As filed with the Securities and Exchange Commission on August 27, 1999
File Nos.
2-96634
811-4267
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. 29 (X)
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 30 (X)
INSTITUTIONAL FIDUCIARY TRUST
(Exact Name of Registrant as Specified in Charter)
777 MARINERS ISLAND BLVD., SAN MATEO, CA 94404
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (650) 312-2000
DEBORAH R. GATZEK 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
Money Market Portfolio
Franklin U.S. Government Securities Money Market Portfolio
Institutional Fiduciary Trust
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 FUNDS
[Begin callout]
INFORMATION ABOUT EACH FUND YOU SHOULD KNOW BEFORE INVESTING
[End callout]
[insert page #] Money Market Portfolio
[insert page #] Franklin U.S. Government Securities Money Market Portfolio
[insert page #] Distributions and Taxes; Year 2000 Problem
YOUR ACCOUNT
[Begin callout]
INFORMATION ABOUT ACCOUNT TRANSACTIONS AND SERVICES
[End callout]
[insert page #] Buying Shares
[insert page #] Investor Services
[insert page #] Selling Shares
[insert page #] Account Policies
[insert page #] Questions
FOR MORE INFORMATION
[Begin callout]
WHERE TO LEARN MORE ABOUT EACH FUND
[End callout]
Back Cover
MONEY MARKET PORTFOLIO
[Insert graphic of bullseye and arrows] GOAL AND STRATEGY
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 issues, including U.S. government securities, repurchase
agreements, bank obligations and commercial paper.
U.S. GOVERNMENT SECURITIES in which the fund may invest 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).
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 go up, security prices fall. The opposite is
also true: security prices go up 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 go up.
YEAR 2000 When evaluating current and potential portfolio positions, Year 2000
is one of the factors the manager considers.
Issuers in countries outside the U.S., particularly in emerging markets, may be
more susceptible to Year 2000 risks and may not be required to make the same
level of disclosure about Year 2000 readiness as is required in the U.S.
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).
[Begin callout]
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
Trustees, 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]
9.29% 8.24% 5.91% 3.74% 3.14% 4.19% 5.98% 5.38% 5.49% 5.46%
89 90 91 92 93 94 95 96 97 98
YEAR
[Begin callout]
BEST QUARTER:
Q2 '89 2.37%
WORST QUARTER:
Q2 '86 0.76%
[End callout]
AVERAGE ANNUAL TOTAL RETURNS
For the periods ended December 31, 1998
1 YEAR 5 YEARS 10 YEARS
- ----------------------------------------------------------------
Money Market Portfolio 5.02% 5.41% 5.43%
1. As of September 30, 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 None
purchases
Exchange fee 1 $5.00
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) 2
Management fees 3 0.31%
Distribution and service
(12b-1) fees 0.00%
Other expenses 0.02%
---------------
Total annual fund operating 0.33%
expenses 3 ---------------
1. This fee is only for market timers (see page [#]).
2. The annual fund operating expenses shown and included in the example below
reflect the expenses of both the fund and The Money Market Portfolio.
3. For the fiscal year ended June 30, 1999, the administrator had agreed in
advance to limit its fees and to assume as its own expense certain expenses
otherwise payable by the fund. With this reduction, management fees were 0.29%
and total annual fund operating expenses were 0.31%. The administrator may end
this arrangement at any time upon notice to the fund's Board of Trustees.
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
- ------------------------------------------
$34 $106 $185 $418
[Insert graphic of briefcase] MANAGEMENT
Franklin Advisers, Inc. (Advisers), 777 Mariners Island Blvd., San Mateo, CA
94404, is the Portfolio's investment manager and the fund's administrator.
Together, Advisers and its affiliates manage over $227 billion in assets.
The Portfolio pays Advisers a fee for managing the Portfolio's assets and making
its investment decisions. For the fiscal year ended June 30, 1999, the fund's
share of the Portfolio's management fees was 0.15% of the fund's average daily
net assets.
[Insert graphic of a dollar bill] FINANCIAL HIGHLIGHTS
This table presents the fund's financial performance for the past five years.
This information has been audited by PricewaterhouseCoopers LLP.
- ---------------------------------------------------------------------
1999 1998 1997 1996 1995
- ---------------------------------------------------------------------
PER SHARE DATA ($)
Net asset value,
beginning of year 1.00 1.00 1.00 1.00 1.00
-----------------------------------------
Net investment income .049 .054 .053 .055 .053
Distributions from net
investment income (.049) (.054) (.053) (.055) (.053)
-----------------------------------------
Net asset value, end of 1.00 1.00 1.00 1.00 1.00
year
-----------------------------------------
Total return (%) 5.02 5.58 5.42 5.61 5.46
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year
($ x 1,000) 1,289,010 175,881 185,088 341,295 272,147
Ratios to average net
assets: (%)
Expenses 1 .31 .20 .20 .19 .15
Expenses excluding
waiver and payments by .33 .24 .24 .24 .24
affiliate 1
Net investment income 4.82 5.44 5.27 5.45 5.40
1. The expense ratio includes the fund's share of the Portfolio's allocated
expenses.
FRANKLIN U.S. GOVERNMENT SECURITIES MONEY MARKET PORTFOLIO
[Insert graphic of bullseye and arrows] GOAL AND STRATEGY
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 invests only in marketable securities issued or guaranteed by the U.S.
government, its agencies, or by various instrumentalities that have been
established or sponsored by the U.S. government, repurchase agreements
collateralized by such securities, and stripped securities (as described below).
At the present time, it is the U.S. Securities Fund's policy to limit its
investments to U.S. Treasury bills, notes and bonds (including stripped
securities), and repurchase agreements collateralized only by such securities.
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).
STRIPPED SECURITIES are the separate income and principal components of a debt
security. Once the securities have been stripped they are referred to as zero
coupon securities. Each fund only intends to buy stripped securities that are
issued or guaranteed by the U.S. Treasury.
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 go up, security prices fall. The opposite is
also true: security prices go up 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 go up.
DERIVATIVE SECURITIES Stripped securities are considered derivative investments,
since their value depends on the value of the underlying asset to be purchased
or sold. The fund's investment in derivatives may involve a small investment
relative to the amount of risk assumed. To the extent the fund enters into these
transactions, their success will depend on the manager's ability to predict
market movements. 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.
YEAR 2000 When evaluating current and potential portfolio positions, Year 2000
is one of the factors the manager considers.
Issuers in countries outside the U.S., particularly in emerging markets, may be
more susceptible to Year 2000 risks and may not be required to make the same
level of disclosure about Year 2000 readiness as is required in the U.S.
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).
[Begin callout]
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 U.S. Securities 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 a fund may have to withdraw its investment in the Portfolio
if the Portfolio changes its investment goal or if the fund's Board of Trustees,
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]
9.21% 8.14% 5.71% 3.57% 3.06% 4.11% 5.83% 5.27% 5.41% 0.87%
89 90 91 92 93 94 95 96 97 98
YEAR
[Begin callout]
BEST QUARTER:
Q2 '89 2.40%
WORST QUARTER:
Q4 '93 0.75%
[End callout]
AVERAGE ANNUAL TOTAL RETURNS
For the periods ended December 31, 1998
1 YEAR 5 YEARS 10 YEARS
- ------------------------------------------------------------------------
Franklin U.S. Government Securities
Money Market Portfolio 4.82% 5.29% 5.31%
1. As of September 30, 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 None
purchases
Exchange fee 1 $5.00
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) 2
Management fees 3 0.30%
Distribution and service
(12b-1) fees 0.00%
Other expenses 0.04%
---------------
Total annual fund operating 0.34%
expenses 3 ---------------
1. This fee is only for market timers (see page [#]).
2. The annual fund operating expenses shown and included in the example below
reflect the expenses of both the fund and The Money Market Portfolio.
3. For the fiscal year ended June 30, 1999, the administrator had agreed in
advance to limit its fees. With this reduction, management fees were 0.26% and
total annual fund operating expenses were 0.30%. The administrator may end this
arrangement at any time upon notice to the fund's Board of Trustees.
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
- ----------------------------------------
$35 $109 $191 $431
[Insert graphic of briefcase] MANAGEMENT
Franklin Advisers, Inc. (Advisers), 777 Mariners Island Blvd., San Mateo, CA
94404, is the Portfolio's investment manager and the fund's administrator.
Together, Advisers and its affiliates manage over $227 billion in assets.
The fund pays Advisers a fee for managing the fund's assets and making its
investment decisions. For the fiscal year ended June 30, 1999, the fund paid
0.15% of its average daily net assets to the manager.
[Insert graphic of a dollar bill] FINANCIAL HIGHLIGHTS
This table presents the fund's financial performance for the past five years.
This information has been audited by PricewaterhouseCoopers LLP.
YEAR ENDED JUNE 30,
- ---------------------------------------------------------------------
1999 1998 1997 1996 1995
- ---------------------------------------------------------------------
PER SHARE DATA ($)
Net asset value,
beginning of year 1.00 1.00 1.00 1.00 1.00
-----------------------------------------
Net investment income .047 .054 .052 .054 .052
Distributions from net
investment income (.047) (.054) (.052) (.054) (.052)
-----------------------------------------
Net asset value, end of 1.00 1.00 1.00 1.00 1.00
year
-----------------------------------------
Total return (%) 4.82 5.51 5.29 5.50 5.32
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year
($ x 1,000) 111,566 131,151 136,705 152,173 334,830
Ratios to average net
assets: (%)
Expenses 1 .30 .20 .20 .19 .15
Expenses excluding
waiver and payments by .34 .26 .26 .26 .23
affiliate 1
Net investment income 4.69 5.34 5.14 5.44 5.26
1. The expense ratio includes the fund's share of the Portfolio's allocated
expenses.
[Insert graphic of dollar signs and stacks of coins]
DISTRIBUTIONS AND TAXES; YEAR 2000 PROBLEM
INCOME DISTRIBUTIONS Each fund typically pays income dividends each day that its
net asset value is calculated. Your account may begin to receive dividends on
the day we receive your investment and will continue to receive dividends
through the day before we receive a request to sell your shares or the
settlement of a wire order trade. 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, a 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.
Because the funds expect 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. For tax
purposes, an exchange of your fund shares for shares of a different Franklin
Templeton Fund is the same as a sale.
Fund distributions generally will be subject to state and local income tax. It
is anticipated that no portion of fund distributions will qualify for exemption
from state and local taxes as dividends paid from interest earned on direct
obligations of the U.S. government. Non-U.S. investors may be subject to U.S.
withholding and estate tax. You should consult your tax advisor about federal,
state, local and foreign tax consequences of your investment in a fund.
YEAR 2000 PROBLEM The funds' 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 funds' 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 funds'
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 funds could
experience difficulties in effecting transactions if any of its foreign
subcustodians, or if foreign broker-dealers or foreign markets are not ready for
Year 2000.
Each fund's 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.
YOUR ACCOUNT
[Insert graphic of a paper with lines and someone writing] BUYING SHARES
Each fund is available for investment by individuals and institutional
investors, such as corporations, banks, savings and loan associations, trust
companies, and other institutional and government entities, for investment of
their own capital and of monies held in accounts for which they act in a
fiduciary, advisory, agency, custodial, or other similar capacity. THE U.S.
SECURITIES FUND IS ALSO DESIGNED FOR GOVERNMENT AUTHORITIES AND AGENCIES. Fund
shares are offered without a sales charge.
MINIMUM INVESTMENTS
- ----------------------------------------------------------------
INITIAL ADDITIONAL
- ----------------------------------------------------------------
Regular accounts $100,000 no minimum
- ----------------------------------------------------------------
States, counties, cities and their
instrumentalities, departments,
agencies and authorities $1,000 no minimum
[Begin callout]
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
these funds. Please note that for selling or exchanging your shares, or for
other purposes, the funds' shares are considered Class A shares. Before January
1, 1999, the funds' shares were considered Class I shares.
Many of the Money Fund's investments, through The Money Market Portfolio, and
the U.S. Securities Fund's investments, through The Franklin U.S. Government
Securities 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. A 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.
DISTRIBUTION AND SERVICE (12B-1) FEES Each fund has a distribution plan,
sometimes known as a Rule 12b-1 plan, that allows the fund to pay distribution
and other fees of up to 0.15% per year for the sale of shares and for services
provided to shareholders. No payments have been made for 12b-1 expenses since
inception and the funds have no intention to use the Rule 12b-1 plan.
ACCOUNT APPLICATION If you are opening a new account, please complete and sign
an 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
- --------------------------------------------------------------------------------
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- --------------------------------------------------------------------------------
[Insert graphic of
hands shaking]
Contact your investment Contact your investment
THROUGH YOUR representative representative
INVESTMENT
REPRESENTATIVE
- --------------------------------------------------------------------------------
Make your check, Federal Make your check payable to
[Insert graphic of Reserve Draft or negotiable the fund. Include your
envelope] bank draft payable to the account number on the check.
fund. Instruments drawn on
BY MAIL other mutual funds may not Fill out the deposit slip
be accepted. from your account statement.
If you do not have a slip,
Mail the check or draft and include a note with your
your signed application to name, the fund name, and
Investor Services. your account number.
Mail the check and deposit
slip or note to Investor
Services.
- --------------------------------------------------------------------------------
[Insert graphic of Call by 11:15 a.m. pacific Call by 11:15 a.m. pacific
three lightning time for the Money Fund and time for the Money Fund and
bolts] by 1:30 p.m. pacific time by 1:30 p.m. pacific time
for the U.S. Securities Fund for the U.S. Securities Fund
BY WIRE to receive that day's credit to receive that day's credit
See "Holiday and be eligible to receive and be eligible to receive
Schedule" under that day's dividend. The that day's dividend. The
"Account Policies" fund will supply a wire fund will supply a wire
control number and wire control number and wire
1-800/321-8563 instructions. instructions.
(or 1-650/312-3600
collect) Wire the funds and mail your Wire the funds to
signed application to Institutional Services. For
Institutional Services. For investments over $50,000,
investments over $50,000, you also need to complete
you also need to complete the Institutional Telephone
the Institutional Telephone Privileges Agreement. Call
Privileges Agreement. Please Institutional Services to
include the wire control receive a copy.
number on the application.
To make a same day wire To make a same day wire
investment, please make sure investment, please make sure
we receive your order by we receive your order by
3:00 p.m. pacific time. 3:00 p.m. pacific time.
- --------------------------------------------------------------------------------
[Insert graphic of Call Institutional Services Call Institutional Services
two arrows pointing at the number below, or send at the number below, or send
in opposite signed written instructions. signed written instructions.
directions]
For requests over $50,000, For requests over $50,000,
BY EXCHANGE you must complete an you must complete an
Institutional Telephone Institutional Telephone
1-800/321-8563 Privileges Agreement. Call Privileges Agreement. Call
Institutional Services to Institutional Services to
receive a copy. receive a copy.
(Please see page # for (Please see page # for
information on exchanges.) information on exchanges.)
- --------------------------------------------------------------------------------
INSTITUTIONAL SERVICES, 777 MARINERS ISLAND BLVD, P.O. BOX 7777,
SAN MATEO, CA 94403-7777
CALL TOLL-FREE: 1-800/321-8563
(MONDAY THROUGH FRIDAY 6:00 A.M. TO 5:00 P.M., PACIFIC TIME)
[Insert graphic of person with a headset] INVESTOR SERVICES
DISTRIBUTION OPTIONS You may reinvest distributions you receive from a fund in
an existing account in the 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 mailed by check.
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.
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.
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 funds 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.
The telephone transaction options available to retirement plans are limited to
those that are provided under the plan.
EXCHANGE PRIVILEGE You can exchange shares between most Franklin Templeton Funds
within the same class*. If you exchange shares from a 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.
If you exchange shares from a fund into any other series of the trust, the
exchange will be processed the day your request is received, prior to 11:15 a.m.
pacific time for the Money Fund and 1:30 p.m. pacific time for the U.S.
Securities Fund, with payment for the purchased shares processed on the
following business day when the funds are made available from the fund.
If you exchange shares from a fund into Class A shares of other Franklin
Templeton Funds, the exchange will be effected at the respective net asset value
or offering price of the funds involved next computed on the day on which the
request is received in proper form prior to the above deadlines. Requests
received after the deadlines will be effective at the next day's price.
If you exchange shares from another fund in the Franklin Templeton Funds into a
fund, the transaction will be processed as a liquidation from the other fund on
the day the exchange is received in proper form prior to the time of valuation
for that fund (as noted in that fund's prospectus) and shares of the fund will
be bought on the following business day when the money for purchase is
available.
Retirement plan participants may exchange shares in accordance with the options
available under, and the requirements of, their plan and plan administrator.
Retirement plan administrators may charge a fee in connection with exchanges.
[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 funds. Advisor Class shareholders of other Franklin Templeton Funds
also may exchange into the funds. Advisor Class shareholders who exchange their
shares for shares of a fund and later decide they would like to exchange into
another fund that offers Advisor Class may do so.
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 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.
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 funds generally do not have a CDSC, they will impose one if
you sell shares exchanged into a 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
- -------------------------------------------------------------------------
TO SELL SOME OR ALL OF YOUR SHARES
- -------------------------------------------------------------------------
[Insert graphic of
hands shaking]
Contact your investment representative
THROUGH YOUR
INVESTMENT
REPRESENTATIVE
- -------------------------------------------------------------------------
[Insert graphic Send written instructions to Institutional
of envelope] Services. Corporate, partnership or trust
accounts may need to send additional documents.
BY MAIL
Specify the fund, the account number and the
See "Holiday Schedule" dollar value or number of shares you wish to
under "Account sell. Be sure to include all necessary
Policies" 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.
- -------------------------------------------------------------------------
[Insert graphic As long as your transaction is for $100,000 or
of phone] less, or have completed an Institutional
Telephone Privileges Agreement, and you have
BY PHONE not changed your address by phone within the
last 15 days, you can sell your shares by
1-800/632-2301 phone.
A check will be mailed to the name(s) and
address on the account. If requested,
redemption proceeds may also be wired directly
to a commercial bank previously designated by
you on an application, or in a
signature-guaranteed letter of instruction.
Written instructions, with a signature
guarantee, are required to send the check to
another address or to make it payable to
another person.
- -------------------------------------------------------------------------
[Insert graphic of You can call or write to have redemption
three lightning bolts] proceeds wired to you. If requested,
redemption proceeds may also be wired directly
to a commercial bank previously designated by
you on an application, or in a
signature-guaranteed letter of instruction. A
BY WIRE payment may be transmitted by wire the same
business day if the phone request is received
1-800/321-8563 before 11:15 a.m. Pacific time for the Money
Fund and 1:30 p.m. Pacific time for the U.S.
Securities Fund. For later requests, payments
will be transmitted by wire on the following
business day. If you anticipate requesting a
same day wire redemption over $5 million,
please notify the fund about this on the prior
business day. In order to maximize efficient
fund management, please request your same day
wire redemption (regardless of size) as early
in the day as possible. Prior business day
notification of the trade may be required.
Before requesting a bank wire, please make
sure we 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, your bank
account number, the ABA routing number, and a
signature guarantee.
Requests received in proper form by 3:00 p.m.
pacific time will be wired the next business
day.
- -------------------------------------------------------------------------
[Insert graphic of two Obtain a current prospectus for the fund you
arrows pointing in are considering.
opposite directions]
Call Institutional Services at the number
BY EXCHANGE below or our automated TeleFACTS system, or
send signed written instructions. See the
TeleFACTS(R) policies above for selling shares by mail or
1-800/247-1753 phone.
(around-the-clock
access)
- -------------------------------------------------------------------------
INSTITUTIONAL SERVICES, 777 MARINERS ISLAND BLVD, P.O. BOX 7777,
SAN MATEO, CA 94403-7777
CALL TOLL-FREE: 1-800/321-8563
(MONDAY THROUGH FRIDAY 6:00 A.M. TO 5:00 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 Money Fund calculates its NAV per share at 12:30 p.m. pacific time and the
U.S. Securities Fund calculates its NAV per share at 3:00 p.m. pacific time,
each day the New York Stock Exchange and the Federal Reserve Bank of San
Francisco are open, by dividing their net assets by the number of shares
outstanding. A 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.
HOLIDAY SCHEDULE In order to receive same day credit for transactions, you need
to transmit your request to buy, sell or exchange shares before 11:15 a.m.
pacific time for the Money Fund and before 1:30 p.m. pacific time for the U.S.
Securities Fund, except on holidays or the day before or after a holiday.
The funds are informed that the New York Stock Exchange (NYSE) and/or the
Federal Reserve Bank of San Francisco observe the following holidays: New Year's
Day, Martin Luther King Jr. Day, Presidents' Day, Good Friday, Memorial Day
(observed), Independence Day, Labor Day, Columbus Day (observed), Veterans' Day,
Thanksgiving Day and Christmas Day. Although the funds expect the same holiday
schedule to be observed in the future, the Federal Reserve Bank of San Francisco
or the NYSE may modify its holiday schedule at any time. On any day before or
after a NYSE or Federal Reserve Bank of San Francisco holiday, or on any day
when the Public Securities Association recommends an early closing, the funds
reserve the right to set an earlier time for notice and receipt of wire order
purchase and redemption orders submitted for same day credit or redemption.
Please place your trades as early in the day as possible on a day before or
after a holiday. To the extent that a fund's portfolio securities are traded in
other markets on days the Federal Reserve Bank of San Francisco or the NYSE is
closed, the fund's Net Asset Value may be affected when investors do not have
access to the fund to buy or sell shares. Other Franklin Templeton Funds may
follow different holiday closing schedules.
ACCOUNTS WITH LOW BALANCES If the value of your account falls below $20,000
($500 for states, counties, cities and their instrumentalities, departments,
agencies and authorities) 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 funds' 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 1-800/321-8563.
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 funds 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 funds' transfer agent. You will
be considered a market timer if you have (i) requested an exchange out of a fund
within two weeks of an earlier exchange request, or (ii) exchanged shares out of
a fund more than twice in a calendar quarter, or (iii) exchanged shares equal to
at least $5 million, or more than 1% of a 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 funds maintain additional policies and
reserve certain rights, including:
o The funds may refuse any order to buy shares, including any purchase under
the exchange privilege.
o At any time, the funds may change their investment minimums or waive or
lower their minimums for certain purchases.
o If you buy shares with a check or draft that is returned to the fund
unpaid, the funds 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 funds 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 funds reserve 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 or wire would be harmful to existing
shareholders.
o To permit investors to obtain the current price, dealers are responsible
for transmitting all orders to the funds promptly.
GENERAL Government Accounting Standards Board (GASB) Statement No. 3 pertaining
to Deposits with Financial Institutions provides, in paragraph 69, that
investments in mutual funds should be disclosed, but not categorized.
[Insert graphic of question mark] QUESTIONS
If you have any questions about the funds or your account, you can write to us
at 777 Mariners Island Blvd., P.O. Box 7777, San Mateo, CA 94403-7777. You can
also call us at 1-800/321-8563 Monday through Friday, from 6:00 a.m. to 5:00
p.m. pacific time.
FOR MORE INFORMATION
You can learn more about each 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 each 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 each 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 #811-4267 IFT1 P 11/99
Prospectus
Franklin Cash Reserves Fund
Institutional Fiduciary Trust
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
[Begin callout]
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
[End callout]
[insert page #] Buying Shares
[insert page #] Investor Services
[insert page #] Selling Shares
[insert page #] Account Policies
[insert page #] Questions
FOR MORE INFORMATION
[Begin callout]
WHERE TO LEARN MORE ABOUT THE FUND
[End callout]
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 go up, security prices fall. The opposite is
also true: security prices go up 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 go up.
YEAR 2000 When evaluating current and potential portfolio positions, Year 2000
is one of the factors the manager considers. 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).
[Begin callout]
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 The Money Market 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
Trustees, 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 4 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]
5.73% 5.08% 5.19% 5.00%
95 96 97 98
YEAR
[Begin callout]
BEST QUARTER:
Q2 '95 1.45%
WORST QUARTER:
Q2 '99 1.00%
[End callout]
AVERAGE ANNUAL TOTAL RETURNS
For the periods ended December 31, 1998
SINCE
1 YEAR INCEPTION
(7/1/94)
- ----------------------------------------------------------
Franklin Cash Reserves Fund 4.49% 5.11%
1. As of September 30, 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 None
purchases
Exchange fee 1 $5.00
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS) 2
Management fees 0.40%
Distribution and service
(12b-1) fees 0.25%
Other expenses 0.17%
------------
Total annual fund operating expenses 0.82%
------------
1. This fee is only for market timers (see page [#]).
2. The annual fund operating expenses shown and included in the example below
reflect the expenses of both the fund and The Money Market Portfolio.
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
- ----------------------------------------
$84 $262 $455 $1,014
[Insert graphic of briefcase] MANAGEMENT
Franklin Advisers, Inc. (Advisers), 777 Mariners Island Blvd., San Mateo, CA
94404, is the Portfolio's investment manager and the fund's administrator.
Together, Advisers and its affiliates manage over $227 billion in assets.
The Portfolio pays Advisers a fee for managing the Portfolio's assets and making
its investment decisions. For the fiscal year ended June 30, 1999, the fund's
share of the Portfolio's management fees was 0.40% of the fund's average daily
net assets.
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 fund could
experience difficulties in effecting transactions if any of its foreign
subcustodians, or if foreign broker-dealers or foreign markets are not ready for
Year 2000.
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 declares income dividends each day that
its net asset value is calculated and pays them monthly. 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.
Because the fund expects to maintain a $1.00 net asset value per share, you
should not have any gain or loss on the sale of your fund shares. For tax
purposes, an exchange of your fund shares for shares of a different Franklin
Templeton Fund is the same as a sale.
Fund distributions generally will be subject to state and local income tax. It
is anticipated that no portion of fund distributions will qualify for exemption
from state and local taxes as dividends paid from interest earned on direct
obligations of the U.S. government. Non-U.S. investors may be subject to U.S.
withholding and estate tax. You should consult your tax advisor about federal,
state, local and foreign tax consequences of your investment in the fund.
[Insert graphic of a dollar bill] FINANCIAL HIGHLIGHTS
This table presents the fund's financial performance for the past five years.
This information has been audited by PricewaterhouseCoopers LLP.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
- ---------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------
PER SHARE DATA ($)
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of year 1.00 1.00 1.00 1.00 1.00
------------------------------------------------
Net investment income .044 .051 .050 .052 .052
Distributions from net
investment income (.044) (.051) (.050) (.052) (.052)
------------------------------------------------
Net asset value, end of year 1.00 1.00 1.00 1.00 1.00
------------------------------------------------
Total return (%) 4.49 5.28 5.11 5.35 5.34
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year
($ x 1,000) 135,390 119,585 76,510 30,381 14,545
Ratios to average net
assets: (%)
Expenses 1 .82 .50 .50 .49 .40
Expenses excluding waiver
and payments by affiliate 1 .82 .77 .69 .73 .79
Net investment income 4.38 5.14 5.00 5.10 5.69
</TABLE>
1. The expense ratio includes the fund's share of the Portfolio's allocated
expenses.
YOUR ACCOUNT
[Insert graphic of a paper with lines and someone writing] BUYING SHARES
You may buy shares of the fund without a sales charge. The fund is available
exclusively to retirement plan participants and other institutional investors,
including corporations, banks, savings and loan associations, and government
entities. Individuals may not otherwise buy shares of the fund. In the case of
retirement plans, there is no required minimum initial investment amount and
shares of the fund must be registered at the omnibus level. Although the amount
that may be contributed to the various investment options under a retirement
plan in any one year is subject to certain limitations, assets already held by a
retirement plan may be invested in the fund without regard to the limitations.
Certain institutional investors, such as corporations, banks, and savings and
loan associations, may also purchase shares of the fund subject to a minimum
initial investment of $100,000. Government entities, however, including states,
counties, cities, and their instrumentalities, departments, agencies, and
authorities may open an account in the fund with a minimum initial investment of
$1,000. Subsequent purchases are not subject to a minimum purchase requirement.
[Begin callout]
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.
DISTRIBUTION AND SERVICE (12B-1) FEES The fund has a distribution plan,
sometimes known as a Rule 12b-1 plan, that allows the fund to pay distribution
and other fees of up to 0.25% per year for the sale of shares and for services
provided to shareholders.
Because these fees are paid out of the assets of the fund on an on-going basis,
over time these fees will increase the cost of your investment.
ACCOUNT APPLICATION If you are opening a new account, please complete and sign
the 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
- --------------------------------------------------------------------------------
Make your check, Federal Make your check payable to
[Insert graphic of Reserve Draft or negotiable Franklin Cash Reserves Fund.
envelope] bank draft payable to
Franklin Cash Reserves Fund. Mail the check to
BY MAIL Instruments drawn on other Institutional Services.
mutual funds may not be
accepted.
Mail the check or draft and
your signed application to
Institutional Services.
- --------------------------------------------------------------------------------
[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 Wire the funds to
See "Holiday signed application to Institutional Services. For
Schedule" under Institutional Services. For investments over $50,000,
"Account Policies" investments over $50,000, you also need to complete
you also need to complete the Institutional Telephone
1-800/321-8563 the Institutional Telephone Privileges Agreement. Call
(or 1-650/312-3600 Privileges Agreement. Please Institutional Services to
collect) include the wire control receive a copy.
number on the application.
To make a same day wire To make a same day wire
investment, please make sure investment, please make sure
we receive your order by we receive your order by
3:00 p.m. pacific time. 3:00 p.m. pacific time.
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[Insert graphic of Call Institutional Services Call Institutional Services
two arrows pointing at the number below, or send at the number below, or send
in opposite signed written instructions. signed written instructions.
directions]
For requests over $100,000, For requests over $100,000,
BY EXCHANGE you must complete an you must complete an
Institutional Telephone Institutional Telephone
Privileges Agreement. Call Privileges Agreement. Call
1-800/321-8563 Institutional Services to Institutional Services to
receive a copy. receive a copy.
(Please see page # for (Please see page # for
information on exchanges.) information on exchanges.)
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INSTITUTIONAL SERVICES, 777 MARINERS ISLAND BLVD, P.O. BOX 7777,
SAN MATEO, CA 94403-7777
CALL TOLL-FREE: 1-800/321-8563
(MONDAY THROUGH FRIDAY 6:00 A.M. TO 5:00 P.M., PACIFIC TIME)
[Insert graphic of person with a headset] INVESTOR SERVICES
DISTRIBUTION OPTIONS You may reinvest distributions you receive from the fund in
an existing account in the 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 mailed by check.
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. Certain
restrictions may apply to retirement plans.
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.
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.
Retirement plan participants may exchange shares in accordance with the options
available under, and the requirements of, their plan and plan administrator.
Retirement plan administrators may charge a fee in connection with exchanges.
[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.
[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 if you have completed a separate
agreement. Call Institutional Services to receive a copy. 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 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.
For non-retirement plan participants, payment may be transmitted by wire the
same business day, if the phone request is received before 11:15 a.m. Pacific
time that day. For later requests, payment will be transmitted by wire the next
business day. If you anticipate requesting a same-day wire redemption over $5
million, please notify the fund about this on the prior business day. In order
to maximize efficient fund management, please request your same-day wire
redemption of any size as early in the day as possible. Prior business day
notification of the trade may be required.
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
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[Insert graphic of
hands shaking]
Contact your investment representative
THROUGH YOUR
INVESTMENT
REPRESENTATIVE
- -------------------------------------------------------------------------
[Insert graphic Send written instructions to Institutional
of envelope] Services. Corporate, partnership or trust
accounts may need to send additional documents.
BY MAIL
Specify the fund, the account number and the
See "Holiday Schedule" dollar value or number of shares you wish to
under "Account sell. Be sure to include all necessary
Policies" 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.
- -------------------------------------------------------------------------
[Insert graphic As long as your transaction is for $100,000 or
of phone] less, or have completed an Institutional
Telephone Privileges Agreement, and you have
BY PHONE not changed your address by phone within the
last 15 days, you can sell your shares by
1-800/321-8563 phone.
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.
- -------------------------------------------------------------------------
[Insert graphic of You can call or write to have redemption
three lightning bolts] proceeds wired to you. If requested,
redemption proceeds may also be wired directly
to a commercial bank previously designated by
you on an application, or in a
signature-guaranteed letter of instruction.
BY WIRE
Before requesting a bank wire, please make
1-800/321-8563 sure we 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, your bank
account number, the ABA routing number, and a
signature guarantee.
Requests received in proper form by 3:00 p.m.
pacific time will be wired the next business
day.
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[Insert graphic of two Obtain a current prospectus for the fund you
arrows pointing in are considering.
opposite directions]
Call Institutional Services at the number
BY EXCHANGE below or send signed written instructions. See
the policies above for selling shares by mail
or phone.
- -------------------------------------------------------------------------
INSTITUTIONAL SERVICES, 777 MARINERS ISLAND BLVD, P.O. BOX 7777,
SAN MATEO, CA 94403-7777
CALL TOLL-FREE: 1-800/321-8563
(MONDAY THROUGH FRIDAY 6:00 A.M. TO 5:00 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 and the Federal Reserve Bank of San Francisco are 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.
HOLIDAY SCHEDULE The fund is informed that the New York Stock Exchange (NYSE)
and/or the Federal Reserve Bank of San Francisco observe the following holidays:
New Year's Day, Martin Luther King Jr. Day, Presidents' Day, Good Friday,
Memorial Day (observed), Independence Day, Labor Day, Columbus Day (observed),
Veterans' Day, Thanksgiving Day and Christmas Day. Although the fund expects the
same holiday schedule to be observed in the future, the Federal Reserve Bank of
San Francisco or the NYSE may modify its holiday schedule at any time. Please
place your trades as early in the day as possible on a day before or after a
holiday. To the extent that the fund's portfolio securities are traded in other
markets on days the Federal Reserve Bank of San Francisco or the NYSE is closed,
the fund's Net Asset Value may be affected when investors do not have access to
the fund to buy or sell shares. Other Franklin Templeton Funds may follow
different holiday closing schedules.
ACCOUNTS WITH LOW BALANCES If the value of your account falls below $20,000 (or
one-half the minimum required investment, whichever is less) 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. If you need additional copies, please call 1-800/321-8563.
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 or wire 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.
GENERAL Government Accounting Standards Board (GASB) Statement No. 3 pertaining
to Deposits with Financial Institutions provides, in paragraph 69, that
investments in mutual funds should be disclosed, but not categorized.
[Insert graphic of question mark]QUESTIONS
If you have any questions about the fund or your account, you can write to us at
777 Mariners Island Blvd., P.O. Box 7777, San Mateo, CA 94403-7777. You can also
call us at 1-800/321-8563 Monday through Friday, from 6:00 a.m. to 5:00 p.m.
pacific time.
If you are a ValuSelect plan participant you may obtain current price, yield and
performance information regarding the Franklin Templeton Funds included in the
plan by calling KeyFACTSsm at 8-1800 KEY-2110.
For your protection and to help ensure we provide you with quality service, all
calls may be monitored or recorded.
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)
1-800/321-8563
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 #811-4267 149p 11/99
INSTITUTIONAL
FIDUCIARY TRUST
MONEY MARKET PORTFOLIO
FRANKLIN U.S. GOVERNMENT SECURITIES
MONEY MARKET PORTFOLIO
STATEMENT OF ADDITIONAL INFORMATION
NOVEMBER 1, 1999
P.O. BOX 997151
SACRAMENTO, CA 95899-9983 1-800/321-8563
This Statement of Additional Information (SAI) is not a prospectus. It contains
information in addition to the information in the funds' prospectus. The funds'
prospectus, dated November 1, 1999, which we may amend from time to time,
contains the basic information you should know before investing in a fund. You
should read this SAI together with the funds' prospectus.
The audited financial statements and auditor's report in the trust's Annual
Report to Shareholders, for the fiscal year ended June 30, 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
Goals and Strategies
Risks
Officers and Trustees
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
Appendices
California Government Code Section 53601
California Government Code Section 53635
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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.
- --------------------------------------------------------------------------------
GOALS AND STRATEGIES
- --------------------------------------------------------------------------------
The investment goal of each fund 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. Each fund also tries to maintain a stable $1 share
price.
U.S. GOVERNMENT SECURITIES The U.S. Securities Fund may invest only in
obligations, including U.S. Treasury bills, notes, bonds and securities of the
Government National Mortgage Association (popularly called "GNMAs" or "Ginnie
Maes") and the Federal Housing Administration, which are issued or guaranteed by
the U.S. government or that carry a guarantee supported by the full faith and
credit of the U.S. government, repurchase agreements collateralized only by such
securities, and stripped securities. Some 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
on by the credit of the instrumentality.
BANK OBLIGATIONS The Money Market 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 Money Fund will invest in these obligations or instruments issued by banks
and savings institutions with assets of at 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 Money Fund may not invest more than 10% of
its assets in time deposits with more than seven days to maturity.
The Money 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
Money 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 in which the Money
Fund may invest. They are direct arrangements between a lender and a borrower
that allow daily changes to the amount borrowed and to the interest rate. The
Money Fund, as lenders, 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 Money 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 Money 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.
Repayment of these securities is intended to be obtained from an identified pool
of diversified assets, typically receivables related to a particular industry,
such as asset-backed securities related to credit card receivables, automobile
receivables, trade receivables or diversified financial assets. The credit
quality of most asset-backed commercial paper depends primarily on the credit
quality of the assets underlying the securities, how well the entity issuing the
security is insulated from the credit risk of the originator (or any other
affiliated entities) and the amount and quality of any credit support provided
to the securities.
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, in which the Money Fund may invest, include fixed,
floating and variable rate bonds, debentures or notes.
COMMERCIAL PAPER The Money Fund may invest in commercial paper of domestic and
foreign issuers.
STRIPPED SECURITIES are the separate income and principal components of a debt
security. Once the securities have been stripped they are referred to a 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.
Each 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 Money 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 Money Fund is a diversified fund. As fundamental policies:
(a) the Money 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 Money Fund may not invest in a security if the Money 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 money market funds, however, the funds must follow certain procedures
required by federal securities laws that may be more restrictive than some of
the funds' other policies or investment restrictions. With respect to
diversification, these procedures require that the each 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. Each 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 each fund.
WHAT ARE SOME OF THE FUNDS' 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 delivery, the fund
assumes the risk that the value of the security at delivery may be more or less
than the purchase price. When the Money 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 Money Fund will not engage in when-issued and
delayed-delivery transactions for investment leverage purposes.
REPURCHASE AGREEMENTS Each 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, each fund may enter into repurchase agreements.
Under a repurchase agreement, a 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 a fund's ability to sell the underlying securities.
The funds will enter into repurchase agreements only with parties who meet
creditworthiness standards approved by the funds' board of trustees, 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. Both funds may enter into repurchase agreements
with certain U.S. and foreign banks and broker-dealers.
LOANS OF PORTFOLIO SECURITIES To generate additional income, each fund may lend
certain of its portfolio securities to qualified banks and broker-dealers. These
loans may not exceed 25%% of the value of the Money Fund's total assets and 10%
of the value of the U.S. Securities Fund's total assets, measured at the time of
the most recent loan. For each loan, the borrower must maintain with the Money
Fund's custodian collateral (consisting of cash) and with the U.S. Securities
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 100% of the
current market value of the loaned securities. The funds retain all or a portion
of the interest received on investment of the cash collateral or receive a fee
from the borrower. The funds 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 funds 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 funds will loan their securities only to
parties who meet creditworthiness standards approved by the funds' board of
trustees, 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 Money Fund may borrow up to 5% of its total assets from banks for
temporary or emergency purposes. The maximum amount the U.S. Securities Fund may
borrow from banks for such purposes is 10% of its total assets. The Portfolio
will not make any new investments while any outstanding loans exceed 5% of its
total assets.
ILLIQUID INVESTMENTS The Money 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 Money Fund has valued them.
OTHER LIMITATIONS The Money 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 Money 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 Money Fund seeks to achieve its investment goal by
investing all of its assets in shares of The Money Market Portfolio (Money
Portfolio). The U.S. Securities Fund seeks to achieve its investment goal by
investing all of its assets in shares of The U.S. Government Securities Money
Market Portfolio (U.S. Securities Portfolio). The Money Portfolio and the U.S.
Securities Portfolio are series of The Money Market Portfolios ("Money Market").
References to the "Portfolio," unless the context indicates that an individual
portfolio is being referenced, are to both the Money Portfolio and the U.S.
Securities 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.
Each 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, each 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 a 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 Each 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.
Each fund may not:
(1) Borrow money or mortgage or pledge any of its assets, except that borrowings
(and a pledge of assets therefor) for temporary or emergency purposes may be
made from banks in any amount up to 5% of the Money Fund's total asset value and
up to 10% of the U.S. Securities Fund's 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 above.
(3) Acquire, lease or hold real estate, provided that this limitation shall not
prohibit the purchase of municipal and other debt securities secured by real
estate or interests therein.
(4) Buy any securities "on margin" or sell any securities "short," except that
it may use such short-term credits as are necessary for the clearance of
transactions.
(5) Invest in commodities and commodity contracts, puts, calls, straddles,
spreads or any combination thereof, or interests in oil, gas or other mineral
exploration or development programs, except that it may purchase, hold and
dispose of "obligations with puts attached" or write covered call options in
accordance with its stated investment policies.
(6) Purchase securities, in private placements or in other transactions, for
which there are legal or contractual restrictions on resale and are not readily
marketable, or enter into a repurchase agreement with more than seven days to
maturity if, as a result, more than 10% of the total assets of the fund would be
invested in such securities or repurchase agreements, except that, to the extent
this restriction is applicable, the fund may purchase, in private placements,
shares of another registered investment company having the same investment
objectives and policies as the fund.
(7) Act as underwriter of securities issued by other persons, except insofar as
the Trust may technically be deemed an underwriter under the federal securities
laws in connection with the disposition of portfolio securities; except that all
or substantially all of the assets of the fund may be invested in another
registered investment company having the same investment objectives and policies
as the fund.
(8) Purchase securities of other investment companies, except in connection with
a merger, consolidation, acquisition or reorganization; provided that all or
substantially all of the assets of the fund may be invested in another
registered investment company having the same investment objectives and policies
as the fund.
(9) Invest in any issuer for purposes of exercising control or management,
except that, to the extent this restriction is applicable, all or substantially
all of the assets of the fund may be invested in another registered investment
company having the same investment objectives and policies as the fund.
(10) Purchase securities from or sell to the trust's officers and trustees, or
any firm of which any officer or trustee is a member, as principal, or retain
securities of any issuer if, to the knowledge of the trust, one or more of the
trust's officers, trustees or investment adviser own beneficially more than 1/2
of 1% of the securities of such issuer and all such officers and trustees
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 policies
of a fund, 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 policy.
In addition to the above restrictions, the funds have the following fundamental
policies, which may only be changed with shareholder approval: i) the U.S.
Securities Fund may invest only in marketable securities issued or guaranteed by
the U.S. government, by various agencies of the U.S. government and by various
instrumentalities that have been established or sponsored by the U.S.
government, including U.S. Treasury bills, notes, bonds and securities of the
Government National Mortgage Association (GNMA) and the Federal Housing
Administration, which are issued or guaranteed by the U.S. government or which
carry a guarantee supported by the full faith and credit of the U.S. government;
or in another open-end investment company (such as the U.S. Securities Fund)
that has a fundamental policy to invest in these types of securities; ii) each
fund will invest 100% of its assets in securities with remaining maturities of
397 days or less, or in another open-end management investment company that has
the same fundamental investment policy; iii) the Money Fund will invest
primarily in various types of money market instruments, such as U.S. government
and federal agency obligations, certificates of deposit, banker's acceptances,
time deposits of major financial institutions, high grade commercial paper, high
grade short-term corporate obligations, taxable municipal securities and
repurchase agreements (secured by U.S. government securities) and may seek its
objectives by investing all or substantially all of its assets in an open-end
management investment company with the same investment objectives and policies;
iv) the Money Fund may not purchase the securities of any one issuer (other than
obligations of the U.S. government, its agencies or instrumentalities) if,
immediately thereafter, more than 5% of the value of its total assets would be
invested in the securities of any one issuer with respect to 75% of the Money
Fund's total assets (pursuant to an operating policy on diversification adopted
by the Board and the Board of Trustees of Money Market to comply with
requirements under SEC Rule 2a-7, the 5% limitation applies to the Portfolio's
total assets and is more restrictive than the fund's fundamental policy), or
more than 10% of the outstanding voting securities of any one issuer would be
owned by the Money Fund, except that this policy does not apply to the extent
all or substantially all of the assets of the Money Fund may be invested in
another registered investment company having the same investment objectives and
policies as the Money Fund; and v) the Money Fund may not invest more than 5% of
its total assets in the securities of companies (including predecessors) that
have been in continuous operation for less than three years, nor invest more
than 25% of its total assets in any particular industry, except that this policy
is inapplicable to the extent all or substantially all of the assets of the
Money Fund may be invested in another registered investment company having the
same investment objectives and policies as the Money Fund.
Each fund presently has the following additional restrictions, which are not
fundamental and may be changed without shareholder approval.
Each fund may not invest in real estate limited partnerships (investments in
marketable securities issued by real estate investment trusts are not subject to
this restriction) or in interests (other than publicly traded equity securities)
in oil, gas, or other mineral leases, exploration or development program.
The U.S. Securities Fund may invest only in U.S. Treasury bills, notes, and
bonds (including stripped securities) and repurchase agreements collateralized
only by such securities.
To continue its money market status in Texas, the Money Fund and its respective
Portfolio will comply with Section 123.3 of the Texas Administrative Code (as
stated in Conditions 1-7 listed in Form 133.26, entitled "Request for
Determination as a Money Market Fund," with the understanding that Condition 4
excludes expenses of the Money Fund's transfer agent associated with shareholder
recordkeeping and reporting).
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.
Money Market's trustees have elected to value the Portfolio's assets in
accordance with SEC Rule 2a-7. This rule also imposes various restrictions on
the Portfolio which are, in some cases, more restrictive than the Portfolio's
other stated fundamental policies and investment restrictions. The Portfolio
must comply with these provisions unless its shareholders vote to change its
policy of being a money market fund.
RISKS
- --------------------------------------------------------------------------------
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 funds'
master/feeder structure. If other shareholders in the Portfolio sell their
shares, he corresponding fund's expenses may increase. Additionally, any
economies of scale a 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 corresponding 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
trustees considers it to be in a 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 a 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 a fund's
expenses.
OFFICERS AND TRUSTEES
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The trust has a board of trustees. The board is responsible for the overall
management of the trust, including general supervision and review of each fund's
investment activities. The board, in turn, elects the officers of the trust who
are responsible for administering the trust'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 trust, and principal occupations during
the past five years are shown below.
Frank H. Abbott, III (78)
1045 Sansome Street, San Francisco, CA 94111
TRUSTEE
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
TRUSTEE
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
TRUSTEE
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
TRUSTEE
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 TRUSTEE
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.
*Charles E. Johnson (43)
500 East Broward Blvd., Fort Lauderdale, FL 33394-3091
PRESIDENT AND TRUSTEE
Senior Vice President and Director, Franklin Resources, Inc.; Senior Vice
President, Franklin Templeton Distributors, Inc.; President and Director,
Templeton Worldwide, Inc.; Chairman and Director, Templeton Investment Counsel,
Inc.; Vice President, Franklin Advisers, Inc.; officer and/or director of some
of the other subsidiaries of Franklin Resources, Inc.; and officer and/or
director or trustee, as the case may be, of 33 of the investment companies in
the Franklin Templeton Group of Funds.
*Rupert H. Johnson, Jr. (59)
777 Mariners Island Blvd., San Mateo, CA 94404
VICE PRESIDENT AND TRUSTEE
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
TRUSTEE
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
TRUSTEE
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.
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.
*This board member is considered an "interested person" under federal securities
laws.
Note: Charles B. Johnson and Rupert H. Johnson, Jr. are brothers and the father
and uncle, respectively, of Charles E. Johnson.
The trust pays noninterested board members $310 per month plus $225 per meeting
attended. Board members who serve on the audit committee of the trust and other
funds in the Franklin Templeton Group of Funds receive a flat fee of $2,000 per
committee meeting attended, a portion of which is allocated to the trust.
Members of a committee are not compensated for any committee meeting held on the
day of a board meeting. Noninterested board members also may serve as directors
or trustees of other funds in the Franklin Templeton Group of Funds and may
receive fees from these funds for their services. The fees payable to
noninterested board members by the trust are subject to reductions resulting
from fee caps limiting the amount of fees payable to board members who serve on
other boards within the Franklin Templeton Group of Funds. The following table
provides the total fees paid to noninterested board members by the trust and by
the Franklin Templeton Group of Funds.
<TABLE>
<CAPTION>
NUMBER OF BOARDS IN
TOTAL FEES TOTAL FEES RECEIVED THE FRANKLIN
RECEIVED FROM THE FRANKLIN TEMPLETON GROUP OF
FROM THE TRUST1 TEMPLETON GROUP OF FUNDS ON WHICH EACH
NAME ($) FUNDS2 ($) SERVES3
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Frank H. Abbott, III 4,502 159,051 27
Harris J. Ashton 4,934 361,157 48
Robert Carlson 6,195 78,052 9
S. Joseph Fortunato 4,597 367,835 50
Frank W.T. LaHaye 4,727 163,753 27
Gordon S. Macklin 4,934 361,157 48
</TABLE>
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 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
- --------------------------------------------------------------------------------
MANAGER AND SERVICES PROVIDED Each 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 Each Portfolio pays the manager a fee equal to a daily rate of
0.15 of 1% of the value of 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 Portfolios paid the following
management fees:
MANAGEMENT FEES PAID ($) 1
- -----------------------------------------------------------------------
1999 1998 1997
- -----------------------------------------------------------------------
Money Portfolio 3,900,807 2,830,858 2,429,509
U.S. Securities Portfolio 430,179 367,433 364,509
1. For the fiscal years ended June 30, 1999, 1998 and 1997, management fees,
before any advance waiver, totaled $3,996,761, $2,963,304 and $2,547,891 for the
Money Portfolio and $437,891, $394,321 and $404,358 for the U.S. Securities
Portfolio. Under an agreement by the manager to waive its fees, the Portfolios
paid the management fees shown.
ADMINISTRATOR AND SERVICES PROVIDED Franklin Advisers, Inc. (Advisers) has an
agreement with the funds to provide various administrative, statistical and
other services to the funds.
ADMINISTRATION FEES Each fund pays Advisers a fee equal to an annual rate of
0.20 of 1% of the value of the fund's average daily net assets.
During the last three fiscal years ended June 30, 1999, the funds paid Advisers
the following administration fees:
ADMINISTRATION FEES PAID ($) 1
-----------------------------------------------------------------
1999 1998 1997
-----------------------------------------------------------------
Money Fund 379,721 39,173 70,428
U.S. Securities Fund 147,435 0 1,694
1. For the fiscal years ended June 30, 1999, 1998 and 1997, administration fees,
before any advance waiver, totaled $444,184, $104,796 and $150,356 for the Money
Fund and $203,308, $66,469 and $70,196 for the U.S. Securities Fund. Under an
agreement by the administrator to waive its fees, the funds paid the
administration fees shown.
SHAREHOLDER SERVICING AND TRANSFER AGENT Franklin/Templeton Investor Services,
Inc. (Investor Services) is the funds' shareholder servicing agent and acts as
the funds' 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 funds
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 funds to Investor Services in
connection with maintaining shareholder accounts.
CUSTODIAN Investor Services, as the transfer agent for the Portfolio,
effectively acts as the funds' custodian and holds the funds' 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 funds' 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 funds' independent auditor. The auditor gives an opinion on the financial
statements included in the trust's Annual Report to Shareholders and reviews the
trust's registration statement filed with the U.S. Securities and Exchange
Commission (SEC).
PORTFOLIO TRANSACTIONS
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The funds 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 June 30, 1999, neither the funds nor the Portfolio owned securities of
their regular broker-dealers.]
DISTRIBUTIONS AND TAXES
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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 funds declare dividends for each day
that its net asset value is calculated. These dividends will equal all of the
funds' daily net income payable to shareholders of record as of the close of
business the preceding day.
The funds receive income generally in the form of dividends derived on its
investment in the Portfolio. This income, less expenses incurred in the
operation of the funds, constitutes its net investment income from which
dividends may be paid to you. Any distributions by the funds 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 funds 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
funds are money market funds, they do not anticipate realizing any long-term
capital gains.
MAINTENANCE OF $1.00 NET ASSET VALUE Gains and losses derived by the funds on
its investment in shares of the Portfolio and unrealized appreciation or
depreciation in the value of these securities may require the funds to adjust
distributions in order to maintain a $1.00 net asset value. These procedures may
result in under- or over-distributions of 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 funds as ordinary
dividends, and any losses will reduce the Portfolio's ordinary income otherwise
available for distribution to the funds. This treatment could increase or reduce
the Portfolio's ordinary income distributions to the funds and, in turn, to you.
INFORMATION ON THE TAX CHARACTER OF DISTRIBUTIONS The funds 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 funds have 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 funds generally pay no federal income tax on the income and gains it
distributes. The board reserves the right not to maintain the qualification of
the funds as regulated investment companies if it determines such course of
action to be beneficial to shareholders. In such case, the funds will be subject
to federal, and possibly state, corporate taxes on their taxable income and
gains, and distributions will be taxed as ordinary dividend income to the extent
of the funds' earnings and profits.
EXCISE TAX DISTRIBUTION REQUIREMENTS To avoid federal excise taxes, the Internal
Revenue Code requires the funds 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 funds intend to declare and pay these amounts
in December (or in January of the following year that are treated by you as
received in December of the prior year) 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. However, because the
funds seek to maintain a constant $1.00 per share net asset value, you should
not expect to realize a capital gain or loss upon redemption 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 funds. 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. It is anticipated, however, that no portion of
the funds' distributions to you will qualify for exemption from state and local
personal income tax as dividends paid 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 funds do so only indirectly by investing in the
portfolio's shares.
DIVIDENDS-RECEIVED DEDUCTION FOR CORPORATIONS Because the funds' income is
indirectly attributable to interest, no portion of its distributions generally
will be eligible for the corporate dividends-received deduction. None of the
dividends paid by the funds 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 funds to
you.
ORGANIZATION, VOTING RIGHTS AND PRINCIPAL HOLDERS
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The funds are diversified series of the Institutional Fiduciary Trust, an
open-end management investment company, commonly called a mutual fund. The trust
was organized as a Massachusetts business trust on January 15, 1985, and is
registered with the SEC.
As a shareholder of a Massachusetts business trust, you could, under certain
circumstances, be held personally liable as a partner for its obligations. The
Agreement and Declaration of Trust, however, contains an express disclaimer of
shareholder liability for acts or obligations of the fund. The Declaration of
Trust also provides for indemnification and reimbursement of expenses out of the
funds' assets if you are held personally liable for obligations of the funds.
The Declaration of Trust provides that the funds shall, upon request, assume the
defense of any claim made against you for any act or obligation of the fund and
satisfy any judgment thereon. All such rights are limited to the assets of the
funds. The Declaration of Trust further provides that the funds may maintain
appropriate insurance (for example, fidelity bonding and errors and omissions
insurance) for the protection of the funds, its shareholders, trustees,
officers, employees and agents to cover possible tort and other liabilities.
Furthermore, the activities of the funds as an investment company, as
distinguished from an operating company, would not likely give rise to
liabilities in excess of the funds' total assets. Thus, the risk that you would
incur financial loss on account of shareholder liability is limited to the
unlikely circumstance in which both inadequate insurance exists and the funds
themselves are unable to meet their obligations.
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 trust has noncumulative voting rights. For board member elections, this
gives holders of more than 50% of the shares voting the ability to elect all of
the members of the board. If this happens, holders of the remaining shares
voting will not be able to elect anyone to the board.
The trust does not intend to hold annual shareholder meetings. The trust or a
series of the trust 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.
As of August 11, 1999, the principal shareholders of the fund, beneficial or of
record, were:
NAME AND ADDRESS PERCENTAGE (%)
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MONEY PORTFOLIO
Franklin Resources Inc. 11.95
Corporate Accounting
555 Airport Blvd. 4th Floor
Burlingame, CA 94010
Franklin Templeton Distributors Inc. 20.69
Corporate Accounting
555 Airport Blvd. 4th Floor
Burlingame, CA 94010
Templeton International Inc. 5.45
Corporate Accounting
555 Airport Blvd. 4th Floor
Burlingame, CA 94010
Franklin California Growth Fund 15.35
c/o Fund Accounting Department
3310 Quality Drive
Rancho Cordova, CA 95670
U.S. SECURITIES PORTFOLIO
PNC Bank National Association 10.44
Two PNC Plaza
620 Liberty Avenue
Pittsburgh, PA 15222-2705
PNC Bank National Association 5.29
Two PNC Plaza
620 Liberty Plaza
Pittsburgh, PA 15222-2705
Franklin Resources Inc. 17.49
Corporate Accounting
555 Airport Blvd. 4th Floor
Burlingame, CA 94010
City of Anaheim 13.53
C/o Road A 1992 Loan Fund
201 South Anaheim Blvd. 901
City Hall West
Anaheim, CA 92805
Note: Charles B. Johnson and Rupert H. Johnson, Jr., who are officers and/or
trustees of the trust, may be considered beneficial holders of the fund shares
held by Franklin Resources, Inc. (Resources). As principal shareholders of
Resources, they may be able to control the voting of Resources' shares of the
funds.
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.
As of August 11, 1999, the officers and board members, as a group, owned of
record and beneficially less than 1% of the outstanding shares of the funds. 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 funds continuously offer their 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 funds. 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 funds 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 funds 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 the 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.
CDSC WAIVERS. The CDSC for each class generally will be waived for:
o Account fees
o Redemptions by the fund when an account falls below the minimum required
account size
o Redemptions following the death of the shareholder or beneficial owner
o Redemptions through a systematic withdrawal plan, up to 1% monthly, 3%
quarterly, 6% semiannually or 12% annually of your account's net asset
value depending on the frequency of your plan
o Redemptions by Franklin Templeton Trust Company employee benefit plans or
employee benefit plans serviced by ValuSelect(R) (not applicable to Class
B)
o Distributions from individual retirement accounts (IRAs) due to death or
disability or upon periodic distributions based on life expectancy (for
Class B, this applies to all retirement plan accounts, not only IRAs)
o Returns of excess contributions (and earnings, if applicable) from
retirement plan accounts
o Participant initiated distributions from employee benefit plans or
participant initiated exchanges among investment choices in employee
benefit plans (not applicable to Class B)
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.
The wiring of redemption proceeds 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 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
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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 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
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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.
Distributors may be entitled to reimbursement under the Rule 12b-1 plans for the
funds, as discussed below. Distributors received no compensation from the funds
for acting as underwriter.
DISTRIBUTION AND SERVICE (12B-1) FEES Each fund has a distribution or "Rule
12b-1" plan. Under each plan, the fund shall pay or may reimburse Distributors
or others for the expenses of activities that are primarily intended to sell
shares of the fund. These expenses may include, among others, distribution or
service fees paid to securities dealers or others who have executed a servicing
agreement with the fund, Distributors or its affiliates; a prorated portion of
Distributors' overhead expenses; and the expenses of printing prospectuses and
reports used for sales purposes, and preparing and distributing sales literature
and advertisements.
Payments by each fund under the plan may not exceed 0.15% per year of average
daily net assets, payable quarterly. All distribution expenses over this amount
will be borne by those who have incurred them.
In addition to the payments that Distributors or others are entitled to under
each plan, each plan also provides that to the extent the fund, the manager or
Distributors or other parties on behalf of the fund, the manager or Distributors
make payments that are deemed to be for the financing of any activity primarily
intended to result in the sale of fund shares within the context of Rule 12b-1
under the Investment Company Act of 1940, as amended, then such payments shall
be deemed to have been made pursuant to the plan. The terms and provisions of
each plan relating to required reports, term, and approval are consistent with
Rule 12b-1.
In no event shall the aggregate asset-based sales charges, which include
payments made under each plan, plus any other payments deemed to be made
pursuant to a plan, exceed the amount permitted to be paid under the rules of
the National Association of Securities Dealers, Inc.
To the extent fees are for distribution or marketing functions, as distinguished
from administrative servicing or agency transactions, certain banks will not be
entitled to participate in the plans as a result of applicable federal law
prohibiting certain banks from engaging in the distribution of mutual fund
shares. These banking institutions, however, are permitted to receive fees under
the plans for administrative servicing or for agency transactions. If you are a
customer of a bank that is prohibited from providing these services, you would
be permitted to remain a shareholder of the fund, and alternate means for
continuing the servicing would be sought. In this event, changes in the services
provided might occur and you might no longer be able to avail yourself of any
automatic investment or other services then being provided by the bank. It is
not expected that you would suffer any adverse financial consequences as a
result of any of these changes.
Each plan has been approved in accordance with the provisions of Rule 12b-1. The
plans are renewable annually by a vote of the board, including a majority vote
of the board members who are not interested persons of the fund and who have no
direct or indirect financial interest in the operation of the plans, cast in
person at a meeting called for that purpose. It is also required that the
selection and nomination of such board members be done by the noninterested
members of the fund's board. The plans and any related agreement may be
terminated at any time, without penalty, by vote of a majority of the
noninterested board members on not more than 60 days' written notice, by
Distributors on not more than 60 days' written notice, by any act that
constitutes an assignment of the administration agreement between the trust and
the administrator or the management agreement between The Money Market
Portfolios and the manager or by vote of a majority of the outstanding shares of
the Portfolio. Distributors or any dealer or other firm also may terminate their
respective distribution or service agreement at any time upon written notice.
The plans and any related agreements may not be amended to increase materially
the amount to be spent for distribution expenses without approval by a majority
of the outstanding shares, and all material amendments to the plans or any
related agreements shall be approved by a vote of the noninterested board
members, cast in person at a meeting called for the purpose of voting on any
such amendment.
Distributors is required to report in writing to the board at least quarterly on
the amounts and purpose of any payment made under the plans and any related
agreements, as well as to furnish the board with such other information as may
reasonably be requested in order to enable the board to make an informed
determination of whether the plans should be continued.
For the fiscal year ended June 30, 1999, the funds did not incur any expenses
pursuant to the plans.
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 (%)
- ----------------------------------------------------------------------------
Money Fund 5.02 5.41 5.43
U.S. Securities Fund 5.57 5.20 5.31
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 funds. 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 4.61% for
the Money Fund and 4.47% for the U.S. Securities Fund.
EFFECTIVE YIELD The funds' effective yield is calculated in the same manner as
their 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 4.72% for the Money Fund and 4.57% for the
U.S. Securities Fund.
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 - a
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.
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 funds' 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 $227 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.
APPENDICES
CALIFORNIA GOVERNMENT CODE SECTION 53601. SECURITIES AUTHORIZED FOR INVESTMENT;
TEXT OF SECTION EFFECTIVE ON JULY 7, 1988, AMENDED IN 1992, 1995 AND 1996.
The legislative body of a local agency having money in a sinking fund of, or
surplus money in, its treasury not required for the immediate necessities of the
local agency may invest any portion of the money which it deems wise or
expedient in those investments set forth below. A local agency purchasing or
obtaining any securities prescribed in this section, in a negotiable, bearer,
registered, or nonregistered format, shall require delivery of the securities to
the local agency, including those purchased for the agency by financial
advisors, consultants, or managers using the agency's funds, by book entry,
physical delivery or by third party custodial agreement. The transfer of
securities to the counterparty bank's customer book entry account may be used
for book entry delivery. For purposes of this section "counterparty" means the
other party to the transaction. A counterparty bank's trust department or
separate safekeeping department may be used for the physical delivery of the
security if the security is held in the name of the local agency. Where this
section does not specify a limitation on the term or remaining maturity at the
time of the investment, no investment shall be made in any security, other than
a security underlying a repurchase or reverse repurchase agreement authorized by
this section, that at the time of the investment has a term remaining to
maturity in excess of five years, unless the legislative body has granted
express authority to make that investment either specifically or as a part of an
investment program approved by the legislative body no less than three months
prior to the investment:
(a) Bonds issued by the local agency, including bonds payable solely out of the
revenues from a revenue-producing property owned, controlled, or operated by the
local agency or by a department, board, agency, or authority of the local
agency.
(b) United States Treasury notes, bonds, bills, or certificates of indebtedness,
or those for which the faith and credit of the United States are pledged for the
payment of principal and interest.
(c) Registered state warrants or Treasury notes or bonds of this state,
including bonds payable solely out of the revenues from a revenue-producing
property owned, controlled, or operated by the state or by a department, board,
agency, or authority of the state.
(d) Bonds, notes, warrants, or other evidences of indebtedness of any local
agency within this state, including bonds payable solely out of the revenues
from a revenue-producing property owned, controlled or operated by the local
agency, or by a department, board, agency, or authority of the local agency.
(e) Obligations issued by banks for cooperatives, federal land banks, federal
intermediate credit banks, federal home loan banks, the Federal Home Loan Bank
Board, the Tennessee Valley Authority, or in obligations, participations, or
other instruments of, or issued by, or fully guaranteed as to principal and
interest by, the Federal National Mortgage Association; or in guaranteed
portions of Small Business Administration notes; or in obligations,
participations, or other instruments of, or issued by, a federal agency or a
United States government-sponsored enterprise.
(f) Bills of exchange or time drafts drawn on and accepted by a commercial bank,
otherwise known as banker's acceptances. Purchases of banker's acceptances may
not exceed 270 days maturity or 40 percent of the agency's surplus money that
may be invested pursuant to this section. However, no more than 30 percent of
the agency's surplus funds may be invested in the banker's acceptances of any
one commercial bank pursuant to this section.
This subdivision does not preclude a municipal utility district from investing
any surplus money in its treasury in any manner authorized by the Municipal
Utility District Act, (Division 6 (commencing with Section 11501) of the Public
Utilities Code).
(g) Commercial paper of "prime" quality of the highest ranking or of the highest
letter and numerical rating as provided for by Moody's Investors Service, Inc.,
or Standard and Poor's Corporation. Eligible paper is further limited to issuing
corporations that are organized and operating within the United States and
having total assets in excess of five hundred million dollars ($500,000,000) and
having an "A" or higher rating for the issuer's debt, other than commercial
paper, if any, as provided for by Moody's Investors Service, Inc. or Standard
and Poor's Corporation. Purchases of eligible commercial paper may not exceed
180 days maturity nor represent more than 10 percent of the outstanding paper of
an issuing corporation. Purchases of commercial paper may not exceed 15 percent
of the agency's surplus money that may be invested pursuant to this section. An
additional 15 percent, or a total of 30 percent of the agency's surplus money,
may be invested pursuant to this subdivision. The additional 15 percent may be
so invested only if the dollar-weighted average maturity of the entire amount
does not exceed 31 days. "Dollar-weighted average maturity" means the sum of the
amount of each outstanding commercial paper investment multiplied by the number
of days to maturity, divided by the total amount of outstanding commercial
paper.
(h) Negotiable certificates of deposit issued by a nationally or state-chartered
bank or a state or federal association (as defined by Section 5102 of the
Financial Code) or by a state-licensed branch of a foreign bank. Purchases of
negotiable certificates of deposit may not exceed 30 percent of the agency's
surplus money which may be invested pursuant to this section. For purposes of
this section, negotiable certificates of deposits do not come within Article 2
(commencing with Section 53630) of Chapter 4 of Part 1 of Division 2 of Title 5,
except that the amount so invested shall be subject to the limitations of
Section 53638.
(i) (1) Investments in repurchase agreements or reverse repurchase agreements of
any securities authorized by this section as long as the agreements are subject
to this subdivision, including, the delivery requirements specified in this
section.
(2) Investments in repurchase agreements may be made, on any investment
authorized in this section when the term of the agreement does not exceed one
year. The market value of securities that underlay a repurchase agreement shall
be valued at 102 percent or greater of the funds borrowed against those
securities and the value shall be adjusted no less than quarterly.
(3) Reverse repurchase agreements may be utilized only when either of the
following conditions are met:
(A) The security was owned or specifically committed to purchase, by the local
agency prior to December 31, 1994, and was sold using a reverse repurchase
agreement on December 31, 1994.
(B) The security to be sold on reverse repurchase agreement has been owned and
fully paid for by the local agency for a minimum of 30 days prior to sale; the
total of all reverse repurchase agreements on investments owned by the local
agency not purchased or committed to purchase, prior to December 31, 1994, does
not exceed 20 percent of the base value of the portfolio; and the agreement does
not exceed a term of 92 days, unless the agreement includes a written codicil
guaranteeing a minimum earning or spread for the entire period between the sale
of a security using a reverse repurchase agreement and the final maturity date
of the same security.
(4) After December 31, 1994, a reverse repurchase agreement may not be entered
into with securities not sold on a reverse repurchase agreement and purchased,
or committed to purchase, prior to that date, as a means of financing or paying
for the security sold on a reverse repurchase agreement, but may only be entered
into with securities owned and previously paid for a minimum of 30 days prior to
the settlement of the reverse repurchase agreement, in order to supplement the
yield on securities owned and previously paid for or to provide funds for the
immediate payment of a local agency obligation. Funds obtained or funds within
the pool of an equivalent amount to that obtained from selling a security to a
counterparty by way of a reverse repurchase agreement, on securities originally
purchased subsequent to December 31, 1994, shall not be used to purchase another
security with a maturity longer than 92 days from the initial settlement date of
the reverse repurchase agreement, unless the reverse repurchase agreement
includes a written codicil guaranteeing a minimum earning or spread for the
entire period between the sale of a security using a reverse repurchase
agreement and the final maturity date of the same security. Reverse repurchase
agreements specified in subparagraph (B) of paragraph (3) may not be entered
into unless the percentage restrictions specified in that subparagraph are met,
including the total of any reverse repurchase agreements specified in
subparagraph (A) of paragraph (3).
(5) Investments in reverse repurchase agreements or similar investments in which
the local agency sells securities prior to purchase, with a simultaneous
agreement to repurchase the security, may only be made upon prior approval of
the governing body of the local agency and shall only be made with primary
dealers of the Federal Reserve Bank of New York.
(6) (A) "Repurchase agreement" means a purchase of securities by the local
agency pursuant to an agreement by which the counterparty seller will repurchase
the securities on or before a specified date and for a specified amount and the
counterparty will deliver the underlying securities to the local agency by book
entry, physical delivery, or by third party custodial agreement. The transfer of
underlying securities to the counterparty bank's customer book-entry account may
be used for book-entry delivery.
(B) "Securities," for purpose of repurchase under this subdivision, means
securities of the same issuer, description, issue date, and maturity.
(C) "Reverse repurchase agreement" means a sale of securities by the local
agency pursuant to an agreement by which the local agency will repurchase the
securities on or before a specified date and includes other comparable
agreements.
(D) For purposes of this section, the base value of the local agency's pool
portfolio shall be that dollar amount obtained by totaling all cash balances
placed in the pool by all pool participants, excluding any amounts obtained
through selling securities by way of reverse repurchase agreements or other
similar borrowing methods.
(E) For purposes of this section, the spread is the difference between the cost
of funds obtained using the reverse repurchase agreement and the earnings
obtained on the reinvestment of the funds.
(j) Medium-term notes of a maximum of five years maturity issued by corporations
organized and operating within the United States or by depository institutions
licensed by the United States or any state and operating within the United
States. Notes eligible for investment under this subdivision shall be rated in a
rating category of "A" or its equivalent or better by a nationally recognized
rating service. Purchases of medium-term notes may not exceed 30 percent of the
agency's surplus money which may be invested pursuant to this section.
(k) (1) Shares of beneficial interest issued by diversified management companies
that invest in the securities and obligations as authorized by subdivisions (a)
to (j), inclusive, or subdivisions (m) or (n) and that comply with the
investment restrictions of this article and Article 2 (commencing with Section
53630). However, notwithstanding these restrictions, a counterparty to a reverse
repurchase agreement is not required to be a primary dealer of the Federal
Reserve Bank of New York if the company's board of directors finds that the
counterparty presents a minimal risk of default, and the value of the securities
underlying a repurchase agreement may be 100 percent of the sales price if the
securities are marked to market daily.
(2) Shares of beneficial interest issued by diversified management companies
that are money market funds registered with the Securities and Exchange
Commission under the Investment Company Act of 1940 (15 U.S.C. Sec. 80a-1, et
seq.).
(3) If investment is in shares issued pursuant to paragraph (1), the company
shall have met either of the following criteria:
(A) Attained the highest ranking or the highest letter and numerical rating
provided by not less than two nationally recognized statistical rating
organizations.
(B) Retained an investment adviser registered or exempt from registration with
the Securities and Exchange Commission with not less than five years' experience
investing in the securities and obligations authorized by subdivisions (a) to
(j), inclusive, or subdivisions (m) or (n) and with assets under management in
excess of five hundred million dollars ($500,000,000).
(4) If investment is in shares issued pursuant to paragraph (2), the company
shall have met either of the following criteria:
(A) Attained the highest ranking or the highest letter and numerical rating
provided by not less than two nationally recognized statistical rating
organizations.
(B) Retained an investment adviser registered or exempt from registration with
the Securities and Exchange Commission with not less than five years' experience
managing money market mutual funds with assets under management in excess of
five hundred million dollars ($500,000,000).
(5) The purchase price of shares of beneficial interest purchased pursuant to
this subdivision shall not include any commission that the companies may charge
and shall not exceed 20 percent of the agency's surplus money that may be
invested pursuant to this section. However, no more than 10 percent of the
agency's surplus funds may be invested in shares of beneficial interest of any
one mutual fund pursuant to paragraph (1).
(l) Notwithstanding anything to the contrary contained in this section, Section
53635 or any other provision of law, money held by a trustee or fiscal agent and
pledged to the payment or security of bonds or other indebtedness, or
obligations under a lease, installment sale, or other agreement of a local
agency, or certificates of participation in those bonds, indebtedness, lease
installment sale, or other agreements, may be invested in accordance with the
statutory provisions governing the issuance of those bonds, indebtedness, lease
installment sale, or other agreement, or to the extent not inconsistent
therewith or if there are no specific statutory provisions, in accordance with
the ordinance, resolution, indenture, or agreement of the local agency providing
for the issuance.
(m) Notes, bonds, or other obligations that are at all times secured by a valid
first priority security interest in securities of the types listed by Section
53651 as eligible securities for the purpose of securing local agency deposits
having a market value at least equal to that required by Section 53652 for the
purpose of securing local agency deposits. The securities serving as collateral
shall be placed by delivery or book entry into the custody of a trust company or
the trust department of a bank which is not affiliated with the issuer of the
secured obligation, and the security interest shall be perfected in accordance
with the requirements of the Uniform Commercial Code or federal regulations
applicable to the types of securities in which the security interest is granted.
(n) Any mortgage pass-through security, collateralized mortgage obligation,
mortgage-backed or other pay-through bond, equipment lease-backed certificate,
consumer receivable pass-through certificate, or consumer receivable-backed bond
of a maximum of five years maturity. Securities eligible for investment under
this subdivision shall be issued by an issuer having an "A" or higher rating for
the issuer's debt as provided by a nationally recognized rating service and
rated in a rating category of "AA" or its equivalent or better by a nationally
recognized rating service. Purchase of securities authorized by this subdivision
may not exceed 20 percent of the agency's surplus money that may be invested
pursuant to this section.
CALIFORNIA GOVERNMENT CODE SECTION 53635.
FUNDS OF LOCAL AGENCY; DEPOSIT OR INVESTMENT. TEXT OF SECTION
EFFECTIVE JULY 7, 1988, AMENDED IN 1995 AND 1996.
As far as possible, all money belonging to, or in the custody of, a local
agency, including money paid to the treasurer or other official to pay the
principal, interest or penalties of bonds, shall be deposited for safekeeping in
state or national banks, savings associations or federal associations, credit
unions, or federally insured industrial loan companies in this state selected by
the treasurer or other official having the legal custody of the money; or,
unless otherwise directed by the legislative body pursuant to Section 53601, may
be invested in the investments set forth below. A local agency purchasing or
obtaining any securities described in this section, in a negotiable, bearer,
registered, or nonregistered format, shall require delivery of all the
securities to the local agency, including those purchased for the agency by
financial advisors, consultants, or managers using the agency's funds, by book
entry, physical delivery, or by third-party custodial agreement. The transfer of
securities to the counterparty bank's customer book entry account may be used
for book-entry delivery. For purposes of this section, "counterparty" means the
other party to the transaction. A counterparty bank's trust department or
separate safekeeping department may be used for the physical delivery of the
security if the security is held in the name of the local agency.
(a) Bonds issued by the local agency, including bonds payable solely out of the
revenues from a revenue-producing property owned, controlled, or operated by the
local agency or by a department, board, agency or authority of the local agency.
(b) United States Treasury notes, bonds, bills, or certificates of indebtedness,
or those for which the faith and credit of the United States are pledged for the
payment of principal and interest.
(c) Registered state warrants or Treasury notes or bonds of this state,
including bonds payable solely out of the revenues from a revenue-producing
property owned, controlled, or operated by the state or by a department, board,
agency, or authority of the state.
(d) Bonds, notes, warrants, or other evidences of indebtedness of any local
agency within this state, including bonds payable solely out of the revenues
from a revenue-producing property owned, controlled, or operated by the local
agency, or by a department, board, agency, or authority of the local agency.
(e) Obligations issued by banks for cooperatives, federal land banks, federal
intermediate credit banks, federal home loan banks, the Federal Home Loan Bank,
the Tennessee Valley Authority, or in obligations, participations, or other
instruments of, or issued by, or fully guaranteed as to principal and interest
by, the Federal National Mortgage Association; or in guaranteed portions of
Small Business Administration notes; or in obligations, participations, or other
instruments of, or issued by, a federal agency or a United States
government-sponsored enterprise.
(f) Bills of exchange or time drafts drawn on and accepted by a commercial bank,
otherwise known as banker's acceptances, which are eligible for purchase by the
Federal Reserve System. Purchases of banker's acceptances may not exceed 270
days maturity or 40 percent of the agency's surplus funds which may be invested
pursuant to this section. No more than 30 percent of the agency's surplus funds,
however, may be invested in the banker's acceptances of any one commercial bank
pursuant to this section.
This subdivision does not preclude a municipal utility district from investing
any surplus money in its treasury in any manner authorized by the Municipal
Utility District Act, Division 6 (commencing with Section 11501) of the Public
Utilities Code.
(g) Commercial paper of "prime" quality of the highest ranking or of the highest
letter and numerical rating as provided for by Moody's Investors Service, Inc.
or Standard and Poor's Corporation. Eligible paper is further limited to issuing
corporations that are organized and operating within the United States and
having total assets in excess of five hundred million dollars ($500,000,000) and
having an "A" or higher rating for the issuer's debt, other than commercial
paper, if any, as provided for by Moody's Investors Service, Inc. or Standard
and Poor's Corporation. Purchases of eligible commercial paper may not exceed
180 days maturity nor represent more than 10 percent of the outstanding paper of
an issuing corporation. Purchases of commercial paper may not exceed 15 percent
of the agency's surplus money which may be invested pursuant to this section. An
additional 15 percent, or a total of 30 percent of the agency's money or money
in its custody, may be invested pursuant to this subdivision. The additional 15
percent may be so invested only if the dollar-weighted average maturity of the
entire amount does not exceed 31 days. "Dollar-weighted average maturity" means
the sum of the amount of each outstanding commercial paper investment multiplied
by the number of days to maturity, divided by the total amount of outstanding
commercial paper.
(h) Negotiable certificates of deposit issued by a nationally or state-chartered
bank or a savings association or federal association or a state or federal
credit union or by a state-licensed branch of a foreign bank. Purchases of
negotiable certificates of deposit may not exceed 30 percent of the agency's
surplus money which may be invested pursuant to this section. For purposes of
this section, negotiable certificates of deposit do not come within Article 2
(commencing with Section 53630) of Chapter 4 of Part 1 of Division 2 of Title 5,
except that the amount so invested shall be subject to the limitations of
Section 53638. For purposes of this section, the legislative body of a local
agency and the treasurer or other official of the local agency having legal
custody of the money are prohibited from depositing or investing local agency
funds, or funds in the custody of the local agency, in negotiable certificates
of deposit issued by a state or federal credit union if a member of the
legislative body of the local agency, or an employee of the administrative
officer, manager's office, budget office, auditor-controller's office, or
treasurer's office of the local agency also serves on the board of directors, or
any committee appointed by the board of directors, the credit committee or
supervisory committee of the state or federal credit union issuing the
negotiable certificates of deposit.
(i) (1) Investments in repurchase agreements or reverse repurchase agreements of
any securities authorized by this section, so long as the agreements are subject
to this subdivision, including the delivery requirements specified in this
section.
(2) Investments in repurchase agreements may be made, on any investment
authorized in this section when the term of the agreement does not exceed one
year. The market value of securities that underlay a repurchase agreement shall
be valued at 102 percent or greater of the funds borrowed against those
securities and the value shall be adjusted no less than quarterly.
(3) Reverse repurchase agreements may be utilized only when either of the
following conditions are met:
(A) The security was owned or specifically committed to purchase, by the local
agency, prior to repurchase agreement on December 31, 1994, and was sold using a
reverse repurchase agreement on December 31, 1994.
(B) The security to be sold on reverse repurchase agreement has been owned and
fully paid for by the local agency for a minimum of 30 days prior to sale, the
total of all reverse repurchase agreements on investments owned by the local
agency not purchased or committed to purchase, prior to December 31, 1994, does
not exceed 20 percent of the base value of the portfolio, and the agreement does
not exceed a term of 92 days, unless the agreement includes a written codicil
guaranteeing a minimum earning or spread for the entire period between the sale
or a security using a reverse repurchase agreement and the final maturity date
of the same security.
(4) After December 31, 1994, a reverse repurchase agreement may not be entered
into with securities not sold on a reverse repurchase agreement and purchased,
or committed to purchase, prior to that date, as a means of financing or paying
for the security sold on a reverse repurchase agreement, but may only be entered
into with securities owned and previously paid for, for a minimum of 30 days
prior to the settlement of the reverse repurchase agreement, in order or
supplement the yield on securities owned and previously paid for or to provide
funds for the immediate payment of a local agency obligation. Funds obtained or
funds within the pool of an equivalent amount to that obtained from selling a
security to a counterparty by way of a reverse repurchase agreement, on
securities originally purchased subsequent to December 31, 1994, shall not be
used to purchase another security with a maturity longer than 92 days from the
initial settlement date of the reverse repurchase agreement, unless the reverse
repurchase agreement includes a written codicil guaranteeing a minimum earning
or spread for the entire period between the sale of a security using a reverse
repurchase agreement and the final maturity date of the same security. Reverse
repurchase agreements specified in subparagraph (B) of paragraph (3) may not be
entered into unless the percentage restrictions specified in that subparagraph
are met, including the total of any reverse repurchase agreements specified in
subparagraph (A) of paragraph (3).
(5) Investments in reverse repurchase agreements or similar investments in which
the local agency sells securities prior to purchase, with a simultaneous
agreement to repurchase the security, may only be made upon prior approval of
the governing body of the local agency and shall only be made with primary
dealers of the Federal Reserve Bank of New York.
(6) (A) "Repurchase agreement" means a purchase of securities by the local
agency pursuant to an agreement by which the counterparty seller will repurchase
the securities on or before a specified date and for a specified amount, and the
counterparty will deliver the underlying securities to the local agency by book
entry, physical delivery, or by third party custodial agreement. The transfer of
underlying securities to the counterparty's bank's customer book-entry account
may be used for book-entry delivery.
(B) "Securities," for purpose of repurchase under this subdivision, means
securities of the same issuer, description, issue date, and maturity.
(C) "Reverse repurchase agreement" means a sale of securities by the local
agency, pursuant to an agreement by which the local agency will repurchase the
securities on or before a specified date and includes other comparable
agreements.
(D) For purposes of this section, the base value of the local agency's pool
portfolio shall be that dollar amount obtained by totaling all cash balances
placed in the pool by all pool participants, excluding any amounts obtained
through selling securities by way of reverse repurchase agreements or other
similar borrowing methods.
(E) For purposes of this section, the spread is the difference between the costs
of funds obtained using the reverse repurchase agreement and the earnings
obtained on the reinvestment of the funds.
(j) Medium-term notes of a maximum of five years maturity issued by corporations
organized and operating within the United States or by depository institutions
licensed by the United States or any state and operating within the United
States. Notes eligible for investment under this subdivision shall be rated in a
rating category of "A" or its equivalent or better by a nationally recognized
rating service. Purchases of medium-term notes may not exceed 30 percent of the
agency's surplus money which may be invested pursuant to this section.
(k) (1) Shares of beneficial interest issued by diversified management companies
that invest in the securities and obligations as authorized by sub divisions (a)
to (i), inclusive, or subdivisions (l) or (m) and that comply with the
investment restrictions of this article and Article 2 (commencing with Section
53600). However, notwithstanding these restrictions, a counterparty to a reverse
repurchase agreement is not required to be a primary dealer of the Federal
Reserve Bank of New York if the company's board of directors finds that the
counterparty presents a minimal risk of default, and the value of the securities
underlying a repurchase agreement may be 100 percent of the sales price if the
securities are marked to market daily.
(2) Shares of beneficial interest issued by diversified management companies
that are money market funds registered with the Securities and Exchange
Commission under the Investment Company Act of 1940 (15 U.S.C. Sec. 80a-1, et
seq.).
(3) If investment is in shares issued pursuant to paragraph (1), the company
shall have met either of the following criteria:
(A) Attained the highest ranking or the highest letter and numerical rating
provided by not less than two nationally recognized statistical rating
organizations.
(B) Retained an investment adviser registered or exempt from registration with
the Securities and Exchange Commission with not less than five years' experience
investing in the securities and obligations authorized by subdivisions (a) to
(j), inclusive, or subdivisions (l) or (m) and with assets under management in
excess of five hundred million dollars ($500,000,000).
(4) If investment is in shares issued pursuant to paragraph (2), the company
shall have met either of the following criteria:
(A) Attained the highest ranking or the highest letter and numerical rating
provided by not less than two nationally recognized statistical rating
organizations.
(B) Retained an investment adviser registered or exempt from registration with
the Securities and Exchange Commission with not less than five years' experience
managing money market mutual funds with assets under management in excess of
five hundred million dollars ($500,000,000).
(5) The purchase price of shares of beneficial interest purchased pursuant to
this subdivision shall not include any commission that the companies may charge
and shall not exceed 20 percent of the agency's surplus money that may be
invested pursuant to this section. However, no more than 10 percent of the
agency's surplus funds may be invested in shares of beneficial interest of any
one mutual fund pursuant to paragraph (1).
(l) Notes, bonds, or other obligations which are at all times secured by a valid
first priority security interest in securities of the types listed by Section
53651 as eligible securities for the purpose of securing local agency deposits
having a market value at least equal to that required by Section 53652 for the
purpose of securing local agency deposits. The securities serving as collateral
shall be placed by delivery or book entry into the custody of a trust company or
the trust department of a bank which is not affiliated with the issuer of the
secured obligation, and the security interest shall be perfected in accordance
with the requirements of the Uniform Commercial Code or federal regulations
applicable to the types of securities in which the security interest is granted.
(m) Any mortgage pass-through security, collateralized mortgage obligation,
mortgage-backed or other pay-through bond, equipment lease-backed certificate,
consumer receivable pass-through certificate, or consumer receivable-backed bond
of a maximum of five years maturity. Securities eligible for investment under
this subdivision shall be issued by an issuer having an "A" or higher rating for
the issuer's debt as provided by a nationally recognized rating service and
rated in a rating category of "AA" or its equivalent or better by a nationally
recognized rating service. Purchase of securities authorized by this subdivision
may not exceed 20 percent of the agency's surplus money that may be invested
pursuant to this section.
DESCRIPTION OF RATINGS
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CORPORATE BOND RATINGS
MOODY'S INVESTORS SERVICE, INC. (MOODY'S)
Aaa: Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as
"gilt-edged." Interest payments are protected by a large or exceptionally stable
margin, and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa: Bonds rated Aa are judged to be high quality by all standards. Together with
the Aaa group, they comprise what are generally known as high-grade bonds. They
are rated lower than the best bonds because margins of protection may not be as
large, fluctuation of protective elements may be of greater amplitude, or there
may be other elements present that make the long-term risks appear somewhat
larger.
A: Bonds rated A possess many favorable investment attributes and are considered
upper medium-grade obligations. Factors giving security to principal and
interest are considered adequate, but elements may be present that suggest a
susceptibility to impairment sometime in the future.
Baa: Bonds rated Baa are considered medium-grade obligations. They are neither
highly protected nor poorly secured. Interest payments and principal security
appear adequate for the present but certain protective elements may be lacking
or may be characteristically unreliable over any great length of time. These
bonds lack outstanding investment characteristics and, in fact, have speculative
characteristics as well.
Ba: Bonds rated Ba are judged to have predominantly speculative elements and
their future cannot be considered well assured. Often the protection of interest
and principal payments is very moderate and, thereby, not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B: Bonds rated B generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or of maintenance of other terms of
the contract over any long period of time may be small.
Caa: Bonds rated Caa are of poor standing. These issues may be in default or
there may be present elements of danger with respect to principal or interest.
Ca: Bonds rated Ca represent obligations that are speculative to a high degree.
These issues are often in default or have other marked shortcomings.
C: Bonds rated C are the lowest rated class of bonds and can be regarded as
having extremely poor prospects of ever attaining any real investment standing.
Note: Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate bond ratings. The modifier 1
indicates that the security ranks in the higher end of its generic rating
category; modifier 2 indicates a mid-range ranking; and modifier 3 indicates
that the issue ranks in the lower end of its generic rating category.
STANDARD & POOR'S CORPORATION (S&P)
AAA: This is the highest rating assigned by S&P to a debt obligation and
indicates an extremely strong capacity to pay principal and interest.
AA: Bonds rated AA also qualify as high-quality debt obligations. Capacity to
pay principal and interest is very strong and, in the majority of instances,
differ from AAA issues only in a small degree.
A: Bonds rated A have a strong capacity to pay principal and interest, although
they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.
BBB: Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay principal and interest for bonds in this category
than for bonds in the A category.
BB, B, CCC, CC: Bonds rated BB, B, CCC and CC are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligations. BB
indicates the lowest degree of speculation and CC the highest degree of
speculation. While these bonds will likely have some quality and protective
characteristics, they are outweighed by large uncertainties or major risk
exposures to adverse conditions.
C: Bonds rated C are typically subordinated debt to senior debt that is assigned
an actual or implied CCC- rating. The C rating also may reflect the filing of a
bankruptcy petition under circumstances where debt service payments are
continuing. The C1 rating is reserved for income bonds on which no interest is
being paid.
D: Debt rated D is in default and payment of interest and/or repayment of
principal is in arrears.
Plus (+) or minus (-): The ratings from "AA" to "CCC" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
MUNICIPAL BOND RATINGS
MOODY'S INVESTORS SERVICE, INC. (MOODY'S)
Aaa: Municipal bonds rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as
"gilt-edged." Interest payments are protected by a large or exceptionally stable
margin, and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa: Municipal bonds rated Aa are judged to be high quality by all standards.
Together with the Aaa group, they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large, fluctuation of protective elements may be of
greater amplitude, or there may be other elements present that make the
long-term risks appear somewhat larger.
A: Municipal bonds rated A possess many favorable investment attributes and are
considered upper medium-grade obligations. Factors giving security to principal
and interest are considered adequate, but elements may be present that suggest a
susceptibility to impairment sometime in the future.
Baa: Municipal bonds rated Baa are considered medium-grade obligations. They are
neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
These bonds lack outstanding investment characteristics and, in fact, have
speculative characteristics as well.
Ba: Municipal bonds rated Ba are judged to have predominantly speculative
elements and their future cannot be considered well assured. Often the
protection of interest and principal payments may be very moderate and, thereby,
not well safeguarded during both good and bad times over the future. Uncertainty
of position characterizes bonds in this class.
B: Municipal bonds rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa: Municipal bonds rated Caa are of poor standing. These issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca: Municipal bonds rated Ca represent obligations that are speculative to a
high degree. These issues are often in default or have other marked
shortcomings.
C: Municipal bonds rated C are the lowest-rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Con.(-): Municipal bonds for which the security depends upon the completion of
some act or the fulfillment of some condition are rated conditionally. These are
bonds secured by (a) earnings of projects under construction, (b) earnings of
projects unseasoned in operation experience, (c) rentals that begin when
facilities are completed, or (d) payments to which some other limiting condition
attaches. Parenthetical rating denotes probable credit stature upon the
completion of construction or the elimination of the basis of the condition.
STANDARD & POOR'S CORPORATION (S&P)
AAA: Municipal bonds rated AAA are the highest-grade obligations. They possess
the ultimate degree of protection as to principal and interest. In the market,
they move with interest rates and, hence, provide the maximum safety on all
counts.
AA: Municipal bonds rated AA also qualify as high-grade obligations, and in the
majority of instances differ from AAA issues only in a small degree. Here, too,
prices move with the long-term money market.
A: Municipal bonds rated A are regarded as upper medium-grade. They have
considerable investment strength but are not entirely free from adverse effects
of changes in economic and trade conditions. Interest and principal are regarded
as safe. They predominantly reflect money rates in their market behavior but
also, to some extent, economic conditions.
BBB: Municipal bonds rated BBB are regarded as having an adequate capacity to
pay principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for bonds in
this category than for bonds in the A category.
BB, B, CCC, CC: Municipal bonds rated BB, B, CCC and CC are regarded, on
balance, as predominantly speculative with respect to the issuer's capacity to
pay interest and repay principal in accordance with the terms of the
obligations. BB indicates the lowest degree of speculation and CC the highest
degree of speculation. While these bonds will likely have some quality and
protective characteristics, they are outweighed by large uncertainties or major
risk exposures to adverse conditions.
C: This rating is reserved for income bonds on which no interest is being paid.
D: Debt rated "D" is in default and payment of interest and/or repayment of
principal is in arrears.
Plus (+) or minus (-): The ratings from "AA" to "CCC" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
FITCH INVESTORS SERVICE, INC. (FITCH)
AAA: Municipal bonds rated AAA are considered to be investment grade and of the
highest credit quality. The obligor has an exceptionally strong ability to pay
interest and repay principal that is unlikely to be affected by reasonably
foreseeable events.
AA: Municipal bonds rated AA are considered to be investment grade and of very
high credit quality. The obligor's ability to pay interest and repay principal
is very strong although not quite as strong as bonds rated AAA and not
significantly vulnerable to foreseeable future developments.
A: Municipal bonds rated A are considered to be investment grade and of high
credit quality. The obligor's ability to pay interest and repay principal is
considered to be strong, but may be more vulnerable to adverse changes in
economic conditions and circumstances than bonds with higher ratings.
BBB: Municipal bonds rated BBB are considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay interest and repay
principal is considered adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have an adverse impact on these
bonds, and therefore impair timely payment. The likelihood that the ratings of
these bonds will fall below investment grade is higher than for bonds with
higher ratings.
BB: Municipal bonds rated BB are considered speculative. The obligor's ability
to pay interest and repay principal may be affected over time by adverse
economic changes. Business and financial alternatives can be identified,
however, that could assist the obligor in satisfying its debt service
requirements.
B: Municipal bonds rated B are considered highly speculative. While bonds in
this class are currently meeting debt service requirements, the probability of
continued timely payment of principal and interest reflects the obligor's
limited margin of safety and the need for reasonable business and economic
activity throughout the life of the issue.
CCC: Municipal bonds rated CCC have certain identifiable characteristics which,
if not remedied, may lead to default. The ability to meet obligations requires
an advantageous business and economic environment.
CC: Municipal bonds rated CC are minimally protected. Default in payment of
interest and/or principal seems probable over time.
C: Municipal bonds rated C are in imminent default in the payment of interest or
principal.
DDD, DD and D: Municipal bonds rated DDD, DD and D are in default on interest
and/or principal payments. Such bonds are extremely speculative and should be
valued on the basis of their ultimate recovery value in liquidation or
reorganization of the obligor. DDD represents the highest potential for recovery
while D represents the lowest potential for recovery.
Plus (+) or minus (-) signs are used with a rating symbol to indicate the
relative position of a credit within the rating category. Plus or minus signs
are not used with the AAA, DDD, DD or D categories.
MUNICIPAL NOTE RATINGS
MOODY'S
Moody's ratings for state, municipal and other short-term obligations will be
designated Moody's Investment Grade (MIG). This distinction is in recognition of
the differences between short-term credit risk and long-term risk. Factors
affecting the liquidity of the borrower are uppermost in importance in
short-term borrowing; factors of the first importance in long-term borrowing
risk are of lesser importance in the short run. Symbols used will be as follows:
MIG 1: Notes are of the best quality enjoying strong protection from established
cash flows of funds for their servicing or from established and broad-based
access to the market for refinancing, or both.
MIG 2: Notes are of high quality, with margins of protection ample, although not
so large as in the preceding group.
MIG 3: Notes are of favorable quality, with all security elements accounted for,
but lacking the undeniable strength of the preceding grades. Market access for
refinancing, in particular, is likely to be less well established.
MIG 4: Notes are of adequate quality, carrying specific risk but having
protection and not distinctly or predominantly speculative.
S&P
Until June 29, 1984, S&P used the same rating symbols for notes and bonds. After
June 29, 1984, for new municipal note issues due in three years or less, the
ratings below will usually be assigned. Notes maturing beyond three years will
most likely receive a bond rating of the type recited above.
SP-1: Issues carrying this designation have a very strong or strong capacity to
pay principal and interest. Issues determined to possess overwhelming safety
characteristics will be given a "plus" (+) designation.
SP-2: Issues carrying this designation have a satisfactory capacity to pay
principal and interest.
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 CASH RESERVES FUND
INSTITUTIONAL FIDUCIARY TRUST
STATEMENT OF ADDITIONAL INFORMATION
NOVEMBER 1, 1999
P.O. BOX 997151
SACRAMENTO, CA 95899-9983 1-800/321-8563
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 trust's Annual
Report to Shareholders, for the fiscal year ended June 30, 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 Trustees
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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GOAL AND STRATEGIES
- -------------------------------------------------------------------------------
The fund's investment goal is to provide investors with as high a level of
current income as is consistent with 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 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 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 at 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 a 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
master demand notes and may invest only in 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 master demand note, the manager considers,
among other things, the earning 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 s a bank or credit card company. 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.
Repayment of these securities is intended to be obtained from an identified pool
of diversified assets, typically receivables related to a particular industry,
such as asset-backed securities related to credit card receivables, automobile
receivables, trade receivables or diversified financial assets. The credit
quality of most asset-backed commercial paper depends primarily on the credit
quality of the assets underlying the securities, how well the entity issuing the
security is insulated from the credit risk of the originator (or any other
affiliated entities) and the amount and quality of any credit support provided
to the securities.
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
issues.
STRIPPED SECURITIES are the separate income and principal components of a debt
security. once the securities have been stripped they are referred to as zero
coupon securities. Their risks are similar to those of other money market
securities although they may be more volatile. Stripped securities do not make
periodic payments of interest prior to maturity and the stripping of the
interest coupons causes them to be offered at a discount from their face amount.
This results in the securities being subject to greater fluctuations in response
to changing interest rates than interest-paying securities of similar
maturities.
The 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 diversified. As fundamental policies, 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. The fund also 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, except to the
extent that the fund invests all of its assets in another registered investment
company with the same investment objective and substantially similar policies as
the fund.
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.
WHAT ARE SOME OF THE FUND'S OTHER INVESTMENT STRATEGIES AND PRACTICES?
WHEN-ISSUED AND 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 delivery, the fund
assumes the risk that the value of the security at delivery may be more or less
than the purchase price. 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-delivery 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 trustees, 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 25% 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 cash) with a value at least equal
to 100% 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
trustees, 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 therefor) for temporary or emergency purposes may be
made from banks in any amount up to 5% of the fund's 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 above.
(3) Acquire, lease or hold real estate, provided that this limitation shall not
prohibit the purchase of municipal and other debt securities secured by real
estate or interests therein.
(4) Buy any securities "on margin" or sell any securities "short," except that
it may use such short-term credits as are necessary for the clearance of
transactions.
(5) Invest in commodities and commodity contracts, puts, calls, straddles,
spreads, or any combination thereof, or interests in oil, gas, or other mineral
exploration or development programs, except that it may purchase, hold, and
dispose of "obligations with puts attached" 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 that are not
readily marketable, or enter into a repurchase agreement with more than seven
days to maturity if, as a result, more than 10% of the total assets of the fund
would be invested in such securities or repurchase agreements, except that, to
the extent this restriction is applicable, the fund may purchase, in private
placements, shares of another registered investment company having the same
investment objectives and policies as the fund.
(7) Act as underwriter of securities issued by other persons, except insofar as
the fund may technically be deemed an underwriter under the federal securities
laws in connection with the disposition of portfolio securities; except that all
or substantially all of the assets of the fund may be invested in another
registered investment company having the same investment objectives and policies
as the fund.
(8) Purchase securities of other investment companies, except in connection with
a merger, consolidation, acquisition, or reorganization; provided that all or
substantially all of the assets of the fund may be invested in another
registered investment company having the same investment objectives and policies
as the fund.
(9) Invest in any issuer for purposes of exercising control or management,
except that, to the extent this restriction is applicable, all or substantially
all of the assets of the fund may be invested in another registered investment
company having the same investment objectives and policies as the fund.
(10) Purchase securities from or sell to the trust's officers and trustees, or
any firm of which any officer or trustee is a member, as principal, or retain
securities of any issuer if, to the knowledge of the trust, one or more of the
trust's officers, trustees, or the manager own beneficially more than 1/2 of 1%
of the securities of such issuer and all such officers and trustees together own
beneficially more than 5% of such securities.
(11) Invest more than 25% of its assets in securities of any industry, except
that this policy is inapplicable where the fund's policies, as described in its
current Prospectus, state otherwise, and further does not apply to the extent
that the fund invests all or substantially all of its assets in another
registered investment company having the same investment objectives and
policies. For purposes of this limitation, U.S. government obligations are not
considered to be part of any industry.
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
trustees 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 TRUSTEES
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The trust has a board of trustees. The board is responsible for the overall
management of the trust, including general supervision and review of each fund's
investment activities. The board, in turn, elects the officers of the trust who
are responsible for administering the trust'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 trust, and principal occupations during
the past five years are shown below.
Frank H. Abbott, III (78)
1045 Sansome Street, San Francisco, CA 94111
TRUSTEE
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
TRUSTEE
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
TRUSTEE
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
TRUSTEE
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 TRUSTEE
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.
*Charles E. Johnson (43)
500 East Broward Blvd., Fort Lauderdale, FL 33394-3091
PRESIDENT AND TRUSTEE
Senior Vice President and Director, Franklin Resources, Inc.; Senior Vice
President, Franklin Templeton Distributors, Inc.; President and Director,
Templeton Worldwide, Inc.; Chairman and Director, Templeton Investment Counsel,
Inc.; Vice President, Franklin Advisers, Inc.; officer and/or director of some
of the other subsidiaries of Franklin Resources, Inc.; and officer and/or
director or trustee, as the case may be, of 33 of the investment companies in
the Franklin Templeton Group of Funds.
*Rupert H. Johnson, Jr. (59)
777 Mariners Island Blvd., San Mateo, CA 94404
VICE PRESIDENT AND TRUSTEE
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
TRUSTEE
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
TRUSTEE
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.
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.
*This board member is considered an "interested person" under federal securities
laws.
Note: Charles B. Johnson and Rupert H. Johnson, Jr. are brothers and the father
and uncle, respectively, of Charles E. Johnson.
The trust pays noninterested board members $310 per month plus $225 per meeting
attended. Board members who serve on the audit committee of the trust and other
funds in the Franklin Templeton Group of Funds receive a flat fee of $2,000 per
committee meeting attended, a portion of which is allocated to the trust.
Members of a committee are not compensated for any committee meeting held on the
day of a board meeting. Noninterested board members also may serve as directors
or trustees of other funds in the Franklin Templeton Group of Funds and may
receive fees from these funds for their services. The fees payable to
noninterested board members by the trust are subject to reductions resulting
from fee caps limiting the amount of fees payable to board members who serve on
other boards within the Franklin Templeton Group of Funds. The following table
provides the total fees paid to noninterested board members by the trust and by
the Franklin Templeton Group of Funds.
NUMBER OF BOARDS
TOTAL FEES TOTAL FEES IN THE FRANKLIN
RECEIVED RECEIVED FROM TEMPLETON GROUP
FROM THE THE FRANKLIN OF FUNDS ON
NAME TRUST 1 ($) TEMPLETON GROUP WHICH EACH
OF FUNDS 2 ($) SERVES 3
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Frank H. Abbott, III 4,502 159,051 27
Harris J. Ashton 4,934 361,157 48
Robert F. Carlson 6,195 78,052 9
S. Joseph Fortunato 4,597 367,835 50
Frank W.T. LaHaye 4,727 163,753 27
Gordon S. Macklin 4,934 361,157 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 the fund'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 and 1997, management fees,
before any advance waiver, totaled $3,996,761, $2,963,304 and $2,547,891,
respectively. Under an agreement by the manager to limits its fees, the
Portfolio paid the management fees shown.
ADMINISTRATOR AND SERVICES PROVIDED Franklin Advisers, Inc. (Advisers) has an
agreement with the fund to provide various administrative, statistical and other
services to the fund.
ADMINISTRATION FEES The fund pays Advisers a fee equal to an annual rate of
0.25% of the value of the fund's average daily net assets.
During the last three fiscal years ended June 30, the fund paid Advisers the
following administration fees:
ADMINISTRATION FEES PAID ($) 1
-------------------------------------------------
1999 369,360
1998 0
1997 43,899
1. For the fiscal years ended June 30, 1999, 1998 and 1997, administration fees,
before any advance waiver, totaled $369,360, $292,245 and $148,055,
respectively. Under an agreement by the administrator to limits its fees, the
fund paid the administration fees shown.
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 trust's Annual Report to Shareholders and reviews the
trust's registration statement filed with the U.S. Securities and Exchange
Commission (SEC).
PORTFOLIO TRANSACTIONS
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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 June 30, 1999, neither the fund nor the Portfolio owned securities of
their regular broker-dealers.]
DISTRIBUTIONS AND TAXES
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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 declares dividends for each day
that its net asset value is calculated. These dividends will equal all of the
fund's daily net income payable to shareholders of record as of the close of
business the preceding day.
The fund receives income generally in the form of dividends derived on its
investment in the Portfolio. This income, less expenses incurred in the
operation of the fund, constitutes its 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 is a money market fund, it does not anticipate realizing any long-term
capital gains.
MAINTENANCE OF $1.00 NET ASSET VALUE Gains and losses derived by the fund on its
investment in shares of the Portfolio and unrealized appreciation or
depreciation in the value of these securities may require the fund to adjust
distributions in order to maintain a $1.00 net asset value. These procedures may
result in under- or over-distributions of 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. 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 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 of the following year that are treated by you as
received in December of the prior year) 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. However, because the
fund seeks to maintain a constant $1.00 per share net asset value, you should
not expect to realize a capital gain or loss upon redemption 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. It is anticipated, however, that no portion of
the fund's distributions to you will qualify for exemption from state and local
personal income tax as dividends paid 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 does so only indirectly by investing in the
portfolio's shares.
DIVIDENDS-RECEIVED DEDUCTION FOR CORPORATIONS Because the fund's income is
indirectly attributable to interest, no portion of its distributions generally
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 a diversified series of Institutional Fiduciary Trust, an open-end
management investment company, commonly called a mutual fund. The trust was
organized as a Massachusetts business trust on January 15, 1985, and is
registered with the SEC.
As a shareholder of a Massachusetts business trust, you could, under certain
circumstances, be held personally liable as a partner for its obligations. The
Agreement and Declaration of Trust, however, contains an express disclaimer of
shareholder liability for acts or obligations of the fund. The Declaration of
Trust also provides for indemnification and reimbursement of expenses out of the
fund's assets if you are held personally liable for obligations of the fund. The
Declaration of Trust provides that the fund shall, upon request, assume the
defense of any claim made against you for any act or obligation of the fund and
satisfy any judgment thereon. All such rights are limited to the assets of the
fund. The Declaration of Trust further provides that the fund may maintain
appropriate insurance (for example, fidelity bonding and errors and omissions
insurance) for the protection of the fund, its shareholders, trustees, officers,
employees and agents to cover possible tort and other liabilities. Furthermore,
the activities of the fund as an investment company, as distinguished from an
operating company, would not likely give rise to liabilities in excess of the
fund's total assets. Thus, the risk that you would incur financial loss on
account of shareholder liability is limited to the unlikely circumstance in
which both inadequate insurance exists and the fund itself is unable to meet its
obligations.
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 trust has noncumulative voting rights. For board member elections, this
gives holders of more than 50% of the shares voting the ability to elect all of
the members of the board. If this happens, holders of the remaining shares
voting will not be able to elect anyone to the board.
The trust does not intend to hold annual shareholder meetings. The trust or a
series of the trust 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.
As of August 11, 1999, the principal shareholders of the fund, beneficial or of
record, were:
NAME AND ADDRESS PERCENTAGE (%)
- ----------------------------------------------------------
City National Bank as Trustee
c/o BAC/Plan Member Services
Attn: Kerry Dunbar
1200 5th Ave., Suite 600 5.84%
Seattle, WA 98101-1188
The Bank of New York
Trust Budget Group Inc.
Savings Plus Plan
1 Wall Street
New York, NY 10005-2500 7.17%
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 11, 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 wires sent and received by the custodian bank and reported by the custodian
bank to the fund prior to 3:00 p.m. pacific time, except on holidays, the day
before a holiday or the day after a holiday, are normally effective on the same
day, provided the fund is notified on time as provided in the prospectus. All
wire payments received or reported by the custodian bank to the fund after 3:00
p.m. will be effective on the next business day. All checks or other negotiable
bank drafts will normally be effective within two business days for checks drawn
on a member bank of the Federal Reserve System and longer for most other checks.
All checks, 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 may not be
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.
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. This eliminates the costly problem of replacing lost,
stolen or destroyed certificates.
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.
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.
The wiring of redemption proceeds 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 is not processed as described 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
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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 valuation of the 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
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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.
Distributors may be entitled to reimbursement under the Rule 12b-1 plans, as
discussed below. Except as noted, Distributors received no other compensation
from the fund for acting as underwriter.
DISTRIBUTION AND SERVICE (12B-1) FEES The fund has a distribution or "Rule
12b-1" plan. Under the plan, the fund shall pay or may reimburse Distributors or
others for the expenses of activities that are primarily intended to sell shares
of the fund. These expenses may include, among others, distribution or service
fees paid to securities dealers or others who have executed a servicing
agreement with the fund, Distributors or its affiliates; a prorated portion of
Distributors' overhead expenses; and the expenses of printing prospectuses and
reports used for sales purposes, and preparing and distributing sales literature
and advertisements.
Payments by the fund under the plan may not exceed 0.25% per year of average
daily net assets, payable quarterly. All distribution expenses over this amount
will be borne by those who have incurred them.
In addition to the payments that Distributors or others are entitled to under
the plan, the plan also provides that to the extent the fund, the manager or
Distributors or other parties on behalf of the fund, the manager or Distributors
make payments that are deemed to be for the financing of any activity primarily
intended to result in the sale of fund shares within the context of Rule 12b-1
under the Investment Company Act of 1940, as amended, then such payments shall
be deemed to have been made pursuant to the plan. The terms and provisions of
the plan relating to required reports, term, and approval are consistent with
Rule 12b-1.
In no event shall the aggregate asset-based sales charges, which include
payments made under the plan, plus any other payments deemed to be made pursuant
to the plan, exceed the amount permitted to be paid under the rules of the
National Association of Securities Dealers, Inc.
To the extent fees are for distribution or marketing functions, as distinguished
from administrative servicing or agency transactions, certain banks will not be
entitled to participate in the plan as a result of applicable federal law
prohibiting certain banks from engaging in the distribution of mutual fund
shares. These banking institutions, however, are permitted to receive fees under
the plan for administrative servicing or for agency transactions. If you are a
customer of a bank that is prohibited from providing these services, you would
be permitted to remain a shareholder of the fund, and alternate means for
continuing the servicing would be sought. In this event, changes in the services
provided might occur and you might no longer be able to avail yourself of any
automatic investment or other services then being provided by the bank. It is
not expected that you would suffer any adverse financial consequences as a
result of any of these changes.
The plan has been approved in accordance with the provisions of Rule 12b-1. The
plan is renewable annually by a vote of the board, including a majority vote of
the board members who are not interested persons of the fund and who have no
direct or indirect financial interest in the operation of the plan, cast in
person at a meeting called for that purpose. It is also required that the
selection and nomination of such board members be done by the noninterested
members of the fund's board. The plan and any related agreement may be
terminated at any time, without penalty, by vote of a majority of the
noninterested board members on not more than 60 days' written notice, by
Distributors on not more than 60 days' written notice, by any act that
constitutes an assignment of the administration agreement between the trust and
the administrator or the management agreement between The Money Market
Portfolios and the manager or by vote of a majority of the outstanding shares of
the Portfolio. Distributors or any dealer or other firm also may terminate their
respective distribution or service agreement at any time upon written notice.
The plan and any related agreements may not be amended to increase materially
the amount to be spent for distribution expenses without approval by a majority
of the outstanding shares, and all material amendments to the plan or any
related agreements shall be approved by a vote of the noninterested board
members, cast in person at a meeting called for the purpose of voting on any
such amendment.
Distributors is required to report in writing to the board at least quarterly on
the amounts and purpose of any payment made under the plan and any related
agreements, as well as to furnish the board with such other information as may
reasonably be requested in order to enable the board to make an informed
determination of whether the plan should be continued.
For the fiscal year ended June 30, 1999, Distributors' eligible expenditures for
advertising, printing, payments to underwriters and broker-dealers and other
expenses pursuant to the plan and the amounts the fund paid Distributors under
the plan were:
DISTRIBUTORS' AMOUNT PAID
ELIGIBLE EXPENSES ($) BY THE FUND ($)
- ----------------------------------------------------------------------
522,630 366,332
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. Performance figures reflect Rule 12b-1 fees from the date
of the plan's implementation. 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.
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 3.94%.
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 4.02%.
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 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 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 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 - a
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.
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 $227 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
- --------------------------------------------------------------------------------
MUNICIPAL NOTE RATINGS
MOODY'S INVESTORS SERVICE, INC. (MOODY'S)
Moody's ratings for state, municipal and other short-term obligations will be
designated Moody's Investment Grade (MIG). This distinction is in recognition of
the differences between short-term credit risk and long-term risk. Factors
affecting the liquidity of the borrower are uppermost in importance in
short-term borrowing; factors of the first importance in long-term borrowing
risk are of lesser importance in the short run. Symbols used will be as follows:
MIG 1: Notes are of the best quality enjoying strong protection from established
cash flows of funds for their servicing or from established and broad-based
access to the market for refinancing, or both.
MIG 2: Notes are of high quality, with margins of protection ample, although not
so large as in the preceding group.
MIG 3: Notes are of favorable quality, with all security elements accounted for,
but lacking the undeniable strength of the preceding grades. Market access for
refinancing, in particular, is likely to be less well established.
MIG 4: Notes are of adequate quality, carrying specific risk but having
protection and not distinctly or predominantly speculative.
STANDARD & POOR'S CORPORATION (S&P)
Until June 29, 1984, S&P used the same rating symbols for notes and bonds. After
June 29, 1984, for new municipal note issues due in three years or less, the
ratings below will usually be assigned. Notes maturing beyond three years will
most likely receive a bond rating of the type recited above.
SP-1: Issues carrying this designation have a very strong or strong capacity to
pay principal and interest. Issues determined to possess overwhelming safety
characteristics will be given a "plus" (+) designation.
SP-2: Issues carrying this designation have a satisfactory capacity to pay
principal and interest.
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.
INSTITUTIONAL FIDUCIARY TRUST
FILE NOS. 2-96634
811-4267
FORM N-1A
PART C
OTHER INFORMATION
ITEM 23. EXHIBITS.
The following exhibits are incorporated by reference to the previously filed
documents indicated below, except as noted:
(a) Agreement and Declaration of Trust
(i) Agreement and Declaration of Trust dated January 15, 1985
Filing: Post-Effective Amendment No. 24 to Registration
Statement on Form N-1A
File No. 2-96634
Filing Date: September 1, 1995
(ii) Certificate of Amendment of Agreement and Declaration of
Trust dated May 12, 1987
Filing: Post-Effective Amendment No. 24 to Registration
Statement on Form N-1A
File No. 2-96634
Filing Date: September 1, 1995
(iii) Certificate of Amendment of Agreement and Declaration of
Trust dated October 9, 1987
Filing: Post-Effective Amendment No. 24 to Registration
Statement on Form N-1A
File No. 2-96634
Filing Date: September 1, 1995
(iv) Certificate of Amendment of Agreement and Declaration of
Trust dated November 17, 1987
Filing: Post-Effective Amendment No. 24 to Registration
Statement on Form N-1A
File No. 2-96634
Filing Date: September 1, 1995
(v) Certificate of Amendment of Agreement and Declaration of
Trust dated December 8, 1987
Filing: Post-Effective Amendment No. 24 to Registration
Statement on Form N-1A
File No. 2-96634
Filing Date: September 1, 1995
(vi) Certificate of Amendment of Agreement and Declaration of
Trust dated December 12, 1989
Filing: Post-Effective Amendment No. 24 to Registration
Statement on Form N-1A
File No. 2-96634
Filing Date: September 1, 1995
(b) By-Laws
(i) By-Laws
Filing: Post-Effective Amendment No. 24 to Registration
Statement on Form N-1A
File No. 2-96634
Filing Date: September 1, 1995
(ii) Certificate of Amendment of By-Laws dated October 9, 1987
Filing: Post-Effective Amendment No. 24 to Registration
Statement on Form N-1A
File No. 2-96634
Filing Date: September 1, 1995
(c) Instruments Defining Rights of Security Holders
Not Applicable
(d) Investment Advisory Contracts
(i) Administration Agreement between Registrant, on behalf of
Franklin U.S. Government Securities Money Market Portfolio,
and Franklin Advisers, Inc. dated November 1, 1992
Filing: Post-Effective Amendment No. 24 to
Registration Statement on Form N-1A
File No. 2-96634
Filing Date: September 1, 1995
(ii) Administration Agreement between Registrant, on behalf of
Money Market Portfolio, and Franklin Advisers, Inc. dated
November 1, 1992
Filing: Post-Effective Amendment No. 24 to Registration
Statement on Form N-1A
File No. 2-96634
Filing Date: September 1, 1995
(iii) Administration Agreement between Registrant, on behalf of
Franklin Cash Reserves Fund, and Franklin Advisers, Inc.
dated July 1, 1994
Filing: Post-Effective Amendment No. 24 to Registration
Statement on Form N-1A
File No. 2-96634
Filing Date: September 1, 1995
(iv) Amendment to Administration Agreement between Registrant, on
behalf of Franklin U.S. Government Securities Money Market
Portfolio, and Franklin Advisers, Inc. dated August 1, 1995
Filing: Post-Effective Amendment No. 26 to Registration
Statement on Form N-1A
File No. 2-96634
Filing date: October 30, 1997
(v) Amendment to Administration Agreement between Registrant, on
behalf of Money Market Portfolio, and Franklin Advisers, Inc.
dated August 1, 1995
Filing: Post-Effective Amendment No. 26 to Registration
Statement on Form N-1A
File No. 2-96634
Filing date: October 30, 1997
(vi) Amendment to Administration Agreement between Registrant, on
behalf of Franklin Cash Reserves Fund, and Franklin Advisers,
Inc. dated August 1, 1995
Filing: Post-Effective Amendment No. 26 to Registration
Statement on Form N-1A
File No. 2-96634
Filing date: October 30, 1997
(vii) Amendment to Administration Agreement between Registrant, on
behalf of Franklin U.S. Government Securities Money Market
Portfolio, and Franklin Advisers, Inc. dated November 1, 1998
(viii)Amendment to Administration Agreement between Registrant, on
behalf of Money Market Portfolio, and Franklin Advisers, Inc.
dated November 1, 1998
(e) Underwriting Contracts
(i) Amended and Restated Distribution Agreement between
Registrant and Franklin/Templeton Distributors, Inc. dated
April 23, 1995
Filing: Post-Effective Amendment No. 24 to Registration
Statement on Form N-1A
File No. 2-96634
Filing Date: September 1, 1995
(ii) Forms of Dealer Agreements between Franklin/Templeton
Distributors, Inc. and Securities Dealers dated March 1, 1998
(iii) Amendment of Amended and Restated Distribution Agreement
between Registrant and Franklin/Templeton Distributors, Inc.
dated January 12, 1999
(f) Bonus or Profit Sharing Contracts
Not Applicable
(g) Custodian Agreements
(i) Master Custody Agreement between Registrant and Bank of New
York dated February 16, 1996
Filing: Post-Effective Amendment No. 25 to
Registration Statement on Form N-1A
File No. 2-96634
Filing Date: October 31, 1996
(ii) Terminal Link Agreement between Registrant and Bank of New
York dated February 16, 1996
Filing: Post-Effective Amendment No. 25 to
Registration Statement on Form N-1A
File No. 2-96634
Filing Date: October 31, 1996
(iii) Amendment to Master Custody Agreement between Registrant and
Bank of New York dated May 7, 1997
Filing: Post-Effective Amendment No. 26 to Registration
Statement on Form N-1A
File No. 2-96634
Filing date: October 30, 1997
(iv) Amendment dated February 27, 1998 to Exhibit A of the Master
Custody Agreement between the Registrant and Bank of New York
dated February 16, 1996
Filing: Post-Effective Amendment No. 27 to Registration
Statement on Form N-1A
File No. 2-96634
Filing date: August 24, 1998
(h) Other Material Contracts
Not Applicable
(i) Legal Opinion
(i) Opinion and consent of counsel dated August 18, 1998
Filing: Post-Effective Amendment No. 27 to Registration
Statement on Form N-1A
File No. 2-96634
Filing date: August 24, 1998
(j) Other Opinions
(i) Consent of Independent Auditors
(k) Omitted Financial Statements
Not Applicable
(l) Initial Capital Agreements
Not Applicable
(m) Rule 12b-1 Plan
(i) Amended and Restated Distribution Plan pursuant to Rule 12b-1
between Registrant, on behalf of Franklin Cash Reserves Fund,
and Franklin/Templeton Distributors, Inc. dated July 1, 1994
Filing: Post-Effective Amendment No. 24 to Registration
Statement on Form N-1A
File No. 2-96634
Filing Date: September 1, 1995
(ii) Amended and Restated Distribution Plan pursuant to Rule 12b-1
between Registrant, on behalf of Franklin U.S. Government
Securities Money Market Portfolio, and Franklin/Templeton
Distributors, Inc. dated December 1, 1993
Filing: Post-Effective Amendment No. 24 to Registration
Statement on Form N-1A
File No. 2-96634
Filing Date: September 1, 1995
(iii) Amended and Restated Distribution Plan pursuant to Rule 12b-1
between Registrant, on behalf of Money Market Portfolio, and
Franklin/Templeton Distributors, Inc. dated December 1, 1993
Filing: Post-Effective Amendment No. 24 to Registration
Statement on Form N-1A
File No. 2-96634
Filing Date: September 1, 1995
(o) Rule 18f-3 Plan
Not Applicable
(p) Powers of Attorney
(i) Power of Attorney for Institutional Fiduciary Trust 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
REGISTRANT
None
ITEM 25. INDEMNIFICATION
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to trustees, 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 trustee, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
trustee, 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 Declaration of Trust, By-Laws, Management, 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 in such By-Laws.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT ADVISER
The officers and directors of Franklin Advisers, Inc. (Advisers), administrator
of Money Market Portfolio, Franklin U. S. Government Securities Money Market
Portfolio, and Franklin Cash Reserves Fund, and investment advisor of the Master
Fund 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 Money Fund
Franklin Mutual Series Fund Inc.
Franklin Municipal Securities Trust
Franklin New York Tax-Free Income Fund
Franklin New York Tax-Free Trust
Franklin Real Estate Securities Trust
Franklin Strategic Mortgage Portfolio
Franklin Strategic Series
Franklin Tax-Exempt Money Fund
Franklin Tax-Free Trust
Franklin Templeton Fund Allocator Series
Franklin Templeton Global Trust
Franklin Templeton International Trust
Franklin Templeton Money Fund Trust
Franklin Value Investors Trust
Franklin Templeton Variable Insurance Products 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 Blvd., San Mateo, CA 94404.
ITEM 29. MANAGEMENT SERVICES
There are no management-related service contracts not discussed in Part A or
Part B.
ITEM 30. UNDERTAKINGS
Not Applicable
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized in the
City of San Mateo and the State of California, on the 27th day of August, 1999.
INSTITUTIONAL FIDUCIARY TRUST
(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:
CHARLES E. JOHNSON* Trustee and Principal
Charles E. Johnson Executive Officer
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 Power 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 Institutional Fiduciary Trust and has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of San Mateo and the State of
California, on the 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 officers and trustees 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 Power of Attorney filed herewith)
INSTITUTIONAL FIDUCIARY TRUST
REGISTRATION STATEMENT
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION LOCATION
EX-99.a(i) Agreement and Declaration of Trust *
dated January 15, 1985
EX-99.a(ii) Certificate of Amendment of *
Agreement and Declaration of Trust
dated May 12, 1987
EX-99.a(iii) Certificate of Amendment of *
Agreement and Declaration of Trust
dated October 9, 1987
EX-99.a(iv) Certificate of Amendment of *
Agreement and Declaration of Trust
dated November 17, 1987
EX-99.a(v) Certificate of Amendment of *
Agreement and Declaration of Trust
dated December 8, 1987
EX-99.a(vi) Certificate of Amendment of *
Agreement and Declaration of Trust
dated December 12, 1989
EX-99.b(i) By-Laws *
EX-99.b(ii) Certificate of Amendment of *
By-Laws dated October 9, 1987
EX-99.d(i) Administration Agreement between *
Registrant, on behalf of Franklin
U.S. Government Securities Money
Market Portfolio, and Franklin
Advisers, Inc. dated November 1,
1992
EX-99.d(ii) Administration Agreement between *
Registrant, on behalf of Money
Market Portfolio, and Franklin
Advisers, Inc. dated November 1,
1992
EX-99.d(iii) Administration Agreement between *
Registrant, on behalf of Franklin
Cash Reserve Fund, and Franklin
Advisers, Inc. dated July 1, 1994
EX-99.d(iv) Amendment to Administration *
Agreement between Registrant, on
behalf of Franklin U.S. Government
Securities Money Market Portfolio,
and Franklin Advisers, Inc. dated
August 1, 1995
EX-99.d(v) Amendment to Administration *
Agreement between Registrant, on
behalf of Money Market Portfolio,
and Franklin Advisers, Inc. dated
August 1, 1995
EX-99.d(vi) Amendment to Administration *
Agreement between Registrant, on
behalf of Franklin Cash Reserves
Fund, and Franklin Advisers, Inc.
dated August 1, 1995
EX-99.d(vii) Amendment to Administration Attached
Agreement between Registrant, on
behalf of Franklin U.S. Government
Securities Money Market Portfolio,
and Franklin Advisers, Inc. dated
November 1, 1998
EX-99.d(viii) Amendment to Administration Attached
Agreement between Registrant, on
behalf of Money Market Portfolio,
and Franklin Advisers, Inc. dated
November 1, 1998
EX-99.e(i) Amended and Restated Distribution *
Agreement between Registrant and
Franklin/Templeton Distributors,
Inc. dated April 23, 1995
EX-99.e(ii) Forms of Dealer Agreements between Attached
Franklin/Templeton Distributors,
Inc. and Securities Dealers dated
March 1, 1998
EX-99.e(iii) Amendment of Amended and Restated Attached
Distribution Agreement between
Registrant and Franklin/Templeton
Distributors, Inc. dated January
12, 1999
EX-99.g(i) Master Custody Agreement between *
Registrant and Bank of New York
dated February 16, 1996
EX-99.g(ii) Terminal Link Agreement between *
Registrant and Bank of New York
dated February 16, 1996
EX-99.g(iii) Amendment to Master Custody *
Agreement between Registrant and
Bank of New York dated May 7, 1997
EX-99.g(iv) Amendment dated February 27, 1998 *
to Exhibit A of 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 18, 1998
EX-99.j(i) Consent of Independent Auditors Attached
EX-99.m(i) Amended and Restated Distribution *
Plan pursuant to Rule 12b-1
between Registrant, on behalf of
Franklin Cash Reserves Fund, and
Franklin/Templeton Distributors,
Inc. dated July 1, 1994
EX-99.m(ii) Amended and Restated Distribution *
Plan pursuant to Rule 12b-1
between Registrant, on behalf of
Franklin U.S. Government
Securities Money Market Portfolio,
and Franklin/Templeton
Distributors, Inc. dated December
1, 1993
EX-99.m(iii) Amended and Restated Distribution *
Plan pursuant to Rule 12b-1
between Registrant, on behalf of
Money Market Portfolio, and
Franklin/Templeton Distributors,
Inc. dated December 1, 1993
EX-99.p(i) Power of Attorney for Attached
Institutional Fiduciary Trust
dated July 15, 1999
EX-99.p(ii) Power of Attorney for The Money Attached
Market Portfolios dated July 15,
1999
*Incorporated by Reference
AMENDMENT TO ADMINISTRATION AGREEMENT
This Amendment effective as of November 1, 1998, is to the
Administration Agreement dated November 1, 1992, by and between INSTITUTIONAL
FIDUCIARY TRUST, a Massachusetts business trust (the "Trust"), on behalf of
FRANKLIN U.S. GOVERNMENT SECURITIES MONEY MARKET PORTFOLIO (the "Fund"), a
series of the Trust, and FRANKLIN ADVISERS, INC., a California corporation,
(the "Administrator"). The undersigned parties, intending to be legally
bound, hereby agree as follows:
Paragraph 4A is amended by changing the last sentence to read as follows:
"The annual rate of the administration fee payable by the Fund
shall be 20/100 of 1% of the value of its net assets".
All other provisions of the Administration Agreement dated November 1,
1992, remain in full force and effect.
IN WITNESS WHEREOF, we have signed this Amendment as of the date and
year first above written.
INSTITUTIONAL FIDUCIARY TRUST
On behalf of Franklin U.S. Government
Securities Money Market Portfolio
By /S/ DEBORAH R. GATZEK
---------------------
Deborah R. Gatzek
Vice President & Secretary
FRANKLIN ADVISERS, INC.
By /S/ HARMON E. BURNS
-------------------
Harmon E. Burns
Executive Vice President
AMENDMENT TO ADMINISTRATION AGREEMENT
This Amendment effective as of November 1, 1998, is to the
Administration Agreement dated November 1, 1992, by and between INSTITUTIONAL
FIDUCIARY TRUST, a Massachusetts business trust (the "Trust"), on behalf of
MONEY MARKET PORTFOLIO (the "Fund"), a series of the Trust, and FRANKLIN
ADVISERS, INC., a California corporation, (the "Administrator"). The
undersigned parties, intending to be legally bound, hereby agree as follows:
Paragraph 4A is amended by changing the last sentence to read as follows:
"The annual rate of the administration fee payable by the Fund
shall be 20/100 of 1% of the value of its net assets".
All other provisions of the Administration Agreement dated November 1,
1992, remain in full force and effect.
IN WITNESS WHEREOF, we have signed this Amendment as of the date and
year first above written.
INSTITUTIONAL FIDUCIARY TRUST
On behalf of Money Market Portfolio
By /S/ DEBORAH R. GATZEK
---------------------
Deborah R. Gatzek
Vice President & Secretary
FRANKLIN ADVISERS, INC.
By /S/ HARMON E. BURNS
-------------------
Harmon E. Burns
Executive Vice President
DEALER AGREEMENT
Effective: March 1, 1998
Dear Securities Dealer:
Franklin/Templeton Distributors, Inc. ("we" or "us") invites you to
participate in the distribution of shares of the Franklin Templeton
investment companies (the "Funds") for which we now or in the future serve as
principal underwriter, subject to the terms of this Agreement. We will notify
you from time to time of the Funds which are eligible for distribution and
the terms of compensation under this Agreement. This Agreement supersedes any
prior dealer agreements between us, as stated in Section 18, below.
1. LICENSING.
(a) You represent that you are (i) a member in good standing of the
National Association of Securities Dealers, Inc. ("NASD") and are presently
licensed to the extent necessary by the appropriate regulatory agency of each
jurisdiction in which you will offer and sell shares of the Funds, or (ii) a
broker, dealer or other company licensed, registered or otherwise qualified to
effect transactions in securities in a country (a "foreign country") other than
the United States of America (the "U.S.") where you will offer or sell shares of
the Funds. You agree that termination or suspension of such membership with the
NASD, or of your license to do business by any regulatory agency having
jurisdiction, at any time shall terminate or suspend this Agreement forthwith
and shall require you to notify us in writing of such action. If you are not a
member of the NASD but are a broker, dealer or other company subject to the laws
of a foreign country, you agree to conform to the Conduct Rules of the NASD.
This Agreement is in all respects subject to the Conduct Rules of the NASD,
particularly Conduct Rule 2830 of the NASD, which shall control any provision to
the contrary in this Agreement.
(b) You agree to notify us immediately in writing if at any time you are
not a member in good standing of the Securities Investor Protection Corporation
("SIPC").
2. SALES OF FUND SHARES. You may offer and sell shares of each Fund and class of
each Fund only at the public offering price which shall be applicable to, and in
effect at the time of, each transaction. The procedures relating to all orders
and the handling of them shall be subject to the terms of the applicable then
current prospectus and statement of additional information (hereafter, the
"prospectus") and new account application, including amendments, for each such
Fund and each class of such Fund, and our written instructions from time to
time. This Agreement is not exclusive, and either party may enter into similar
agreements with third parties.
3. DUTIES OF DEALER: You agree:
(a) To act as principal, or as agent on behalf of your customers, in all
transactions in shares of the Funds except as provided in Section 4 hereof. You
shall not have any authority to act as agent for the issuer (the Funds), for the
Principal Underwriter, or for any other dealer in any respect, nor will you
represent to any third party that you have such authority or are acting in such
capacity.
(b) To purchase shares only from us or from your customers.
(c) To enter orders for the purchase of shares of the Funds only from us
and only for the purpose of covering purchase orders you have already received
from your customers or for your own bona fide investment.
(d) To maintain records of all sales, redemptions and repurchases of shares
made through you and to furnish us with copies of such records on request.
(e) To distribute prospectuses and reports to your customers in compliance
with applicable legal requirements, except to the extent that we expressly
undertake to do so on your behalf.
(f) That you will not withhold placing customers' orders for shares so as
to profit yourself as a result of such withholding or place orders for shares in
amounts just below the point at which sales charges are reduced so as to benefit
from a higher sales charge applicable to an amount below the breakpoint.
(g) That if any shares confirmed to you hereunder are repurchased or
redeemed by any of the Funds within seven business days after such confirmation
of your original order, you shall forthwith refund to us the full concession,
allowed to you on such orders, including any payments we made to you from our
own resources as provided in Section 6(b) hereof with respect to such orders. We
shall forthwith pay to the appropriate Fund the share, if any, of the sales
charge we retained on such order and shall also pay to such Fund the refund of
the concession we receive from you as herein provided (other than the portion of
such concession we paid to you from our own resources as provided in Section
6(b) hereof). We shall notify you of such repurchase or redemption within a
reasonable time after settlement. Termination or suspension of this Agreement
shall not relieve you or us from the requirements of this subsection.
(h) That if payment for the shares purchased is not received within the
time customary or the time required by law for such payment, the sale may be
canceled without notice or demand and without any responsibility or liability on
our part or on the part of the Funds, or at our option, we may sell the shares
which you ordered back to the Funds, in which latter case we may hold you
responsible for any loss to the Funds or loss of profit suffered by us resulting
from your failure to make payment as aforesaid. We shall have no liability for
any check or other item returned unpaid to you after you have paid us on behalf
of a purchaser. We may refuse to liquidate the investment unless we receive the
purchaser's signed authorization for the liquidation.
(i) That you shall assume responsibility for any loss to the Funds caused
by a correction made subsequent to trade date, provided such correction was not
based on any error, omission or negligence on our part, and that you will
immediately pay such loss to the Funds upon notification.
(j) That if on a redemption which you have ordered, instructions in proper
form, including outstanding certificates, are not received within the time
customary or the time required by law, the redemption may be canceled forthwith
without any responsibility or liability on our part or on the part of any Fund,
or at our option, we may buy the shares redeemed on behalf of the Fund, in which
latter case we may hold you responsible for any loss to the Fund or loss of
profit suffered by us resulting from your failure to settle the redemption.
(k) To obtain from your customers all consents required by applicable
privacy laws to permit us, any of our affiliates or the Funds to provide you
either directly or through a service established for that purpose with
confirmations, account statements and other information about your customers'
investments in the Funds.
4. DUTIES OF DEALER: RETIREMENT ACCOUNTS. In connection with orders for the
purchase of shares on behalf of an Individual Retirement Account, Self-Employed
Retirement Plan or other retirement accounts, by mail, telephone, or wire, you
shall act as agent for the custodian or trustee of such plans (solely with
respect to the time of receipt of the application and payments), and you shall
not place such an order until you have received from your customer payment for
such purchase and, if such purchase represents the first contribution to such a
plan, the completed documents necessary to establish the plan and enrollment in
the plan. You agree to indemnify us and Franklin Templeton Trust Company and/or
Templeton Funds Trust Company as applicable for any claim, loss, or liability
resulting from incorrect investment instructions received from you which cause a
tax liability or other tax penalty.
5. CONDITIONAL ORDERS; CERTIFICATES. We will not accept from you any conditional
orders for shares of any of the Funds. Delivery of certificates or confirmations
for shares purchased shall be made by the Funds only against constructive
receipt of the purchase price, subject to deduction for your concession and our
portion of the sales charge, if any, on such sale. No certificates for shares of
the Funds will be issued unless specifically requested.
6. DEALER COMPENSATION.
(a) On each purchase of shares by you from us, the total sales charges and
your dealer concessions shall be as stated in each Fund's then current
prospectus, subject to NASD rules and applicable laws. Such sales charges and
dealer concessions are subject to reductions under a variety of circumstances as
described in the Funds' prospectuses. For an investor to obtain these
reductions, we must be notified at the time of the sale that the sale qualifies
for the reduced charge. If you fail to notify us of the applicability of a
reduction in the sales charge at the time the trade is placed, neither we nor
any of the Funds will be liable for amounts necessary to reimburse any investor
for the reduction which should have been effected.
(b) In accordance with the Funds' prospectuses, we or our affiliates may,
but are not obligated to, make payments to you from our own resources as
compensation for certain sales which are made at net asset value ("Qualifying
Sales"). If you notify us of a Qualifying Sale, we may make a contingent advance
payment up to the maximum amount available for payment on the sale. If any of
the shares purchased in a Qualifying Sale are repurchased or redeemed within
twelve months of the month of purchase, we shall be entitled to recover any
advance payment attributable to the repurchased or redeemed shares by reducing
any account payable or other monetary obligation we may owe to you or by making
demand upon you for repayment in cash. We reserve the right to withhold advances
to you, if for any reason we believe that we may not be able to recover unearned
advances from you. Termination or suspension of this Agreement shall not relieve
you or us from the requirements of this subsection.
7. REDEMPTIONS OR REPURCHASES. Redemptions or repurchases of shares of the Funds
will be made at the net asset value of such shares, less any applicable deferred
sales or redemption charges, in accordance with the applicable prospectuses.
Except as permitted by applicable law, you agree not to purchase any shares from
your customers at a price lower than the net asset value of such shares next
computed by the Funds after the purchase (the "Redemption/Repurchase Price").
You shall, however, be permitted to sell shares of the Funds for the account of
the record owner to the Funds at the Redemption/Repurchase Price for such
shares.
8. EXCHANGES. Telephone exchange orders will be effective only for
uncertificated shares or for which share certificates have been previously
deposited and may be subject to any fees or other restrictions set forth in the
applicable prospectuses. Exchanges from a Fund sold with no sales charge to a
Fund which carries a sales charge, and exchanges from a Fund sold with a sales
charge to a Fund which carries a higher sales charge may be subject to a sales
charge in accordance with the terms of the applicable Fund's prospectus. You
will be obligated to comply with any additional exchange policies described in
the applicable Fund's prospectus, including without limitation any policy
restricting or prohibiting "Timing Accounts" as therein defined.
9. TRANSACTION PROCESSING. All orders are subject to acceptance by us and by the
Fund or its transfer agent, and become effective only upon confirmation by us.
If required by law, each transaction shall be confirmed in writing on a fully
disclosed basis and if confirmed by us, a copy of each confirmation shall be
sent simultaneously to you if you so request. All sales are made subject to
receipt of shares by us from the Funds. We reserve the right in our discretion,
without notice, to suspend the sale of shares of the Funds or withdraw the
offering of shares of the Funds entirely. Orders will be effected at the
price(s) next computed on the day they are received if, as set forth in the
applicable Fund's current prospectus, the orders are received by us, an agent
appointed by us or the Funds prior to the time the price of the Fund's shares is
calculated. Orders received after that time will be effected at the price(s)
computed on the next business day. All orders must be accompanied by payment in
U.S. Dollars. Orders payable by check must be drawn payable in U.S. Dollars on a
U.S. bank, for the full amount of the investment.
10. MULTIPLE CLASSES. We may from time to time provide to you written compliance
guidelines or standards relating to the sale or distribution of Funds offering
multiple classes of shares (each, a "Class") with different sales charges and
distribution related operating expenses. In addition, you will be bound by any
applicable rules or regulations of government agencies or self-regulatory
organizations generally affecting the sale or distribution of shares of
investment companies offering multiple classes of shares.
11. RULE 12B-1 PLANS. You are invited to participate in all distribution plans
(each, a "Plan") adopted for a Class of a Fund or for a Fund that has only a
single Class (each, a "Plan Class") pursuant to Rule 12b-1 under the Investment
Company Act of 1940, as amended (the "1940 Act").
To the extent you provide administrative and other services, including, but
not limited to, furnishing personal and other services and assistance to your
customers who own shares of a Plan Class, answering routine inquiries regarding
a Fund or Class, assisting in changing account designations and addresses,
maintaining such accounts or such other services as a Fund may require, to the
extent permitted by applicable statutes, rules, or regulations, we shall pay you
a Rule 12b-1 servicing fee. To the extent that you participate in the
distribution of Fund shares that are eligible for a Rule 12b-1 distribution fee,
we shall also pay you a Rule 12b-1 distribution fee. All Rule 12b-1 servicing
and distribution fees shall be based on the value of shares attributable to
customers of your firm and eligible for such payment, and shall be calculated on
the basis and at the rates set forth in the compensation schedule then in effect
for the applicable Plan (the "Schedule"). Without prior approval by a majority
of the outstanding shares of a particular Class of a Fund which has a Plan, the
aggregate annual fees paid to you pursuant to such Plan shall not exceed the
amounts stated as the "annual maximums" in such Plan Class' prospectus, which
amount shall be a specified percent of the value of such Plan Class' net assets
held in your customers' accounts which are eligible for payment pursuant to this
Agreement (determined in the same manner as such Plan Class uses to compute its
net assets as set forth in its effective prospectus).
You shall furnish us and each Fund that has a Plan Class (each, a "Plan
Fund") with such information as shall reasonably be requested by the Board of
Directors, Trustees or Managing General Partners (hereinafter referred to as
"Directors") of such Plan Fund with respect to the fees paid to you pursuant to
the Schedule of such Plan Fund. We shall furnish to the Boards of Directors of
the Plan Funds, for their review on a quarterly basis, a written report of the
amounts expended under the Plans and the purposes for which such expenditures
were made.
Each Plan and the provisions of any agreement relating to such Plan must be
approved annually by a vote of the Directors of the Fund that has such Plan,
including such persons who are not interested persons of such Plan Fund and who
have no financial interest in such Plan or any related agreement ("Rule 12b-1
Directors"). Each Plan or the provisions of this Agreement relating to such Plan
may be terminated at any time by the vote of a majority of the Rule 12b-1
Directors, or by a vote of a majority of the outstanding shares of the Class
that has such Plan, on sixty (60) days' written notice, without payment of any
penalty. A Plan or the provisions of this Agreement may also be terminated by
any act that terminates the Underwriting Agreement between us and the Fund that
has such Plan, and/or the management or administration agreement between
Franklin Advisers, Inc. or Templeton Investment Counsel, Inc. or their
affiliates and such Plan Fund. In the event of the termination of a Plan for any
reason, the provisions of this Agreement relating to such Plan will also
terminate.
Continuation of a Plan and provisions of this Agreement relating to such
Plan are conditioned on Rule 12b-1 Directors being ultimately responsible for
selecting and nominating any new Rule 12b-1 Directors. Under Rule 12b-1,
Directors of any of the Plan Funds have a duty to request and evaluate, and
persons who are party to any agreement related to a Plan have a duty to furnish,
such information as may reasonably be necessary to an informed determination of
whether the Plan or any agreement should be implemented or continued. Under Rule
12b-1, a Plan Fund is permitted to implement or continue a Plan or the
provisions of this Agreement relating to such Plan from year-to-year only if,
based on certain legal considerations, the Board of Directors of such Plan Fund
is able to conclude that such Plan will benefit the Plan Class. Absent such
yearly determination, such Plan and the provisions of this Agreement relating to
such Plan must be terminated as set forth above. In addition, any obligation
assumed by a Fund pursuant to this Agreement shall be limited in all cases to
the assets of such Fund and no person shall seek satisfaction thereof from
shareholders of a Fund. You agree to waive payment of any amounts payable to you
by us under a Fund's Plan until such time as we are in receipt of such fee from
the Fund.
The provisions of the Plans between the Plan Funds and us shall control
over the provisions of this Agreement in the event of any inconsistency.
12. REGISTRATION OF SHARES. Upon request, we shall notify you of the states or
other jurisdictions in which each Fund's shares are currently noticed,
registered or qualified for offer or sale to the public. We shall have no
obligation to make notice filings of, register or qualify, or to maintain notice
filings of, registration of or qualification of, Fund shares in any state or
other jurisdiction. We shall have no responsibility, under the laws regulating
the sale of securities in any U.S. or foreign jurisdiction, for the
registration, qualification or licensed status of persons offering or selling
Fund shares or for the manner of offering or sale of Fund shares. If it is
necessary to file notice of, register or qualify Fund shares in any foreign
jurisdictions in which you intend to offer the shares of any Funds, it will be
your responsibility to arrange for and to pay the costs of such notice filing,
registration or qualification; prior to any such notice filing, registration or
qualification, you will notify us of your intent and of any limitations that
might be imposed on the Funds, and you agree not to proceed with such notice
filing, registration or qualification without the written consent of the
applicable Funds and of ourselves. Except as stated in this section, we shall
not, in any event, be liable or responsible for the issue, form, validity,
enforceability and value of such shares or for any matter in connection
therewith, and no obligation not expressly assumed by us in this Agreement shall
be implied. Nothing in this Agreement shall be deemed to be a condition,
stipulation or provision binding any person acquiring any security to waive
compliance with any provision of the Securities Act of 1933, as amended (the
"1933 Act"), the Securities Exchange Act of 1934, as amended (the "1934 Act"),
the 1940 Act, the rules and regulations of the U.S. Securities and Exchange
Commission, or any applicable laws or regulations of any government or
authorized agency in the U.S. or any other country having jurisdiction over the
offer or sale of shares of the Funds, or to relieve the parties hereto from any
liability arising under such laws, rules and regulations.
13. CONTINUOUSLY OFFERED CLOSED-END FUNDS. This Section 13 relates solely to
shares of Funds that represent a beneficial interest in the Franklin Floating
Rate Trust and shares issued by any other continuously offered closed-end
investment company registered under the 1940 Act for which we or an affiliate of
ours serve as principal underwriter and that periodically repurchases its shares
(each, a "Trust"). Shares of a Trust that are offered to the public will be
registered under the 1933 Act, and are expected to be offered during an offering
period that may continue indefinitely ("Continuous Offering Period"). There is
no guarantee that such a continuous offering will be maintained by a Trust. The
Continuous Offering Period, shares of a Trust and certain of the terms on which
such shares are offered shall be as described in the prospectus of the Trust.
As set forth in a Trust's then current prospectus, we may, but are not
obligated to, provide you with appropriate compensation for selling shares of
the Trust. In addition, you may be entitled to a fee for servicing your clients
who are shareholders in a Trust, subject to applicable law and NASD Conduct
Rules. You agree that any repurchases of shares of a Trust that were originally
purchased as Qualifying Sales shall be subject to Subsection 6(b) hereof.
You expressly acknowledge and understand that, notwithstanding anything to
the contrary in this Agreement:
(a) No Trust has a Rule 12b-1 Plan and in no event will a Trust pay, or
have any obligation to pay, any compensation directly or indirectly to
you.
(b) Shares of a Trust will not be repurchased by either the Trust (other
than through repurchase offers by the Trust from time to time, if any)
or by us and no secondary market for such shares exists currently, or
is expected to develop. Any representation as to a repurchase or
tender offer by a Trust, other than that set forth in the Trust's then
current prospectus, notification letters, reports or other related
material provided by the Trust, is expressly prohibited.
(c) An early withdrawal charge payable by shareholders of a Trust to us
may be imposed on shares accepted for repurchase by the Trust that
have been held for less than a stated period, as set forth in the
Trust's then current Prospectus.
(d) In the event your customer cancels his or her order for shares of a
Trust after confirmation, such shares will not be repurchased,
remarketed or otherwise disposed of by or though us.
14. FUND INFORMATION. No person is authorized to give any information or make
any representations concerning shares of any Fund except those contained in the
Fund's then current prospectus or in materials issued by us as information
supplemental to such prospectus. We will supply reasonable quantities of
prospectuses, supplemental sales literature, sales bulletins, and additional
information as issued by the Fund or us. You agree not to use other advertising
or sales material relating to the Funds except that which (a) conforms to the
requirements of any applicable laws or regulations of any government or
authorized agency in the U.S. or any other country having jurisdiction over the
offering or sale of shares of the Funds, and (b) is approved in writing by us in
advance of such use. Such approval may be withdrawn by us in whole or in part
upon notice to you, and you shall, upon receipt of such notice, immediately
discontinue the use of such sales literature, sales material and advertising.
You are not authorized to modify or translate any such materials without our
prior written consent.
15. INDEMNIFICATION. You agree to indemnify, defend and hold harmless us, the
Funds, and the respective officers, directors and employees of the Funds and us
from any and all losses, claims, liabilities and expenses arising out of (1) any
alleged violation of any statute or regulation (including without limitation the
securities laws and regulations of the U.S. or any state or foreign country) or
any alleged tort or breach of contract, in or related to the offer or sale by
you of shares of the Funds pursuant to this Agreement (except to the extent that
our negligence or failure to follow correct instructions received from you is
the cause of such loss, claim, liability or expense), (2) any redemption or
exchange pursuant to telephone instructions received from you or your agents or
employees, or (3) the breach by you of any of the terms and conditions of this
Agreement. This Section 15 shall survive the termination of this Agreement.
16. TERMINATION; SUCCESSION; ASSIGNMENT; AMENDMENT. Each party to this Agreement
may terminate its participation in this Agreement by giving written notice to
the other parties. Such notice shall be deemed to have been given and to be
effective on the date on which it was either delivered personally to the other
parties or any officer or member thereof, or was mailed postpaid or delivered by
electronic transmission to the other parties' chief legal officers at the
addresses shown herein or in the most recent NASD Manual. This Agreement shall
terminate immediately upon the appointment of a Trustee under the Securities
Investor Protection Act or any other act of insolvency by you. The termination
of this Agreement by any of the foregoing means shall have no effect upon
transactions entered into prior to the effective date of termination. A trade
placed by you subsequent to your voluntary termination of this Agreement will
not serve to reinstate the Agreement. Reinstatement, except in the case of a
temporary suspension of a dealer, will be effective only upon written
notification by us to you. This Agreement will terminate automatically in the
event of its assignment by us. For purposes of the preceding sentence, the word
"assignment" shall have the meaning given to it in the 1940 Act. This Agreement
may not be assigned by you without our prior written consent. This Agreement may
be amended by us at any time by written notice to you and your placing of an
order or acceptance of payments of any kind after the effective date and receipt
of notice of any such Amendment shall constitute your acceptance of such
Amendment.
17. SETOFF; DISPUTE RESOLUTION. Should any of your concession accounts with us
have a debit balance, we may offset and recover the amount owed to us or the
Funds from any other account you have with us, without notice or demand to you.
In the event of a dispute concerning any provision of this Agreement, either
party may require the dispute to be submitted to binding arbitration under the
commercial arbitration rules of the NASD or the American Arbitration
Association. Judgment upon any arbitration award may be entered by any court
having jurisdiction. This Agreement shall be construed in accordance with the
laws of the State of California, not including any provision that would require
the general application of the law of another jurisdiction.
18. ACCEPTANCE; CUMULATIVE EFFECT. This Agreement is cumulative and supersedes
any agreement previously in effect. It shall be binding upon the parties hereto
when signed by us and accepted by you. If you have a current dealer agreement
with us, your first trade or acceptance of payments from us after your receipt
of this Agreement, as it may be amended pursuant to Section 16, above, shall
constitute your acceptance of its terms. Otherwise, your signature below shall
constitute your acceptance of its terms.
FRANKLIN/TEMPLETON DISTRIBUTORS, INC.
By /s/ Greg Johnson
------------------------
Greg Johnson, President
777 Mariners Island Blvd.
San Mateo, CA 94404
Attention: Chief Legal Officer (for legal notices only)
415/312-2000
700 Central Avenue
St. Petersburg, Florida 33701-3628
813/823-8712
- --------------------------------------------------------------------------------
Dealer: If you have NOT previously signed a Dealer Agreement with us, please
complete and sign this section and return the original to us.
__________________________________
DEALER NAME:
By _______________________________
(Signature)
Name:_____________________________
Title: ___________________________
Address: ______________________________
_______________________________________
_______________________________________
Telephone: _______________________
NASD CRD # _______________________
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Franklin Templeton Dealer # ______________________
(Internal Use Only)
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Version 12/31/97
232567.4
Franklin Templeton Distributors, Inc.
777 Mariners Island Boulevard
San Mateo, CA 94403-7777
May 15, 1998
Re: Amendment of Dealer Agreement - Notice Pursuant to Section 16
Dear Securities Dealer:
This letter constitutes notice of amendment of the current Dealer Agreement (the
"Agreement") between Franklin/Templeton Distributors, Inc. ("we" or "us") and
you pursuant to Section 16 of the Agreement. The Agreement is hereby amended as
follows:
1. Defined terms in this amendment have the meanings as stated in the
Agreement unless otherwise indicated.
2. Section 6 is modified to add a subsection 6(c), as follows:
(c) The following limitations apply with respect to shares of each Trust as
described in Section 13 of this Agreement.
(1) Consistent with the NASD Conduct Rules, the total compensation to
be paid to us and selected dealers and their affiliates, including you and your
affiliates, in connection with the distribution of shares of a Trust will not
exceed the underwriting compensation limitation prescribed by NASD Conduct Rule
2710. The total underwriting compensation to be paid to us and selected dealers
and their affiliates, including you and your affiliates, may include: (i) at the
time of purchase of shares a payment to you or another securities dealer of 1%
of the dollar amount of the purchased shares by the Distributor; and (ii) a
quarterly payment at an annual rate of .50% to you or another securities dealer
based on the value of such remaining shares sold by you or such securities
dealer, if after twelve (12) months from the date of purchase, the shares sold
by you or such securities dealer remain outstanding.
(2) The maximum compensation shall be no more than as disclosed in the
section "Payments to Dealers" of the prospectus of the applicable Trust.
Pursuant to Section 16 of the Agreement, your placement of an order or
acceptance of payments of any kind after the effective date and receipt of
notice of this amendment shall constitute your acceptance of this amendment.
FRANKLIN/TEMPLETON DISTRIBUTORS, INC.
By /s/ Greg Johnson
--------------------------
Greg Johnson, President
777 Mariners Island Blvd.
San Mateo, CA 94404
Attention: Chief Legal Officer (for legal notices only)
650/312-2000
100 Fountain Parkway
St. Petersburg, FL 33716
813/299-8712
MUTUAL FUND PURCHASE AND SALES AGREEMENT
FOR ACCOUNTS OF BANK AND TRUST COMPANY CUSTOMERS
EFFECTIVE: APRIL 1, 1998
1. INTRODUCTION
The parties to this Agreement are the undersigned bank or trust company
("Bank") and Franklin/Templeton Distributors, Inc. ("FTDI"). This Agreement sets
forth the terms and conditions under which FTDI will execute purchases and
redemptions of shares of the Franklin or Templeton investment companies or
series of such investment companies for which FTDI now or in the future serves
as principal underwriter (each, a "Fund"), at the request of the Bank upon the
order and for the account of Bank's customers ("Customers"). In this Agreement,
"Customer" shall include the beneficial owners of an account and any agent or
attorney-in-fact duly authorized or appointed to act on the owners' behalf with
respect to the account; and "redemptions" shall include redemptions of shares of
Funds that are open-end management investment companies and repurchases of
shares of Funds that are closed-end investment companies by the Fund that is the
issuer of such shares. FTDI will notify Bank from time to time of the Funds
which are eligible for distribution and the terms of compensation under this
Agreement. This Agreement is not exclusive, and either party may enter into
similar agreements with third parties.
2. REPRESENTATIONS AND WARRANTIES OF BANK
Bank warrants and represents to FTDI and the Funds that:
a) Bank is a "bank" as defined in section 3(a)(6) of the Securities
Exchange Act of 1934, as amended (the "1934 Act");
b) Bank is authorized to enter into this Agreement as agent for the
Customers, and Bank's performance of its obligations and receipt of
consideration under this Agreement will not violate any law,
regulation, charter, agreement, or regulatory restriction to which
Bank is subject; and
c) Bank has received all regulatory agency approvals and taken all legal
and other steps necessary for offering the services Bank will provide
to Customers and receiving any applicable compensation in connection
with this Agreement.
3. REPRESENTATIONS AND WARRANTIES OF THE PRINCIPAL UNDERWRITER
FTDI warrants and represents to Bank that:
a) FTDI is a broker/dealer registered under the 1934 Act; and
b) FTDI is the principal underwriter of the Funds.
4. COVENANTS OF BANK
a) For each purchase or redemption transaction under this Agreement
(each, a "Transaction"), Bank will:
1) be authorized to engage in the Transaction;
2) act as agent for the Customer, unless Bank is the Customer;
3) act solely at the request of and for the account of the Customer,
unless Bank is the Customer;
4) not submit an order unless Bank has already received the order
from the Customer, unless Bank is the Customer;
5) not offer to sell shares of Fund(s) or submit a purchase order
unless Bank has already delivered to the Customer a copy of the
then current prospectuses for the Fund(s) whose shares are
offered or are to be purchased;
6) not withhold placing any Customer's order for the purpose of
profiting from the delay or place orders for shares in amounts
just below the point at which sales charges are reduced so as to
benefit from a higher Fee (as defined in Paragraph 5(e) below)
applicable to a Transaction in an amount below the breakpoint;
7) have no beneficial ownership of the securities in any purchase
Transaction (the Customer will have the full beneficial
ownership), unless Bank is the Customer (in which case, Bank will
not engage in the Transaction unless the Transaction is legally
permissible for Bank);
8) not accept or withhold any Fee (as defined in Paragraph 5(e) of
this Agreement) otherwise allowed under Paragraphs 5(d) and (e)
of this Agreement, if prohibited by the Employee Retirement
Income Security Act of 1974, as amended, or trust or similar laws
to which Bank is subject, in the case of Transactions of Fund
shares involving retirement plans, trusts, or similar accounts;
9) maintain records of all Transactions of Fund shares made through
Bank and furnish FTDI with copies of such records on request; and
10) distribute prospectuses, statements of additional information and
reports to Customers in compliance with applicable legal
requirements, except to the extent that FTDI expressly undertakes
to do so on behalf of Bank.
b) While this Agreement is in effect, Bank will:
1) not purchase any Fund shares from any person at a price lower
than the redemption or repurchase price as applicable next
determined by the applicable Fund;
2) repay FTDI the full Fee received by Bank under Paragraphs 5(d)
and (e) of this Agreement, and any payments FTDI or its
affiliates made to Bank from their own resources under Paragraph
5(e) of this Agreement ("FTDI Payments"), for any Fund shares
purchased under this Agreement which are redeemed or repurchased
by the Fund within 7 business days after the purchase; in turn,
FTDI shall pay to the Fund the amount repaid by Bank (other than
any portion of such repayment that is a repayment of FTDI
Payments) and will notify Bank of any such redemption within a
reasonable time (termination or suspension of this Agreement
shall not relieve Bank or FTDI from the requirements of this
subparagraph);
3) in connection with orders for the purchase of Fund shares on
behalf of an Individual Retirement Account, Self-Employed
Retirement Plan or other retirement accounts, by mail, telephone,
or wire, act as agent for the custodian or trustee of such plans
(solely with respect to the time of receipt of the application
and payments) and shall not place such an order until Bank has
received from its Customer payment for such purchase and, if such
purchase represents the first contribution to such a plan, the
completed documents necessary to establish the plan and
enrollment in the plan (Bank agrees to indemnify FTDI and
Franklin Templeton Trust Company and/or Templeton Funds Trust
Company as applicable for any claim, loss, or liability resulting
from incorrect investment instructions received from Bank which
cause a tax liability or other tax penalty);
4) be responsible for compliance with all laws and regulations,
including those of the applicable federal and state bank and
securities regulatory authorities, with regard to Bank and Bank's
Customers; and
5) obtain from its Customers any consents required by applicable
federal and/or state privacy laws to permit FTDI, any of its
affiliates or the Funds to provide Bank with confirmations,
account statements and other information about Customers'
investments in the Funds.
5. TERMS AND CONDITIONS FOR TRANSACTIONS
a) Price
Purchase orders for Fund shares received from Bank will be accepted only at
the public offering price and in compliance with procedures applicable to each
purchase order as set forth in the then current prospectus and statement of
additional information (hereinafter, collectively, "prospectus") for the
applicable Fund. All purchase orders must be accompanied by payment in U.S.
Dollars. Orders payable by check must be drawn payable in U.S. Dollars on a U.S.
bank, for the full amount of the investment. All sales are made subject to
receipt of shares by FTDI from the Funds. FTDI reserves the right in its
discretion, without notice, to suspend the sale of shares or withdraw the
offering of shares entirely.
b) Orders and Confirmations
All orders are subject to acceptance or rejection by FTDI and by the Fund
or its transfer agent at their sole discretion, and become effective only upon
confirmation by FTDI. Transaction orders shall be made using the procedures and
forms required by FTDI from time to time. Orders received by FTDI or an agent
appointed by FTDI or the Funds on any business day after the time for
calculating the price of Fund shares as set forth in each Fund's current
prospectus will be effected at the price determined on the next business day. No
order will be accepted unless Bank or the Customer shall have provided FTDI with
the Customer's full name, address and other information normally required by
FTDI to open a customer account, and FTDI shall be entitled to rely on the
accuracy of the information provided by Bank. A written confirming statement
will be sent to Bank and to Customer upon settlement of each Transaction.
c) Multiple Class Guidelines
FTDI may from time to time provide to Bank written compliance guidelines or
standards relating to the sale or distribution of Funds offering multiple
classes of shares (each, a "Class") with different sales charges and
distribution-related operating expenses. Bank will comply with FTDI's written
compliance guidelines and standards, as well as with any applicable rules or
regulations of government agencies or self-regulatory organizations generally
affecting the sale or distribution of investment companies offering multiple
classes of shares, whether or not Bank deems itself otherwise subject to such
rules or regulations.
d) Payments by Bank for Purchases
On the settlement date for each purchase, Bank shall either (i) remit the
full purchase price by wire transfer to an account designated by FTDI, or (ii)
following FTDI's procedures, wire the purchase price less the Fee allowed by
Paragraph 5(e) of this Agreement. Twice monthly, FTDI will pay Bank Fees not
previously paid to or withheld by Bank. Each calendar month, FTDI, as
applicable, will prepare and mail an activity statement summarizing all
Transactions.
e) Fees and Payments
Where permitted by the prospectus for a Fund, a charge, concession, or fee
(each of the foregoing forms of compensation, a "Fee") may be paid to Bank,
related to services provided by Bank in connection with Transactions in shares
of such Fund. The amount of the Fee, if any, is set by the relevant prospectus.
Adjustments in the Fee are available for certain purchases, and Bank is solely
responsible for notifying FTDI when any purchase or redemption order is
qualified for such an adjustment. If Bank fails to notify FTDI of the
applicability of a reduction in the sales charge at the time the trade is
placed, neither FTDI nor any of the Funds will be liable for amounts necessary
to reimburse any Customer for the reduction which should have been effected.
In accordance with the Funds' prospectuses, FTDI or its affiliates may, but
are not obligated to, make payments from their own resources to Bank as
compensation for certain sales that are made at net asset value ("Qualifying
Sales"). If Bank notifies FTDI of a Qualifying Sale, FTDI may make a contingent
advance payment up to the maximum amount available for payment on the sale. If
any of the shares purchased in a Qualifying Sale are redeemed or repurchased
within twelve months of the month of purchase, FTDI shall be entitled to recover
any advance payment attributable to the redeemed or repurchased shares by
reducing any account payable or other monetary obligation FTDI may owe to Bank
or by making demand upon Bank for repayment in cash. FTDI reserves the right to
withhold any one or more advances, if for any reason FTDI believes that FTDI may
not be able to recover unearned advances. Termination or suspension of this
Agreement does not relieve Bank from the requirements of this paragraph.
f) Rule 12b-1 Plans
Bank is also invited to participate in all distribution plans (each, a
"Plan") adopted for a Class of a Fund or for a Fund that has only a single Class
(each, a "Plan Class") pursuant to Rule 12b-1 under the Investment Company Act
of 1940, as amended (the "1940 Act").
To the extent Bank provides administrative and other services, including,
but not limited to, furnishing personal and other services and assistance to
Customers who own shares of a Plan Class, answering routine inquiries regarding
a Fund or Class, assisting in changing account designations and addresses,
maintaining such accounts or such other services as a Fund may require, to the
extent permitted by applicable statutes, rules, or regulations, FTDI shall pay
Bank a Rule 12b-1 servicing fee. To the extent that Bank participates in the
distribution of Fund shares that are eligible for a Rule 12b-1 distribution
fee,FTDI shall also pay Bank a Rule 12b-1 distribution fee. All Rule 12b-1
servicing and distribution fees shall be based on the value of shares
attributable to Customers and eligible for such payment, and shall be calculated
on the basis and at the rates set forth in the compensation schedule then in
effect for the applicable Plan (the "Schedule"). Without prior approval by a
majority of the outstanding shares of a particular Class of a Fund, the
aggregate annual fees paid to Bank pursuant to such Plan shall not exceed the
amounts stated as the "annual maximums" in such Plan Class' prospectus, which
amount shall be a specified percent of the value of such Plan Class' net assets
held in Customers' accounts which are eligible for payment pursuant to this
Agreement (determined in the same manner as such Plan Class uses to compute its
net assets as set forth in its effective Prospectus).
Bank shall furnish FTDI and each Fund that has a Plan Class (each, a "Plan
Fund") with such information as shall reasonably be requested by the Board of
Directors, Trustees or Managing General Partners (hereinafter referred to as
"Directors") of such Plan Fund with respect to the fees paid to Bank pursuant to
the Schedule of such Plan Fund. FTDI shall furnish to the Boards of Directors of
the Plan Funds, for their review on a quarterly basis, a written report of the
amounts expended under the Plans and the purposes for which such expenditures
were made.
Each Plan and the provisions of any agreement relating to such Plan must be
approved annually by a vote of the Directors of the Fund that has such Plan,
including such persons who are not interested persons of such Plan Fund and who
have no financial interest in such Plan or any related agreement ("Rule 12b-1
Directors"). Each Plan or the provisions of this Agreement relating to such Plan
may be terminated at any time by the vote of a majority of Rule 12b-1 Directors
of the Fund that has such Plan, or by a vote of a majority of the outstanding
shares of the Class that has such Plan on sixty (60) days' written notice,
without payment of any penalty. A Plan or the provisions of this Agreement may
also be terminated by any act that terminates the Underwriting Agreement between
FTDI and the Fund that has such Plan, and/or the management or administration
agreement between Franklin Advisers, Inc. or Templeton Investment Counsel, Inc.
or their affiliates and such Plan Fund. In the event of the termination of a
Plan for any reason, the provisions of this Agreement relating to such Plan will
also terminate.
Continuation of a Plan and the provisions of this Agreement relating to
such Plan are conditioned on Rule 12b-1 Directors being ultimately responsible
for selecting and nominating any new Rule 12b-1 Directors. Under Rule 12b-1,
Directors of any of the Plan Funds have a duty to request and evaluate, and
persons who are party to any agreement related to a Plan have a duty to furnish,
such information as may reasonably be necessary to an informed determination of
whether the Plan or any agreement should be implemented or continued. Under Rule
12b-1, a Plan Fund is permitted to implement or continue a Plan or the
provisions of this Agreement relating to such Plan from year-to-year only if,
based on certain legal considerations, the Board of Directors of such Plan Fund
is able to conclude that the Plan will benefit the Plan Class. Absent such
yearly determination, a Plan and the provisions of this Agreement relating to
such Plan must be terminated as set forth above. In addition, any obligation
assumed by a Fund pursuant to this Agreement shall be limited in all cases to
the assets of such Fund and no person shall seek satisfaction thereof from
shareholders of a Fund. Bank agrees to waive payment of any amounts payable to
Bank by FTDI under a Fund's Plan until such time as FTDI is in receipt of such
fee from the Fund.
The provisions of the Plans between the Plan Funds and FTDI shall control
over the provisions of this Agreement in the event of any inconsistency.
g) Other Distribution Services
From time to time, FTDI may offer telephone and other augmented services in
connection with Transactions under this Agreement. If Bank uses any such
service, Bank will be subject to the procedures applicable to the service,
whether or not Bank has executed any agreement required for the service.
h) Conditional Orders; Certificates
FTDI will not accept any conditional Transaction orders. Delivery of
certificates or confirmations for shares purchased shall be made by a Fund only
against constructive receipt of the purchase price, subject to deduction of any
Fee and FTDI's portion of the sales charge, if any, on such sale. No
certificates for shares of the Funds will be issued unless specifically
requested.
i) Cancellation of Orders
If payment for shares purchased is not received within the time customary
or the time required by law for such payment, the sale may be canceled without
notice or demand, and neither FTDI nor the Fund(s) shall have any responsibility
or liability for such a cancellation; alternatively, at FTDI's option, the
unpaid shares may be sold back to the Fund, and Bank shall be liable for any
resulting loss to FTDI or to the Fund(s). FTDI shall have no liability for any
check or other item returned unpaid to Bank after Bank has paid FTDI on behalf
of a purchaser. FTDI may refuse to liquidate the investment unless FTDI receives
the purchaser's signed authorization for the liquidation.
j) Order Corrections
Bank shall assume responsibility for any loss to a Fund(s) caused by a
correction made subsequent to trade date, provided such correction was not based
on any error, omission or negligence on FTDI's part, and Bank will immediately
pay such loss to the Fund(s) upon notification.
k) Redemptions; Cancellation
Redemptions or repurchases of shares will be made at the net asset value of
such shares, less any applicable deferred sales or redemption charges, in
accordance with the applicable prospectuses. If Bank sells shares for the
account of the record owner to the Funds, Bank shall be deemed to represent to
FTDI that Bank is doing so as agent for the Customer and that Bank is authorized
to do so in such capacity. Such sales to the Funds shall be at the redemption or
repurchase price then currently in effect for such shares. If on a redemption
which Bank has ordered, instructions in proper form, including outstanding
certificates, are not received within the time customary or the time required by
law, the redemption may be canceled forthwith without any responsibility or
liability on the part of FTDI or any Fund, or at the option of FTDI, FTDI may
buy the shares redeemed on behalf of the Fund, in which latter case FTDI may
hold Bank responsible for any loss to the Fund or loss of profit suffered by
FTDI resulting from Bank's failure to settle the redemption.
l) Exchanges
Telephone exchange orders will be effective only for uncertificated shares
or for which share certificates have been previously deposited and may be
subject to any fees or other restrictions set forth in the applicable
prospectuses. Exchanges from a Fund sold with no sales charge to a Fund which
carries a sales charge, and exchanges from a Fund sold with a sales charge to a
Fund which carries a higher sales charge may be subject to a sales charge in
accordance with the terms of the applicable Fund's prospectus. Bank will be
obligated to comply with any additional exchange policies described in the
applicable Fund's prospectus, including without limitation any policy
restricting or prohibiting "Timing Accounts" as therein defined.
m) Qualification of Shares; Indemnification
Upon request, FTDI shall notify Bank of the states or other jurisdictions
in which each Fund's shares are currently noticed, registered or qualified for
offer or sale to the public. FTDI shall have no obligation to make notice
filings of, register or qualify, or to maintain notice filings of, registration
of or qualification of, Fund shares in any state or other jurisdiction. FTDI
shall have no responsibility, under the laws regulating the sale of securities
in any U.S. or foreign jurisdiction, for the registration, qualification or
licensed status of Bank or any of its agents or sub-agents in connection with
the purchase or sale of Fund shares or for the manner of offering, sale or
purchase of Fund shares. Except as stated in this paragraph, FTDI shall not, in
any event, be liable or responsible for the issue, form, validity,
enforceability and value of such shares or for any matter in connection
therewith, and no obligation not expressly assumed by FTDI in this Agreement
shall be implied. If it is necessary to file notice of, register or qualify
shares of any Fund in any country, state or other jurisdiction having authority
over the purchase or sale of Fund shares that are purchased by a Customer, it
will be Bank's responsibility to arrange for and to pay the costs of such notice
filing, registration or qualification; prior to any such notice filing,
registration or qualification, Bank will notify FTDI of its intent and of any
limitations that might be imposed on the Funds, and Bank agrees not to proceed
with such notice filing, registration or qualification without the written
consent of the applicable Funds and of FTDI. Nothing in this Agreement shall be
deemed to be a condition, stipulation, or provision binding any person acquiring
any security to waive compliance with any provision of the Securities Act of
1933, as amended (the "1933 Act"), the 1934 Act, the 1940 Act, the rules and
regulations of the U.S. Securities and Exchange Commission, or any applicable
laws or regulations of any government or authorized agency in the U.S. or any
other country having jurisdiction over the offer or sale of shares of the Funds,
or to relieve the parties hereto from any liability arising under such laws,
rules or regulations.
Bank further agrees to indemnify, defend and hold harmless FTDI, the Funds,
their officers, directors and employees from any and all losses, claims,
liabilities and expenses, arising out of (1) any alleged violation of any
statute or regulation (including without limitation the securities laws and
regulations of the United States of America or any state or foreign country) or
any alleged tort or breach of contract, in or related to any offer, sale or
purchase of shares of the Funds involving Bank or any Customer pursuant to this
Agreement (except to the extent that FTDI's negligence or failure to follow
correct instructions received from Bank is the cause of such loss, claim,
liability or expense), (2) any redemption or exchange pursuant to telephone
instructions received from Bank or its agents or employees, or (3) the breach by
Bank of any of the terms and conditions of this Agreement. This Paragraph 5(m)
shall survive the termination of this Agreement.
n) Prospectus and Sales Materials; Limit on Advertising
No person is authorized to give any information or make any representations
concerning shares of any Fund except those contained in the Fund's current
prospectus or in materials issued by FTDI as information supplemental to such
prospectus. FTDI will supply prospectuses, reasonable quantities of supplemental
sale literature, sales bulletins, and additional information as issued. Bank
agrees not to use other advertising or sales material or other material or
literature relating to the Funds except that which (a) conforms to the
requirements of any applicable laws or regulations of any government or
authorized agency in the U.S. or any other country having jurisdiction over the
offering or sale of shares of the Funds, and (b) is approved in writing by FTDI
in advance of such use. Such approval may be withdrawn by FTDI in whole or in
part upon notice to Bank, and Bank shall, upon receipt of such notice,
immediately discontinue the use of such sales literature, sales material and
advertising. Bank is not authorized to modify or translate any such materials
without the prior written consent of FTDI.
o) Customer Information
1) DEFINITION. For purposes of this Paragraph 5(o), "Customer
Information" means customer names and other identifying
information pertaining to one or more Customers which is
furnished by Bank to FTDI in the ordinary course of business
under this Agreement. Customer Information shall not include any
information obtained from any sources other than the Customer or
the Bank.
2) PERMITTED USES. FTDI may use Customer Information to fulfill its
obligations under this Agreement, the Distribution Agreements
between the Funds and FTDI, the Funds' prospectuses, or other
duties imposed by law. In addition, FTDI or its affiliates may
use Customer Information in communications to shareholders to
market the Funds or other investment products or services,
including without limitation variable annuities, variable life
insurance, and retirement plans and related services. FTDI may
also use Customer Information if it obtains Bank's prior written
consent.
3) PROHIBITED USES. Except as stated above, FTDI shall not disclose
Customer Information to third parties, and shall not use Customer
Information in connection with any advertising, marketing or
solicitation of any products or services, provided that Bank
offers or soon expects to offer comparable products or services
to mutual fund customers and has so notified FTDI.
4) SURVIVAL; TERMINATION. The agreements described in this paragraph
5(o) shall survive the termination of this Agreement, but shall
terminate as to any account upon FTDI's receipt of valid
notification of either the termination of that account with Bank
or the transfer of that account to another bank or dealer.
6. CONTINUOUSLY OFFERED CLOSED-END FUNDS
This Paragraph 6 relates solely to shares of Funds that represent a
beneficial interest in the Franklin Floating Rate Trust or that are issued by
any other continuously offered closed-end investment company registered under
the 1940 Act for which FTDI or an affiliate of FTDI serves as principal
underwriter and that periodically repurchases its shares (each, a "Trust").
Shares of a Trust being offered to the public will be registered under the 1933
Act and are expected to be offered during an offering period that may continue
indefinitely ("Continuous Offering Period"). There is no guarantee that such a
continuous offering will be maintained by the Trust. The Continuous Offering
Period, shares of a Trust and certain of the terms on which such shares are
being offered are more fully described in the prospectus of the Trust.
As set forth in a Trust's then current prospectus, FTDI shall provide Bank
with appropriate compensation for purchases of shares of the Trust made by the
Bank for the account of Customers or by Customers. In addition, Bank may be
entitled to a fee for servicing Customers who are shareholders in a Trust,
subject to applicable law. Bank agrees that any repurchases of shares of a Trust
that were originally purchased as Qualifying Sales shall be subject to Paragraph
5(e) hereof.
Bank expressly acknowledges and understands that, notwithstanding anything
to the contrary in this Agreement:
a) No Trust has a Rule 12b-1 Plan and in no event will a Trust pay, or
have any obligation to pay, any compensation directly or indirectly to
Bank.
b) Shares of a Trust will not be repurchased by either the Trust (other
than through repurchase offers by the Trust from time to time, if any)
or by FTDI and no secondary market for such shares exists currently,
or is expected to develop. Any representation as to a repurchase or
tender offer by the Trust, other than that set forth in the Trust's
then current Prospectus, notification letters, reports or other
related material provided by the Trust, is expressly prohibited.
c) An early withdrawal charge payable by shareholders of a Trust to FTDI
may be imposed on shares accepted for repurchase by the Trust that
have been held for less than a stated period, as set forth in the
Trust's then current Prospectus.
d) In the event a Customer cancels his or her order for shares of a Trust
after confirmation, such shares will not be repurchased, remarketed or
otherwise disposed of by or though FTDI.
7. GENERAL
a) Successors and Assignments
This Agreement shall extend to and be binding upon the parties hereto and
their respective successors and assigns; provided that this Agreement will
terminate automatically in the event of its assignment by FTDI. For purposes of
the preceding sentence, the word "assignment" shall have the meaning given to it
in the 1940 Act. Bank may not assign this Agreement without the advance written
consent of FTDI.
b) Paragraph Headings
The paragraph headings of this Agreement are for convenience only, and
shall not be deemed to define, limit, or describe the scope or intent of this
Agreement.
c) Severability
Should any provision of this Agreement be determined to be invalid or
unenforceable under any law, rule, or regulation, that determination shall not
affect the validity or enforceability of any other provision of this Agreement.
d) Waivers
There shall be no waiver of any provision of this Agreement except a
written waiver signed by Bank and FTDI. No written waiver shall be deemed a
continuing waiver or a waiver of any other provision, unless the waiver
expresses such intention.
e) Sole Agreement
This Agreement is the entire agreement of Bank and FTDI and supersedes all
oral negotiations and prior writings.
f) Governing Law
This Agreement shall be construed in accordance with the laws of the State
of California, not including any provision which would require the general
application of the law of another jurisdiction, and shall be binding upon the
parties hereto when signed by FTDI and accepted by Bank, either by Bank's
signature in the space provided below or by Bank's first trade entered after
receipt of this Agreement.
g) Arbitration
Should Bank owe any sum of money to FTDI under or in relation to this
Agreement for the purchase, sale, redemption or repurchase of any Fund shares,
FTDI may offset and recover the amount owed by Bank to FTDI or the Funds from
any amount owed by FTDI to Bank or from any other account Bank has with FTDI,
without notice or demand to Bank. Either party may submit any dispute under this
Agreement to binding arbitration under the commercial arbitration rules of the
American Arbitration Association. Judgment upon any arbitration award may be
entered by any court having jurisdiction.
h) Amendments
FTDI may amend this Agreement at any time by depositing a written notice of
the amendment in the U.S. mail, first class postage pre-paid, addressed to
Bank's address given below. Bank's placement of any Transaction order or
acceptance of any payments after the effective date and receipt of notice of any
such amendment shall constitute Bank's acceptance of the amendment.
i) Term and Termination
This Agreement shall continue in effect until terminated and shall
terminate automatically in the event that Bank ceases to be a "bank" as set
forth in paragraph 2(a) of this Agreement. FTDI or Bank may terminate this
Agreement at any time by written notice to the other, but such termination shall
not affect the payment or repayment of Fees on Transactions prior to the
termination date. Termination also will not affect the indemnities given under
this Agreement.
j) Acceptance; Cumulative Effect
This Agreement is cumulative and supersedes any agreement previously in
effect. It shall be binding upon the parties hereto when signed by FTDI and
accepted by Bank. If Bank has a current agreement with FTDI, Bank's first trade
or acceptance of payments from FTDI after receipt of this Agreement, as it may
be amended pursuant to paragraph 7(h), above, shall constitute Bank's acceptance
of the terms of this Agreement.
Otherwise, Bank's signature below shall constitute Bank's acceptance of
these terms.
FRANKLIN/TEMPLETON DISTRIBUTORS, INC.
By: /s/ Greg Johnson
-----------------------
Greg Johnson, President
777 Mariners Island Blvd.
San Mateo, CA 94404
Attention: Chief Legal Officer (for legal
notices only)
650/312-2000
100 Fountain Parkway
St. Petersburg, Florida 33716
813/299-8712
- --------------------------------------------------------------------------------
To the Bank or Trust Company: If you have not previously signed an agreement
with FTDI for the sale of mutual fund shares to your customers, please complete
and sign this section and return the original to us.
BANK OR TRUST COMPANY:
____________________________________
(Bank's name)
By: ____________________________________
(Signature)
Name: _________________________________
Title: _________________________________
Franklin Templeton Distributors, Inc.
777 Mariners Island Boulevard
San Mateo, CA 94403-7777
May 15, 1998
Re: Amendment of Mutual Fund Purchase and Sales Agreement for Accounts of
Bank and Trust Company Customers - Notice Pursuant to Paragraph 7(h)
Dear Bank or Trust Company:
This letter constitutes notice of amendment of the current Mutual Fund Purchase
and Sales Agreement for Accounts of Bank and Trust Company Customers (the
"Agreement") between Franklin/Templeton Distributors, Inc. ("FTDI") and the bank
or trust company ("the Bank") pursuant to Paragraph 7(h) of the Agreement. The
Agreement is hereby amended as follows:
1. Defined terms in this amendment have the meanings as stated in the
Agreement unless otherwise indicated.
2. Paragraph 5(e) is modified to add the following language:
With respect to shares of each Trust as described in Paragraph 6 of this
Agreement, the total compensation to be paid to FTDI and selected dealers and
their affiliates, including the Bank and the Bank's affiliates, in connection
with the distribution of shares of a Trust will not exceed the underwriting
compensation limitation prescribed by NASD Conduct Rule 2710. The total
underwriting compensation to be paid to FTDI and selected dealers and their
affiliates, including the Bank and the Bank's affiliates, may include: (i) at
the time of purchase of shares a payment to the Bank or a securities dealer of
1% of the dollar amount of the purchased shares by FTDI; and (ii) a quarterly
payment at an annual rate of .50% to the Bank or a securities dealer based on
the value of such remaining shares sold by the Bank or such securities dealer,
if after twelve (12) months from the date of purchase, the shares sold by the
Bank or such securities dealer remain outstanding.
The maximum compensation shall be no more than as disclosed in the section
"Payments to Dealers" of the prospectus of the applicable Trust.
Pursuant to Paragraph 7(h) of the Agreement, the Bank's placement of an order or
acceptance of payments of any kind after the effective date and receipt of
notice of this amendment shall constitute the Bank's acceptance of this
amendment.
FRANKLIN/TEMPLETON DISTRIBUTORS, INC.
By /s/ Greg Johnson
------------------------
Greg Johnson, President
777 Mariners Island Blvd.
San Mateo, CA 94404
Attention: Chief Legal Officer (for legal notices only)
650/312-2000
100 Fountain Parkway
St. Petersburg, FL 33716
813/299-8712
INSTITUTIONAL FIDUCIARY TRUST
777 Mariners Island Blvd.
San Mateo, California 94404
Franklin/Templeton Distributors, Inc
777 Mariners Island Blvd.
San Mateo, CA 94404
Re: Amendment of Amended and Restated Distribution Agreement
Gentlemen:
We (the "Fund") are a corporation or business trust operating as an open-end
management investment company or "mutual fund," which is registered under the
Investment Company Act of 1940, as amended (the "1940 Act") and whose shares
are registered under the Securities Act of 1933, as amended (the "1933
Act"). You have informed us that your company is registered as a
broker-dealer under the provisions of the Securities Exchange Act of 1934, as
amended (the "1934 Act") and that your company is a member of the National
Association of Securities Dealers, Inc.
This agreement is an amendment (the "Amendment") of the Amended and Restated
Distribution Agreement (the "Agreement") currently in effect between you and
us. As used herein all capitalized terms herein have the meanings set forth
in the Agreement. We have been authorized to execute and deliver the
Amendment to you by a resolution of our Board passed at a meeting at which a
majority of Board members, including a majority who are not otherwise
interested persons of the Fund and who are not interested persons of our
investment adviser, its related organizations or of you or your related
organizations, were present and voted in favor of such resolution approving
the Amendment.
To the extent that any provision of the Amendment conflicts with any
provision of the Agreement, the Amendment provision supersedes the Agreement
provision. The Agreement and the Amendment together constitute the entire
agreement between the parties hereto and supersede all prior oral or written
agreements between the parties hereto.
Section 4. entitled "Compensation" is amended by adding the following
sentences at the end of Subsection 4.B:
The compensation provided in the Class B Distribution Plan
applicable to Class B Shares (the "Class B Plan") is divided into a
distribution fee and a service fee, each of which fees is in
compensation for different services to be rendered to the Fund.
Subject to the termination provisions in the Class B Plan, the
distribution fee with respect to the sale of a Class B Share shall
be earned when such Class B Share is sold and shall be payable from
time to time as provided in the Class B Plan. The distribution fee
payable to you as provided in the Class B Plan shall be payable
without offset, defense or counterclaim (it being understood by the
parties hereto that nothing in this sentence shall be deemed a
waiver by the Fund of any claim the Fund may have against you).
You may direct the Fund to cause our custodian to pay such
distribution fee to Lightning Finance Company Limited ("LFL") or
other persons providing funds to you to cover expenses referred to
in Section 2(a) of the Class B Plan and to cause our custodian to
pay the service fee to you for payment to dealers or others or
directly to others to cover expenses referred to in Section 2(b) of
the Class B Plan.
We understand that you intend to assign your right to receive
certain distribution fees with respect to Class B Shares to LFL in
exchange for funds that you will use to cover expenses referred to
in Section 2(a) of the Class B Plan. In recognition that we will
benefit from your arrangement with LFL, we agree that, in addition
to the provisions of Section 7 (iii) of the Class B Plan, we will
not pay to any person or entity, other than LFL, any such assigned
distribution fees related to Class B Shares sold by you prior to
the termination of either the Agreement or the Class B Plan. We
agree that the preceding sentence shall survive termination of the
Agreement.
Section 4. entitled "Compensation" is amended by adding the following
Subsection 4.C. after Subsection 4.B.:
C. With respect to the sales commission on the redemption of
Shares of each series and class of the Fund as provided in
Subsection 4.A. above, we will cause our shareholder services agent
(the "Transfer Agent") to withhold from redemption proceeds payable
to holders of the Shares all contingent deferred sales charges
properly payable by such holders in accordance with the terms of
our then current prospectuses and statements of additional
information (each such sales charge, a "CDSC"). Upon receipt of an
order for redemption, the Transfer Agent shall direct our custodian
to transfer such redemption proceeds to a general trust account.
We shall then cause the Transfer Agent to pay over to you or your
assigns from the general trust account such CDSCs properly payable
by such holders as promptly as possible after the settlement date
for each such redemption of Shares. CDSCs shall be payable without
offset, defense or counterclaim (it being understood that nothing
in this sentence shall be deemed a waiver by us of any claim we may
have against you.) You may direct that the CDSCs payable to you be
paid to any other person.
Section 11. entitled "Conduct of Business" is amended by replacing the
reference in the second paragraph to "Rules of Fair Practice" with a
reference to the "Conduct Rules".
Section 16. entitled "Miscellaneous" is amended in the first paragraph by
changing the first letter of each of the words in each of the terms in
quotations marks, except "Parent," to the lower case and giving to the term
"assignment" the meaning as set forth only in the 1940 Act and the Rules and
Regulations thereunder (and not as set forth in the 1933 Act and the Rules
and Regulations thereunder.)
If the foregoing meets with your approval, please acknowledge your acceptance
by signing each of the enclosed copies, whereupon this will become a binding
agreement as of the date set forth below.
Very truly yours,
INSTITUTIONAL FIDUCIARY TRUST
By: /S/ DEBORAH R. GATZEK
---------------------
Deborah R. Gatzek
Vice President & Secretary
Accepted:
Franklin/Templeton Distributors, Inc.
By: /S/ HARMON E. BURNS
-------------------
Harmon E. Burns
Executive Vice President
Dated: January 12, 1999
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in Post-Effective Amendment No. 29
to the Registration Statement of Institutional Fiduciary Trust on Form N-1A File
No. 2-96634 of our reports dated August 3, 1999 on our audit of the financial
statements and financial highlights of the Institutional Fiduciary Trust 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."
/s/ PricewaterhouseCoopers LLP
San Francisco, California
August 26, 1999
POWER OF ATTORNEY
The undersigned officers and trustees of INSTITUTIONAL FIDUCIARY TRUST (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
Charles E. Johnson, Charles B. Johnson,
Principal Executive Officer Trustee
and Trustee
/S/ FRANK H. ABBOTT, III /S/ HARRIS J. ASHTON
Frank H. Abbott, III, Harris J. Ashton,
Trustee Trustee
/S/ ROBERT F. CARLSON /S/ S. JOSEPH FORTUNATO
Robert F. Carlson, S. Joseph Fortunato,
Trustee Trustee
/S/ RUPERT H. JOHNSON, JR. /S/ FRANK W.T. LAHAYE
Rupert H. Johnson, Jr., Frank W.T. LaHaye,
Trustee Trustee
/S/ GORDON S. MACKLIN /S/ MARTIN L. FLANAGAN
Gordon S. Macklin, Martin L. Flanagan,
Trustee Principal Financial Officer
/S/ DIOMEDES LOO-TAM
Diomedes Loo-Tam,
Principal Accounting Officer
POWER OF ATTORNEY
The undersigned officers and trustees of THE MONEY MARKET PORTFOLIOS (the
"Registrant") hereby appoint 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
Charles E. Johnson, Charles B. Johnson,
Principal Executive Officer Trustee
and Trustee
/S/ FRANK H. ABBOTT, III /S/ HARRIS J. ASHTON
Frank H. Abbott, III, Harris J. Ashton,
Trustee Trustee
/S/ ROBERT F. CARLSON /S/ S. JOSEPH FORTUNATO
Robert F. Carlson, S. Joseph Fortunato,
Trustee Trustee
/S/ RUPERT H. JOHNSON, JR. /S/ FRANK W.T. LAHAYE
Rupert H. Johnson, Jr., Frank W.T. LaHaye,
Trustee Trustee
/S/ GORDON S. MACKLIN /S/ MARTIN L. FLANAGAN
Gordon S. Macklin, Martin L. Flanagan,
Trustee Principal Financial Officer
/S/ DIOMEDES LOO-TAM
Diomedes Loo-Tam,
Principal Accounting Officer
