from unauthorized requests. Of
course, you can decline telephone exchange or redemption privileges on your
account application.
EXCHANGE PRIVILEGE You can exchange shares between most Franklin Templeton
Funds within the same class*. If you exchange shares from the fund to another
Franklin Templeton Fund, a sales charge may apply unless you acquired your
fund shares by exchange or through the reinvestment of dividends, or you
otherwise qualify to buy shares without an initial sales charge.
[Begin callout]
An EXCHANGE is really two transactions: a sale of one fund and the purchase
of another. In general, the same policies that apply to purchases and sales
apply to exchanges, including minimum investment amounts. Exchanges also have
the same tax consequences as ordinary sales and purchases.
[End callout]
Generally exchanges may only be made between identically registered accounts,
unless you send written instructions with a signature guarantee.
Frequent exchanges can interfere with fund management or operations and drive
up costs for all shareholders. To protect shareholders, there are limits on
the number and amount of exchanges you may make (please see "Market Timers"
on page [#]).
*Certain Class Z shareholders of Franklin Mutual Series Fund Inc. may
exchange into the fund. Advisor Class shareholders of other Franklin
Templeton Funds also may exchange into the fund. Advisor Class shareholders
who exchange their shares for shares of the fund and later decide they would
like to exchange into another fund that offers Advisor Class may do so.
Retirement plan assets temporarily invested in the fund and not previously
subject to a sales charge in another Franklin Templeton Fund may be exchanged
for Class C shares of another Franklin Templeton Fund. The time the shares
were held in the fund will not count towards the CDSC holding period for the
Class C shares.
SYSTEMATIC WITHDRAWAL PLAN This plan allows you to automatically sell your
shares and receive regular payments from your account. Certain terms and
minimums apply. To sign up, complete the appropriate section of your
application.
[Insert graphic of a certificate] SELLING SHARES
You can sell your shares at any time.
SELLING SHARES IN WRITING Generally, requests to sell $100,000 or less can be
made over the phone or with a simple letter. Sometimes, however, to protect
you and the fund we will need written instructions signed by all registered
owners, with a signature guarantee for each owner, if:
[Begin callout]
A SIGNATURE GUARANTEE helps protect your account against fraud.
You can obtain a signature guarantee at most banks and securities dealers.
A notary public CANNOT provide a signature guarantee.
[End callout]
o you are selling more than $100,000 worth of shares
o you want your proceeds paid to someone who is not a registered owner
o you want to send your proceeds somewhere other than the address of
record, or preauthorized bank or brokerage firm account
We also may require a signature guarantee on instructions we receive from an
agent, not the registered owners, or when we believe it would protect the
fund against potential claims based on the instructions received.
SELLING SHARES BY CHECK For accounts with check writing privileges, you may
make checks payable to any person and for any amount of $100 or more. Since
you will not know the exact amount in your account on the day a check clears,
a check should not be used to close your account.
When a check is presented for payment, we will redeem an equivalent number of
shares in your account to cover the amount of the check. The shares will be
redeemed at the net asset value next determined after we receive the check,
as long as the check does not exceed the collected balance in your account.
If a check is presented for payment that exceeds the collected balance in
your account, the bank may return the check unpaid.
The checks are drawn through Bank of America NT & SA. Bank of America may end
this service at any time upon notice to you. You generally will not be able
to convert a check drawn on your fund account into a certified or cashier's
check by presenting it at the bank. Since the fund is not a bank, the fund
cannot assure that a stop payment order you write will be effective. The fund
will use its best efforts, however, to see that these orders are carried out.
SELLING RECENTLY PURCHASED SHARES If you sell shares recently purchased with
a check or draft, we may delay sending you the proceeds until your check or
draft has cleared, which may take seven business days or more. A certified or
cashier's check may clear in less time.
REDEMPTION PROCEEDS Your redemption check will be sent within seven days
after we receive your request in proper form. We are not able to receive or
pay out cash in the form of currency. Redemption proceeds may be delayed if
we have not yet received your signed account application.
RETIREMENT PLANS You may need to complete additional forms to sell shares in
a Franklin Templeton Trust Company retirement plan. For participants under
age 591/2, tax penalties may apply. Call Retirement Plan Services at
1-800/527-2020 for details.
CONTINGENT DEFERRED SALES CHARGE (CDSC) Most Franklin Templeton Funds impose
a 1% CDSC on certain investments of Class A shares sold within 12 months of
purchase. While the fund generally does not have a CDSC, it will impose one
if you sell shares exchanged into the fund from another Franklin Templeton
Fund and those shares would have been assessed a CDSC in the other fund.
Please keep in mind that the time the shares are held in the money fund does
not count towards the CDSC holding period.
The CDSC is based on the current value of the shares being sold or their net
asset value when purchased, whichever is less. To keep your CDSC as low as
possible, each time you place a request to sell shares we will first sell any
shares in your account that are not subject to a CDSC. If there are not
enough of these to meet your request, we will sell the shares in the order
they were purchased.
SELLING SHARES
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TO SELL SOME OR ALL OF YOUR SHARES
- -------------------------------------------------------------------------
[Insert graphic of
hands shaking]
Contact your investment representative
THROUGH YOUR INVESTMENT
REPRESENTATIVE
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[Insert graphic of Send written instructions and endorsed share
envelope] certificates (if you hold share certificates)
to Investor Services. Corporate, partnership
BY MAIL or trust accounts may need to send additional
documents.
Specify the fund, the account number and the
dollar value or number of shares you wish to
sell. Be sure to include all necessary
signatures and any additional documents, as
well as signature guarantees if required.
A check will be mailed to the name(s) and
address on the account, or otherwise according
to your written instructions.
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[Insert graphic of As long as your transaction is for $100,000 or
phone] less, you do not hold share certificates and
you have not changed your address by phone
BY PHONE within the last 15 days, you can sell your
shares by phone.
1-800/632-2301
A check will be mailed to the name(s) and
address on the account. Written instructions,
with a signature guarantee, are required to
send the check to another address or to make
it payable to another person.
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[Insert graphic of You can call or write to have redemption
three lightning bolts] proceeds sent to a bank account. See the
policies above for selling shares by mail or
phone.
Before requesting to have redemption proceeds
BY ELECTRONIC FUNDS sent to a bank account, please make sure we
TRANSFER (ACH) have your bank account information on file. If
we do not have this information, you will need
to send written instructions with your bank's
name and address, a voided check or savings
account deposit slip, and a signature
guarantee if the ownership of the bank and
fund accounts are different.
If we receive your request in proper form by
3:00 p.m. pacific time, proceeds sent by ACH
generally will be available within two to
three business days.
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[Insert graphic of two Obtain a current prospectus for the fund you
arrows pointing in are considering.
opposite directions]
Call Shareholder Services at the number below
BY EXCHANGE or our automated TeleFACTS system, or send
signed written instructions. See the policies
TeleFACTS(R) above for selling shares by mail or phone.
1-800/247-1753
(around-the-clock If you hold share certificates, you will need
access) to return them to the fund before your
exchange can be processed.
- -------------------------------------------------------------------------
FRANKLIN TEMPLETON INVESTOR SERVICES P.O. BOX 997151,
SACRAMENTO, CA 95899-9983
CALL TOLL-FREE: 1-800/632-2301
(MONDAY THROUGH FRIDAY 5:30 A.M. TO 5:00 P.M., PACIFIC TIME
SATURDAY 6:30 A.M. TO 2:30 P.M., PACIFIC TIME)
[Insert graphic of paper and pen] ACCOUNT POLICIES
CALCULATING SHARE PRICE When you buy shares, you pay the net asset value
(NAV) per share. When you sell shares, you receive the NAV minus any
applicable contingent deferred sales charge (CDSC).
The fund calculates its NAV per share at 3:00 p.m. pacific time, each day the
New York Stock Exchange is open , by dividing its net assets by the number of
shares outstanding. The fund's assets are generally valued at their amortized
cost.
Requests to buy and sell shares are processed at the NAV next calculated
after we receive your request in proper form.
ACCOUNTS WITH LOW BALANCES If the value of your account falls below $250
($50 for employee and UGMA/UTMA accounts) because you sell some of your
shares, we may mail you a notice asking you to bring the account back up to
its applicable minimum investment amount. If you choose not to do so within
30 days, we may close your account and mail the proceeds to the address of
record.
STATEMENTS AND REPORTS You will receive statements that show your account
transactions. You also will receive the fund's financial reports every six
months. To reduce fund expenses, we try to identify related shareholders in a
household and send only one copy of the financial reports. If you need
additional copies, please call 1-800/DIAL BEN.
If there is a dealer or other investment representative of record on your
account, he or she also will receive confirmations, account statements and
other information about your account directly from the fund.
STREET OR NOMINEE ACCOUNTS You may transfer your shares from the street or
nominee name account of one dealer to another, as long as both dealers have
an agreement with Franklin Templeton Distributors, Inc. We will process the
transfer after we receive authorization in proper form from your delivering
securities dealer.
JOINT ACCOUNTS Unless you specify a different registration, accounts with
two or more owners are registered as "joint tenants with rights of
survivorship" (shown as "Jt Ten" on your account statement). To make any
ownership changes to a joint account, all owners must agree in writing,
regardless of the law in your state.
MARKET TIMERS The fund may restrict or refuse exchanges by market timers. If
accepted, each exchange by a market timer will be charged $5 by
Franklin/Templeton Investor Services, Inc., the fund's transfer agent. You
will be considered a market timer if you have (i) requested an exchange out
of the fund within two weeks of an earlier exchange request, or (ii)
exchanged shares out of the fund more than twice in a calendar quarter, or
(iii) exchanged shares equal to at least $5 million, or more than 1% of the
fund's net assets, or (iv) otherwise seem to follow a timing pattern. Shares
under common ownership or control are combined for these limits.
ADDITIONAL POLICIES Please note that the fund maintains additional policies
and reserves certain rights, including:
o The fund may refuse any order to buy shares, including any purchase under
the exchange privilege.
o At any time, the fund may change its investment minimums or waive or
lower its minimums for certain purchases.
o If you buy shares with a check or draft that is returned to the fund
unpaid, the fund may impose a $10 charge against your account for each
returned item.
o When you buy shares, it does not create a checking or other bank account
relationship with the fund or any bank.
o The fund may modify or discontinue the exchange privilege on 60 days'
notice.
o You may only buy shares of a fund eligible for sale in your state or
jurisdiction.
o In unusual circumstances, we may temporarily suspend redemptions, or
postpone the payment of proceeds, as allowed by federal securities laws.
o For redemptions over a certain amount, the fund reserves the right to
make payments in securities or other assets of the fund, in the case of an
emergency or if the payment by check, wire or electronic funds transfer
would be harmful to existing shareholders.
o To permit investors to obtain the current price, dealers are responsible
for transmitting all orders to the fund promptly.
[Insert graphic of question mark]QUESTIONS
If you have any questions about the fund or your account, you can write to us
at P.O. Box 997151, Sacramento, CA 95899-9983. You can also call us at one of
the following numbers. For your protection and to help ensure we provide you
with quality service, all calls may be monitored or recorded.
HOURS (PACIFIC TIME,
DEPARTMENT NAME TELEPHONE NUMBER MONDAY THROUGH FRIDAY)
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Shareholder Services 1-800/632-2301 5:30 a.m. to 5:00 p.m.
6:30 a.m. to 2:30 p.m.
(Saturday)
Fund Information 1-800/DIAL BEN 5:30 a.m. to 8:00 p.m.
(1-800/342-5236) 6:30 a.m. to 2:30 p.m.
(Saturday)
Retirement Plan Services
1-800/527-2020 5:30 a.m. to 5:00 p.m.
Dealer Services 1-800/524-4040 5:30 a.m. to 5:00 p.m.
Institutional Services 1-800/321-8563 6:00 a.m. to 5:00 p.m.
TDD (hearing impaired) 1-800/851-0637 5:30 a.m. to 5:00 p.m.
FOR MORE INFORMATION
You can learn more about the fund in the following documents:
ANNUAL/SEMIANNUAL REPORT TO SHAREHOLDERS
Includes a discussion of recent market conditions and fund strategies,
financial statements, detailed performance information, portfolio holdings,
and the auditor's report.
STATEMENT OF ADDITIONAL INFORMATION (SAI)
Contains more information about the fund, its investments and policies. It is
incorporated by reference (is legally a part of this prospectus).
For a free copy of the current annual/semiannual report or the SAI, please
contact your investment representative or call us at the number below.
FRANKLIN(R)TEMPLETON(R)
1-800/DIAL BEN(R) (1-800/342-5236)
TDD (Hearing Impaired) 1-800/851-0637
www.franklintempleton.com
You can also obtain information about the fund by visiting the SEC's Public
Reference Room in Washington, D.C. (phone 1-800/SEC-0330) or by sending your
request and a duplicating fee to the SEC's Public Reference Section,
Washington, D.C. 20549-6009. You can also visit the SEC's Internet site at
http://www.sec.gov.
Investment Company Act file #811-2605 111P 10/99
FRANKLIN MONEY FUND
STATEMENT OF ADDITIONAL INFORMATION
NOVEMBER 1, 1999
P.O. BOX 997151
SACRAMENTO, CA 95899-9983 1-800/DIAL BEN(R)
This Statement of Additional Information (SAI) is not a prospectus. It
contains information in addition to the information in the fund's prospectus.
The fund's prospectus, dated November 1, 1999, which we may amend from time
to time, contains the basic information you should know before investing in
the fund. You should read this SAI together with the fund's prospectus.
The audited financial statements and auditor's report in the fund's Annual
Report to Shareholders, for the fiscal year ended June 1, 1999, are
incorporated by reference (are legally a part of this SAI).
For a free copy of the current prospectus or annual report, contact your
investment representative or call 1-800/DIAL BEN (1-800/342-5236).
CONTENTS
Goal and Strategies
Risks
Officers and Directors
Management and Other Services
Portfolio Transactions
Distributions and Taxes
Organization, Voting Rights and Principal Holders
Buying and Selling Shares
Pricing Shares
The Underwriter
Performance
Miscellaneous Information
Description of Ratings
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MUTUAL FUNDS, ANNUITIES, AND OTHER INVESTMENT PRODUCTS:
o ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY OF THE U.S. GOVERNMENT;
o ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY
BANK;
o ARE SUBJECT TO INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
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GOALS AND STRATEGIES
- ------------------------------------------------------------------------------
The fund's investment goal is to provide investors with as high a level of
current income as is consistent with the preservation of shareholders'
capital and liquidity. This goal is fundamental, which means it may not be
changed without shareholder approval. The fund also tries to maintain a
stable $1 share price.
U.S. GOVERNMENT SECURITIES Some of the U.S. government securities, including
U.S. Treasury bills, notes and bonds and securities of the Government
National Mortgage Association and the Federal Housing Administration, are
issued or guaranteed by the U.S. government or carry a guarantee that is
supported by the full faith and credit of the U.S. government. Other U.S.
government securities are issued or guaranteed by federal agencies or
government-sponsored enterprises and are not considered direct obligations of
the U.S. government. Instead, they involve sponsorship or guarantees by
government agencies or enterprises. For example, some securities are
supported by the right of the issuer to borrow from the U.S. Treasury, such
as obligations of the Federal home Loan Bank. Others, such as obligations of
the Federal National Mortgage Association, are supported only by the credit
of the instrumentality.
BANK OBLIGATIONS The fund may invest in obligations of U.S. banks, foreign
branches of U.S. or foreign banks, and U.S. branches of foreign banks. These
obligations may include deposits that are fully insured by the U.S.
government, its agencies or instrumentalities, such as deposits in banking
and savings institutions up to the current limit of the insurance on
principal provided by the Federal Deposit Insurance Corporation. Deposits
are frequently combined in larger units by an intermediate bank or other
institution.
The fund will invest in these obligations or instruments issued by banks and
savings institutions with assets of al least $1 billion. Time deposits are
non-negotiable deposits that are held in a banking institution for a
specified time at a stated interest rate. The fund may not invest more than
10% of its assets in time deposits with more than seven days to maturity.
The fund may invest in an obligation issued by a branch of a bank only if the
parent bank has assets of at least $5 billion, and may invest only up to 25%
of its assets in obligations of foreign branches of U.S. or foreign banks.
The fund may, however, invest more than 25% of its assets in certain domestic
bank obligations, including U.S. branches of foreign banks.
VARIABLE MASTER DEMAND NOTES are a type of commercial paper. They are direct
arrangements between a lender and a borrower that allow daily changes to the
amount borrowed and to the interest rate. The fund, as lender, may increase
or decrease the amount provided by the note agreement, and the borrower may
repay up to the full amount of the note without penalty. Typically, the
borrower may also set the interest rate daily, usually at a rate that is the
same or similar to the interest rate on other commercial paper issued by the
borrower. The fund does not have any limit on the amount of its assets that
may be invested in variable master demand notes and may invest only in
variable master demand notes of U.S. issuers.
Because variable master demand notes are direct lending arrangements between
the lender and the borrower, they generally are not traded and do not have a
secondary market. They are, however, redeemable at face value plus accrued
interest at any time, although the fund's ability to redeem a note is
dependent on the ability of the borrower to pay the principal and interest on
demand. When determining whether to invest in a variable master demand note,
the manager considers, among other things, the earnings power, cash flow and
other liquidity ratios of the issuer.
ASSET-BACKED SECURITIES are typically commercial paper backed by the loans
or accounts receivable of an entity, such as a bank or credit card company in
which the Money Fund may invest. The issuer intends to repay using the
assets backing the securities (once collected). Therefore, repayment depends
largely on the cash-flows generated by the assets backing the securities.
Sometimes the credit support for these securities is limited to the
underlying assets. In other cases it may be provided by a third party
through a letter of credit or insurance guarantee.
Asset-backed commercial paper is often backed by a pool of assets
representing the obligations of a number of different parties. To lessen the
effect of failures by obligors on these underlying assets to make payment,
the securities may contain elements of credit support. The credit support
falls into two categories: liquidity protection and protection against
ultimate default on the underlying assets. Liquidity protection refers to the
provision of advances, generally by the entity administering the pool of
assets, to ensure that scheduled payments on the underlying pool are made in
a timely fashion. Protection against ultimate default ensures payment on at
least a portion of the assets in the pool. This protection may be provided
through guarantees, insurance policies or letters of credit obtained from
third parties, through various means of structuring the transaction or
through a combination of these approaches. The degree of credit support
provided on each issue is based generally on historical information
respecting the level of credit risk associated with the payments. Delinquency
or loss that exceeds the anticipated amount could adversely impact the return
on an investment in an asset-backed security.
CORPORATE OBLIGATIONS may include fixed, floating and variable rate bonds,
debentures or notes.
COMMERCIAL PAPER The fund may invest in commercial paper of domestic or
foreign issuers.
STRIPPED SECURITIES are the separate income and principal components of a
debt securities. Once the securities have been stripped they are referred to
as zero coupon securities. Their risks are similar to those of other money
market securities although they may be more volatile. Stripped securities do
not make periodic payments of interest prior to maturity and the stripping of
the interest coupons causes them to be offered at a discount from their face
amount. This results in the securities being subject to greater fluctuations
in response to changing interest rates than interest-paying securities of
similar maturities.
The fund only intends to buy stripped securities that are issued or
guaranteed by the U.S. Treasury or by an agency or instrumentality of the
U.S. government.
MUNICIPAL SECURITIES The fund may invest up to 10% of its assets in taxable
municipal securities. Municipal securities are issued by or on behalf of
states, territories or possessions of the U.S., the District of Columbia, or
their political subdivisions, agencies or instrumentalities. They are
generally issued to raise money for various public purposes, such as
constructing public facilities and making loans to public institutions.
Certain types of municipal securities are issued to provide funding for
privately operated facilities and are generally taxable.
DIVERSIFICATION The fund is a diversified fund. As fundamental policies: (a)
the fund may not buy a security if, with respect to 75% of its total assets,
more than 5% would be invested in the securities of any one issuer, and (b)
the fund may not invest in a security if the fund would own more than 10% of
the outstanding voting securities of any one issuer. These limitations do not
apply to obligations issued or guaranteed by the U.S. government or its
instrumentalities.
As a money market fund, however, the fund must follow certain procedures
required by federal securities laws that may be more restrictive than some of
the fund's other policies or investment restrictions. With respect to
diversification, these procedures require that the fund not invest more than
5% of its total assets in securities of a single issuer, other than U.S.
government securities, although it may invest up to 25% of its total assets
in securities of a single issuer that are rated in the highest rating
category for a period of up to three business days after purchase. The fund
also must not invest more than (a) the greater of 1% of its total assets or
$1 million in securities issued by a single issuer that are rated in the
second highest rating category; and (b) 5% of its total assets in securities
rated in the second highest rating category. These procedures are fundamental
policies of the fund.
WHAT ARE SOME OF THE FUND'S OTHER INVESTMENT STRATEGIES AND PRACTICES?
WHEN-ISSUED OR DELAYED-DELIVERY TRANSACTIONS are those where payment and
delivery for the security take place at a future date. Since the market
price of the security may fluctuate during the time before payment and
deliver, the fund assumes the risk that the value of the security at delivery
may be ore or less than the purchase prices. When the fund is the buyer in
the transaction, it will maintain cash or liquid securities, with an
aggregate value equal to the amount of its purchase commitments, in a
segregated account with its custodian bank until payment is made. The fund
will not engage in when-issued and delayed-deliver transactions for
investment leverage purposes.
REPURCHASE AGREEMENTS The fund generally will have a portion of its assets in
cash or cash equivalents for a variety of reasons, including waiting for a
special investment opportunity or taking a defensive position. To earn income
on this portion of its assets, the fund may enter into repurchase agreements.
Under a repurchase agreement, the fund agrees to buy securities guaranteed as
to payment of principal and interest by the U.S. government or its agencies
from a qualified bank or broker-dealer and then to sell the securities back
to the bank or broker-dealer after a short period of time (generally, less
than seven days) at a higher price. The bank or broker-dealer must transfer
to the fund's custodian securities with an initial market value of at least
102% of the dollar amount invested by the fund in each repurchase agreement.
The manager will monitor the value of such securities daily to determine that
the value equals or exceeds the repurchase price. Repurchase agreements may
involve risks in the event of default or insolvency of the bank or
broker-dealer, including possible delays or restrictions upon the fund's
ability to sell the underlying securities. The fund will enter into
repurchase agreements only with parties who meet creditworthiness standards
approved by the fund's board of directors , i.e., banks or broker-dealers
that the manager has determined present no serious risk of becoming involved
in bankruptcy proceedings within the time frame contemplated by the
repurchase transaction. The fund may enter into repurchase agreements with
certain U.S. and foreign banks and broker-dealers.
LOANS OF PORTFOLIO SECURITIES To generate additional income, the fund may
lend certain of its portfolio securities to qualified banks and
broker-dealers. These loans may not exceed 33 1/3% of the value of the fund's
total assets, measured at the time of the most recent loan. For each loan,
the borrower must maintain with the fund's custodian collateral (consisting
of any combination of cash, securities issued by the U.S. government and its
agencies and instrumentalities, or irrevocable letters of credit) with a
value at least equal to 102% of the current market value of the loaned
securities. The fund retains all or a portion of the interest received on
investment of the cash collateral or receives a fee from the borrower. The
fund may terminate the loan at any time and obtain the return of the
securities loaned within the normal settlement period for the security
involved. The fund will continue to receive any interest or dividends paid on
the loaned securities and to have voting rights with respect to the
securities. As with other extensions of credit, however, there are risks of
delay in recovery or even loss of rights in collateral in the event of
default or insolvency of the borrower. The fund will loan its securities only
to parties who meet creditworthiness standards approved by the fund's board
of directors, i.e., banks or broker-dealers that the manager has determined
present no serious risk of becoming involved in bankruptcy proceedings within
the time frame contemplated by the loan.
BORROWING The fund may borrow up to 5% of its total assets from banks for
temporary or emergency purposes. The fund will not make any new investments
while any outstanding loans exceed 5% of its total assets.
ILLIQUID INVESTMENTS The fund's policy is not to invest more than 10% of its
net assets in illiquid securities. Illiquid securities are generally
securities that cannot be sold within seven days in the normal course of
business at approximately the amount at which the fund has valued them.
OTHER LIMITATIONS The fund may not invest more than 5% of its total assets in
securities of companies, including predecessors, that have been in continuous
operation for less than three years. The fund also may not invest more than
25% of its total assets in any particular industry, although it may invest
more than 25% of its assets in certain domestic bank obligations. These
limitations do not apply to U.S. government securities, federal agency
obligations, or repurchase agreements fully collateralized by U.S. government
securities. There are, however, certain tax diversification requirements that
may apply to investments in repurchase agreements and other securities that
are not treated as U.S. government securities under the Internal Revenue Code.
MASTER/FEEDER STRUCTURE The fund seeks to achieve its investment goal by
investing all of its assets in shares of The Money Market Portfolio
(Portfolio). The Portfolio has the same investment goal and substantially
similar investment policies as the fund, except, in all cases, the fund may
pursue its policies by investing in a mutual fund with the same investment
goal and substantially similar policies and restrictions as the fund. The
investment goal of the Portfolio also is fundamental and may not be changed
without shareholder approval.
The fund's structure, where it invests all of its assets in the Portfolio, is
sometimes known as a "master/feeder" structure. By investing all of its
assets in shares of the Portfolio, the fund, other mutual funds and
institutional investors can pool their assets. This may result in asset
growth and lower expenses, although there is no guarantee this will happen.
If the fund, as a shareholder of the Portfolio, has to vote on a matter
relating to the Portfolio, it will hold a meeting of fund shareholders and
will cast its votes in the same proportion as the fund's shareholders voted.
INVESTMENT RESTRICTIONS The fund has adopted the following restrictions as
fundamental policies. This means they may only be changed if the change is
approved by (i) more than 50% of the fund's outstanding shares or (ii) 67% or
more of the fund's shares present at a shareholder meeting if more than 50%
of the fund's outstanding shares are represented at the meeting in person or
by proxy, whichever is less.
The fund may not:
1. Borrow money or mortgage or pledge any of its assets, except that
borrowings (and a pledge of assets therefore) for temporary or emergency
purposes may be made from banks in any amount up to 5% of the total asset
value.
2. Make loans, except (a) through the purchase of debt securities in
accordance with the investment objective and policies of the fund, (b) to
the extent the entry into a repurchase agreement is deemed to be a loan,
or (c) by the loan of its portfolio securities in accordance with the
policies described in the Prospectus.
3. Acquire, lease or hold real estate, provided that this limitation shall
not prohibit the purchase of municipal and other debt securities secured
by real estate or interests therein.
4. Buy any securities "on margin" or sell any securities "short," except
that it may use such short-term credits as are necessary for the
clearance of transactions.
5. Invest in commodities and commodity contracts, puts, calls, straddles,
spreads, or any combination thereof, or interests in oil, gas, or other
mineral exploration or development programs, except that it may purchase,
hold and dispose of "obligations with puts attached" or write covered
call options in accordance with its stated investment policies.
6. Purchase securities in private placements or in other transactions, for
which there are legal or contractual restrictions on resale and which are
not readily marketable, or enter into a repurchase agreement with more
than seven days to maturity if, as a result, more than 10% of the total
assets of the fund would be invested in such securities or repurchase
agreement, except that, to the extent this restriction is applicable, the
fund may purchase, in private placements, shares of another registered
investment company having the same investment objectives and policies as
the fund.
7. Act as underwriter of securities issued by other persons except insofar
as the fund may technically be deemed an underwriter under the federal
securities laws in connection with the disposition of portfolio
securities, except that all or substantially all of the assets of the
fund may be invested in another registered investment company having the
same investment objectives and policies as the fund.
8. Purchase the securities of other investment companies, except in
connection with a merger, consolidation, acquisition, or reorganization;
provided that all or substantially all of the assets of the fund may be
invested in another registered investment company having the same
investment objective and policies as the fund.
9. Invest in any issuer for purposes of exercising control or management,
except that, to the extent this restriction is applicable, all or
substantially all of the assets of the fund may be invested in another
registered investment company having the same investment objectives and
policies as the fund.
10. Purchase securities from or sell to the fund's officers and directors,
or any firm of which any officer or director is a member, as principal,
or retain securities of any issuer if, to the knowledge of the fund, one
or more of the fund's officers, directors, or investment advisor own
beneficially more than 1/2 of 1% of the securities of such issuer and all
such officers and directors together own beneficially more than 5% of
such securities.
11. Invest more than 25% of its assets in securities of any industry,
although for purposes of this limitation, U.S. government obligations are
not considered to be part of any industry. This prohibition does not
apply where the fund's policies, as described in the Prospectus, state
otherwise, and further does not apply to the extent that the fund invests
all of its assets in another registered investment company having the
same investment objective and policies.
The Portfolio's investment restrictions are the same as the fund's, except as
necessary to reflect the fund's policy to invest all of its assets in shares
of the Portfolio.
If a bankruptcy or other extraordinary event occurs concerning a particular
security the fund owns, the fund may receive stock, real estate, or other
investments that the fund would not, or could not, buy. If this happens, the
fund intends to sell such investments as soon as practicable while maximizing
the return to shareholders.
Generally, the policies and restrictions discussed in this SAI and in the
prospectus apply when the fund makes an investment. In most cases, the fund
is not required to sell a security because circumstances change and the
security no longer meets one or more of the fund's policies or restrictions.
If a percentage restriction or limitation is met at the time of investment, a
later increase or decrease in the percentage due to a change in the value or
liquidity of portfolio securities will not be considered a violation of the
restriction or limitation.
RISKS
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FOREIGN SECURITIES The value of foreign and (U.S.) securities is affected by
general economic conditions and individual company and industry earnings
prospects. While foreign securities may offer significant opportunities for
gain, they also involve additional risks that can increase the potential for
losses in the fund.
The political, economic and social structures of some countries the fund
invests in may be less stable and more volatile than those in the U.S. The
risks of investing in these countries include the possibility of the
imposition of exchange controls, expropriation, restrictions on removal of
currency or other assets, nationalization of assets and punitive taxes.
There may be less publicly available information about a foreign company or
government than about a U.S. company or public entity. Certain countries'
financial markets and services are less developed than those in the U.S. or
other major economies. As a result, they may not have uniform accounting,
auditing and financial reporting standards and may have less government
supervision of financial markets. Foreign securities markets may have
substantially lower trading volumes than U.S. markets, resulting in less
liquidity and more volatility than experienced in the U.S. Transaction costs
on foreign securities markets are generally higher than in the U.S. The
settlement practices may be cumbersome and result in delays that may affect
portfolio liquidity. The fund may have greater difficulty exercising rights,
pursuing legal remedies, and obtaining judgments with respect to foreign
investments in foreign courts than with respect to domestic issuers in U.S.
courts.
DERIVATIVES The fund's transactions in stripped securities involve certain
risks. These risks include, among others, the risk that the price movements
in the underlying securities correlate with price movements in the relevant
portion of the fund's portfolio. The fund bears the risk in the same amount
as the instrument it has purchased, or that there may be a negative
correlation that would result in a loss on both the underlying security and
the derivative security.
MASTER/FEEDER STRUCTURE There are some risks associated with the fund's
master/feeder structure. If other shareholders in the Portfolio sell their
shares, the fund's expenses may increase. Additionally, any economies of
scale the fund has achieved as a result of the structure may be diminished.
Institutional investors in the Portfolio that have a greater pro rata
ownership interest in the Portfolio than the fund could also have effective
voting control.
If the Portfolio changes its investment goal or any of its fundamental
policies and fund shareholders do not approve the same change for the fund,
the fund may need to withdraw its investment from the Portfolio. Likewise, if
the board of directors considers it to be in the fund's best interest, it may
withdraw the fund's investment from the Portfolio at any time. If either
situation occurs, the board will decide what action to take. Possible
solutions might include investing all of the fund's assets in another pooled
investment entity with the same investment goal and policies as the fund, or
hiring an investment manager to manage the fund's investments. Either
circumstance could increase the fund's expenses.
OFFICERS AND DIRECTORS
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The fund has a board of directors. The board is responsible for the overall
management of the fund, including general supervision and review of the
fund's investment activities. The board, in turn, elects the officers of the
fund who are responsible for administering the fund's day-to-day operations.
The name, age and address of the officers and board members, as well as their
affiliations, positions held with the fund, and principal occupations during
the past five years are shown below.
Frank H. Abbott, III (78)
1045 Sansome Street, San Francisco, CA 94111
DIRECTOR
President and Director, Abbott Corporation (an investment company); director
or trustee, as the case may be, of 27 of the investment companies in the
Franklin Templeton Group of Funds; and FORMERLY, Director, MotherLode Gold
Mines Consolidated (gold mining) (until 1996) and Vacu-Dry Co. (food
processing) (until 1996).
Harris J. Ashton (67)
191 Clapboard Ridge Road, Greenwich, CT 06830
DIRECTOR
Director, RBC Holdings, Inc. (bank holding company) and Bar-S Foods (meat
packing company); director or trustee, as the case may be, of 48 of the
investment companies in the Franklin Templeton Group of Funds; and FORMERLY,
President, Chief Executive Officer and Chairman of the Board, General Host
Corporation (nursery and craft centers) (until 1998).
Robert F. Carlson (71)
2120 Lambeth Way, Carmichael, CA 95608
DIRECTOR
Member and past President, Board of Administration, California Public
Employees Retirement Systems (CALPERS); director or trustee, as the case may
be, of nine of the investment companies in the Franklin Templeton Group of
Funds; and FORMERLY, member and Chairman of the Board, Sutter Community
Hospitals, member, Corporate Board, Blue Shield of California, and Chief
Counsel, California Department of Transportation.
S. Joseph Fortunato (67)
Park Avenue at Morris County, P.O. Box 1945
Morristown, NJ 07962-1945
DIRECTOR
Member of the law firm of Pitney, Hardin, Kipp & Szuch; and director or
trustee, as the case may be, of 50 of the investment companies in the
Franklin Templeton Group of Funds.
*Charles B. Johnson (66)
777 Mariners Island Blvd., San Mateo, CA 94404
CHAIRMAN OF THE BOARD AND DIRECTOR
President, Chief Executive Officer and Director, Franklin Resources, Inc.;
Chairman of the Board and Director, Franklin Advisers, Inc., Franklin
Investment Advisory Services, Inc. and Franklin Templeton Distributors, Inc.;
Director, Franklin/Templeton Investor Services, Inc. and Franklin Templeton
Services, Inc.; officer and/or director or trustee, as the case may be, of
most of the other subsidiaries of Franklin Resources, Inc. and of 49 of the
investment companies in the Franklin Templeton Group of Funds.
*Rupert H. Johnson, Jr. (59)
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.
and Franklin Investment Advisory Services, Inc.; Senior Vice President,
Franklin Advisory Services, LLC; Director, Franklin/Templeton Investor
Services, Inc.; and officer and/or director or trustee, as the case may be,
of most of the other subsidiaries of Franklin Resources, Inc. and of 52 of
the investment companies in the Franklin Templeton Group of Funds.
Frank W.T. LaHaye (70)
20833 Stevens Creek Blvd., Suite 102, Cupertino, CA 95014
DIRECTOR
General Partner, Miller & LaHaye, which is the General Partner of Peregrine
Ventures II (venture capital firm); director or trustee, as the case may be,
of 27 of the investment companies in the Franklin Templeton Group of Funds;
and FORMERLY, Director, Fischer Imaging Corporation (medical imaging
systems), Digital Transmission Systems, Inc. (wireless communications) and
Quarterdeck Corporation (software firm), and General Partner, Peregrine
Associates, which was the General Partner of Peregrine Ventures (venture
capital firm).
Gordon S. Macklin (71)
8212 Burning Tree Road, Bethesda, MD 20817
DIRECTOR
Director, Fund American Enterprises Holdings, Inc. (holding company), Martek
Biosciences Corporation, MCI WorldCom (information services), MedImmune, Inc.
(biotechnology), Spacehab, Inc. (aerospace services) and Real 3D (software);
director or trustee, as the case may be, of 48 of the investment companies in
the Franklin Templeton Group of Funds; and FORMERLY, Chairman, White River
Corporation (financial services) and Hambrecht and Quist Group (investment
banking), and President, National Association of Securities Dealers, Inc.
Harmon E. Burns (54)
777 Mariners Island Blvd., San Mateo, CA 94404
VICE PRESIDENT
Executive Vice President and Director, Franklin Resources, Inc., Franklin
Templeton Distributors, Inc. and Franklin Templeton Services, Inc.; Executive
Vice President, Franklin Advisers, Inc.; Director, Franklin Investment
Advisory Services, Inc. and Franklin/Templeton Investor Services, Inc.; and
officer and/or director or trustee, as the case may be, of most of the other
subsidiaries of Franklin Resources, Inc. and of 52 of the investment
companies in the Franklin Templeton Group of Funds.
Martin L. Flanagan (39)
777 Mariners Island Blvd., San Mateo, CA 94404
VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
Senior Vice President and Chief Financial Officer, Franklin Resources, Inc.,
Franklin/Templeton Investor Services, Inc. and Franklin Mutual Advisers, LLC;
Executive Vice President, Chief Financial Officer and Director, Templeton
Worldwide, Inc.; Executive Vice President, Chief Operating Officer and
Director, Templeton Investment Counsel, Inc.; Executive Vice President and
Chief Financial Officer, Franklin Advisers, Inc.; Chief Financial Officer,
Franklin Advisory Services, LLC and Franklin Investment Advisory Services,
Inc.; President and Director, Franklin Templeton Services, Inc.; officer
and/or director of some of the other subsidiaries of Franklin Resources,
Inc.; and officer and/or director or trustee, as the case may be, of 52 of
the investment companies in the Franklin Templeton Group of Funds.
Deborah R. Gatzek (50)
777 Mariners Island Blvd., San Mateo, CA 94404
VICE PRESIDENT AND SECRETARY
Senior Vice President and General Counsel, Franklin Resources, Inc.; Senior
Vice President, Franklin Templeton Services, Inc. and Franklin Templeton
Distributors, Inc.; Executive Vice President, Franklin Advisers, Inc.; Vice
President, Franklin Advisory Services, LLC and Franklin Mutual Advisers, LLC;
Vice President, Chief Legal Officer and Chief Operating Officer, Franklin
Investment Advisory Services, Inc.; and officer of 53 of the investment
companies in the Franklin Templeton Group of Funds.
Diomedes Loo-Tam (60)
777 Mariners Island Blvd., San Mateo, CA 94404
TREASURER AND PRINCIPAL ACCOUNTING OFFICER
Senior Vice President, Franklin Templeton Services, Inc.; and officer of 32
of the investment companies in the Franklin Templeton Group of Funds.
Edward V. McVey (62)
777 Mariners Island Blvd., San Mateo, CA 94404
VICE PRESIDENT
Senior Vice President and National Sales Manager, Franklin Templeton
Distributors, Inc.; and officer of 28 of the investment companies in the
Franklin Templeton Group of Funds.
Thomas J. Runkel (41)
777 Mariners Island Blvd., San Mateo, CA 94404
VICE PRESIDENT
Senior Vice President, Franklin Advisers, Inc.; and officer of four of the
investment companies in the Franklin Templeton Group of Funds.
R. Martin Wiskemann (72)
777 Mariners Island Blvd., San Mateo, CA 94404
VICE PRESIDENT
Senior Vice President, Portfolio Manager and Director, Franklin Advisers,
Inc.; Senior Vice President, Franklin Management, Inc.; Vice President and
Director, ILA Financial Services, Inc.; and officer and/or director or
trustee, as the case may be, of 15 of the investment companies in the
Franklin Templeton Group of Funds.
*This board member is considered an "interested person" under federal
securities laws.
Note: Charles B. Johnson and Rupert H. Johnson, Jr. are brothers.
The fund pays noninterested board members $800 per month plus $575 per
meeting attended. Board members who serve on the audit committee of the fund
and other funds in the Franklin Templeton Group of Funds receive a flat fee
of $2,000 per committee meeting attended, a portion of which is allocated to
the fund. Members of a committee are not compensated for any committee
meeting held on the day of a board meeting. Noninterested board members also
may serve as directors or trustees of other funds in the Franklin Templeton
Group of Funds and may receive fees from these funds for their services. The
fees payable to noninterested board members by the fund are subject to
reductions resulting from fee caps limiting the amount of fees payable to
board members who serve on other boards within the Franklin Templeton Group
of Funds. The following table provides the total fees paid to noninterested
board members by the fund and by the Franklin Templeton Group of Funds.
NUMBER OF
BOARDS IN THE
TOTAL FEES FRANKLIN
TOTAL FEES RECEIVED FROM THE TEMPLETON GROUP
RECEIVED FRANKLIN OF FUNDS ON
FROM THE TEMPLETON GROUP WHICH EACH
NAME FUND1 ($) OF FUNDS2 ($) SERVES3
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Frank H. Abbott, III 11,605 159,051 27
Harris J. Ashton 12,673 361,157 48
Robert F. Carlson 15,925 78,052 9
S. Joseph Fortunato 11,803 367,835 50
Frank W.T. LaHaye 12,180 163,753 27
Gordon S. Macklin 12,673 361,157 48
1. For the fiscal year ended June 30, 1999.
2. For the calendar year ended December 31, 1998.
3. We base the number of boards on the number of registered investment
companies in the Franklin Templeton Group of Funds. This number does not
include the total number of series or funds within each investment company
for which the board members are responsible. The Franklin Templeton Group of
Funds currently includes 54 registered investment companies, with
approximately 162 U.S. based funds or series.
Noninterested board members are reimbursed for expenses incurred in
connection with attending board meetings, paid pro rata by each fund in the
Franklin Templeton Group of Funds for which they serve as director or
trustee. No officer or board member received any other compensation,
including pension or retirement benefits, directly or indirectly from the
fund or other funds in the Franklin Templeton Group of Funds. Certain
officers or board members 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.
Board members historically have followed a policy of having substantial
investments in one or more of the funds in the Franklin Templeton Group of
Funds, as is consistent with their individual financial goals. In February
1998, this policy was formalized through adoption of a requirement that each
board member invest one-third of fees received for serving as a director or
trustee of a Templeton fund in shares of one or more Templeton funds and
one-third of fees received for serving as a director or trustee of a Franklin
fund in shares of one or more Franklin funds until the value of such
investments equals or exceeds five times the annual fees paid such board
member. Investments in the name of family members or entities controlled by a
board member constitute fund holdings of such board member for purposes of
this policy, and a three year phase-in period applies to such investment
requirements for newly elected board members. In implementing such policy, a
board member's fund holdings existing on February 27, 1998, are valued as of
such date with subsequent investments valued at cost.
The board, with approval of all noninterested and interested board members,
has adopted written procedures designed to deal with potential conflicts of
interest that may arise from the fund and the Money Market Portfolio having
substantially the same boards. These procedures call for an annual review of
the fund's relationship with the Portfolio. If a conflict exists, the boards
may take action, which may include the establishment of a new board. The
board has determined that there are no conflicts of interest at the present
time.
MANAGEMENT AND OTHER SERVICES
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MANAGER AND SERVICES PROVIDED The Money Market Portfolio's manager is
Franklin Advisers, Inc. The manager is a wholly owned subsidiary of Franklin
Resources, Inc. (Resources), a publicly owned company engaged in the
financial services industry through its subsidiaries. Charles B. Johnson and
Rupert H. Johnson, Jr. are the principal shareholders of Resources.
The manager provides investment research and portfolio management services,
and selects the securities for the Portfolio to buy, hold or sell. The
manager also selects the brokers who execute the Portfolio's portfolio
transactions. The manager provides periodic reports to the board, which
reviews and supervises the manager's investment activities. To protect the
Portfolio, the manager and its officers, directors and employees are covered
by fidelity insurance.
The manager and its affiliates manage numerous other investment companies and
accounts. The manager may give advice and take action with respect to any of
the other funds it manages, or for its own account, that may differ from
action taken by the manager on behalf of the Portfolio. Similarly, with
respect to the Portfolio, the manager is not obligated to recommend, buy or
sell, or to refrain from recommending, buying or selling any security that
the manager and access persons, as defined by applicable federal securities
laws, may buy or sell for its or their own account or for the accounts of any
other fund. The manager is not obligated to refrain from investing in
securities held by the Portfolio or other funds it manages. Of course, any
transactions for the accounts of the manager and other access persons will be
made in compliance with the Portfolio's code of ethics.
Under the Portfolio's code of ethics, employees of the Franklin Templeton
Group who are access persons may engage in personal securities transactions
subject to the following general restrictions and procedures: (i) the trade
must receive advance clearance from a compliance officer and must be
completed by the close of the business day following the day clearance is
granted; (ii) copies of all brokerage confirmations and statements must be
sent to a compliance officer; (iii) all brokerage accounts must be disclosed
on an annual basis; and (iv) access persons involved in preparing and making
investment decisions must, in addition to (i), (ii) and (iii) above, file
annual reports of their securities holdings each January and inform the
compliance officer (or other designated personnel) if they own a security
that is being considered for a fund or other client transaction or if they
are recommending a security in which they have an ownership interest for
purchase or sale by a fund or other client.
MANAGEMENT FEES The Portfolio pays the manager a fee equal to an annual rate
of 0.15 of 1% of the Portfolio's average daily net assets. The fee is
computed at the close of business on the last business day of each month
according to the terms of the management agreement.
For the last three fiscal years ended June 30, the Portfolio paid the
following management fees:
MANAGEMENT FEES PAID ($) 1
- -------------------------------------------------
1999 3,900,807
1998 2,830,858
1997 2,429,509
1. For the fiscal years ended June 30, 1999, 1998, 1997, management fees,
before any advance waiver, totaled $3,996,761, $2,963,304 and $2,547,891.
Under an agreement by the manager to limit its fees, the Portfolio paid the
management fees shown.
ADMINISTRATOR AND SERVICES PROVIDED Franklin Advisers, Inc. (Advisers) has
an agreement with the fund to provide various administrative, statistical and
other services to the fund.
ADMINISTRATION FEES The fund pays Advisers fee equal to an annual rate of:
o 91/200 of 1% for the first $100 million of its average daily net assets;
o 33/100 of 1% of its average daily net assets over $100 million up to and
including $250 million;
o 7/25 of 1% of its average daily net assets in excess of $250 million
During the last three fiscal years ended June 30, the fund paid Advisers the
following administration fees:
ADMINISTRATION FEES PAID ($)
------------------------------------------------
1999 6,256,919
1998 4,789,789
1997 3,977,302
SHAREHOLDER SERVICING AND TRANSFER AGENT Franklin/Templeton Investor
Services, Inc. (Investor Services) is the fund's shareholder servicing agent
and acts as the fund's transfer agent and dividend-paying agent. Investor
Services is located at 777 Mariners Island Blvd., San Mateo, CA 94404. Please
send all correspondence to Investor Services to P.O. Box 997151, Sacramento,
CA 95899-9983.
For its services, Investor Services receives a fixed fee per account. The
fund also will reimburse Investor Services for certain out-of-pocket
expenses, which may include payments by Investor Services to entities,
including affiliated entities, that provide sub-shareholder services,
recordkeeping and/or transfer agency services to beneficial owners of the
fund. The amount of reimbursements for these services per benefit plan
participant fund account per year will not exceed the per account fee payable
by the fund to Investor Services in connection with maintaining shareholder
accounts.
CUSTODIAN Investor Services, as the transfer agent for the Money Market
Portfolio, effectively acts as the fund's custodian and holds the fund's
shares of the Portfolio on its books. Bank of New York, Mutual Funds
Division, 90 Washington Street, New York, NY 10286, acts as custodian of the
fund's cash, pending investment in Portfolio shares. Bank of New York also
acts as custodian of the securities and other assets of the Portfolio.
AUDITOR PricewaterhouseCoopers LLP, 333 Market Street, San Francisco, CA
94105, is the fund's independent auditor. The auditor gives an opinion on the
financial statements included in the fund's Annual Report to Shareholders and
reviews the fund's registration statement filed with the U.S. Securities and
Exchange Commission (SEC).
PORTFOLIO TRANSACTIONS
- ------------------------------------------------------------------------------
The fund will not incur any brokerage or other costs in connection with
buying or selling shares of the Portfolio.
Since most purchases by the Portfolio are principal transactions at net
prices, the Portfolio incurs little or no brokerage costs. The Portfolio
deals directly with the selling or buying principal or market maker without
incurring charges for the services of a broker on its behalf, unless it is
determined that a better price or execution may be obtained by using the
services of a broker. Purchases of portfolio securities from underwriters
will include a commission or concession paid by the issuer to the
underwriter, and purchases from dealers will include a spread between the bid
and ask prices. The Portfolio seeks to obtain prompt execution of orders at
the most favorable net price. Transactions may be directed to dealers in
return for research and statistical information, as well as for special
services provided by the dealers in the execution of orders.
It is not possible to place a dollar value on the special executions or on
the research services the manager receives from dealers effecting
transactions in portfolio securities. The allocation of transactions in order
to obtain additional research services allows the manager to supplement its
own research and analysis activities and to receive the views and information
of individuals and research staffs of other securities firms. As long as it
is lawful and appropriate to do so, the manager and its affiliates may use
this research and data in their investment advisory capacities with other
clients. If the Portfolio's officers are satisfied that the best execution is
obtained, the sale of fund shares, as well as shares of other funds in the
Franklin Templeton Group of Funds, also may be considered a factor in the
selection of broker-dealers to execute the Portfolio's portfolio transactions.
If purchases or sales of securities of the Portfolio and one or more other
investment companies or clients supervised by the manager are considered at
or about the same time, transactions in these securities will be allocated
among the several investment companies and clients in a manner deemed
equitable to all by the manager, taking into account the respective sizes of
the funds and the amount of securities to be purchased or sold. In some cases
this procedure could have a detrimental effect on the price or volume of the
security so far as the Portfolio is concerned. In other cases it is possible
that the ability to participate in volume transactions may improve execution
and reduce transaction costs to the Portfolio.
During the fiscal years ended June 30, 1999, 1998 and 1997, the Portfolio did
not pay any brokerage commissions.
As of [], 199[], neither the fund nor the Portfolio owned securities of their
regular broker-dealers.
DISTRIBUTIONS AND TAXES
- ------------------------------------------------------------------------------
The fund does not pay "interest" or guarantee any fixed rate of return on an
investment in its shares.
DISTRIBUTIONS OF NET INVESTMENT INCOME The fund and the Portfolio declare
dividends for each day that their net asset value is calculated. These
dividends will equal all of their daily net income payable to shareholders of
record as of the close of business the preceding day.
The fund receives income generally in the form of dividends received its
investment in the Portfolio. This income, less expenses incurred in the
operation of the fund, constitutes the fund's net investment income from
which dividends may be paid to you. Any distributions by the fund from such
income will be taxable to you as ordinary income, whether you take them in
cash or in additional shares.
The Portfolio's daily net income includes accrued interest and any original
issue or acquisition 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 constant net
asset value per share), less the estimated expenses of the Portfolio.
DISTRIBUTIONS OF CAPITAL GAINS The fund may derive capital gains and losses
in connection with its investment in shares of the Portfolio. These capital
gains are distributed to you as capital gain distributions. Distributions
from net short-term capital gains will be taxable to you as ordinary income.
Because the fund and the Portfolio are money market funds, they do not
anticipate realizing any long-term capital gains.
MAINTAINING A $1 SHARE PRICE Gains and losses on the fund's investment in
shares of the Portfolio and unrealized appreciation or depreciation in the
value of these shares may require the fund to adjust distributions in order
to maintain a $1. These procedures may result in under- or
over-distributions by the fund of its net investment income.
EFFECT OF FOREIGN INVESTMENTS ON DISTRIBUTIONS Most foreign exchange gains
realized on the sale of debt securities are treated as ordinary income by the
Portfolio. Similarly, foreign exchange losses realized by the Portfolio on
the sale of debt securities are generally treated as ordinary losses by the
Portfolio. These gains when distributed will be taxable to the fund as
ordinary dividends, and any losses will reduce the Portfolio's ordinary
income otherwise available for distribution to the fund. This treatment
could increase or reduce the Portfolio's ordinary income distributions to the
fund and, in turn, to you.
INFORMATION ON THE TAX CHARACTER OF DISTRIBUTIONS The fund will inform you
of the amount of your distributions at the time they are paid, and will
advise you of their tax status for federal income tax purposes shortly after
the close of each calendar year.
ELECTION TO BE TAXED AS A REGULATED INVESTMENT COMPANY The fund has elected
to be treated as a regulated investment company under Subchapter M of the
Internal Revenue Code, has qualified as such for its most recent fiscal year,
and intends to so qualify during the current fiscal year. As a regulated
investment company, the fund generally pays no federal income tax on the
income and gains it distributes to you. The board reserves the right not to
maintain the qualification of the fund as a regulated investment company if
it determines such course of action to be beneficial to shareholders. In
such case, the fund will be subject to federal, and possibly state, corporate
taxes on its taxable income and gains, and distributions to you will be taxed
as ordinary dividend income to the extent of the fund's earnings and profits.
EXCISE TAX DISTRIBUTION REQUIREMENTS To avoid federal excise taxes, the
Internal Revenue Code requires the fund to distribute to you by December 31
of each year, at a minimum, the following amounts: 98% of its taxable
ordinary income earned during the calendar year; 98% of its capital gain net
income earned during the twelve month period ending October 31; and 100% of
any undistributed amounts from the prior year. The fund intends to declare
and pay these amounts in December (or in January that are treated by you as
received in December) to avoid these excise taxes, but can give no assurances
that its distributions will be sufficient to eliminate all taxes.
REDEMPTION OF FUND SHARES Redemptions and exchanges of fund shares are
taxable transactions for federal and state income tax purposes. Because the
fund tries to maintain a stable $1 share price, however, you should not
expect to realize a capital gain or loss on the sale or exchange of your fund
shares.
U.S. GOVERNMENT OBLIGATIONS Many states grant tax-free status to dividends
paid to you from interest earned on direct obligations of the U.S.
government, subject in some states to minimum investment requirements that
must be met by the fund. Investments in Government National Mortgage
Association or Federal National Mortgage Association securities, bankers'
acceptances, commercial paper and repurchase agreements collateralized by
U.S. government securities do not generally qualify for tax-free treatment.
The rules on exclusion of this income are different for corporations. The
fund, however, anticipates that no portion of its distributions to you will
qualify for exemption from state and local personal income taxes as dividends
paid to you from interest earned on direct obligations of the U.S.
government. Even if the Portfolio invests in direct obligations of the U.S.
government, the fund only does so indirectly by investing in the Portfolio.
DIVIDENDS-RECEIVED DEDUCTION FOR CORPORATIONS Because the fund's income is
derived indirectly from interest, generally no portion of its distributions
will be eligible for the corporate dividends-received deduction. None of the
dividends paid by the fund for the most recent fiscal year qualified for such
deduction, and it is anticipated that none of the current year's dividends
will so qualify.
INVESTMENT IN COMPLEX SECURITIES The Portfolio may invest in complex
securities. These investments may be subject to numerous special and complex
tax rules. These rules could affect whether gains and losses recognized by
the Portfolio are treated as ordinary income or capital gain, accelerate the
recognition of income to the Portfolio and/or defer the Portfolio's ability
to recognize losses, and, in limited cases, subject the Portfolio to U.S.
federal income tax on income from certain of its foreign securities. In
turn, these rules may affect the amount, timing or character of the income
distributed by the fund to you.
ORGANIZATION, VOTING RIGHTS AND PRINCIPAL HOLDERS
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The fund is an open-end management investment company, commonly called a
mutual fund. The fund was organized as a California corporation on November
7, 1975, and is registered with the SEC.
Certain Franklin Templeton Funds offer multiple classes of shares. The
different classes have proportionate interests in the same portfolio of
investment securities. They differ, however, primarily in their sales charge
structures and Rule 12b-1 plans. Please note that for selling or exchanging
your shares, or for other purposes, the fund's shares are considered Class A
shares. Before January 1, 1999, the fund's shares were considered Class I
shares.
The fund has cumulative voting rights. For board member elections, this means
the number of votes you will have is equal to the number of shares you own
times the number of board members to be elected. You may cast all of your
votes for one candidate or distribute your votes between two or more
candidates.
The fund does not intend to hold annual shareholder meetings. The fund may
hold special meetings, however, for matters requiring shareholder approval. A
meeting may be called by the board to consider the removal of a board member
if requested in writing by shareholders holding at least 10% of the
outstanding shares. In certain circumstances, we are required to help you
communicate with other shareholders about the removal of a board member. A
special meeting also may be called by the board in its discretion.
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 outstanding shares of
the fund.
As of August 6, 1999, the officers and board members, as a group, owned of
record and beneficially less than 1% of the outstanding shares of the fund. The
board members may own shares in other funds in the Franklin Templeton Group of
Funds.
BUYING AND SELLING SHARES
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The fund continuously offers its shares through securities dealers who have
an agreement with Franklin Templeton Distributors, Inc. (Distributors). A
securities dealer includes any financial institution that, either directly or
through affiliates, has an agreement with Distributors to handle customer
orders and accounts with the fund. This reference is for convenience only and
does not indicate a legal conclusion of capacity. Banks and financial
institutions that sell shares of the fund may be required by state law to
register as securities dealers.
For investors outside the U.S., the offering of fund shares may be limited in
many jurisdictions. An investor who wishes to buy shares of the fund should
determine, or have a broker-dealer determine, the applicable laws and
regulations of the relevant jurisdiction. Investors are responsible for
compliance with tax, currency exchange or other regulations applicable to
redemption and purchase transactions in any jurisdiction to which they may be
subject. Investors should consult appropriate tax and legal advisors to
obtain information on the rules applicable to these transactions.
All checks, drafts, wires and other payment mediums used to buy or sell
shares of the fund must be denominated in U.S. dollars, drawn on a U.S. bank,
and are accepted subject to collection at full face value. Checks drawn in
U.S. funds on foreign banks will not be credited to your account and
dividends will not begin to accrue until the proceeds are collected, which
may take a long period of time. We may, in our sole discretion, either (a)
reject any order to buy or sell shares denominated in any other currency or
(b) honor the transaction or make adjustments to your account for the
transaction as of a date and with a foreign currency exchange factor
determined by the drawee bank. We may deduct any applicable banking charges
imposed by the bank from your account.
The offering of fund shares may be suspended at any time and resumed at any
time thereafter.
DEALER COMPENSATION Distributors and/or its affiliates may provide financial
support to securities dealers that sell shares of the Franklin Templeton
Group of Funds. This support is based primarily on the amount of sales of
fund shares and/or total assets with the Franklin Templeton Group of Funds.
The amount of support may be affected by: total sales; net sales; levels of
redemptions; the proportion of a securities dealer's sales and marketing
efforts in the Franklin Templeton Group of Funds; a securities dealer's
support of, and participation in, Distributors' marketing programs; a
securities dealer's compensation programs for its registered representatives;
and the extent of a securities dealer's marketing programs relating to the
Franklin Templeton Group of Funds. Financial support to securities dealers
may be made by payments from Distributors' resources, from Distributors'
retention of underwriting concessions and, in the case of funds that have
Rule 12b-1 plans, from payments to Distributors under such plans. In
addition, certain securities dealers may receive brokerage commissions
generated by fund portfolio transactions in accordance with the rules of the
National Association of Securities Dealers, Inc.
Distributors routinely sponsors due diligence meetings for registered
representatives during which they receive updates on various Franklin
Templeton Funds and are afforded the opportunity to speak with portfolio
managers. Invitation to these meetings is not conditioned on selling a
specific number of shares. Those who have shown an interest in the Franklin
Templeton Funds, however, are more likely to be considered. To the extent
permitted by their firm's policies and procedures, registered
representatives' expenses in attending these meetings may be covered by
Distributors.
EXCHANGE PRIVILEGE If a substantial number of shareholders should, within a
short period, sell their fund shares under the exchange privilege, the fund
might have to sell portfolio securities it might otherwise hold and incur the
additional costs related to such transactions.
The proceeds from the sale of shares of an investment company are generally
not available until the seventh day following the sale. The funds you are
seeking to exchange into may delay issuing shares pursuant to an exchange
until that seventh day. The sale of fund shares to complete an exchange will
be effected at net asset value at the close of business on the day the
request for exchange is received in proper form.
SYSTEMATIC WITHDRAWAL PLAN Our systematic withdrawal plan allows you to sell
your shares and receive regular payments from your account on a monthly,
quarterly, semiannual or annual basis. The value of your account must be at
least $5,000 and the minimum payment amount for each withdrawal must be at
least $50. For retirement plans subject to mandatory distribution
requirements, the $50 minimum will not apply. There are no service charges
for establishing or maintaining a systematic withdrawal plan.
Payments under the plan will be made from the redemption of an equivalent
amount of shares in your account, generally on the 25th day of the month in
which a payment is scheduled. If the 25th falls on a weekend or holiday, we
will process the redemption on the next business day. When you sell your
shares under a systematic withdrawal plan, it is a taxable transaction.
Redeeming shares through a systematic withdrawal plan may reduce or exhaust
the shares in your account if payments exceed distributions received from the
fund. If a withdrawal amount exceeds the value of your account, your account
will be closed and the remaining balance in your account will be sent to you.
Because the amount withdrawn under the plan may be more than your actual
yield or income, part of the payment may be a return of your investment.
You may discontinue a systematic withdrawal plan, change the amount and
schedule of withdrawal payments, or suspend one payment by notifying us by
mail or by phone at least seven business days before the end of the month
preceding a scheduled payment. The fund may discontinue a systematic
withdrawal plan by notifying you in writing and will automatically
discontinue a systematic withdrawal plan if all shares in your account are
withdrawn or if the fund receives notification of the shareholder's death or
incapacity.
REDEMPTIONS IN KIND The fund has committed itself to pay in cash (by check)
all requests for redemption by any shareholder of record, limited in amount,
however, during any 90-day period to the lesser of $250,000 or 1% of the
value of the fund's net assets at the beginning of the 90-day period. This
commitment is irrevocable without the prior approval of the U.S. Securities
and Exchange Commission (SEC). In the case of redemption requests in excess
of these amounts, the board reserves the right to make payments in whole or
in part in securities or other assets of the fund, in case of an emergency,
or if the payment of such a redemption in cash would be detrimental to the
existing shareholders of the fund. In these circumstances, the securities
distributed would be valued at the price used to compute the fund's net
assets and you may incur brokerage fees in converting the securities to cash.
Redemptions in kind are taxable transactions.
SHARE CERTIFICATES We will credit your shares to your fund account. We do
not issue share certificates unless you specifically request them. This
eliminates the costly problem of replacing lost, stolen or destroyed
certificates. If a certificate is lost, stolen or destroyed, you may have to
pay an insurance premium of up to 2% of the value of the certificate to
replace it.
All purchases of fund shares will be credited to you, in full and fractional
fund shares (rounded to the nearest 1/100 of a share), in an account
maintained for you by the fund's transfer agent. No share certificates will
be issued for fractional shares at any time. No certificates will be issued
to you if you have elected to redeem shares by check or by preauthorized bank
or brokerage firm account methods.
Any outstanding share certificates must be returned to the fund if you want
to sell or exchange those shares or if you would like to start a systematic
withdrawal plan. The certificates should be properly endorsed. You can do
this either by signing the back of the certificate or by completing a share
assignment form. For your protection, you may prefer to complete a share
assignment form and to send the certificate and assignment form in separate
envelopes.
GENERAL INFORMATION If dividend checks are returned to the fund marked
"unable to forward" by the postal service, we will consider this a request by
you to change your dividend option to reinvest all distributions. The
proceeds will be reinvested in additional shares at net asset value until we
receive new instructions.
Distribution or redemption checks sent to you do not earn interest or any
other income during the time the checks remain uncashed. Neither the fund nor
its affiliates will be liable for any loss caused by your failure to cash
such checks. The fund is not responsible for tracking down uncashed checks,
unless a check is returned as undeliverable.
In most cases, if mail is returned as undeliverable we are required to take
certain steps to try to find you free of charge. If these attempts are
unsuccessful, however, we may deduct the costs of any additional efforts to
find you from your account. These costs may include a percentage of the
account when a search company charges a percentage fee in exchange for its
location services.
Sending redemption proceeds by wire or electronic funds transfer (ACH) is a
special service that we make available whenever possible. By offering this
service to you, the fund is not bound to meet any redemption request in less
than the seven day period prescribed by law. Neither the fund nor its agents
shall be liable to you or any other person if, for any reason, a redemption
request by wire or ACH is not processed as described in the prospectus.
Franklin Templeton Investor Services, Inc. (Investor Services) may pay
certain financial institutions that maintain omnibus accounts with the fund
on behalf of numerous beneficial owners for recordkeeping operations
performed with respect to such owners. For each beneficial owner in the
omnibus account, the fund may reimburse Investor Services an amount not to
exceed the per account fee that the fund normally pays Investor Services.
These financial institutions also may charge a fee for their services
directly to their clients.
Investor Services may charge you separate fees, negotiated directly with you,
for providing special services in connection with your account, such as
processing a large number of checks each month. Fees for special services
will not increase the fund's expenses.
Special procedures have been designed for banks and other institutions
wishing to open multiple accounts. An institution may open a single master
account by filing one application form with the fund, signed by personnel
authorized to act for the institution. Individual sub-accounts may be opened
at the time the master account is filed by listing them, or instructions may
be provided to the fund at a later date. These sub-accounts may be
established by the institution with registration either by name or number.
The investment minimums applicable to the fund are applicable to each
sub-account. The fund will provide each institution with a written
confirmation for each transaction in a sub-account and arrangements may be
made at no additional charge for the transmittal of duplicate confirmations
to the beneficial owner of the sub-account.
The fund will provide to each institution, on a quarterly basis or more
frequently if requested, a statement setting forth each sub-account's share
balance, income earned for the period, income earned for the year to date,
and total current market value.
If you buy or sell shares through your securities dealer, we use the net
asset value next calculated after your securities dealer receives your
request, which is promptly transmitted to the fund.
For institutional accounts, there may be additional methods of buying or
selling fund shares than those described in this SAI or in the prospectus.
In the event of disputes involving multiple claims of ownership or authority
to control your account, the fund has the right (but has no obligation) to:
(a) freeze the account and require the written agreement of all persons
deemed by the fund to have a potential property interest in the account,
before executing instructions regarding the account; (b) interplead disputed
funds or accounts with a court of competent jurisdiction; or (c) surrender
ownership of all or a portion of the account to the IRS in response to a
notice of levy.
PRICING SHARES
- ------------------------------------------------------------------------------
When you buy shares, you pay the net asset value (NAV) per share. When you
sell shares, you receive the NAV minus any applicable contingent deferred
sales charge (CDSC).
The value of a mutual fund is determined by deducting the fund's liabilities
from the total assets of the portfolio. The net asset value per share is
determined by dividing the net asset value of the fund by the number of
shares outstanding.
The fund calculates the NAV per share each business day at 3:00 p.m. pacific
time. The fund does not calculate the NAV on days the New York Stock Exchange
(NYSE) is closed for trading, which include New Year's Day, Martin Luther
King Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day.
The valuation of the Money Market Portfolio's portfolio securities, including
any securities held in a separate account maintained for when-issued
securities, is based on the amortized cost of the securities, which does not
take into account unrealized capital gains or losses. This method involves
valuing an instrument at its cost and thereafter assuming a constant
amortization to maturity of any discount or premium, regardless of the impact
of fluctuating interest rates on the market value of the instrument. While
this method provides certainty in calculation, it may result in periods
during which value, as determined by amortized cost, is higher or lower than
the price the Portfolio would receive if it sold the instrument. During
periods of declining interest rates, the daily yield on shares of the
Portfolio computed as described above may tend to be higher than a like
computation made by a fund with identical investments but using a method of
valuation based upon market prices and estimates of market prices for all of
its portfolio instruments. Thus, if the use of amortized cost by the
Portfolio resulted in a lower aggregate portfolio value on a particular day,
a prospective investor in the Portfolio would be able to obtain a somewhat
higher yield than would result from an investment in a fund using only market
values, and existing investors in the Portfolio would receive less investment
income. The opposite would be true in a period of rising interest rates.
The Portfolio's use of amortized cost, which helps the Portfolio maintain a
$1 share price, is permitted by a rule adopted by the U.S. Securities and
Exchange Commission (SEC). Under this rule, the Portfolio must adhere to
certain conditions. The Portfolio must maintain a dollar-weighted average
portfolio maturity of 90 days or less and only buy instruments with remaining
maturities of 397 days or less. The Portfolio also must invest only in those
U.S. dollar-denominated securities that the manager, in accordance with
procedures adopted by the board, determines present minimal credit risks and
that are rated in one of the top two ratings by U.S. nationally recognized
rating services (or comparable unrated securities), or are instruments issued
by an issuer that, with respect to an outstanding issue of short-term debt
that is comparable in priority and protection, has received a rating within
the two highest ratings. Securities subject to floating or variable interest
rates with demand features that comply with applicable SEC rules may have
stated maturities in excess of 397 days.
The board has established procedures designed to stabilize, to the extent
reasonably possible, the Portfolio's price per share at $1, as computed for
the purpose of sales and redemptions. These procedures include a review of
the Portfolio's holdings by the board, at such intervals as it may deem
appropriate, to determine if the Portfolio's net asset value calculated by
using available market quotations deviates from $1 per share based on
amortized cost. The extent of any deviation will be examined by the board. If
a deviation exceeds 1/2 of 1%, the board will promptly consider what action,
if any, will be initiated. If the board determines that a deviation exists
that may result in material dilution or other unfair results to investors or
existing shareholders, it will take corrective action that it regards as
necessary and appropriate, which may include selling portfolio instruments
before maturity to realize capital gains or losses or to shorten average
portfolio maturity, withholding dividends, redeeming shares in kind, or
establishing a net asset value per share by using available market
quotations.
THE UNDERWRITER
- ------------------------------------------------------------------------------
Franklin Templeton Distributors, Inc. (Distributors) acts as the principal
underwriter in the continuous public offering of the fund's shares.
Distributors is located at 777 Mariners Island Blvd., San Mateo, CA 94404.
Distributors pays the expenses of the distribution of fund shares, including
advertising expenses and the costs of printing sales material and
prospectuses used to offer shares to the public. The fund pays the expenses
of preparing and printing amendments to its registration statements and
prospectuses (other than those necessitated by the activities of
Distributors) and of sending prospectuses to existing shareholders.
The table below shows the amounts Distributors received in connection with
redemptions or repurchases of shares for the last three fiscal years ended
June 30,:
AMOUNT RECEIVED IN CONNECTION WITH
REDEMPTIONS AND REPURCHASES ($)
------------------------------------------------------
1999 181,129
1998 0
1997 0
Except as noted, Distributors received no other compensation from the fund
for acting as underwriter.
PERFORMANCE
- ------------------------------------------------------------------------------
Performance quotations are subject to SEC rules. These rules require the use
of standardized performance quotations or, alternatively, that every
non-standardized performance quotation furnished by the fund be accompanied
by certain standardized performance information computed as required by the
SEC. Average annual total return, current yield and effective yield
quotations used by the fund are based on the standardized methods of
computing performance mandated by the SEC. An explanation of these and other
methods used by the fund to compute or express performance follows.
Regardless of the method used, past performance does not guarantee future
results, and is an indication of the return to shareholders only for the
limited historical period used.
AVERAGE ANNUAL TOTAL RETURN Average annual total return is determined by
finding the average annual rates of return over the periods indicated below
that would equate an initial hypothetical $1,000 investment to its ending
redeemable value. The calculation assumes income dividends are reinvested at
net asset value. The quotation assumes the account was completely redeemed at
the end of each period and the deduction of all applicable charges and fees.
The average annual total returns for the indicated periods ended June 30,
1999, were:
1 YEAR (%) 5 YEARS (%) 10 YEARS (%)
- ---------------------------------------------------------
4.66 4.89 4.82
The following SEC formula was used to calculate these figures:
n
P(1+T) = ERV
where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of each period at the end
of each period
CURRENT YIELD Current yield shows the income per share earned by the fund.
It is calculated by determining the net change, excluding capital changes, in
the value of a hypothetical pre-existing account with a balance of one share
at the beginning of the period, subtracting a hypothetical charge reflecting
deductions from shareholder accounts, and dividing the difference by the
value of the account at the beginning of the base period to obtain the base
period return. The result is then annualized by multiplying the base period
return by 365/7. The current yield for the seven day period ended June 30,
1999, was 4.36%.
EFFECTIVE YIELD The fund's effective yield is calculated in the same manner
as its current yield, except the annualization of the return for the seven
day period reflects the results of compounding. The effective yield for the
seven day period ended June 30, 1999, was 4.46%.
The following SEC formula was used to calculate this figure:
365/7
Effective yield = [(Base period return + 1) ] - 1
OTHER PERFORMANCE QUOTATIONS The fund may include in its advertising or
sales material information relating to investment goals and performance
results of funds belonging to the Franklin Templeton Group of Funds. Franklin
Resources, Inc. is the parent company of the advisors and underwriter of the
Franklin Templeton Group of Funds.
COMPARISONS To help you better evaluate how an investment in the fund may
satisfy your investment goal, advertisements and other materials about the
fund may discuss certain measures of fund performance as reported by various
financial publications. Materials also may compare performance (as calculated
above) to performance as reported by other investments, indices, and
averages. These comparisons may include, but are not limited to, the
following examples:
o IBC Money Fund Report(R) - industry averages for seven-day annualized and
compounded yields of taxable, tax-free and government money funds.
o Bank Rate Monitor - a weekly publication that reports various bank
investments such as CD rates, average savings account rates and average
loan rates.
o Lipper - Mutual Fund Performance Analysis, Lipper - Fixed Income Fund
Performance Analysis, and Lipper - Mutual Fund Yield Survey - measure
total return and average current yield for the mutual fund industry and
rank individual mutual fund performance over specified time periods,
assuming reinvestment of all distributions, exclusive of any applicable
sales charges.
o Salomon Brothers Bond Market Roundup - a weekly publication that reviews
yield spread changes in the major sectors of the money, government agency,
futures, options, mortgage, corporate, Yankee, Eurodollar, municipal, and
preferred stock markets and summarizes changes in banking statistics and
reserve aggregates.
o Consumer Price Index (or Cost of Living Index), published by the U.S.
Bureau of Labor Statistics - a statistical measure of change, over time,
in the price of goods and services in major expenditure groups.
o Stocks, Bonds, Bills, and Inflation, published by Ibbotson Associates -
historical measure of yield, price, and total return for common and small
company stock, long term government bonds, Treasury bills, and inflation.
o Financial publications: The WALL STREET JOURNAL, and BUSINESS WEEK,
CHANGING TIMES, FINANCIAL WORLD, FORBES, FORTUNE, and MONEY magazines -
provide performance statistics over specified time periods.
o Morningstar - information published by Morningstar, Inc., including
Morningstar proprietary mutual fund ratings. The ratings reflect
Morningstar's assessment of the historical risk-adjusted performance of a
fund over specified time periods relative to other funds within its
category.
From time to time, advertisements or information for the fund may include a
discussion of certain attributes or benefits to be derived from an investment
in the fund. The advertisements or information may include symbols,
headlines, or other material that highlights or summarizes the information
discussed in more detail in the communication.
Advertisements or information also may compare the fund's performance to the
return on certificates of deposit (CDs) or other investments. You should be
aware, however, that an investment in the fund involves the risk of
fluctuation of principal value, a risk generally not present in an investment
in a CD issued by a bank. CDs are frequently insured by an agency of the U.S.
government. An investment in the fund is not insured by any federal, state or
private entity.
In assessing comparisons of performance, you should keep in mind that the
composition of the investments in the reported indices and averages is not
identical to the fund's portfolio, the indices and averages are generally
unmanaged, and the items included in the calculations of the averages may not
be identical to the formula used by the fund to calculate its figures. In
addition, there can be no assurance that the fund will continue its
performance as compared to these other averages.
MISCELLANEOUS INFORMATION
- ------------------------------------------------------------------------------
The fund may help you achieve various investment goals such as accumulating
money for retirement, saving for a down payment on a home, college costs and
other long-term goals. The Franklin College Costs Planner may help you in
determining how much money must be invested on a monthly basis in order to
have a projected amount available in the future to fund a child's college
education. (Projected college cost estimates are based upon current costs
published by the College Board.) The Franklin Retirement Planning Guide leads
you through the steps to start a retirement savings program. Of course, an
investment in the fund cannot guarantee that these goals will be met.
The fund is a member of the Franklin Templeton Group of Funds, one of the
largest mutual fund organizations in the U.S., and may be considered in a
program for diversification of assets. Founded in 1947, Franklin is one of
the oldest mutual fund organizations and now services more than 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, a pioneer in international investing. The Mutual
Series team, known for its value-driven approach to domestic equity
investing, became part of the organization four years later. Together, the
Franklin Templeton Group has over $225 billion in assets under management for
more than 7 million U.S. based mutual fund shareholder and other accounts.
The Franklin Templeton Group of Funds offers 112 U.S. based open-end
investment companies to the public. The fund may identify itself by its
NASDAQ symbol or CUSIP number.
Currently, there are more mutual funds than there are stocks listed on the
New York Stock Exchange. While many of them have similar investment goals, no
two are exactly alike. Shares of the fund are generally sold through
securities dealers, whose investment representatives are experienced
professionals who can offer advice on the type of investments suitable to
your unique goals and needs, as well as the risks associated with such
investments.
The Information Services & Technology division of Franklin Resources, Inc.
(Resources) established a Year 2000 Project Team in 1996. This team has
already begun making necessary software changes to help the computer systems
that service the fund and its shareholders to be Year 2000 compliant. After
completing these modifications, comprehensive tests are conducted in one of
Resources' U.S. test labs to verify their effectiveness. Resources continues
to seek reasonable assurances from all major hardware, software or
data-services suppliers that they will be Year 2000 compliant on a timely
basis. Resources is also beginning to develop a contingency plan, including
identification of those mission critical systems for which it is practical to
develop a contingency plan. However, in an operation as complex and
geographically distributed as Resources' business, the alternatives to use of
normal systems, especially mission critical systems, or supplies of
electricity or long distance voice and data lines are limited.
DESCRIPTION OF RATINGS
- ------------------------------------------------------------------------------
SHORT-TERM DEBT & COMMERCIAL PAPER RATINGS
MOODY'S
Moody's short-term debt ratings are opinions of the ability of issuers to
repay punctually senior debt obligations. These obligations have an original
maturity not exceeding one year, unless explicitly noted. Moody's commercial
paper ratings, which are also applicable to municipal paper investments, 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 for both short-term debt and commercial
paper, 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
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. Reflect 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.
F-3: Fair credit quality. Have characteristics suggesting that the degree of
assurance for timely payment is adequate; however, near-term adverse changes
could cause these securities to be rated below investment grade.
F-5: Weak credit quality. Have characteristics suggesting a minimal degree of
assurance for timely payment and are vulnerable to near-term adverse changes
in financial and economic conditions.
D: Default. Actual or imminent payment default.
LOC: The symbol LOC indicates that the rating is based on a letter of credit
issued by a commercial bank.
FRANKLIN MONEY FUND
File Nos. 2-55029
811-2605
FORM N-1A
PART C
OTHER INFORMATION
ITEM 23 EXHIBITS
The following exhibits are incorporated by reference to the previously filed
document indicated below, except as noted:
(a) Articles of Incorporation
(i) Articles of Incorporation dated November 4, 1975
Filing: Post-Effective Amendment No. 28 to Registration Statement
on Form N-1A
File No. 2-55029
Filing Date: August 31, 1995
(ii) Certificate of Amendment to Articles of Incorporation dated February
12, 1980
Filing: Post-Effective Amendment No. 28 to Registration Statement
on Form N-1A
File No. 2-55029
Filing Date: August 31, 1995
(b) By-Laws
(i) By-Laws
Filing: Post-Effective Amendment No. 28 to Registration Statement
on Form N-1A
File No. 2-55029
Filing Date: August 31, 1995
(ii) Amendment to By-Laws dated November 17, 1987
Filing: Post-Effective Amendment No. 28 to Registration Statement
on Form N-1A
File No. 2-55029
Filing Date: August 31, 1995
(iii)Amendment to By-Laws dated October 27, 1994
Filing: Post-Effective Amendment No. 28 to Registration Statement
on Form N-1A
File No. 2-55029
Filing Date: August 31, 1995
(c) Instruments Defining Rights of Security Holders
Not Applicable
(d) Investment Advisory Contracts
(i) Administration Agreement between the Registrant and Franklin
Advisers, Inc., dated August 1, 1994
Filing: Post-Effective Amendment No. 28 to Registration Statement
on Form N-1A
File No. 2-55029
Filing Date: August 31, 1995
(e) Underwriting Contracts
(i) Amended and Restated Distribution Agreement between the Registrant
and Franklin/Templeton Distributors, Inc., dated April 23, 1995
Filing: Post-Effective Amendment No. 28 to Registration Statement
on Form N-1A
File No. 2-55029
Filing Date: August 31, 1995
(ii) Forms of Dealer Agreements between Franklin/Templeton Distributors,
Inc., and Securities Dealers
Registrant: Franklin Tax-Free Trust
Filing: Post-Effective Amendment No. 22 to Registration Statement
on Form N-1A
File No. 2-94222
Filing Date: March 14, 1996
(f) Bonus or Profit Sharing Contracts
Not Applicable
(g) Custodian Agreements
(i) Master Custody Agreement between the Registrant and Bank of New
York dated February 16, 1996
Filing: Post-Effective Amendment No. 29 to Registration Statement
on Form N-1A
File No. 2-55029
Filing Date: October 29, 1996
(ii) Terminal Link Agreement between the Registrant and Bank of New York
dated February 16, 1996
Filing: Post-Effective Amendment No. 29 to Registration Statement
on Form N-1A
File No. 2-55029
Filing Date: October 29, 1996
(iii) Amendment dated May 7, 1997 to the Master Custody Agreement dated
February 16, 1996 between Registrant and Bank of New York
Filing: Post-Effective Amendment No. 30 to Registration Statement
on Form N-1A
File No. 2-55029
Filing Date: October 28, 1997
(iv) Amendment dated February 27, 1998 to Exhibit A in the Master
Custody Agreement between Registrant and Bank of New York dated
February 16, 1996
Filing: Post-Effective Amendment No. 31 to Registration Statement
on Form N-1A
File No. 2-55029
Filing Date: August 21, 1998
(h) Other Material Contracts
Not Applicable
(i) Legal Opinion
(i) Opinion and consent of counsel dated August 17, 1998
Filing: Post-Effective Amendment No. 31 to Registration Statement
on Form N-1A
File No. 2-55029
Filing Date: August 21, 1998
(j) Other Opinions
(i) Consent of Independent Auditors for Franklin Money Fund
and The Money Market Portfolios
(k) Omitted Financial Statements
Not Applicable
(l) Initial Capital Agreements
Not Applicable
(m) Rule 12b-1
Not Applicable
(o) Rule 18f-3 Plan
Not Applicable
(p) Power of Attorney
(i) Power of Attorney for Franklin Money Fund dated July 15, 1999
(ii) Power of Attorney for The Money Market Portfolios dated July 15, 1999
ITEM 24 PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE FUND
None
ITEM 25 INDEMNIFICATION
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
Please see the By-Laws, Administration, and Distribution Agreements, previously
filed as exhibits and incorporated herein by reference.
Notwithstanding the provisions contained in the Registrant's By-Laws, in the
absence of authorization by the appropriate court on the merits pursuant to
said By-Laws, any indemnification under said Article shall be made by
Registrant only if authorized in the manner provided by such By-Laws.
ITEM 26 BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
The officers and directors of the Registrant's administrator and the Master
Fund's investment adviser, Franklin Advisers, Inc., (Advisers) also serve as
officers and/or directors for (1) Advisers corporate parent, Franklin
Resources, Inc., and/or (2) other investment companies in the Franklin
Templeton Group of Funds. In addition, Mr. Charles B. Johnson was formerly a
director of General Host Corporation. For additional information please see
Part B and Schedules A and D of Form ADV of Advisers (SEC File 801-26292),
incorporated herein by reference, which sets forth the officers and directors
of Advisers and information as to any business, profession, vocation or
employment of a substantial nature engaged in by those officers and directors
during the past two years.
ITEM 27 PRINCIPAL UNDERWRITERS
a) Franklin/Templeton Distributors, Inc., (Distributors) also acts as
principal underwriter of shares of:
Franklin Asset Allocation Fund
Franklin California Tax-Free Income Fund, Inc.
Franklin California Tax-Free Trust
Franklin Custodian Funds, Inc.
Franklin Equity Fund
Franklin Federal Money Fund
Franklin Federal Tax-Free Income Fund
Franklin Floating Rate Trust
Franklin Gold Fund
Franklin High Income Trust
Franklin Investors Securities Trust
Franklin Managed Trust
Franklin Mutual Series Fund Inc.
Franklin Municipal Securities Trust
Franklin New York Tax-Free Income Fund
Franklin New York Tax-Free Trust
Franklin Real Estate Securities Trust
Franklin Strategic Mortgage Portfolio
Franklin Strategic Series
Franklin Tax-Exempt Money Fund
Franklin Tax-Free Trust
Franklin Templeton Fund Allocator Series
Franklin Templeton Global Trust
Franklin Templeton International Trust
Franklin Templeton Money Fund Trust
Franklin Value Investors Trust
Franklin Templeton Variable Insurance Products Trust
(formerly Franklin Valuemark Funds)
Institutional Fiduciary Trust
Templeton Capital Accumulator Fund, Inc.
Templeton Developing Markets Trust
Templeton Funds, Inc.
Templeton Global Investment Trust
Templeton Global Opportunities Trust
Templeton Global Real Estate Fund
Templeton Global Smaller Companies Fund, Inc.
Templeton Growth Fund, Inc.
Templeton Income Trust
Templeton Institutional Funds, Inc.
Templeton Variable Products Series Fund
b) The information required by this Item 29 with respect to each director
and officer of Distributors is incorporated by reference to Part B of this N-1A
and Schedule A of Form BD filed by Distributors with the Securities and
Exchange Commission pursuant to the Securities Act of 1934 (SEC File No.
8-5889).
c) Not Applicable. Registrant's principal underwriter is an affiliated
person of an affiliated person of the Registrant.
ITEM 28 LOCATION OF ACCOUNTS AND RECORDS
The accounts, books or other documents required to be maintained by Section 31
(a) of the Investment Company Act of 1940 are kept by the Fund or its
shareholder services agent, Franklin/Templeton Investor Services, Inc., both of
whose address is 777 Mariners Island Boulevard, San Mateo, CA 94404-1585.
ITEM 29 MANAGEMENT SERVICES
There are no management-related service contracts not discussed in Part A or
Part B.
ITEM 30 UNDERTAKINGS
Not Applicable
SIGNATURE
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized in the
City of San Mateo and the State of California, on the 27th day of August, 1999.
FRANKLIN MONEY FUND
(Registrant)
By: /s/LEIANN NUZUM
Leiann Nuzum
Assistant Secretary
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 and
Rupert H. Johnson, Jr. Director
Dated: August 27, 1999
MARTIN L. FLANAGAN* Principal Financial Officer
Martin L. Flanagan Dated: August 27, 1999
DIOMEDES LOO-TAM* Principal Accounting Officer
Diomedes Loo-Tam Dated: August 27, 1999
FRANK H. ABBOTT, III* Director
Frank H. Abbott, III Dated: August 27, 1999
HARRIS J. ASHTON* Director
Harris J. Ashton Dated: August 27, 1999
S. JOSEPH FORTUNATO* Director
S. Joseph Fortunato Dated: August 27, 1999
CHARLES B. JOHNSON* Director
Charles B. Johnson Dated: August 27, 1999
FRANK W.T. LAHAYE* Director
Frank W.T. LaHaye Dated: August 27, 1999
GORDON S. MACKLIN* Director
Gordon S. Macklin Dated: August 27, 1999
*By /s/ Leiann Nuzum, Attorney-in-Fact
(Pursuant to Powers of Attorney filed herewith)
SIGNATURE
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, as amended, the undersigned has duly consented to the
filing of this Registration Statement of Franklin Money Fund and has caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized in the City of San Mateo and the State of California,
on the 27th day of August, 1999.
THE MONEY MARKET PORTFOLIOS
By: /s/LEIANN NUZUM
Leiann Nuzum
Assistant Secretary
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following Trustees and Officers of The
Money Market Portfolios in the capacities and on the dates indicated:
CHARLES E. JOHNSON* Principal Executive Officer
Charles E. Johnson and Trustee
Dated: August 27, 1999
MARTIN L. FLANAGAN* Principal Financial Officer
Martin L. Flanagan Dated: August 27, 1999
DIOMEDES LOO-TAM* Principal Accounting Officer
Diomedes Loo-Tam Dated: August 27, 1999
FRANK H. ABBOTT, III* Trustee
Frank H. Abbott, III Dated: August 27, 1999
HARRIS J. ASHTON* Trustee
Harris J. Ashton Dated: August 27, 1999
ROBERT F. CARLSON* Trustee
Robert F. Carlson Dated: August 27, 1999
S. JOSEPH FORTUNATO* Trustee
S. Joseph Fortunato Dated: August 27, 1999
CHARLES B. JOHNSON* Trustee
Charles B. Johnson Dated: August 27, 1999
RUPERT H. JOHNSON, JR.* Trustee
Rupert H. Johnson, Jr. Dated: August 27, 1999
FRANK W. T. LAHAYE* Trustee
Frank W. T. LaHaye Dated: August 27, 1999
GORDON S. MACKLIN* Trustee
Gordon S. Macklin Dated: August 27, 1999
*By /S/ LEIANN NUZUM
Leiann Nuzum, Attorney-in-Fact
(Pursuant to Powers of Attorney filed herewith)
FRANKLIN MONEY FUND
REGISTRATION STATEMENT
EXHIBITS INDEX
EXHIBIT NO. DESCRIPTION LOCATION
EX-99.(a)(i) Articles of Incorporation dated November 4, *
1975
EX-99.(a)(ii) Certificate of Amendment to Articles of *
Incorporation
EX-99.(b)(i) By-Laws *
EX-99.(b)(ii) Amendment to By-Laws dated November 17, 1987 *
EX-99.(b)(iii) Amendment to By-Laws dated October 27, 1994 *
EX-99.(d)(i) Administration Agreement between the *
Registrant and Franklin Advisers, Inc., dated
August 1, 1994
EX-99.(e)(i) Amended and Restated Distribution Agreement *
between the Registrant and Franklin/Templeton
Distributors, Inc., dated April 23, 1995
EX-99.(e)(ii) Forms of Dealer Agreements between *
Franklin/Templeton Distributors, Inc., and
Securities Dealers
EX-99.(g)(i) Master Custody Agreement between the *
Registrant and Bank of New York dated February
16, 1996
EX-99.(g)(ii) Terminal Link Agreement between the Registrant *
and Bank of New York dated February 16, 1996
EX-99.(g)(iii) Amendment dated May 7, 1997 to the Master *
Custody Agreement dated February 16, 1996
between Registrant and Bank of New York
EX-99.(g)(iv) Amendment dated February 27, 1998 to Exhibit A *
in the Master Custody Agreement between
Registrant and Bank of New York dated February
16, 1996
EX-99.(i)(i) Opinion and consent of counsel dated August *
17, 1998
EX-99.(j)(i) Consent of Independent Auditors for Franklin Attached
Money Fund and The Money Market Portfolios
EX-99.(p)(i) Power of Attorney for Franklin Money Fund Attached
dated July 15, 1999
EX-99.(p)(ii) Power of Attorney for The Money Market Attached
Portfolios dated July 15, 1999
*Incorporated by reference
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in Post-Effective Amendment No. 32
to the Registration Statement of Franklin Money Fund Form N-1A File No. 2-55029
of our reports dated August 3, 1999 on our audit of the financial statements and
financial highlights of the Franklin Money Fund and The Money Market Portfolios,
which reports are included in the Annual Report to Shareholders for the year
ended June 30, 1999, filed with the Securities and Exchange Commission pursuant
to section 30(d) of the Investment Company Act of 1940, which is incorporated by
reference in the Registration Statement. We also consent to the reference to our
firm under the captions "Financial Highlights" and "Auditor."
PricewaterhouseCoopers LLP
/s/PricewaterhouseCoopers LLP
San Francisco, California
August 26, 1999
POWER OF ATTORNEY
The undersigned officers and directors of FRANKLIN MONEY FUND (the "Registrant")
hereby appoint MARK H. PLAFKER, HARMON E. BURNS, DEBORAH R. GATZEK, KAREN L.
SKIDMORE AND LEIANN NUZUM (with full power to each of them to act alone) his
attorney-in-fact and agent, in all capacities, to execute, file or withdraw 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 15TH day of July, 1999.
/s/Rupert H. Johnson, Jr., /s/Charles B. Johnson,
Principal Executive Officer Director
and Director
/s/Frank H. Abbott, III, /s/Harris J. Ashton,
Director Director
Robert F. Carlson, /s/S. Joseph Fortunato,
Director Director
/s/Frank W.T. LaHaye, /s/Gordon S. Macklin,
Director Director
/s/Martin L. Flanagan, /s/Diomedes Loo-Tam,
Principal Financial Officer Principal Accounting Officer
POWER OF ATTORNEY
The undersigned officers and trustees of THE MONEY MARKET PORTFOLIOS (the
"Registrant") hereby appoint MARK H. PLAFKER, HARMON E. BURNS, DEBORAH R.
GATZEK, KAREN L. SKIDMORE AND LEIANN NUZUM (with full power to each of them to
act alone) his attorney-in-fact and agent, in all capacities, to execute, file
or withdraw 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 trustees hereby execute this Power of Attorney as
of this 15th day of July, 1999.
/s/Charles E. Johnson, /s/Charles B. Johnson,
Principal Executive Officer Trustee
and Trustee
/s/Frank H. Abbott, III, /s/Harris J. Ashton,
Trustee Trustee
/s/Robert F. Carlson, /s/S. Joseph Fortunato,
Trustee Trustee
/s/Rupert H. Johnson, Jr., /s/Frank W.T. LaHaye,
Trustee Trustee
/s/Gordon S. Macklin, /s/Martin L. Flanagan,
Trustee Principal Financial Officer
/s/Diomedes Loo-Tam,
Principal Accounting Officer
