PROSPECTUS
FRANKLIN
CALIFORNIA
TAX-FREE TRUST
NOVEMBER 1, 1998 AS AMENDED JUNE 21, 1999
INVESTMENT STRATEGY
TAX-FREE INCOME
FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND
FRANKLIN CALIFORNIA INTERMEDIATE-TERM TAX-FREE INCOME FUND
FRANKLIN CALIFORNIA TAX-EXEMPT MONEY FUND
Please read this prospectus before investing, and keep it for future
reference. It contains important information, including how each fund invests
and the services available to shareholders.
To learn more about each fund and its policies, you may request a copy of the
funds' Statement of Additional Information ("SAI"), dated November 1, 1998,
which we may amend from time to time. We have filed the SAI with the SEC and
have incorporated it by reference into this prospectus.
For a free copy of the SAI or a larger print version of this prospectus,
contact your investment representative or call 1-800/DIAL BEN.
An investment in the Money Fund is neither insured nor guaranteed by the U.S.
government. There can be no assurance that the fund will be able to maintain
a stable $1 share price.
The Money Fund may invest a significant percentage of its assets in the
securities of a single issuer. Thus, an investment in the Money Fund may
involve more risk than an investment in other types of money market funds.
Mutual fund shares are not deposits or obligations of, or guaranteed or
endorsed by, any bank, and are not federally insured by the Federal Deposit
Insurance Corporation, the Federal Reserve Board, or any other agency of the
U.S. government. Mutual fund shares involve investment risks, including the
possible loss of principal.
The SEC has not approved or disapproved these securities or passed upon the
adequacy of this prospectus. Any representation to the contrary is a criminal
offense.
FRANKLIN CALIFORNIA TAX-FREE TRUST
THIS PROSPECTUS IS NOT AN OFFERING OF THE SECURITIES HEREIN DESCRIBED IN ANY
STATE, JURISDICTION OR COUNTRY IN WHICH THE OFFERING IS NOT AUTHORIZED. NO
SALES REPRESENTATIVE, DEALER, OR OTHER PERSON IS AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS. FURTHER INFORMATION MAY BE OBTAINED FROM DISTRIBUTORS.
TABLE OF CONTENTS
ABOUT THE FUNDS
Expense Summary ............................................ 2
Financial Highlights ....................................... 4
How Do the Funds Invest Their Assets? ...................... 7
What Are the Risks of Investing in the Funds? .............. 12
Who Manages the Funds? ..................................... 14
How Taxation Affects the Funds and Their Shareholders....... 18
How Is the Trust Organized? ................................ 21
ABOUT YOUR ACCOUNT
How Do I Buy Shares? ....................................... 22
May I Exchange Shares for Shares of Another Fund? .......... 30
How Do I Sell Shares? ...................................... 34
What Distributions Might I Receive From the Funds? ......... 37
Transaction Procedures and Special Requirements ............ 39
Services to Help You Manage Your Account ................... 43
What If I Have Questions About My Account? ................. 46
GLOSSARY
Useful Terms and Definitions................................ 46
FRANKLIN
CALIFORNIA
TAX-FREE
TRUST
November 1, 1998
as amended June 21, 1999
When reading this prospectus, you will see certain terms beginning with
capital letters. This means the term is explained in our glossary section.
P.O. Box 997151
Sacramento, CA
95899-9983
1-800/DIAL BEN(R)
ABOUT THE FUNDS
EXPENSE SUMMARY
This table is designed to help you understand the costs of investing in a
fund. It is based on the historical expenses of each fund for the fiscal year
ended June 30, 1998. Each fund's actual expenses may vary.
Insured Insured
Fund - Fund - Intermediate Money
Class A1 Class C1 Fund Fund
A. SHAREHOLDER TRANSACTION EXPENSES+
Maximum Sales Charge (as a
percentage of Offering Price) 4.25% 1.99% 2.25% None
Paid at time of purchase 4.25%++ 1.00%+++ 2.25%++ None
Paid at redemption..... None++++ 0.99%++++ None++++ None
Exchange Fee (per transaction) None None None None*
B. ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees.......... 0.47% 0.47% 0.60%** 0.49%
Rule 12b-1 Fees.......... 0.09%*** 0.65%*** 0.10%*** None
Other Expenses........... 0.04% 0.04% 0.08% 0.11%
---------------------------------------
Total Fund Operating Expenses 0.60% 1.16% 0.78%** 0.60%
==========================================
C. EXAMPLE
Assume the annual return for each fund is 5%, operating expenses are as
described above, and you sell your shares after the number of years shown.
These are the projected expenses for each $1,000 that you invest in a fund.
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------------------------------------------------------------------
Insured Fund - Class A . $48**** $61 $75 $114
Insured Fund - Class C . $32 $46 $73 $149
Intermediate Fund ...... $30**** $47 $65 $117
Money Fund ............. $ 6 $19 $33 $ 75
For the same Class C investment in the Insured Fund, you would pay projected
expenses of $22 if you did not sell your shares at the end of the first year.
Your projected expenses for the remaining periods would be the same.
THIS IS JUST AN EXAMPLE. IT DOES NOT REPRESENT PAST OR FUTURE EXPENSES OR
RETURNS. ACTUAL EXPENSES AND RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN.
Each fund pays its operating expenses. The effects of these expenses are
reflected in the Net Asset Value or dividends of each fund and are not
directly charged to your account.
1. Before January 1, 1999, Class A shares were designated Class I and Class C
shares were designated Class II.
+If your transaction is processed through your Securities Dealer, you may be
charged a fee by your Securities Dealer for this service.
++There is no front-end sales charge if you invest $1 million or more in
Class A shares.
+++Although Class C has a lower front-end sales charge than Class A, its Rule
12b-1 fees are higher. Over time you may pay more for Class C shares. Please
see "How Do I Buy Shares? - Choosing a Share Class - Insured Fund Only."
++++A Contingent Deferred Sales Charge may apply to any Class C purchase if
you sell the shares within 18 months and to Class A purchases of $1 million
or more if you sell the shares within one year. The charge is 1% of the value
of the shares sold or the Net Asset Value at the time of purchase, whichever
is less. The number in the table shows the charge as a percentage of Offering
Price. While the percentage is different depending on whether the charge is
shown based on the Net Asset Value or the Offering Price, the dollar amount
you would pay is the same. See "How Do I Sell Shares? - Contingent Deferred
Sales Charge" for details.
*There is a $5.00 fee charged by Investor Services for exchanges by Market
Timers.
**For the period shown, the manager had agreed in advance to limit its
management fees. With this reduction, management fees were 0.34% and total
operating expenses were 0.52%.
***These fees may not exceed 0.10% for the Intermediate Fund and Class A of
the Insured Fund. For Class C of the Insured Fund, these fees may not exceed
0.65%. The combination of front-end sales charges and Rule 12b-1 fees could
cause long-term shareholders to pay more than the economic equivalent of the
maximum front-end sales charge permitted under the rules of the National
Association of Securities Dealers, Inc.
****Assumes a Contingent Deferred Sales Charge will not apply.
FINANCIAL HIGHLIGHTS
This table summarizes each fund's financial history. The information has been
audited by PricewaterhouseCoopers LLP, the funds' independent auditor. The
audit report covering each of the most recent five years appears in the
Trust's Annual Report to Shareholders for the fiscal year ended June 30,
1998. The Annual Report to Shareholders also includes more information about
each fund's performance. For a free copy, please call Fund Information.
<TABLE>
<CAPTION>
INSURED FUND
CLASS A
YEAR ENDED JUNE 30,
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value,
beginning of year $12.22 $12.01 $11.95 $11.74 $12.30 $11.67 $11.26 $11.17 $11.27 $10.53
--------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income .64 .66 .67 .68 .68 .69 .70 .74 .74 .74
Net realized and
unrealized gains (losses) .37 .21 .06 .20 (.56) .64 .46 .09 (.10) .71
--------------------------------------------------------------------------------------
Total from investment
operations 1.01 .87 .73 .88 .12 1.33 1.16 .83 .64 1.45
--------------------------------------------------------------------------------------
Less distributions from:
Net investment income (.64) (.66) (.67) (.67) (.68) (.70) (.75) (.74) (.74) (.71)
Net realized gains (.12) - - - - - - - - -
--------------------------------------------------------------------------------------
Total distributions (.76) (.66) (.67) (.67) (.68) (.70) (.75) (.74) (.74) (.71)
--------------------------------------------------------------------------------------
Net asset value, end of year $12.47 $12.22 $12.01 $11.95 $11.74 $12.30 $11.67 $11.26 $11.17 $11.27
======================================================================================
Total return+ 8.38% 7.41% 6.18% 7.80% .67% 11.47% 10.32% 7.45% 5.59% 13.97%
Ratios/supplemental data
Net assets, end of year
(millions) $1,717 $1,636 $1,589 $1,468 $1,451 $1,364 $968 $472 $307 $248
Ratios to average net assets:
Expenses .60% .60% .60% .59% .54% .53% .55% .57% .59% .61%
Net investment income 5.11% 5.41% 5.50% 5.77% 5.53% 5.82% 6.16% 6.48% 6.63% 6.79%
Portfolio turnover rate 21.66% 20.40% 14.22% 11.85% 6.98% 8.28% 3.50% 4.20% 10.41% 28.56%
CLASS C
YEAR ENDED JUNE 30,
1998 1997 1996 1995***
-------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year $12.29 $12.07 $11.99 $11.88
-------------------------------------------------
Income from investment operations:
Net investment income .58 .59 .60 .11
Net realized and unrealized gains .37 .22 .08 .10
-------------------------------------------------
Total from investment operations .95 .81 .68 .21
-------------------------------------------------
Less distributions from:
Net investment income (.57) (.59) (.60) (.10)
Net realized gains (.12) - - -
-------------------------------------------------
Total distributions (.69) (.59) (.60) (.10)
-------------------------------------------------
Net asset value, end of year $12.55 $12.29 $12.07 $11.99
=================================================
Total return+ 7.80% 6.86% 5.70% 1.79%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) $55,371 $34,899 $18,458 $507
Ratios to average net assets:
Expenses 1.16% 1.16% 1.17% 1.17%*
Net investment income 4.55% 4.81% 4.96% 5.03%*
Portfolio turnover rate 21.66% 20.40% 14.22% 11.85%
INTERMEDIATE FUND
YEAR ENDED JUNE 30,
-------------------------------------------------------
1998 1997 1996 1995 1994 1993**
-------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year $10.93 $10.67 $10.38 $10.20 $10.55 $10.00
-------------------------------------------------------
Income from investment operations:
Net investment income .53 .53 .53 .54 .54 .29
Net realized and unrealized gains (losses) .31 .26 .29 .17 (.36) .55
-------------------------------------------------------
Total from investment operations .84 .79 .82 .71 .18 .84
-------------------------------------------------------
Less distributions from net investment income (.53) (.53) (.53) (.53) (.53) (.29)
---------------------------------------------------------
Net asset value, end of year $11.24 $10.93 $10.67 $10.38 $10.20 $10.55
=======================================================
Total return+ 7.76% 7.58% 7.96% 7.19% 1.65% 10.95%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (millions) $156 $118 $101 $89 $94 $43
Ratios to average net assets:
Expenses .52% .47% .45% .33% .25% .09%*
Expenses excluding waiver
and payments by affiliate .78% .80% .81% .83% .80% .95%*
Net investment income 4.76% 4.96% 4.99% 5.34% 5.11% 4.73%*
Portfolio turnover rate 9.58% 6.29% 10.13% 10.90% 14.95% .08%
MONEY FUND
YEAR ENDED JUNE 30,
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value,
beginning of year $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
--------------------------------------------------------------------------------------
Net investment income .03 .03 .03 .03 .02 .02 .03 .05 .06 .06
Less distributions from
net investment income (.03) (.03) (.03) (.03) (.02) (.02) (.03) (.05) (.06) (.06)
--------------------------------------------------------------------------------------
Net asset value, end of year $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
======================================================================================
Total return+ 2.85% 2.85% 2.85% 2.94% 1.83% 2.08% 3.17% 4.58% 5.61% 5.67%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (millions) $657 $640 $598 $642 $754 $653 $759 $954 $1,039 $807
Ratios to average net assets:
Expenses .60% .60% .63% .64% .61% .62% .60% .57% .55% .55%
Net investment income 2.82% 2.83% 2.83% 2.88% 1.82% 2.07% 3.14% 4.47% 5.36% 5.57%
</TABLE>
*ANNUALIZED.
**FOR THE PERIOD SEPTEMBER 21, 1992 (EFFECTIVE DATE) TO JUNE 30, 1993.
***FOR THE PERIOD MAY 1, 1995 (EFFECTIVE DATE) TO JUNE 30, 1995.
+TOTAL RETURN DOES NOT REFLECT SALES COMMISSIONS OR THE CONTINGENT DEFERRED
SALES CHARGE, AND IS NOT ANNUALIZED. BEFORE MAY 1, 1994, THE INSURED FUND'S
DIVIDENDS FROM NET INVESTMENT INCOME WERE REINVESTED AT THE OFFERING PRICE.
HOW DO THE FUNDS INVEST THEIR ASSETS?
A QUICK LOOK AT THE FUNDS
CALIFORNIA CALIFORNIA TAX-EXEMPT
CALIFORNIA INSURED INTERMEDIATE-TERM MONEY FUND
TAX-FREE INCOME FUND TAX-FREE INCOME FUND
GOAL: High current GOAL: High current GOAL: High current
tax-free income for tax-free income for tax-free income for
California residents. California residents. California residents
while trying to
STRATEGY: Invests STRATEGY: Invests in maintain a stable $1
primarily in municipal investment grade share price.
securities covered by municipal securities
insurance guaranteeing whose interest is STRATEGY: Invests in
the timely payment of free from federal and high-quality,
principal and interest California personal short-term municipal
and whose interest is income taxes and securities whose
free from federal and maintains a interest is free from
California personal dollar-weighted federal and
income taxes. average portfolio California personal
maturity of three to income taxes.
10 years.
WHAT IS THE MANAGER'S APPROACH?
The funds' investment manager tries to select securities that it believes
will provide the best balance between risk and return within each fund's
range of allowable investments. The manager considers a number of factors,
including general market and economic conditions and the credit quality of
the issuer. The manager may also consider the cost of insurance when
selecting securities for the Insured Fund.
To provide tax-free income to shareholders, the manager typically uses a buy
and hold strategy. This means it holds securities in a fund's portfolio for
income purposes, rather than trading securities for capital gains. The
manager may sell a security at any time, however, when it believes doing so
could help the fund meet its goal.
While income is the most important part of return over time, the total return
from a municipal security includes both income and price gains or losses.
Each fund's focus on income does not mean it invests only in the
highest-yielding securities available, or that it can avoid losses of
principal.
WHO MAY WANT TO INVEST?
The funds may be appropriate for investors in higher tax brackets who seek
high current income that is free from federal and California personal income
taxes. Each fund's level of risk and potential reward depends on the quality
and maturity of its investments.
The Money Fund, like all money funds, follows SEC guidelines on the quality,
maturity and diversification of its investments. These guidelines are
designed to help reduce a money fund's risks so that it is more likely to
maintain its $1 share price. Unlike the Money Fund, the share price of the
Insured and Intermediate funds fluctuates. With their broader range of
investments, the Insured and Intermediate funds have the potential for higher
yields, but also carry a higher degree of risk. Please consider your
investment goals and tolerance for price fluctuations and risk when making
your investment decision.
The value of each fund's investments and the income they generate will vary
from day to day, and generally reflect interest rates, market conditions, and
other federal and state political and economic news. When you sell your
shares, they may be worth more or less than what you paid for them.
THE FUNDS IN MORE DETAIL
WHAT ARE THE FUNDS' GOALS?
The investment goal of each fund is to provide investors with as high a level
of income exempt from federal income taxes and California personal income
taxes as is consistent with prudent investment management and the
preservation of shareholders' capital. This goal is fundamental, which means
that it may not be changed without shareholder approval. The Money Fund also
seeks liquidity in its investments and tries to maintain
a stable Net Asset Value of $1 per share.
WHAT KINDS OF SECURITIES DO THE FUNDS BUY?
Each fund tries to invest all of its assets in tax-free municipal securities,
including bonds, notes and commercial paper.
Municipal securities are issued by state and local governments, their
agencies and authorities, as well as by the District of Columbia and U.S.
territories and possessions, to borrow money for various public or private
projects. The issuer pays a fixed or variable rate of interest, and must
repay the amount borrowed (the "principal") at maturity.
MUNICIPAL SECURITIES generally pay interest free from federal income tax.
Municipal securities issued by California or its counties, municipalities,
authorities, agencies, or other subdivisions ("California municipal
securities"), as well as municipal securities issued by U.S. territories such
as Guam, Puerto Rico, or the U.S. Virgin Islands, also generally pay interest
free from California personal income taxes for California residents.
Each fund normally invests:
o at least 80% of its assets in securities that pay interest free
from federal income taxes, including the federal alternative minimum tax
(this policy is fundamental). Each fund applies this test to its net
assets, except for the Intermediate Fund, which applies the test to its
total assets;
o at least 80% of its net assets in securities that pay interest free
from California personal income taxes, although each fund tries to invest
all of its assets in these securities (this policy is also fundamental and
does not apply to the Intermediate Fund). The Intermediate Fund normally
invests at least 65% of its total assets in securities that pay interest
free from California personal income taxes, although it tries to invest all
of its assets in these securities; and
o at least 65% of its total assets in California municipal securities.
While each fund tries to invest 100% of its assets in tax-free municipal
securities, it is possible, although not anticipated, that a fund may have a
significant amount of its assets in securities that pay taxable interest. If
you are subject to the federal alternative minimum tax, please keep in mind
that each fund may also have a portion of its assets in municipal securities
that pay interest subject to the federal alternative minimum tax.
QUALITY. All things being equal, the lower a security's credit quality, the
higher the risk and the higher the yield the security generally must pay as
compensation to investors for the higher risk.
A security's credit quality depends on the issuer's ability to pay interest
on the security and, ultimately, to repay the principal. Independent rating
agencies, such as Fitch, Moody's and S&P, often rate municipal securities
based on their opinion of the issuer's credit quality. Most rating agencies
use a descending alphabet scale to rate long-term securities, and a
descending numerical scale to rate short-term securities. For example, Fitch
and S&P use AAA, AA, A and BBB for their top four long-term ratings, while
Moody's uses Aaa, Aa, A and Baa. Securities rated in the highest rating
category are "top rated." Securities in the top four ratings are "investment
grade," although securities in the fourth highest rating may have some
speculative features. These ratings are described in more detail
in the SAI.
An insurance company, bank or other foreign or domestic entity may provide
credit support for a municipal security and enhance its credit quality. For
example, some municipal securities are insured, which means they are covered
by an insurance policy that insures the timely payment of principal and
interest. Other municipal securities may be backed by letters of credit,
guarantees, or escrow or trust accounts that contain securities backed by the
full faith and credit of the U.S. government to secure the payment of
principal and interest.
o The Insured Fund invests at least 65% of its total assets in
insured municipal securities. The fund pays insurance premiums either
directly or indirectly, which increases the credit safety of its insured
investments, but decreases its yield. It is important to note that the
insurance does not guarantee the market value of a security, or the fund's
shares or distributions, and shares of the fund are not insured.
The Insured Fund may invest the balance of its assets in the following
types of uninsured securities: (i) municipal securities secured by an
escrow or trust account containing direct U.S. government obligations; (ii)
securities rated in one of the top three ratings or unrated securities that
the manager believes are comparable in quality; or (iii) top rated
short-term, tax-exempt securities, pending investment in longer-term
municipal securities. The fund may only invest up to 20% of its total
assets in the type of securities described in (ii) above.
o The Intermediate Fund only buys investment grade securities or
unrated securities that the manager believes are comparable.
o The Money Fund only buys securities that the manager determines
present minimal credit risks and that are rated in one of the top two
ratings or that are comparable unrated securities in the manager's opinion.
MATURITY. Municipal securities are issued with a specific maturity date - the
date when the issuer must repay the amount borrowed. Maturities typically
range from less than one year (short term) to 30 years (long term). In
general, securities with longer maturities are more sensitive to price
changes, although they may provide higher yields.
o The Insured Fund has no restrictions on the maturity of the
securities it may buy or on its average portfolio maturity.
o The Intermediate Fund may buy securities with any maturity but must
maintain a dollar-weighted average portfolio maturity of three to 10 years.
o The Money Fund only buys securities with remaining maturities of
397 calendar days or less and maintains a dollar-weighted average portfolio
maturity of 90 days or less.
VARIABLE AND FLOATING RATE SECURITIES have interest rates that change either
at specific intervals or whenever a benchmark rate changes. While this
feature helps to protect against a decline in the security's market price, it
also lowers a fund's income when interest rates fall. Of course, a fund's
income from its variable rate investments may also increase if interest rates
rise.
o The Insured Fund may invest in top rated variable and floating rate
securities.
o The Intermediate Fund may invest in investment grade variable and
floating rate securities.
o The Money Fund may buy certain types of variable and floating rate
securities if they are consistent with the fund's goal of maintaining a
stable share price.
MUNICIPAL LEASE OBLIGATIONS finance the purchase of public property. The
property is leased to the state or a local government, and the lease payments
are used to pay the interest on the obligations. Municipal lease obligations
differ from other municipal securities because the lessee's governing body
must set aside the money to make the lease payments each year. If the money
is not set aside, the issuer or the lessee can end the lease without penalty.
If the lease is cancelled, investors who own the municipal lease obligations
may not be paid.
o Each fund may invest in municipal lease obligations without limit,
if the obligations meet the fund's quality and maturity standards.
WHAT ARE SOME OF THE FUNDS' OTHER INVESTMENT STRATEGIES AND PRACTICES?
TEMPORARY INVESTMENTS. When the manager believes unusual or adverse economic,
market or other conditions exist, it may invest a fund's portfolio in a
temporary defensive manner. Under these circumstances, each fund may invest
all of its assets in securities that pay taxable interest, including (i)
municipal securities issued by a state or local government other than
California, or by a U.S. territory such as Guam, Puerto Rico or the U.S.
Virgin Islands; (ii) high quality commercial paper; or (iii) securities
issued or guaranteed by the full faith and credit of the U.S. government.
During these times, the Money Fund may also invest in obligations of U.S.
banks with assets of $1 billion or more.
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.
DIVERSIFICATION. Diversification involves limiting the amount of money
invested in any one issuer or, on a broader scale, in any one state or type
of project to help spread and reduce the risks of investment. A fund can be
either diversified or non-diversified. A non-diversified fund may invest a
greater portion of its assets in the securities of one issuer than a
diversified fund. Economic, business, political or other changes can affect
all securities of a similar type. A non-diversified fund may be more
sensitive to these changes.
o The Intermediate Fund is a non-diversified fund, although it
intends to meet certain diversification requirements for tax purposes. The
Insured and Money funds are diversified. Each fund may, however, invest
more than 25% of its assets in municipal securities that finance similar
types of projects, such as hospitals, housing, industrial development,
transportation or pollution control.
OTHER POLICIES AND RESTRICTIONS. Each fund has a number of additional
investment policies and restrictions that govern its activities. Those that
are identified as "fundamental" may only be changed with shareholder
approval. The others may be changed by the Board alone. For a list of these
restrictions and more information about each fund's investment policies,
including those described above, please see "How Do the Funds Invest Their
Assets?" and "Investment Restrictions" in the SAI.
Generally, the policies and restrictions discussed in this prospectus and in
the SAI apply when a fund makes an investment. In most cases, a 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.
WHAT ARE THE RISKS OF INVESTING IN THE FUNDS?
Like all investments, an investment in a fund involves risks. The risks of
each fund are basically the same as those of other investments in municipal
securities of similar quality, although an investment in the fund may involve
more risk than an investment in a fund that does not focus on securities of a
single state. Because each fund holds many securities, it is likely to be
less risky than any one, or few, directly held municipal investments.
GENERAL RISK. There is no assurance that a fund will meet its investment
goal. A fund's share price, and the value of your investment, may change.
Generally, when the value of a fund's investments go down, so does the fund's
share price. Similarly, when the value of a fund's investments go up, so does
the fund's share price. Since the value of a fund's shares can go up or down,
it is possible to lose money by investing in the fund. The Money Fund,
however, tries to maintain a stable share price of $1, although there is no
assurance that the Money Fund will be able to do so.
INTEREST RATE RISK is the risk that changes in interest rates can reduce the
value of a security. When interest rates rise, municipal security prices
fall. The opposite is also true: municipal security prices go up when
interest rates fall. To explain why this is so, assume you hold a municipal
security offering a 5% yield. A year later, interest rates are on the rise
and comparable securities are offered with a 6% yield. With higher-yielding
securities available, you would have trouble selling your 5% security for the
price you paid - causing you to lower your asking price. On the other hand,
if interest rates were falling and 4% municipal securities were being
offered, you would be able to sell your 5% security for more than you paid.
INCOME RISK is the risk that a fund's income will decrease due to falling
interest rates. Since a fund can only distribute what it earns, a fund's
distributions to its shareholders may decline when interest rates fall.
CREDIT RISK is the possibility that an issuer will be unable to make interest
payments or repay principal. Changes in an issuer's financial strength or in
a security's credit rating may affect its value. Even securities supported by
credit enhancements have the credit risk of the entity providing the credit
support. Credit support provided by a foreign entity may be less certain
because of the possibility of adverse foreign economic, political or legal
developments that may affect the ability of that foreign entity to meet its
obligations. Changes in the credit quality of the credit provider could
affect the value of the security and the fund's share price. The Money Fund's
ability to maintain a stable share price may depend on these credit supports,
which are not backed by federal deposit insurance.
MARKET RISK is the risk that a security's value will 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
increase.
CALL RISK is the likelihood that a security will be prepaid (or "called")
before maturity. An issuer is more likely to call its bonds when interest
rates are falling, because the issuer can issue new bonds with lower interest
payments. If a bond is called, a fund may have to replace it with a
lower-yielding security. At any time, a fund may have a large amount of its
assets invested in municipal securities subject to call risk, including
escrow-secured or defeased bonds. A call of some or all of these securities
may lower the fund's income and its distributions to shareholders.
CALIFORNIA RISKS. Since the funds invest heavily in California municipal
securities, events in California are likely to affect a fund's investments
and its performance. These events may include:
o economic or political policy changes;
o tax base erosion;
o state constitutional limits on tax increases;
o budget deficits and other financial difficulties; and
o changes in the ratings assigned to California's municipal issuers.
A negative change in any one of these or other areas could affect the ability
of California's municipal issuers to meet their obligations. In recent years,
certain issuers in California have experienced financial difficulties, such
as the 1994 bankruptcy of Orange County. It is important to remember that
economic, budget and other conditions within California are unpredictable and
can change at any time.
U.S. TERRITORIES RISKS. Each fund may invest up to 35% of its assets in
municipal securities issued by U.S. territories such as Guam, Puerto Rico or
the U.S. Virgin Islands. As with California municipal securities, events in
any of these territories where a fund invests may affect the fund's
investments and its performance.
YEAR 2000. When evaluating current and potential portfolio positions, Year
2000 is one of the factors the manager considers.
Municipal issuers generally are not required to report on their Year 2000
readiness. This makes it more difficult for the manager to evaluate their
readiness. There have been reports, however, that many municipal issuers are
behind in their efforts to address the Year 2000 problem. The manager, of
course, cannot audit each issuer and its major suppliers to verify their Year
2000 readiness. The manager is making extensive efforts, however, to contact
the issuers of municipal securities held by the fund to try to assess their
Year 2000 readiness.
If an issuer in which a fund is invested is adversely affected by Year 2000
problems, it is possible that the issuer's ability to make timely interest
and principal payments also will be affected, at least temporarily. This may
affect both the amount and timing of a fund's distributions and a fund's
performance. It also is likely that the price of the issuer's securities will
be adversely affected. A decrease in the value of one or more of the fund's
portfolio holdings will have a similar impact on the fund's performance.
Please see "Year 2000 Issue" under "Who Manages the Funds?" for more
information.
FOR MORE INFORMATION ABOUT THE FUNDS' RISKS. The funds' SAI also has
information about each fund's investment policies and risks, including
specific information on California's economy and financial strength. Please
see "How Do the Funds Invest Their Assets?" and "What Are the Risks of
Investing in the Funds?" in the SAI.
WHO MANAGES THE FUNDS?
THE BOARD. The Board oversees the management of each fund and elects its
officers. The officers are responsible for each fund's day-to-day operations.
The Board also monitors the Insured Fund to ensure no material conflicts
exist among the fund's classes of shares. While none is expected, the Board
will act appropriately to resolve any material conflict that may arise.
INVESTMENT MANAGER. Franklin Advisers, Inc. manages each fund's assets and
makes its investment decisions. The manager also performs similar services
for other funds. It is wholly owned by Resources, a publicly owned company
engaged in the financial services industry through its subsidiaries. Charles
B. Johnson and Rupert H. Johnson, Jr. are the principal shareholders of
Resources. Together, the manager and its affiliates manage over $216 billion
in assets, including more than $51 billion in the municipal securities
market. Please see "Investment Management and Other Services" and
"Miscellaneous Information" in the SAI for information on securities
transactions and a summary of the funds' Code of Ethics.
MANAGEMENT TEAM. The team responsible for the day-to-day management of each
fund's portfolio is:
Thomas Kenny
Executive Vice President of Franklin Advisers, Inc.
Mr. Kenny has been an analyst or portfolio manager for the Intermediate Fund
since inception and the Insured and Money funds since 1987. He is the
Director of Franklin's Municipal Bond Department. He holds a Master of
Science degree in Finance from Golden Gate University and a Bachelor of Arts
degree in Business and Economics from the University of California at Santa
Barbara. Mr. Kenny joined the Franklin Templeton Group in 1986. He is a
member of several securities industry-related committees and associations.
Carrie Higgins
Portfolio Manager of Franklin Advisers, Inc.
Ms. Higgins has been an analyst or portfolio manager for the Money Fund since
1992. She holds a Bachelor of Science degree in Economics from the University
of California at Davis. She joined the Franklin Templeton Group in 1990. She
is a member of several securities industry-related committees and
associations.
John Pomeroy
Vice President of Franklin Advisers, Inc.
Mr. Pomeroy has been an analyst or portfolio manager for the Money Fund since
1989. He holds a Bachelor of Science degree in Finance from San Francisco State
University. He joined the Franklin Templeton Group in 1986. He is a member of
several securities industry-related committees and associations.
Bernard Schroer
Senior Vice President of Franklin Advisers, Inc.
Mr. Schroer has been an analyst or portfolio manager for the Insured Fund
since 1987 and the Intermediate Fund since inception. He holds a Bachelor of
Arts degree in Finance from Santa Clara University. He has been with the
Franklin Templeton Group since 1987. He is a member of several securities
industry-related committees and associations.
John Wiley
Vice President of Franklin Advisers, Inc.
Mr. Wiley has been an analyst or portfolio manager for the Insured Fund since
1991 and the Intermediate Fund since inception. He holds a Master of Business
Administration degree in Finance from Saint Mary's College and a Bachelor of
Science degree from the University of California at Berkeley. He joined the
Franklin Templeton Group in 1989. He is a member of several securities
industry-related committees and associations.
MANAGEMENT FEES. During the fiscal year ended June 30, 1998, management fees
paid to the manager and total operating expenses, as a percentage of average
net assets, were as follows:
TOTAL
MANAGEMENT OPERATING
FEES EXPENSES
Insured Fund - Class A......... 0.47% 0.60%
Insured Fund - Class C ........ 0.47% 1.16%
Intermediate Fund ............. 0.34%* 0.52%*
Money Fund .................... 0.49% 0.60%
*Management fees, before any advance waiver, totaled 0.60% and total
operating expenses were 0.78%. Under an agreement by the manager to limit its
fees, the Intermediate Fund paid the management fees and total operating
expenses shown. The manager may end this arrangement at any time upon notice
to the Board.
PORTFOLIO TRANSACTIONS. The manager tries to obtain the best execution on all
transactions. If the manager believes more than one broker or dealer can
provide the best execution, it may consider research and related services and
the sale of fund shares, as well as shares of other funds in the Franklin
Templeton Group of Funds, when selecting a broker or dealer. Please see "How
Do the Funds Buy Securities for Their Portfolios?" in the SAI for more
information.
ADMINISTRATIVE SERVICES. Under an agreement with the manager, FT Services
provides certain administrative services and facilities for each fund. During
the fiscal year ended June 30, 1998, administration fees paid to FT Services,
as a percentage of average daily net assets, were as follows:
ADMINISTRATION
FEES
Insured Fund ............ 0.11%
Intermediate Fund ....... 0.15%
Money Fund ............... 0.14%
These fees are paid by the manager. They are not a separate expense of the
funds. Please see "Investment Management and Other Services" in the SAI for
more information.
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' 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 funds' ability to reduce the
effects of the Year 2000 problem is also very much dependent upon the efforts
of third parties over which the funds and the manager may have no control.
THE RULE 12B-1 PLANS
The Intermediate Fund and each class of the Insured Fund have separate
distribution plans or "Rule 12b-1 Plans" under which they may pay or
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 Intermediate Fund under its plan may not exceed 0.10% per
year of the fund's average daily net assets. Payments by the Insured Fund
under its Class A plan also may not exceed 0.10% per year of Class A's
average daily net assets. All distribution expenses over this amount will be
borne by those who have incurred them. During the first year after certain
Class A purchases made without a sales charge, Securities Dealers may not be
eligible to receive the Rule 12b-1 fees associated with the purchase.
Under its Class C plan, the Insured Fund may pay Distributors up to 0.50% per
year of Class C's average daily net assets to pay Distributors or others for
providing distribution and related services and bearing certain Class C
expenses. All distribution expenses over this amount will be borne by those
who have incurred them. During the first year after a purchase of Class C
shares, Securities Dealers may not be eligible to receive this portion of the
Rule 12b-1 fees associated with the purchase.
The Insured Fund may also pay a servicing fee of up to 0.15% per year of
Class C's average daily net assets under its Class C plan. This fee may be
used to pay Securities Dealers or others for, among other things, helping to
establish and maintain customer accounts and records, helping with requests
to buy and sell shares, receiving and answering correspondence, monitoring
dividend payments from the fund on behalf of customers, and similar servicing
and account maintenance activities.
The Rule 12b-1 fees charged to each class are based only on the fees
attributable to that particular class. For more information, please see "The
Funds' Underwriter" in the SAI.
HOW TAXATION AFFECTS THE FUNDS AND HOW DO THE FUNDS EARN INCOME AND
THEIR SHAREHOLDERS GAINS?
TAXATION OF THE FUNDS' Each fund earns interest and
Investments. Each fund invests other income (the fund's
your money in the municipal and "income") on its investments.
other securities described in the When a fund sells a security for
section "How Do the Funds Invest a price that is higher than it
Their Assets?" Special tax rules paid, it has a gain. When a fund
may apply when determining the sells a security for a price
income and gains that each fund that is lower than it paid, it
earns on its investments. These has a loss.
rules may, in turn, affect the
amount of distributions that a If a fund has held the security
fund pays to you. These special for more than one year, the gain
tax rules are discussed in the SAI. or loss will be a long-term
capital gain or loss. If a fund
TAXATION OF THE FUNDS. As a has held the security for one
regulated investment company, each year or less, the gain or loss
fund generally pays no federal will be a short-term capital
income tax on the income and gains gain or loss. A fund's gains and
that it distributes to you. losses are netted together, and,
if the fund has a net gain (the
fund's "gains"), that gain will
generally be distributed
to you.
TAXATION OF SHAREHOLDERS
DISTRIBUTIONS. Distributions made to you from interest income on
municipal securities will be exempt from the regular federal income
tax. Distributions made to you from other income on temporary
investments, short-term capital gains, or ordinary income from the
sale of market discount bonds will be taxable to you as ordinary
dividends, whether you receive them in cash or in additional shares.
Distributions made to you from interest on certain private activity
bonds, while still exempt from the regular federal income tax, are a
preference item when determining your alternative minimum tax.
The fund will send you a statement WHAT IS A DISTRIBUTION?
in January of the current year
that reflects the amount of As a shareholder, you will
exempt-interest dividends, receive your share of a fund's
ordinary dividends, capital gain income and gains on its
distributions, interest income investments. A fund's interest
that is a tax preference item income on municipal securities
under the alternative minimum tax is paid to you as
and non-taxable distributions you exempt-interest dividends. A
received from the fund in the fund's ordinary income and
prior year. This statement will short-term capital gains are
include distributions declared in paid to you as ordinary
December and paid to you in dividends. A fund's long-term
January of the current year, but capital gains are paid to you as
which are taxable as if paid on capital gain distributions. If a
December 31 of the prior year. The fund pays you an amount in
IRS requires you to report these excess of its income and gains,
amounts on your income tax return this excess will generally be
for the prior year. treated as a non-taxable
distribution. These amounts,
taken together, are what we call
a fund's distributions to you.
DIVIDENDS-RECEIVED DEDUCTION. It is anticipated that no portion of
the funds' distributions will qualify for the corporate
dividends-received deduction.
REDEMPTIONS AND EXCHANGES. If you WHAT IS A REDEMPTION?
redeem your shares or if you
exchange your shares in the funds A redemption is a sale by you to
for shares in another Franklin the fund of some or all of your
Templeton Fund, you will generally shares in the fund. The price
have a gain or loss that the IRS per share
requires you to report on your you receive when you redeem fund
income tax return. If you exchange shares may be more or less than
fund shares held for 90 days or the price at which you purchased
less and pay no sales charge, or a those shares. An exchange of
reduced sales charge, for the new shares in the fund for shares of
shares, all or a portion of the another Franklin Templeton Fund
sales charge you paid on the is treated as a redemption of
purchase of the shares you fund shares and then a purchase
exchanged is not included in their of shares of the other fund.
cost for purposes of computing When you redeem or exchange your
gain or loss on the exchange. If shares, you will generally have
you hold your shares for six a gain or loss, depending upon
months or less, any loss you have whether the amount you receive
will be disallowed to the extent for your shares is more or less
of any exempt-interest dividends than your cost or other basis in
paid on your shares. Any such loss the shares. Please call Fund
not disallowed will be treated as Information for a free Tax
a long-term capital loss to the Information Handbook if you need
extent of any long-term capital more information on calculating
gain distributions paid on your the gain or loss on the
shares. All or a portion of any redemption or exchange of your
loss on the redemption or exchange shares.
of your shares will be disallowed
by the IRS if you buy other shares
in the fund within 30 days before
or after your redemption or
exchange. Because the Money Fund
expects to maintain a $1.00 Net
Asset Value per share, you should
not have any gain or loss on the
redemption or exchange of Money
Fund shares.
CALIFORNIA STATE TAXES. Ordinary dividends and capital gain
distributions that you receive from the funds, and gains arising
from redemptions or exchanges of your fund shares, will generally be
subject to state and local income tax. Distributions paid from the
interest earned on California municipal securities will generally be
exempt from California state personal income taxes. Dividends paid
from interest earned on qualifying U.S. territorial obligations
(including qualifying obligations of Puerto Rico, the U.S. Virgin
Islands and Guam) will also generally be exempt from California
state personal income taxes. Investments in municipal securities of
other states generally do not qualify for tax-free treatment.
Corporate taxpayers subject to the California state franchise tax
are subject to special rules. The holding of fund shares may also be
subject to state and local intangibles taxes. Each fund in which you
are a shareholder will provide you with information at the end of
each calendar year on the amounts of such dividends that may qualify
for exemption from reporting on your individual income tax returns.
You may wish to contact your tax advisor to determine the state and
local tax consequences of your investment
in the fund.
SOCIAL SECURITY AND RAILROAD RETIREMENT BENEFITS. Exempt-interest
dividends paid to you, although exempt from the regular federal
income tax, are includible in the tax base for determining the
taxable portion of your social security or railroad retirement
benefits. The IRS requires you to disclose these exempt-interest
dividends on your federal income tax return.
NON-U.S. INVESTORS. Ordinary dividends generally will be subject to
U.S. income tax withholding. Your home country may also tax ordinary
dividends, exempt-interest dividends, capital gain distributions and
gains arising from redemptions or exchanges of your fund shares.
Fund shares held by the estate of a non-U.S. investor may be subject
to U.S. estate tax. You may wish to contact your tax advisor to
determine the U.S. and non-U.S. tax consequences of your investment
in a fund.
BACKUP WITHHOLDING. When you open WHAT IS A BACKUP WITHHOLDING?
an account, IRS regulations
require that you provide your Backup withholding occurs when a
taxpayer identification number fund is required to withhold and
("TIN"), certify that it is pay over to the IRS 31% of your
correct, and certify that you are distributions and redemption
not subject to backup withholding proceeds. You can avoid backup
under IRS rules. If you fail to withholding by providing the
provide a correct TIN or the fund with your TIN, and by
proper tax certifications, the IRS completing the tax
requires the fund to withhold 31% certifications on your
of all the distributions shareholder application that you
(including ordinary dividends and were asked to sign when you
capital gain distributions), and opened your account. However, if
redemption proceeds paid to you. the IRS instructs the fund to
The fund is also required to begin begin backup withholding, it is
backup withholding on your account required to do so even if you
if the IRS instructs the fund to provided the fund with your TIN
do so. The fund reserves the right and these tax certifications,
not to open your account, or, and backup withholding will
alternatively, to redeem your remain in place until the fund
shares at the current Net Asset is instructed by the IRS that it
Value, less any taxes withheld, if is no longer required.
you fail to provide a correct TIN,
fail to provide the proper tax
certifications, or the IRS
instructs the fund to begin backup
withholding on your account.
THIS TAX DISCUSSION IS FOR GENERAL INFORMATION ONLY. PROSPECTIVE INVESTORS
SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE FEDERAL, STATE, LOCAL OR
FOREIGN TAX CONSEQUENCES OF AN INVESTMENT IN THE FUNDS. FOR A MORE COMPLETE
DISCUSSION OF THESE RULES AND RELATED MATTERS, PLEASE SEE "ADDITIONAL
INFORMATION ON DISTRIBUTIONS AND TAXES" IN THE SAI. THE TAX TREATMENT TO YOU
OF DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS, INTEREST INCOME THAT IS A TAX
PREFERENCE ITEM AND INCOME TAXES WITHHELD IS ALSO DISCUSSED IN A FREE
FRANKLIN TEMPLETON TAX INFORMATION HANDBOOK, WHICH YOU MAY REQUEST BY
CONTACTING FUND INFORMATION.
HOW IS THE TRUST ORGANIZED?
The funds are series of Franklin California Tax-Free Trust (the "Trust"), an
open-end management investment company, commonly called a mutual fund. The
Trust was organized as a Massachusetts business trust on July 18, 1985, and
is registered with the SEC. The Insured Fund offers two classes of shares:
Franklin California Insured Tax-Free Income Fund - Class A and Franklin
California Insured Tax-Free Income Fund - Class C. All shares of the Insured
Fund outstanding before the offering of Class C shares, and all shares of the
Intermediate and Money funds, are considered Class A shares. Additional
series and classes of shares may be offered in the future.
Shares of each class of the Insured Fund represent proportionate interests in
the assets of the fund and have the same voting and other rights and
preferences as any other class of the fund for matters that affect the fund
as a whole. For matters that only affect one class, however, only
shareholders of that class may vote. Each class will vote separately on
matters affecting only that class, or expressly required to be voted on
separately by state or federal law. Shares of each class of a series have the
same voting and other rights and preferences as the other classes and series
of the Trust for matters that affect the Trust as a whole.
The Trust has noncumulative voting rights. 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 also be called by the Board in its
discretion or by shareholders holding at least 10% of the outstanding shares.
In certain circumstances, we are required to help you communicate with other
shareholders about the removal of a Board member.
ABOUT YOUR ACCOUNT
HOW DO I BUY SHARES?
OPENING YOUR ACCOUNT
To open your account, please follow the steps below. This will help avoid any
delays in processing your request. PLEASE KEEP IN MIND THAT THE INSURED AND
INTERMEDIATE FUNDS DO NOT CURRENTLY ALLOW INVESTMENTS BY MARKET TIMERS.
1. Read this prospectus carefully.
2. Determine how much you would like to invest. The funds' minimum
investments are:
o To open a regular account...............................$1,000
o To open a custodial account for a minor
(an UGMA/UTMA account).................................. $ 100
o To open an account with an automatic investment plan.... $ 50
o To add to an account.................................... $ 50
For purchases by broker-dealers, registered investment advisors or
certified financial planners who have entered into an agreement with
Distributors for clients participating in comprehensive fee programs,
the minimum initial investment is $250. The minimum initial investment
is $100 for officers, trustees, directors and full-time employees of the
Franklin Templeton Funds or the Franklin Templeton Group, and their
family members, consistent with our then-current policies.
We reserve the right to change the amount of these minimums from time to
time or to waive or lower these minimums for certain purchases. We also
reserve the right to refuse any order to buy shares.
3. Carefully complete and sign the enclosed shareholder application,
including the optional shareholder privileges section. By applying for
privileges now, you can avoid the delay and inconvenience of having to
send an additional application to add privileges later. FOR THE INSURED
FUND, PLEASE ALSO INDICATE WHICH CLASS OF SHARES YOU WANT TO BUY. IF YOU
DO NOT SPECIFY A CLASS, WE WILL AUTOMATICALLY INVEST YOUR PURCHASE IN
CLASS A SHARES. It is important that we receive a signed application
since we will not be able to process any redemptions from your account
until we receive your signed application.
4. Make your investment using the table below.
METHOD STEPS TO FOLLOW
- ----------------------------------------------------------------------
BY MAIL For an initial investment:
Return the application to the fund with
your check made payable to the fund. For
an investment in the Money Fund you may
also send a Federal Reserve draft or
negotiable bank draft, but instruments
drawn on other investment companies may
not be accepted.
For additional investments:
Send a check made payable to the fund.
Please include your account number on the
check. If you are a Money Fund
shareholder, you may also use the deposit
slips included with your monthly
statement or checkbook (if you have
requested one).
- ----------------------------------------------------------------------
BY WIRE 1. Call Shareholder Services or, if that
number is busy, call 1-650/312-2000
collect, to receive a wire control
number. You need a new wire control
number every time you wire money into
your account. If you do not have a
currently effective wire control number,
we will return the money to the bank,
and we will not credit the purchase to
your account.
2. For the Insured and Intermediate funds,
we will provide wire instructions when
you call. If we receive your call before
1:00 p.m. Pacific time and the bank
receives the wired funds and reports the
receipt of wired funds to the fund by
3:00 p.m. Pacific time, we will credit
the purchase to your account that day.
If we receive your call after 1:00 p.m.
or the bank receives the wire after 3:00
p.m., we will credit the purchase to
your account the following business day.
For the Money Fund, wire the funds to
Bank of America, ABA routing number
121000358, for credit to Franklin
California Tax-Exempt Money Fund, A/C
1493-3-04779. Your name and wire control
number must be included.
3. For an initial investment you must also
return your signed shareholder
application to the fund.
- ----------------------------------------------------------------------
THROUGH YOUR DEALER Call your investment representative
- ----------------------------------------------------------------------
You may buy shares of the Money Fund without a sales charge and write
redemption drafts against your account. Redemption drafts are similar to
checks and are referred to as checks in this prospectus. When you buy shares,
it does not create a checking or other bank account relationship with the
fund or any bank.
If the Money Fund receives your order in proper form before 3:00 p.m. Pacific
time, we will credit the purchase to your account that day. Orders received
after 3:00 p.m. will be credited the following business day.
Many of the Money Fund's investments must be paid for in federal funds, which
are monies held by the fund's custodian bank on deposit at the Federal
Reserve Bank of San Francisco and elsewhere. The Money Fund generally cannot
invest money received from you until it is converted into and is available to
the fund in federal funds. Therefore, your purchase order may not be
considered in proper form until the money received from you is available in
federal funds, which may take up to two days. If the fund is able to make
investments immediately (within one business day), it may accept your order
with payment in other than federal funds.
When you buy shares, if you submit a check or a draft that is returned unpaid
to the fund we may impose a $10 charge against your account for each returned
item.
The investment authority of certain investors may be restricted by law. If
you are such an investor, you should consult your legal advisor to determine
whether and to what extent shares of the fund are legal investments for you.
If you are a municipal investor considering investing proceeds of bond
offerings, you should consult with expert counsel to determine the effect, if
any, of payments by the fund on arbitrage rebate calculations.
CHOOSING A SHARE CLASS - INSURED FUND ONLY
Each class has its own sales charge and expense structure, allowing you to
choose the class that best meets your situation. The class that may be best
for you depends on a number of factors, including the amount and length of
time you expect to invest. Generally, Class A shares may be more attractive
for long-term investors or investors who qualify to buy Class A shares at a
reduced sales charge. Your financial representative can help you decide.
CLASS A CLASS C
- ----------------------------------------------------------------------
o Higher front-end sales o Lower front-end sales
charges than Class C shares. charges than Class A shares
There are several ways to
reduce these charges, as
described below. There is no
front-end sales charge for
purchases of $1 million or
more.*
o Contingent Deferred Sales o Contingent Deferred Sales
Charge on purchases of $1 Charge on purchases sold
million or more sold within one within 18 months
year
o Lower annual expenses than o Higher annual expenses
Class C shares than Class A shares
*If you are investing $1 million or more, it is generally more beneficial for
you to buy Class A shares because there is no front-end sales charge and the
annual expenses are lower. Therefore, any purchase of $1 million or more is
automatically invested in Class A shares. You may accumulate more than $1
million in Class C shares through purchases over time. If you plan to do
this, however, you should determine if it would be better for you to buy
Class A shares through a Letter of Intent.
INSURED AND INTERMEDIATE FUNDS
The rest of the "How Do I Buy Shares?" section of this prospectus only
applies to the Insured and Intermediate funds.
PURCHASE PRICE OF FUND SHARES
For Class A shares, the sales charge you pay depends on the dollar amount you
invest, as shown in the table below. The sales charge for Class C shares is
1% and, unlike Class A, does not vary based on the size of your purchase.
TOTAL SALES CHARGE AMOUNT PAID TO
AS A PERCENTAGE OF DEALER AS A
AMOUNT OF PURCHASE OFFERING NET AMOUNT PERCENTAGE OF
AT OFFERING PRICE PRICE INVESTED OFFERING PRICE
INSURED FUND - CLASS A
Under $100,000 ................ 4.25% 4.44% 4.00%
$100,000 but less than $250,000 3.50% 3.63% 3.25%
$250,000 but less than $500,000 2.50% 2.56% 2.25%
$500,000 but less than $1,000,000 2.00% 2.04% 1.85%
$1,000,000 or more*............ None None None
INSURED FUND - CLASS C
Under $1,000,000*.............. 1.00% 1.01% 1.00%
TOTAL SALES CHARGE AMOUNT PAID TO
AS A PERCENTAGE OF DEALER AS A
AMOUNT OF PURCHASE OFFERING NET AMOUNT PERCENTAGE OF
AT OFFERING PRICE PRICE INVESTED OFFERING PRICE
INTERMEDIATE FUND
Under $100,000................. 2.25% 2.30% 2.00%
$100,000 but less than $250,000 1.75% 1.78% 1.50%
$250,000 but less than $500,000 1.25% 1.26% 1.00%
$500,000 but less than $1,000,000 1.00% 1.01% 0.85%
$1,000,000 or more*............ None None None
*A Contingent Deferred Sales Charge of 1% may apply to Class A purchases of
$1 million or more and any Class C purchase. Please see "How Do I Sell
Shares? - Contingent Deferred Sales Charge." Please also see "Other Payments
to Securities Dealers" below for a discussion of payments Distributors may
make out of its own resources to Securities Dealers for certain purchases.
Purchases of Class C shares are limited to purchases below $1 million. Please
see "Choosing a Share Class - Insured Fund Only."
SALES CHARGE REDUCTIONS AND WAIVERS
- - IF YOU QUALIFY TO BUY SHARES UNDER ONE OF THE SALES CHARGE REDUCTION OR
WAIVER CATEGORIES DESCRIBED BELOW, PLEASE INCLUDE A WRITTEN STATEMENT WITH
EACH PURCHASE ORDER EXPLAINING WHICH PRIVILEGE APPLIES. If you don't
include this statement, we cannot guarantee that you will receive the sales
charge reduction or waiver.
CUMULATIVE QUANTITY DISCOUNTS - Class A Only. To determine if you may pay a
reduced sales charge, the amount of your current Class A purchase is added to
the cost or current value, whichever is higher, of your existing shares in
the Franklin Templeton Funds,
as well as those of your spouse, children under the age of 21 and
grandchildren under the age of 21. If you are the sole owner of a company,
you may also add any company accounts, including retirement plan accounts.
LETTER OF INTENT - Class A Only. You may buy Class A shares at a reduced
sales charge by completing the Letter of Intent section of the shareholder
application. A Letter of Intent is a commitment by you to invest a specified
dollar amount during a 13 month period. The amount you agree to invest
determines the sales charge you pay on Class A shares.
BY COMPLETING THE LETTER OF INTENT SECTION OF THE SHAREHOLDER APPLICATION,
YOU ACKNOWLEDGE AND AGREE TO THE FOLLOWING:
o You authorize Distributors to reserve 5% of your total intended purchase
in Class A shares registered in your name until you fulfill your Letter.
o You give Distributors a security interest in the reserved shares and
appoint Distributors as attorney-in-fact.
o Distributors may sell any or all of the reserved shares to cover any
additional sales charge if you do not fulfill the terms of the Letter.
o Although you may exchange your shares, you may not sell reserved shares
until you complete the Letter or pay the higher sales charge.
Your periodic statements will include the reserved shares in the total shares
you own. We will pay or reinvest dividend and capital gain distributions on
the reserved shares as you direct.
If you would like more information about the Letter of Intent privilege,
please see "How Do I Buy, Sell and Exchange Shares? - Letter of Intent" in
the SAI or call Shareholder Services.
GROUP PURCHASES - Class A Only. If you are a member of a qualified group, you
may buy Class A shares at a reduced sales charge that applies to the group as
a whole. The sales charge is based on the combined dollar value of the group
members' existing investments, plus the amount of the current purchase.
A qualified group is one that:
o Was formed at least six months ago,
o Has a purpose other than buying fund shares at a discount,
o Has more than 10 members,
o Can arrange for meetings between our representatives and group members,
o Agrees to include Franklin Templeton Fund sales and other materials in
publications and mailings to its members at reduced or no cost to
Distributors,
o Agrees to arrange for payroll deduction or other bulk transmission of
investments to the fund, and
o Meets other uniform criteria that allow Distributors to achieve cost
savings in distributing shares.
SALES CHARGE WAIVERS. If one of the following sales charge waivers applies to
you or your purchase of fund shares, you may buy shares of the fund without a
front-end sales charge or a Contingent Deferred Sales Charge. All of the
sales charge waivers listed below apply to purchases of Class A shares only,
except for items 1 and 2 which also apply to Class C purchases.
Certain distributions, payments or redemption proceeds that you receive may
be used to buy shares of the fund without a sales charge if you reinvest them
within 365 days of their payment or redemption date. They include:
1. Dividend and capital gain distributions from any Franklin Templeton
Fund. The distributions generally must be reinvested in the same class
of shares. Certain exceptions apply, however, to Class C shareholders
who chose to reinvest their distributions in Class A shares of the fund
before November 17, 1997, and to Advisor Class or Class Z shareholders
of a Franklin Templeton Fund who may reinvest their distributions in
Class A shares of the fund.
2. Redemption proceeds from the sale of shares of any Franklin Templeton
Fund. The proceeds must be reinvested in the same class of shares,
except proceeds from the sale of Class B shares will be reinvested in
Class A shares.
If you paid a Contingent Deferred Sales Charge when you sold your Class A
or C shares, we will credit your account with the amount of the Contingent
Deferred Sales Charge paid but a new Contingent Deferred Sales Charge will
apply. For Class B shares reinvested in Class A, a new Contingent Deferred
Sales Charge will not apply, although your account will not be credited
with the amount of any Contingent Deferred Sales Charge paid when you sold
your Class B shares.
Proceeds immediately placed in a Franklin Bank CD also may be reinvested
without a front-end sales charge if you reinvest them within 365 days from
the date the CD matures, including any rollover.
This waiver does not apply to shares you buy and sell under our exchange
program. Shares purchased with proceeds from a money fund may be subject
to a sales charge.
3. Dividend or capital gain distributions from a real estate investment trust
(REIT) sponsored or advised by Franklin Properties, Inc.
4. Annuity payments received under either an annuity option or from death
benefit proceeds, only if the annuity contract offers as an investment
option the Franklin Valuemark Funds or the Templeton Variable Products
Series Fund. You should contact your tax advisor for information on any
tax consequences that may apply.
5. Redemption proceeds from a repurchase of shares of Franklin Floating Rate
Trust, if the shares were continuously held for at least 12 months.
If you immediately placed your redemption proceeds in a Franklin Bank CD
or a Franklin Templeton money fund, you may reinvest them as described
above. The proceeds must be reinvested within 365 days from the date the
CD matures, including any rollover, or the date you redeem your money fund
shares.
6. Redemption proceeds from the sale of Class A shares of any of the
Templeton Global Strategy Funds if you are a qualified investor.
If you paid a contingent deferred sales charge when you redeemed your
Class A shares from a Templeton Global Strategy Fund, a Contingent
Deferred Sales Charge will apply to your purchase of fund shares and a new
Contingency Period will begin. We will, however, credit your fund account
with additional shares based on the contingent deferred sales charge you
paid and the amount of the redemption proceeds that you reinvest.
If you immediately placed your redemption proceeds in a Franklin Templeton
money fund, you may reinvest them as described above. The proceeds must be
reinvested within 365 days from the date they are redeemed from the money
fund.
Various individuals and institutions also may buy Class A shares without a
front-end sales charge or Contingent Deferred Sales Charge, including:
1. Trust companies and bank trust departments agreeing to invest in
Franklin Templeton Funds over a 13 month period at least $1 million of
assets held in a fiduciary, agency, advisory, custodial or similar
capacity and over which the trust companies and bank trust departments
or other plan fiduciaries or participants, in the case of certain
retirement plans, have full or shared investment discretion. We will
accept orders for these accounts by mail accompanied by a check or by
telephone or other means of electronic data transfer directly from the
bank or trust company, with payment by federal funds received by the
close of business on the next business day following the order.
2. An Eligible Governmental Authority
3. Broker-dealers, registered investment advisors or certified financial
planners who have entered into an agreement with Distributors for
clients participating in comprehensive fee programs
4. Qualified registered investment advisors who buy through a broker-dealer
or service agent who has entered into an agreement with Distributors
5. Registered Securities Dealers and their affiliates, for their investment
accounts only
6. Current employees of Securities Dealers and their affiliates and their
family members, as allowed by the internal policies of their employer
7. Officers, trustees, directors and full-time employees of the Franklin
Templeton Funds or the Franklin Templeton Group, and their family
members, consistent with our then-current policies
8. Investment companies exchanging shares or selling assets pursuant to a
merger, acquisition or exchange offer
9. Accounts managed by the Franklin Templeton Group
10. Certain unit investment trusts and their holders reinvesting
distributions from the trusts
OTHER PAYMENTS TO SECURITIES DEALERS
The payments described below may be made to Securities Dealers who initiate
and are responsible for Class C purchases and certain Class A purchases made
without a sales charge. The payments are subject to the sole discretion of
Distributors, and are paid by Distributors or one of its affiliates and not
by the fund or its shareholders.
1. Class C purchases - up to 1% of the purchase price.
2. Class A purchases of $1 million or more - up to 0.75% of the amount
invested.
3. Class A purchases by trust companies and bank trust departments, Eligible
Governmental Authorities, and broker-dealers or others on behalf of
clients participating in comprehensive fee programs - up to 0.25% of the
amount invested.
A Securities Dealer may receive only one of these payments for each
qualifying purchase. Securities Dealers who receive payments in connection
with investments described in paragraphs 1 or 2 above will be eligible to
receive the Rule 12b-1 fee associated with the purchase starting in the
thirteenth calendar month after the purchase.
FOR BREAKPOINTS THAT MAY APPLY AND INFORMATION ON ADDITIONAL COMPENSATION
PAYABLE TO SECURITIES DEALERS IN CONNECTION WITH THE SALE OF FUND SHARES,
PLEASE SEE "HOW DO I BUY, SELL AND EXCHANGE SHARES? - OTHER PAYMENTS TO
SECURITIES DEALERS" IN THE SAI.
FOR INVESTORS OUTSIDE THE U.S.
The distribution of this prospectus and 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.
MAY I EXCHANGE SHARES FOR SHARES OF ANOTHER FUND?
We offer a wide variety of funds. If you would like, you can move your
investment from your fund account to an existing or new account in another
Franklin Templeton Fund (an "exchange"). Because it is technically a sale and
a purchase of shares, an exchange is a taxable transaction.
If you own Class A shares, you may exchange into any of our money funds
except Franklin Templeton Money Fund II ("Money Fund II"). Money Fund II is
the only money fund exchange option available to Class C shareholders. Unlike
our other money funds, shares of Money Fund II may not be purchased directly
and no drafts (checks) may be written on Money Fund II accounts.
Before making an exchange, please read the prospectus of the fund you are
interested in. This will help you learn about the fund, its investment goal
and policies, and its rules and requirements for exchanges. For example, some
Franklin Templeton Funds do not accept exchanges and others may have
different investment minimums. Some Franklin Templeton Funds do not offer
Class C shares.
METHOD STEPS TO FOLLOW
- ----------------------------------------------------------------------
BY MAIL 1. Send us signed written
instructions
2. Include any outstanding share
certificates for the shares
you want to exchange
- ----------------------------------------------------------------------
BY PHONE Call Shareholder Services or
TeleFACTS(R)
- If you do not want the
ability to exchange by phone
to apply to your account,
please let us know.
- ----------------------------------------------------------------------
THROUGH YOUR DEALER Call your investment
representative
Please refer to "Transaction Procedures and Special Requirements" for other
important information on how to exchange shares.
WILL SALES CHARGES APPLY TO MY EXCHANGE?
If you are exchanging shares of the Money Fund, you will generally pay the
applicable front-end sales charge of the fund you are exchanging into, unless
you acquired your Money Fund shares under the exchange privilege. These
charges may not apply if you qualify to buy shares without a sales charge.
For the Insured and Intermediate funds, you generally will not pay a
front-end sales charge on exchanges. If you have held your shares less than
six months, however, you will pay the percentage difference between the sales
charge you previously paid and the applicable sales charge of the new fund,
if the difference is more than 0.25%. If you have never paid a sales charge
on your shares because, for example, they have always been held in a money
fund, you will pay the fund's applicable sales charge no matter how long you
have held your shares. These charges may not apply if you qualify to buy
shares without a sales charge.
CONTINGENT DEFERRED SALES CHARGE. We will not impose a Contingent Deferred
Sales Charge when you exchange shares. Any shares subject to a Contingent
Deferred Sales Charge at the time of exchange, however, will remain so in the
new fund.
For accounts with shares subject to a Contingent Deferred Sales Charge, we
will first exchange any shares in your account that are not subject to the
charge. If there are not enough of these to meet your exchange request, we
will exchange shares subject to the charge in the order they were purchased.
If you exchange Class A shares into one of our money funds, the time your
shares are held in that fund will not count towards the completion of any
Contingency Period. If you exchange your Class C shares for shares of Money
Fund II, however, the time your shares are held in that fund will count
towards the completion of any Contingency Period.
For more information about the Contingent Deferred Sales Charge, please see
"How Do I Sell Shares?"
EXCHANGE RESTRICTIONS
Please be aware that the following restrictions apply to exchanges:
o You must meet the applicable minimum investment amount of the fund you
are exchanging into, or exchange 100% of your fund shares.
o You may only exchange shares within the same class, except as noted
below.
o Generally exchanges may only be made between identically registered
accounts, unless you send written instructions with a signature guarantee.
You may, however, exchange shares from a fund account requiring two or more
signatures into an identically registered money fund account requiring only
one signature for all transactions. Please notify us in writing if you do
not want this option to be available on your account. Additional procedures
may apply. Please see "Transaction Procedures and Special Requirements."
o The fund you are exchanging into must be eligible for sale in your state.
o We may modify or discontinue our exchange policy if we give you 60 days'
written notice.
o For the Money Fund, your exchange may be restricted or refused if you
have: (i) requested an exchange out of the fund within two weeks of an
earlier exchange request, (ii) exchanged shares out of the fund more than
twice in a calendar quarter, or (iii) exchanged shares equal to at least $5
million, or more than 1% of the fund's net assets. Shares under common
ownership or control are combined for these limits. If you have exchanged
shares as described in this paragraph, you will be considered a Market
Timer. Each exchange by a Market Timer, if accepted, will be charged $5.00
by Investor Services. Currently, none of the funds, except the Money Fund,
allow investments by Market Timers. Some of the other funds in the Franklin
Templeton Funds also may not allow investments by Market Timers.
Because excessive trading can hurt fund performance, operations and
shareholders, we may refuse any exchange purchase if (i) we believe the fund
would be harmed or unable to invest effectively, or (ii) the fund receives or
anticipates simultaneous orders that may significantly affect the fund.
LIMITED EXCHANGES BETWEEN DIFFERENT CLASSES OF SHARES
Certain funds in the Franklin Templeton Funds offer classes of shares not
offered by the funds, such as "Advisor Class" or "Class Z" shares. Because
the funds do not currently offer an Advisor Class, you may exchange Advisor
Class shares of any Franklin Templeton Fund for Class A shares of a fund at
Net Asset Value. If you do so and you later decide you would like to exchange
into a fund that offers an Advisor Class, you may exchange your Class A
shares for Advisor Class shares of that fund. Certain shareholders of Class Z
shares of Franklin Mutual Series Fund Inc. may also exchange their Class Z
shares for Class A shares of a fund at Net Asset Value.
HOW DO I SELL SHARES?
You may sell (redeem) your shares at any time.
METHOD STEPS TO FOLLOW
- ----------------------------------------------------------------------
BY CHECK - 1. You may request redemption
MONEY FUND ONLY drafts (checks) free of charge
(Only available if there are no on the shareholder application
outstanding share certificates for or by calling TeleFACTS(R).
your account)
2. You may make checks payable
to any person and in any amount
of $100 or more. You will
continue to earn daily income
dividends until the check has
cleared. Please see "More
Information About Selling Your
Shares By Check" below.
- ----------------------------------------------------------------------
BY MAIL 1.Send us signed written
instructions. If you would like
your redemption proceeds wired
to a bank account, your
instructions should include:
o The name, address and
telephone number of the bank
where you want the proceeds sent
o Your bank account number
o The Federal Reserve ABA
routing number
o If you are using a savings and
loan or credit union, the name
of the corresponding bank and
the account number
If you are a Money Fund
shareholder, you may also
request to have your Money Fund
redemption proceeds wired to a
bank account by completing the
"Wire Redemption Privilege"
section of the Money Fund
shareholder application and
sending it to us.
2. Include any outstanding share
certificates for the shares you
are selling
3. Provide a signature guarantee
if required
4. Corporate, partnership and
trust accounts may need to send
additional documents. Accounts
under court jurisdiction may
have other requirements.
- ----------------------------------------------------------------------
BY PHONE Call Shareholder Services. If
you would like your redemption
proceeds wired to a bank
account, other than an escrow
account, you must first sign up
for the wire feature. To sign
up, send us written
instructions, with a signature
guarantee. To avoid any delay in
processing, the instructions
should include the items listed
in "By Mail" above. If you are a
Money Fund shareholder, you may
also sign up by completing the
"Wire Redemption Privilege"
section of the Money Fund
shareholder application and
sending it to us.
Telephone requests will be
accepted:
o If the request is $100,000 or
less. Institutional accounts may
exceed $100,000 by completing a
separate agreement. Call
Institutional Services to
receive a copy.
o If there are no share
certificates issued for the
shares you want to sell or you
have already returned them to
the fund
o Unless the address on your
account was changed by phone
within the last 15 days
- If you do not want the ability
to redeem by phone to apply to
your account, please let us know.
- ----------------------------------------------------------------------
THROUGH YOUR DEALER Call your investment
representative
- ----------------------------------------------------------------------
We will send your redemption check within seven days after we receive your
request in proper form. If you would like the check sent to an address other
than the address of record or made payable to someone other than the
registered owners on the account, send us written instructions signed by all
account owners, with a signature guarantee. We are not able to receive or pay
out cash in the form of currency.
The wiring of redemption proceeds is a special service that we make available
whenever possible for redemption requests of $1,000 or more. If we receive
your request in proper form before 1:00 p.m. Pacific time for the Insured and
Intermediate funds or before 3:00 p.m. Pacific time for the Money Fund, your
wire payment will be sent the next business day. For requests received in
proper form after these deadlines, the payment will be sent the second
business day. You may also have Money Fund redemption proceeds wired to an
escrow account the same day, if we receive your request in proper form before
9:00 a.m. Pacific time. By offering these services to you, the funds are not
bound to meet any redemption request in less than the seven day period
prescribed by law. Neither the funds nor their agents shall be liable to you
or any other person if, for any reason, a redemption request by wire is not
processed as described in this section.
If you sell shares you recently purchased with a check or draft, we may delay
sending you the proceeds until your check or draft has cleared, which may
take seven business days or more. A certified or cashier's check may clear in
less time.
Under unusual circumstances, we may suspend redemptions or postpone payment
for more than seven days as permitted by federal securities law.
Please refer to "Transaction Procedures and Special Requirements" for other
important information on how to sell shares.
MORE INFORMATION ABOUT SELLING YOUR SHARES BY CHECK - MONEY FUND ONLY
If you want the convenience of check access to your Money Fund account, order
your checks from the Money Fund, free of charge, as described above. For
security reasons and reasons related to check processing systems that require
checks to be a certain size and printed with specific encoding formats, the
Money Fund can only accept checks ordered from the Money Fund. The Money Fund
cannot be responsible for any check not ordered from the Money Fund that is
returned unpaid to a payee.
The checks are drawn through Bank of America NT & SA (the "Bank"). The Bank
may terminate this service at any time upon notice to you.
When a check is presented for payment, we will redeem an equivalent number of
shares in your account to cover the amount of the check. Your shares will be
redeemed at the Net Asset Value next determined after we receive a check that
does not exceed the collected balance in your account. If a check is
presented for payment that exceeds the collected balance in your account, the
Bank may return the check unpaid. Since you will not know the exact amount in
your account on the day a check clears, you should not use a check to close
your account.
You will generally not be able to convert a check drawn on your Money Fund
account into a certified or cashier's check by presenting it at the Bank.
Because the Money Fund is not a bank, we cannot assure that a stop payment
order written by you will be effective. We will use our best efforts,
however, to see that these orders are carried out.
CONTINGENT DEFERRED SALES CHARGE
Most Franklin Templeton Funds impose a Contingent Deferred Sales Charge on
certain investments if you sell all or a part of the investment within the
Contingency Period. While the Money Fund generally does not impose a
Contingent Deferred Sales Charge,
it will do so if you sell shares that were exchanged into the Money Fund from
another Franklin Templeton Fund and those shares would have been assessed a
Contingent Deferred Sales Charge in the other fund. The charge is 1% of the
value of the shares sold or the Net Asset Value at the time of purchase,
whichever is less. The time the shares are held in the Money Fund does not
count towards the completion of any Contingency Period.
For purchases of the Intermediate Fund and Class A shares of the Insured
Fund, if you did not pay a front-end sales charge because you invested $1
million or more or agreed to invest $1 million or more under a Letter of
Intent, a Contingent Deferred Sales Charge may apply if you sell all or a
part of your investment within the Contingency Period. Once you have invested
$1 million or more, any additional Class A investments you make without a
sales charge may also be subject to a Contingent Deferred Sales Charge if
they are sold within the Contingency Period. For any Class C purchase, a
Contingent Deferred Sales Charge may apply if you sell the shares within the
Contingency Period. The charge is 1% of the value of the shares sold or the
Net Asset Value at the time of purchase, whichever is less.
We will first redeem any shares in your account that are not subject to the
charge. If there are not enough of these to meet your request, we will redeem
shares subject to the charge in the order they were purchased.
Unless otherwise specified, when you request to sell a stated DOLLAR AMOUNT,
we will redeem additional shares to cover any Contingent Deferred Sales
Charge. For requests to sell a stated NUMBER OF SHARES, we will deduct the
amount of the Contingent Deferred Sales Charge, if any, from the sale
proceeds.
WAIVERS. We waive the Contingent Deferred Sales Charge for:
o Account fees
o Redemptions by a 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 set up before February
1, 1995
o Redemptions through a systematic withdrawal plan set up on or after
February 1, 1995, at a rate of up to 1% a month of an account's Net Asset
Value. For example, if you maintain an annual balance of $1 million in
Class A shares, you can redeem up to $120,000 annually through a systematic
withdrawal plan free of charge. Likewise, if you maintain an annual balance
of $10,000 in Class C shares, $1,200 may be redeemed annually free of
charge.
WHAT DISTRIBUTIONS MIGHT I RECEIVE FROM THE FUNDS?
Each fund receives income generally in the form of interest and other income
derived from its investments. This income, less the expenses incurred in the
fund's operations, is its net investment income from which income dividends
may be distributed. Thus, the amount of dividends paid per share may vary
with each distribution.
MONEY FUND
The fund typically pays income dividends each day that its Net Asset Value is
calculated. Your account may begin to receive dividends on the day after we
receive your investment and will continue to receive dividends through the
day we receive a request to sell your shares.
The amount of these dividends will vary, depending on changes in the fund's
net investment income, and there is no guarantee the fund will pay dividends.
THE FUND DOES NOT PAY "INTEREST" OR GUARANTEE ANY AMOUNT OF DIVIDENDS OR
RETURN ON AN INVESTMENT IN ITS SHARES.
DIVIDEND OPTIONS. You may reinvest your dividends in the fund or in the same
share class of another Franklin Templeton Fund, without any sales charges.
You can also have your dividends deposited in a bank account, or mailed by
check. Deposits to a bank account may be made by electronic funds transfer.
Please see "Electronic Fund Transfers" under "Services to Help You Manage
Your Account."
Please indicate on your application the dividend option you have chosen,
otherwise we will automatically reinvest your dividends in the fund. If you
choose not to reinvest
your dividends in the fund, the fund will distribute dividends paid during
the month as directed on the last business day of each month.
To change your dividend option, please notify us by mail or phone and allow
at least seven days for the new option to be processed. To send your
dividends to another person or to a bank account, please send written
instructions with a signature guarantee.
INSURED AND INTERMEDIATE FUNDS
These funds declare dividends from their net investment income daily and pay
them monthly on or about the 20th day of the month. The daily allocation of
net investment income begins on the day after we receive your money or
settlement of a wire order trade and continues to accrue through the day we
receive your request to sell your shares or the settlement of a wire order
trade.
Capital gains, if any, may be distributed annually, usually in December.
Dividends and capital gains are calculated and distributed the same way for
each class. The amount of any income dividends per share will differ,
however, generally due to the difference in the Rule 12b-1 fees of each class.
Dividend payments are not guaranteed, are subject to the Board's discretion
and may vary with each payment. THE FUNDS DO NOT PAY "INTEREST" OR GUARANTEE
ANY FIXED RATE OF RETURN ON AN INVESTMENT IN THEIR SHARES.
If you buy shares shortly before a fund deducts a capital gain distribution
from its Net Asset Value, please keep in mind that you will receive a portion
of the price you paid back in the form of a taxable distribution.
DISTRIBUTION OPTIONS. You may receive your distributions from a fund in any
of these ways:
1. BUY ADDITIONAL SHARES OF THE FUND - You may buy additional shares of the
fund (without a sales charge or imposition of a Contingent Deferred Sales
Charge) by reinvesting capital gain distributions, or both dividend and
capital gain distributions. This is a convenient way to accumulate additional
shares and maintain or increase your earnings base.
2. BUY SHARES OF OTHER FRANKLIN TEMPLETON FUNDS - You may direct your
distributions to buy shares of another Franklin Templeton Fund (without a
sales charge or imposition of a Contingent Deferred Sales Charge). Many
shareholders find this a convenient way to diversify their investments.
3. RECEIVE DISTRIBUTIONS IN CASH - You may receive dividends, or both
dividend and capital gain distributions in cash. If you have the money sent
to another person or to a checking or savings account, you may need a
signature guarantee. If you send the money to a checking or savings account,
please see "Electronic Fund Transfers" under "Services to Help You Manage
Your Account."
Distributions may be reinvested only in the same class of shares, except as
follows: (i) Class C shareholders who chose to reinvest their distributions
in Class A shares of the fund or another Franklin Templeton Fund before
November 17, 1997, may continue to do so; and (ii) Class C shareholders may
reinvest their distributions in shares of any Franklin Templeton money fund.
TO SELECT ONE OF THESE OPTIONS, PLEASE COMPLETE SECTIONS 6 AND 7 OF THE
SHAREHOLDER APPLICATION INCLUDED WITH THIS PROSPECTUS OR TELL YOUR INVESTMENT
REPRESENTATIVE WHICH OPTION YOU PREFER. IF YOU DO NOT SELECT AN OPTION, WE
WILL AUTOMATICALLY REINVEST DIVIDEND AND CAPITAL GAIN DISTRIBUTIONS IN THE
SAME CLASS OF THE FUND. You may change your distribution option at any time
by notifying us by mail or phone. Please allow at least seven days before the
reinvestment date for us to process the new option.
TRANSACTION PROCEDURES AND SPECIAL REQUIREMENTS
SHARE PRICE
When you buy shares, you pay the Offering Price. This is the Net Asset Value
per share of the class you wish to purchase, plus any applicable sales
charges. When you sell shares, you receive the Net Asset Value per share
minus any applicable Contingent Deferred Sales Charges.
The Net Asset Value we use when you buy or sell shares is the one next
calculated after we receive your transaction request in proper form. If you
buy or sell shares through your Securities Dealer, however, we will use the
Net Asset Value next calculated after your Securities Dealer receives your
request, which is promptly transmitted to the fund.
HOW AND WHEN SHARES ARE PRICED
The funds are open for business each day the NYSE is open. For the Insured
and Intermediate funds, we determine the Net Asset Value per share of each
class as of the close of the NYSE, normally 1:00 p.m. Pacific time. For the
Money Fund, we determine the Net Asset Value per share at 3:00 p.m. Pacific
time. You can find the prior day's closing Net Asset Value and Offering Price
in many newspapers.
To calculate Net Asset Value per share of each fund, the assets of each fund
are valued and totaled, liabilities are subtracted, and the balance, called
net assets, is divided by the number of shares of the class outstanding. The
fund's assets are valued as described under "How Are Fund Shares Valued?" in
the SAI.
For the Insured Fund, the Net Asset Value of all outstanding shares of each
class is calculated on a pro rata basis. It is based on each class'
proportionate participation in the fund, determined by the value of the
shares of each class. Each class, however, bears the Rule 12b-1 fees payable
under its Rule 12b-1 plan.
WRITTEN INSTRUCTIONS
Written instructions must be signed by all registered owners. To avoid any
delay in processing your transaction, they should include:
o Your name,
o The fund's name,
o The class of shares,
o A description of the request,
o For exchanges, the name of the fund you are exchanging into,
o Your account number,
o The dollar amount or number of shares, and
o A telephone number where we may reach you during the day, or in the
evening if preferred.
JOINT ACCOUNTS. For accounts with more than one registered owner, the funds
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.
Please keep in mind that if you have previously told us that you do not want
telephone exchange or redemption privileges on your account, then we can only
accept written
instructions to exchange or redeem shares if they are signed by all
registered owners on the account.
SIGNATURE GUARANTEES
For our mutual protection, we require a signature guarantee in the following
situations:
1) You wish to sell over $100,000 worth of shares,
2) You want the proceeds to be paid to someone other than the registered
owners,
3) The proceeds are not being sent to the address of record, preauthorized
bank account, or preauthorized brokerage firm account,
4) We receive instructions from an agent, not the registered owners,
5) We believe a signature guarantee would protect us against potential
claims based on the instructions received.
A signature guarantee verifies the authenticity of your signature. You should
be able to obtain a signature guarantee from a bank, broker, credit union,
savings association, clearing agency, or securities exchange or association.
A NOTARIZED SIGNATURE IS NOT SUFFICIENT.
SHARE CERTIFICATES
We will credit your shares to your fund account. We do not issue share
certificates unless you specifically request them. This eliminates the costly
problem of replacing lost, stolen or destroyed certificates. If a certificate
is lost, stolen or destroyed, you may have to pay an insurance premium of up
to 2% of the value of the certificate to replace it.
Any outstanding share certificates must be returned to the fund if you want
to sell or exchange those shares or if you would like to start a systematic
withdrawal plan. The certificates should be properly endorsed. You can do
this either by signing the back of the certificate or by completing a share
assignment form. For your protection, you may prefer to complete a share
assignment form and to send the certificate and assignment form in separate
envelopes.
TELEPHONE TRANSACTIONS
You may initiate many transactions and changes to your account by phone.
Please refer to the sections of this prospectus that discuss the transaction
you would like to make or call Shareholder Services.
When you call, we will request personal or other identifying information to
confirm that instructions are genuine. We may also record calls. If our lines
are busy or you are otherwise unable to reach us by phone, you may wish to
ask your investment representative for assistance or send us written
instructions, as described elsewhere in this prospectus.
For your protection, we may delay a transaction or not implement one if we
are not reasonably satisfied that the instructions are genuine. If this
occurs, we will not be liable for any loss. We also will not be liable for
any loss if we follow instructions by phone that we reasonably believe are
genuine or if you are unable to execute a transaction by phone.
ACCOUNT REGISTRATIONS AND REQUIRED DOCUMENTS
When you open an account, we need you to tell us how you want your shares
registered. How you register your account will affect your ownership rights
and ability to make certain transactions. If you have questions about how to
register your account, you should consult your investment representative or
legal advisor. Please keep the following information in mind when registering
your account.
JOINT OWNERSHIP. If you open an account with two or more owners, we register
the account as "joint tenants with rights of survivorship" unless you tell us
otherwise. An account registered as "joint tenants with rights of
survivorship" is shown as "Jt Ten" on your account statement. For any account
with two or more owners, we cannot accept instructions to change owners on
the account unless all owners agree in writing, even if the law in your state
says otherwise. If you would like another person or owner to sign for you,
please send us a current power of attorney.
GIFTS AND TRANSFERS TO MINORS. You may set up a custodial account for a minor
under your state's Uniform Gifts/Transfers to Minors Act. Other than this
form of registration, a minor may not be named as an account owner.
TRUSTS. You should register your account as a trust only if you have a valid
written trust document. This avoids future disputes or possible court action
over who owns the account.
REQUIRED DOCUMENTS. For corporate, partnership and trust accounts, please
send us the following documents when you open your account. This will help
avoid delays in processing your transactions while we verify who may sign on
the account.
TYPE OF ACCOUNT DOCUMENTS REQUIRED
- ----------------------------------------------------------------------
CORPORATION Corporate Resolution
- ----------------------------------------------------------------------
PARTNERSHIP 1. The pages from the partnership agreement
that identify the general partners, or
2. A certification for a partnership agreement
- ----------------------------------------------------------------------
TRUST 1. The pages from the trust document that
identify the trustees, or
2. A certification for trust
- ----------------------------------------------------------------------
STREET OR NOMINEE ACCOUNTS. If you have fund shares held in a "street" or
"nominee" name account with your Securities Dealer, you may transfer the
shares to the street or nominee name account of another Securities Dealer.
Both dealers must have an agreement with Distributors or we cannot process
the transfer. Contact your Securities Dealer to initiate the transfer. We
will process the transfer after we receive authorization in proper form from
your delivering Securities Dealer. Accounts may be transferred electronically
through the NSCC. For accounts registered in street or nominee name, we may
take instructions directly from the Securities Dealer or your nominee.
IMPORTANT INFORMATION IF YOU HAVE AN INVESTMENT REPRESENTATIVE
If there is a Securities Dealer or other representative of record on your
account, we are authorized: (1) to provide confirmations, account statements
and other information about your account directly to your dealer and/or
representative; and (2) to accept telephone and electronic instructions
directly from your dealer or representative, including instructions to
exchange or redeem your shares. Electronic instructions may be processed
through established electronic trading systems and programs used by the fund.
Telephone instructions directly from your representative will be accepted
unless you have told us that you do not want telephone privileges to apply to
your account.
KEEPING YOUR ACCOUNT OPEN
Due to the relatively high cost of maintaining a small account, we may close
your account if the value of your shares is less than $250, or less than $50
for employee accounts and custodial accounts for minors. We will only do this
if the value of your account fell below this amount because you voluntarily
sold your shares and your account has been inactive (except for the
reinvestment of distributions) for at least six months. Before we close your
account, we will notify you and give you 30 days to increase the value of
your account to $1,000, or $100 for employee accounts and custodial accounts
for minors. These minimums do not apply to accounts managed by the Franklin
Templeton Group.
SERVICES TO HELP YOU MANAGE YOUR ACCOUNT
AUTOMATIC INVESTMENT PLAN
Our automatic investment plan offers a convenient way to invest in a fund.
Under the plan, you can have money transferred automatically from your
checking or savings account to a fund each month to buy additional shares. If
you are interested in this program, please refer to the automatic investment
plan application included with this prospectus or contact your investment
representative. The market value of the Insured and Intermediate funds'
shares may fluctuate and a systematic investment plan such as this will not
assure a profit or protect against a loss. You may discontinue the program at
any time by calling Shareholder Services.
AUTOMATIC PAYROLL DEDUCTION - CLASS A ONLY
You may have money transferred from your paycheck to a fund to buy additional
Class A shares. Your investments will continue automatically until you
instruct the fund and your employer to discontinue the plan. To process your
investment, we must receive both the check and payroll deduction information
in required form. Due to different procedures used by employers to handle
payroll deductions, there may be a delay between the time of the payroll
deduction and the time we receive the money.
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.
If you would like to establish a systematic withdrawal plan in the Insured or
Intermediate Fund, please complete the systematic withdrawal plan section of
the shareholder application included with this prospectus and indicate how
you would like to receive your payments. If you would like to establish a
systematic withdrawal plan in the Money Fund, call Shareholder Services.
You may choose to direct your payments to buy the same class of shares of
another Franklin Templeton Fund or have the money sent directly to you, to
another person, or to a checking or savings account. If you choose to have
the money sent to a checking or savings account, please see "Electronic Fund
Transfers" below. Once your plan is established, any distributions paid by
the fund will be automatically reinvested in your account.
You will generally receive your payment by the end of the month in which a
payment is scheduled. When you sell your shares under a systematic withdrawal
plan, it is a taxable transaction.
To avoid paying sales charges on money you plan to withdraw within a short
period of time, you may not want to set up a systematic withdrawal plan in
the Insured or Intermediate Fund if you plan to buy shares on a regular
basis. Shares sold under the plan may also be subject to a Contingent
Deferred Sales Charge. Please see "Contingent Deferred Sales Charge" under
"How Do I Sell Shares?"
You may discontinue a systematic withdrawal plan, change the amount and
schedule of withdrawal payments, or suspend one payment by notifying us by
mail or by phone at least seven business days before the end of the month
preceding a scheduled payment. Please see "How Do I Buy, Sell and Exchange
Shares? - Systematic Withdrawal Plan" in the SAI for more information.
ELECTRONIC FUND TRANSFERS
You may choose to have dividend and capital gain distributions or payments
under a systematic withdrawal plan sent directly to a checking or savings
account. If the account is with a bank that is a member of the Automated
Clearing House, the payments may be made automatically by electronic funds
transfer. If you choose this option, please allow at least fifteen days for
initial processing. We will send any payments made during that time to the
address of record on your account.
TELEFACTS(R)
From a touch-tone phone, you may call our TeleFACTS(R) system (day or night) at
1-800/247-1753 to:
o obtain information about your account;
o obtain price and performance information about any Franklin Templeton
Fund;
o exchange shares (within the same class) between identically registered
Franklin Templeton Class A, B or C accounts; and
o request duplicate statements, money fund checks, and deposit slips for
Franklin Templeton accounts.
You will need a fund's code number to use TeleFACTS(R). The code numbers are as
follows:
CODE
NUMBER
- -------------------------------------------------------------------------------
Insured Fund - Class A ............. 124
Insured Fund - Class C ............. 224
Intermediate Fund .................. 152
Money Fund ......................... 125
STATEMENTS AND REPORTS TO SHAREHOLDERS
We will send you the following statements and reports on a regular basis:
o Confirmation and account statements reflecting transactions in your
account, including additional purchases and dividend reinvestments. PLEASE
VERIFY THE ACCURACY OF YOUR STATEMENTS WHEN YOU RECEIVE THEM.
o Financial reports of the funds will be sent every six months. To reduce
fund expenses, we attempt to identify related shareholders within a
household and send only one copy of a report. Call Fund Information if you
would like an additional free copy of the funds' financial reports.
INSTITUTIONAL ACCOUNTS
Additional methods of buying, selling or exchanging shares of the funds may
be available to institutional accounts. Institutional investors may also be
required to complete an institutional account application. For more
information, call Institutional Services.
Special procedures have been designed for banks and other institutions that
would like to open multiple accounts in the Money Fund. Please see the SAI
for more information.
AVAILABILITY OF THESE SERVICES
The services above are available to most shareholders. If, however, your
shares are held by a financial institution, in a street name account, or
networked through the NSCC,
the funds may not be able to offer these services directly to you. Please
contact your investment representative.
WHAT IF I HAVE QUESTIONS ABOUT MY ACCOUNT?
If you have any questions about your account, you may write to Investor
Services at P.O. Box 997151, Sacramento, California 95899-9983. The funds,
Distributors and the manager are also located at this address. You may also
contact us by phone at one of the numbers listed below.
HOURS OF OPERATION
(PACIFIC TIME)
DEPARTMENT NAME TELEPHONE NO. (MONDAY THROUGH FRIDAY)
Shareholder Services 1-800/632-2301 5:30 a.m. to 5:00 p.m.
Dealer Services 1-800/524-4040 5:30 a.m. to 5:00 p.m.
Fund Information 1-800/DIAL BEN 5:30 a.m. to 8:00 p.m.
(1-800/342-5236) 6:30 a.m. to 2:30 p.m. (Saturday)
Retirement Plan Services 1-800/527-2020 5:30 a.m. to 5:00 p.m.
Institutional Services 1-800/321-8563 6:00 a.m. to 5:00 p.m.
TDD (hearing impaired) 1-800/851-0637 5:30 a.m. to 5:00 p.m.
Your phone call may be monitored or recorded to ensure we provide you with
high quality service. You will hear a regular beeping tone if your call is
being recorded.
GLOSSARY
USEFUL TERMS AND DEFINITIONS
BOARD - The Board of Trustees of the Trust
CD - Certificate of deposit
CLASS A, CLASS B AND CLASS C - The Insured Fund offers two classes of shares,
designated "Class A" and "Class C." The two classes have proportionate
interests in the fund's portfolio. They differ, however, primarily in their
sales charge structures and Rule 12b-1 plans. Shares of the Intermediate and
Money funds are considered Class A shares for redemption, exchange and other
purposes. Certain funds in the Franklin Templeton Funds also offer a class of
shares designated "Class B."
CODE - Internal Revenue Code of 1986, as amended
CONTINGENCY PERIOD - For Class A shares, the 12 month period during which a
Contingent Deferred Sales Charge may apply. For Class C shares, the
contingency period is 18 months. The holding period begins on the day you buy
your shares. For example, if you buy shares on the 18th of the month, they
will age one month on the 18th day of the next month and each following month.
CONTINGENT DEFERRED SALES CHARGE (CDSC) - A sales charge of 1% that may apply
if you sell your shares within the Contingency Period.
DISTRIBUTORS - Franklin/Templeton Distributors, Inc., the funds' principal
underwriter. The SAI lists the officers and Board members who are affiliated
with Distributors. See "Officers and Trustees."
ELIGIBLE GOVERNMENTAL AUTHORITY - Any state or local government or any
instrumentality, department, authority or agency thereof that has determined
the fund is a legally permissible investment and that can only buy shares of
the fund without paying sales charges.
FITCH - Fitch Investors Service, Inc.
FRANKLIN TEMPLETON FUNDS - The U.S. registered mutual funds in the Franklin
Group of Funds(R) and the Templeton Group of Funds except Franklin Valuemark
Funds, Templeton Capital Accumulator Fund, Inc., and Templeton Variable
Products Series Fund
FRANKLIN TEMPLETON GROUP - Franklin Resources, Inc., a publicly owned holding
company, and its various subsidiaries
FRANKLIN TEMPLETON GROUP OF FUNDS - All U.S. registered investment companies
in the Franklin Group of Funds(R) and the Templeton Group of Funds
FT SERVICES - Franklin Templeton Services, Inc., the funds' administrator
INVESTOR SERVICES - Franklin/Templeton Investor Services, Inc., the funds'
shareholder servicing and transfer agent
IRS - Internal Revenue Service
LETTER - Letter of Intent
MARKET TIMERS - Market Timers generally include market timing or asset
allocation services, accounts administered so as to buy, sell or exchange
shares based on predetermined market indicators, or any person or group whose
transactions seem to follow a timing pattern or whose transactions include
frequent or large exchanges.
MOODY'S - Moody's Investors Service, Inc.
NET ASSET VALUE (NAV) - The value of a mutual fund is determined by deducting
the fund's liabilities from the total assets of the portfolio. The net asset
value per share is determined by dividing the net asset value of the fund by
the number of shares outstanding.
NSCC - National Securities Clearing Corporation
NYSE - New York Stock Exchange
OFFERING PRICE - The public offering price is based on the Net Asset Value
per share of the class and includes the front-end sales charge. The maximum
front-end sales charge is 2.25% for the Intermediate Fund, 4.25% for the
Insured Fund - Class A and 1% for the Insured Fund - Class C. There is no
front-end sales charge for the Money Fund. We calculate the offering price to
two decimal places using standard rounding criteria.
RESOURCES - Franklin Resources, Inc.
SAI - Statement of Additional Information
S&P - Standard & Poor's Corporation
SEC - U.S. Securities and Exchange Commission
SECURITIES DEALER - A financial institution that, either directly or through
affiliates, has an agreement with Distributors to handle customer orders and
accounts with the fund. This reference is for convenience only and does not
indicate a legal conclusion of capacity.
TELEFACTS(R) - Franklin Templeton's automated customer servicing system
WE/OUR/US - Unless the context indicates a different meaning, these terms
refer to the fund and/or Investor Services, Distributors, or other wholly
owned subsidiaries of Resources.
