As filed with the Securities and Exchange Commission on October 27, 1999.
File No. 811-7038
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 10 (X)
THE MONEY MARKET PORTFOLIOS
(Exact Name of Registrant as Specified in Charter)
777 MARINERS ISLAND BLVD., SAN MATEO, CA 94404
(Address of Principal Executive Offices (Zip Code)
Registrant's Telephone Number, Including Area Code (650) 312-2000
Deborah R. Gatzek, 777 Mariners Island Blvd., San Mateo, CA 94404
(Name and Address of Agent for Service of Process)
Please Send Copy of Communications to:
Mark H. Plafker, Esq.
Stradley, Ronon, Stevens & Young
2600 One Commerce Square
Philadelphia, Pennsylvania 19102
THE MONEY MARKET PORTFOLIOS
THE MONEY MARKET PORTFOLIO
THE U.S. GOVERNMENT SECURITIES MONEY MARKET PORTFOLIO
FORM N-1A, PART A:
Responses to Items 1 through 3 have been omitted pursuant to section 2(b) of
Instruction B of the General Instructions to Form N-1A.
ITEM 4. INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES, AND RELATED
RISKS
MONEY MARKET PORTFOLIO
GOAL AND STRATEGY
GOAL The fund's investment goal is to provide investors with as high a
level of current income as is consistent with the preservation of
shareholders' capital and liquidity. The fund also tries to maintain a stable
$1 share price.
PRINCIPAL INVESTMENTS
The fund normally invests in high-quality, short-term money market securities
of domestic and foreign issuers, including U.S. government securities,
repurchase agreements, bank obligations and commercial paper.
U.S. GOVERNMENT SECURITIES include marketable fixed, floating and variable
rate securities issued or guaranteed by the U.S. government or its agencies,
or by various instrumentalities that have been established or sponsored by
the U.S. government.
A REPURCHASE AGREEMENT is an agreement to buy a security and then to sell the
security back after a short period of time (generally, less than seven days)
at a higher price.
BANK OBLIGATIONS, and instruments secured by bank obligations, include fixed,
floating or variable rate certificates of deposit, letters of credit, time
deposits, bank notes and bankers' acceptances.
COMMERCIAL PAPER typically refers to short-term obligations of banks,
corporations and other borrowers with maturities of up to 270 days.
The fund maintains a dollar-weighted average portfolio maturity of 90 days or
less and only buys securities:
o with remaining maturities of 397 days or less, and
o that the manager determines present minimal credit risks and are rated
in the top two short-term ratings by U.S. nationally recognized rating
services (or comparable unrated securities).
MAIN RISKS
INCOME Since the fund can only distribute what it earns, the fund's
distributions to shareholders may decline when interest rates fall. Because
the fund limits its investments to high-quality, short-term securities, its
portfolio generally will earn lower yields than a portfolio with
lower-quality, longer-term securities subject to more risk.
Income risk is the risk that a fund's income will decrease due to falling
interest rates.
CREDIT There is the possibility that an issuer will be unable to make
interest payments and repay principal. Changes in an issuer's financial
strength or in a security's credit rating may affect a security's value.
INTEREST RATE When interest rates rise, security prices fall. The opposite
is also true: security prices rise when interest rates fall. In general,
securities with longer maturities are more sensitive to these price changes.
MARKET A security's value may be reduced by market activity or the results
of supply and demand. This is a basic risk associated with all securities.
When there are more sellers than buyers, prices tend to fall. Likewise, when
there are more buyers than sellers, prices tend to rise.
YEAR 2000 When evaluating current and potential portfolio positions, Year
2000 is one of the factors the manager considers.
The manager will rely upon public filings and other statements made by
issuers about their Year 2000 readiness. Issuers in countries outside the
U.S. may be more susceptible to Year 2000 risks and may not be required to
make the same level of disclosure about Year 2000 readiness as is required in
the U.S.The manager, of course, cannot audit each issuer and its major
suppliers to verify their Year 2000 readiness.
If an issuer in which the fund is invested is adversely affected by Year 2000
problems, it is likely that the price of its securities also will be
adversely affected. Please see Item 6 for more information.
More detailed information about the fund, its policies and risks, and
short-term debt ratings can be found in Part B.
Mutual fund shares are not deposits or obligations of, or guaranteed or
endorsed by, any bank, and are not federally insured by the Federal Deposit
Insurance Corporation, the Federal Reserve Board, or any other agency of the
U.S. government. Although the fund tries to maintain a $1 share price, it is
possible to lose money by investing in the fund.
FRANKLIN U.S. GOVERNMENT SECURITIES MONEY MARKET PORTFOLIO
GOAL AND STRATEGY
GOAL The fund's investment goal is to provide investors with as high a
level of current income as is consistent with the preservation of
shareholders' capital and liquidity. The fund also tries to maintain a stable
$1 share price.
PRINCIPAL INVESTMENTS
The fund invests only in marketable securities issued or guaranteed by the
U.S. government or which carry a guarantee supported by the full faith and
credit of the U.S. government, repurchase agreements collateralized by such
securities, and stripped securities (as described below). At the present
time, it is the fund's policy to limit its investments to U.S. Treasury
bills, notes and bonds (including stripped securities), and repurchase
agreements collateralized only by such securities.
A REPURCHASE AGREEMENT is an agreement to buy a security and then to sell the
security back after a short period of time (generally, less than seven days)
at a higher price.
STRIPPED SECURITIES are the separate income and principal components of a
debt security. Once the securities have been stripped they are referred to
as zero coupon securities. The fund only intends to buy stripped securities
that are issued or guaranteed by the U.S. Treasury.
The fund maintains a dollar-weighted average portfolio maturity of 90 days or
less and only buys securities:
o with remaining maturities of 397 days or less, and
o that the manager determines present minimal credit risks and are rated
in the top two short-term ratings by U.S. nationally recognized rating
services (or comparable unrated securities).
MAIN RISKS
INCOME Since the fund can only distribute what it earns, the fund's
distributions to shareholders may decline when interest rates fall. Because
the fund limits its investments to high-quality, short-term securities, its
portfolio generally will earn lower yields than a portfolio with
lower-quality, longer-term securities subject to more risk.
Income risk is the risk that a fund's income will decrease due to falling
interest rates.
CREDIT There is the possibility that an issuer will be unable to make
interest payments and repay principal. Changes in an issuer's financial
strength or in a security's credit rating may affect a security's value.
INTEREST RATE When interest rates rise, security prices fall. The opposite
is also true: security prices rise when interest rates fall. In general,
securities with longer maturities are more sensitive to these price changes.
MARKET A security's value may be reduced by market activity or the results
of supply and demand. This is a basic risk associated with all securities.
When there are more sellers than buyers, prices tend to fall. Likewise, when
there are more buyers than sellers, prices tend to rise.
DERIVATIVE SECURITIES Stripped securities are considered derivative
investments, since their value depends on the value of the underlying asset
to be purchased or sold. The fund's investment in derivatives may involve a
small investment relative to the amount of risk assumed. To the extent the
fund enters into these transactions, their success will depend on the
manager's ability to predict market movements. Stripped securities do not
make periodic payments of interest prior to maturity and the stripping of the
interest coupons causes them to be offered at a discount from their face
amount. This results in the securities being subject to greater fluctuations
in response to changing interest rates than interest-paying securities of
similar maturities.
YEAR 2000 When evaluating current and potential portfolio positions, Year
2000 is one of the factors the manager considers.
The manager will rely upon public filings and other statements made by
issuers about their Year 2000 readiness. The manager, of course, cannot audit
each issuer and its major suppliers to verify their Year 2000 readiness.
If an issuer in which the fund is invested is adversely affected by Year 2000
problems, it is likely that the price of its securities also will be
adversely affected. Please see Item 6 for more information.
More detailed information about the fund, its policies and risks, and
short-term debt ratings can be found in the fund's Statement of Additional
Information (SAI).
Mutual fund shares are not deposits or obligations of, or guaranteed or
endorsed by, any bank, and are not federally insured by the Federal Deposit
Insurance Corporation, the Federal Reserve Board, or any other agency of the
U.S. government. Although the fund tries to maintain a $1 share price, it is
possible to lose money by investing in the fund.
ITEM 5. MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
The response to Item 5 has been omitted pursuant to section 2(b) of
Instruction B of the General Instructions to Form N-1A.
ITEM 6. MANAGEMENT, ORGANIZATION, AND CAPITAL STRUCTURE
(A) MANAGEMENT
(1) INVESTMENT ADVISER
Franklin Advisers, Inc. (Advisers), 777 Mariners Island Blvd., San Mateo, CA
94404, is each fund's investment manager. Together, Advisers and its
affiliates manage over $218 billion in assets.
Each fund pays the manager a fee for managing the fund's assets and making
its investment decisions. For the fiscal year ended June 30, 1999, management
fees, before any advance waiver, were 0.15% of each fund's average daily net
assets. Under an agreement by the manager to limit its fees, each fund paid
0.15% of its average daily net assets to the manager. The manager may end
this arrangement at any time upon notice to the funds' board of trustees.
YEAR 2000 PROBLEM Each fund's business operations depend on a worldwide
network of computer systems that contain date fields, including securities
trading systems, securities transfer agent operations and stock market links.
Many of the systems currently use a two digit date field to represent the
date, and unless these systems are changed or modified, they may not be able
to distinguish the Year 1900 from the Year 2000 (commonly referred to as the
Year 2000 problem). In addition, the fact that the Year 2000 is a leap year
may create difficulties for some systems.
When the Year 2000 arrives, a fund's operations could be adversely affected
if the computer systems used by the manager, its service providers and other
third parties it does business with are not Year 2000 ready. For example, a
fund's portfolio and operational areas could be impacted, including
securities trade processing, interest and dividend payments, securities
pricing, shareholder account services, reporting, custody functions and
others.
Each fund's manager and its affiliated service providers are making a
concerted effort to take steps they believe are reasonably designed to
address their Year 2000 problems. Of course, a fund's ability to reduce the
effects of the Year 2000 problem is also very much dependent upon the efforts
of third parties over which the fund and its manager may have no control.
ITEM 7. SHAREHOLDER INFORMATION
(A) PRICING OF FUND SHARES
Each fund calculates its NAV per share at 3:00 p.m. pacific time, each day
the New York Stock Exchange is open, by dividing its net assets by the number
of shares outstanding. The fund's assets are generally valued at their
amortized cost.
Requests to buy and sell shares are processed at the NAV next calculated
after the fund receives a request in proper form.
(B) PURCHASE OF FUND SHARES
The funds' shares have not been registered under the Securities Act of 1933
(1933 Act), which means they may not be sold publicly. The funds' shares may,
however, be sold through private placements pursuant to available exemptions
from the 1933 Act.
Shares of each fund are sold only to other investment companies. Funds should
be wired to the fund's bank account at Bank of America, for credit to the
fund's account. All investments in the fund are credited to the shareholder's
account in the form of full and fractional shares of the fund (rounded to the
nearest 1/1000 of a share). The funds do not issue share certificates.
Shares of each fund generally may be purchased on any day the fund is open
for business. Wire purchase orders in federal funds are not accepted on days
when the Federal Reserve Bank system and the fund's custodian are closed.
(C) REDEMPTION OF FUND SHARES
As stated above, the funds' shares are restricted securities, which may not
be sold unless registered or pursuant to an available exemption from the 1933
Act.
Redemptions are processed on any day the funds are open for business and are
effected at the NAV next calculated after the fund receives a redemption
request in proper form.
Redemption payments will be made within seven days after receipt of the
redemption request in proper form. Proceeds for redemption orders cannot be
wired on those business days when the Federal Reserve Bank System and the
custodian bank are closed. In unusual circumstances, the funds may
temporarily suspend redemptions or postpone the payment of proceeds as
allowed by federal securities law.
ADDITIONAL POLICIES Please note that the funds maintain additional policies
and reserve certain rights, including:
o In unusual circumstances, we may temporarily suspend redemptions, or
postpone the payment of proceeds, as allowed by federal securities laws.
o For redemptions over a certain amount, each fund reserves the right to
make payments in securities or other assets of the fund, in the case of an
emergency or if the payment by check or wire would be harmful to existing
shareholders.
(D) DIVIDENDS AND DISTRIBUTIONS
The funds' shares have not been registered under the Securities Act of 1933
(1933 Act), which means they may not be sold publicly. The funds' shares may,
however, be sold through private placements pursuant to available exemptions
from the 1933 Act.
Each fund declares dividends for each day that the fund's net asset value is
calculated, payable to shareholders of record as of the close of business
that day. The amount of dividends may fluctuate from day to day and dividends
may be omitted on some days, depending on changes in the factors that
comprise the fund's net investment income. THE FUND DOES NOT PAY "INTEREST"
OR GUARANTEE ANY AMOUNT OF DIVIDENDS OR RETURN ON AN INVESTMENT IN ITS SHARES.
Dividends are automatically reinvested monthly in the form of additional
shares of the fund at the net asset value per share at the close of business
on the last business day of the month. Shareholders may request to have their
dividends paid out monthly in cash by notifying the fund.
The daily dividend includes accrued interest and any original issue and
market discount, plus or minus any gain or loss on the sale of portfolio
securities and changes in unrealized appreciation or depreciation in
portfolio securities (to the extent required to maintain a stable net asset
value per share) less amortization of any premium paid on the purchase of
portfolio securities and the estimated expenses of the fund.
(E) TAX CONSEQUENCES
In general, fund distributions are taxable to investors as ordinary income.
This is true whether investors reinvest their distributions in additional
fund shares or receive them in cash.
By law, a fund must withhold 31% of an investor's taxable distributions and
proceeds if the investor does not provide his or her correct social security
or taxpayer identification number, or if the IRS instructs the fund to do so.
Every January, investors will receive a statement that shows the tax status
of distributions they received for the previous year. Distributions declared
in December but paid in January are taxable as if they were paid in December.
Because the funds expect to maintain a $1.00 net asset value per share,
investors should not have any gain or loss on the sale of their fund shares.
For tax purposes, an exchange of fund shares for shares of a different
Franklin Templeton Fund is the same as a sale.
Fund distributions generally will be subject to state and local income tax.
It is anticipated that no portion of fund distributions will qualify for
exemption from state and local taxes as dividends paid from interest earned
on direct obligations of the U.S. government. Non-U.S. investors may be
subject to U.S. withholding and estate tax. Investors should consult their
tax advisors about federal, state, local and foreign tax consequences of
their investment in a fund.
ITEM 8. DISTRIBUTION ARRANGEMENTS
Not Applicable
ITEM 9. FINANCIAL HIGHLIGHTS INFORMATION
The response to Item 9 has been omitted pursuant to section 2(b) of
Instruction B of the General Instructions to Form N-1A.
THE MONEY MARKET PORTFOLIOS
THE MONEY MARKET PORTFOLIO
THE U.S. GOVERNMENT SECURITIES MONEY MARKET PORTFOLIO
FORM N-1A, PART B:
ITEM 10. COVER PAGE AND TABLE OF CONTENTS
Not Applicable
ITEM 11. FUND HISTORY
The Money Market Portfolios (trust), an open-end management investment
company, commonly called a mutual fund. The trust was organized as a Delaware
business trust on June 16, 1992. Currently, the trust has two series, the
shares of beneficial interest of which are available only to other investment
companies.
ITEM 12. DESCRIPTION OF THE FUND AND ITS INVESTMENTS AND RISKS
GOALS AND STRATEGIES
The investment goal of each fund is to provide investors with as high a level
of current income as is consistent with the preservation of shareholders'
capital and liquidity. This goal is fundamental, which means it may not be
changed without shareholder approval. Each fund also tries to maintain a
stable $1 share price.
U.S. GOVERNMENT SECURITIES As a fundamental policy, the U.S. Government
Securities Money Market Portfolio (U.S. Securities Fund) may invest only in
obligations, including U.S. Treasury bills, notes, bonds and securities of
the Government National Mortgage Association (popularly called "GNMAs" or
"Ginnie Maes") and the Federal Housing Administration, which are issued or
guaranteed by the U.S. government or that carry a guarantee supported by the
full faith and credit of the U.S. government, repurchase agreements
collateralized only by such securities, and stripped securities. At the
present time, it is the policy of the U.S. Securities Fund to limit its
investments to U.S. Treasury bills, notes and bonds (including stripped
securities) and repurchase agreements collateralized only by such securities.
This policy may only be changed upon 30 days' written notice to shareholders
and to the National Association of Insurance Commissioners.
The Money Market Portfolio (Money Fund) may invest in most types of U.S.
government securities. Some U.S. government securities, including U.S.
Treasury bills, notes and bonds and securities of the Government National
Mortgage Association are issued or guaranteed by the U.S. government or carry
a guarantee that is supported by the full faith and credit of the U.S.
government. Other U.S. government securities are issued or guaranteed by
federal agencies or government-sponsored enterprises and are not considered
direct obligations of the U.S. government. Instead, they involve sponsorship
or guarantees by government agencies or enterprises. For example, some
securities are supported by the right of the issuer to borrow from the U.S.
Treasury, such as obligations of the Federal Home Loan Bank. Others, such as
obligations of the Federal Farm Credit Banks Funding Corporation, are
supported only by the credit of the instrumentality.
BANK OBLIGATIONS The Money Fund may invest in obligations of U.S. banks,
foreign branches of U.S. or foreign banks, and U.S. branches of foreign
banks. These obligations may include deposits that are fully insured by the
U.S. government, its agencies or instrumentalities, such as deposits in
banking and savings institutions up to the current limit of the insurance on
principal provided by the Federal Deposit Insurance Corporation. Deposits are
frequently combined in larger units by an intermediate bank or other
institution.
The Money Fund will invest in these obligations or instruments issued by
banks and savings institutions with assets of at least $1 billion. Time
deposits are non-negotiable deposits that are held in a banking institution
for a specified time at a stated interest rate. The Money Fund may not
invest more than 10% of its assets in time deposits with more than seven days
to maturity.
The Money Fund may invest in an obligation issued by a branch of a bank only
if the parent bank has assets of at least $5 billion, and may invest only up
to 25% of its assets in obligations of foreign branches of U.S. or foreign
banks. The Money Fund may, however, invest more than 25% of its assets in
certain domestic bank obligations, including U.S. branches of foreign banks.
VARIABLE MASTER DEMAND NOTES are a type of commercial paper in which the
Money Fund may invest. They are direct arrangements between a lender and a
borrower that allow daily changes to the amount borrowed and to the interest
rate. The Money Fund, as lender, may increase or decrease the amount provided
by the note agreement, and the borrower may repay up to the full amount of
the note without penalty. Typically, the borrower may also set the interest
rate daily, usually at a rate that is the same or similar to the interest
rate on other commercial paper issued by the borrower. The Money Fund does
not have any limit on the amount of its assets that may be invested in
variable master demand notes and may invest only in variable master demand
notes of U.S. issuers.
Because variable master demand notes are direct lending arrangements between
the lender and the borrower, they generally are not traded and do not have a
secondary market. They are, however, redeemable at face value plus accrued
interest at any time, although the Money Fund's ability to redeem a note is
dependent on the ability of the borrower to pay the principal and interest on
demand. When determining whether to invest in a variable master demand note,
the manager considers, among other things, the earnings power, cash flow and
other liquidity ratios of the issuer.
ASSET-BACKED SECURITIES in which the Money Fund may invest are typically
commercial paper backed by the loans or accounts receivable of an entity,
such as a bank or credit card company. The issuer intends to repay using the
assets backing the securities (once collected). Therefore, repayment depends
largely on the cash-flows generated by the assets backing the securities.
Sometimes the credit support for these securities is limited to the
underlying assets. In other cases it may be provided by a third party
through a letter of credit or insurance guarantee.
Repayment of these securities is intended to be obtained from an identified
pool of diversified assets, typically receivables related to a particular
industry, such as asset-backed securities related to credit card receivables,
automobile receivables, trade receivables or diversified financial assets.
The credit quality of most asset-backed commercial paper depends primarily on
the credit quality of the assets underlying the securities, how well the
entity issuing the security is insulated from the credit risk of the
originator (or any other affiliated entities) and the amount and quality of
any credit support provided to the securities.
Asset-backed commercial paper is often backed by a pool of assets
representing the obligations of a number of different parties. To lessen the
effect of failures by obligors on these underlying assets to make payment,
the securities may contain elements of credit support. The credit support
falls into two categories: liquidity protection and protection against
ultimate default on the underlying assets. Liquidity protection refers to the
provision of advances, generally by the entity administering the pool of
assets, to ensure that scheduled payments on the underlying pool are made in
a timely fashion. Protection against ultimate default ensures payment on at
least a portion of the assets in the pool. This protection may be provided
through guarantees, insurance policies or letters of credit obtained from
third parties, through various means of structuring the transaction or
through a combination of these approaches. The degree of credit support
provided on each issue is based generally on historical information
respecting the level of credit risk associated with the payments. Delinquency
or loss that exceeds the anticipated amount could adversely impact the return
on an investment in an asset-backed security.
CORPORATE OBLIGATIONS in which the Money Fund may invest include fixed,
floating and variable rate bonds, debentures or notes.
COMMERCIAL PAPER The Money Fund may invest in commercial paper of domestic
and foreign issuers.
STRIPPED SECURITIES are the separate income and principal components of a
debt security. Once the securities have been stripped they are referred to
as zero coupon securities. Their risks are similar to those of other money
market securities although they may be more volatile. Stripped securities do
not make periodic payments of interest prior to maturity and the stripping of
the interest coupons causes them to be offered at a discount from their face
amount. This results in the securities being subject to greater fluctuations
in response to changing interest rates than interest-paying securities of
similar maturities.
Each fund only intends to buy stripped securities that are issued or
guaranteed by the U.S. Treasury or by an agency or instrumentality of the
U.S. government.
MUNICIPAL SECURITIES The Money Fund may invest up to 10% of its assets in
taxable municipal securities. Municipal securities are issued by or on behalf
of states, territories or possessions of the U.S., the District of Columbia,
or their political subdivisions, agencies or instrumentalities. They are
generally issued to raise money for various public purposes, such as
constructing public facilities and making loans to public institutions.
Certain types of municipal securities are issued to provide funding for
privately operated facilities and are generally taxable.
DIVERSIFICATION Each fund is a diversified fund. As fundamental policies,
each fund: (a) may not buy a security if, with respect to 75% of its total
assets, more than 5% would be invested in the securities of any one issuer,
and (b) may not invest in a security if the fund would own more than 10% of
the outstanding voting securities of any one issuer. These limitations do not
apply to obligations issued or guaranteed by the U.S. government or its
instrumentalities.
As money market funds, however, the funds must follow certain procedures
required by federal securities laws that may be more restrictive than some of
the funds' other policies or investment restrictions. With respect to
diversification, these procedures require that each fund not invest more than
5% of its total assets in securities of a single issuer, other than U.S.
government securities, although it may invest up to 25% of its total assets
in securities of a single issuer that are rated in the highest rating
category for a period of up to three business days after purchase. Each fund
also must not invest more than (a) the greater of 1% of its total assets or
$1 million in securities issued by a single issuer that are rated in the
second highest rating category; and (b) 5% of its total assets in securities
rated in the second highest rating category. These procedures are fundamental
policies of each fund. See "Investment restrictions."
WHEN-ISSUED OR DELAYED-DELIVERY TRANSACTIONS are those where payment and
delivery for the security take place at a future date. Since the market
price of the security may fluctuate during the time before payment and
delivery, the fund assumes the risk that the value of the security at
delivery may be more or less than the purchase price. When the Money Fund is
the buyer in the transaction, it will maintain cash or liquid securities,
with an aggregate value equal to the amount of its purchase commitments, in a
segregated account with its custodian bank until payment is made. The Money
Fund will not engage in when-issued and delayed-delivery transactions for
investment leverage purposes.
REPURCHASE AGREEMENTS Each fund generally will have a portion of its assets
in cash or cash equivalents for a variety of reasons, including waiting for a
special investment opportunity or taking a defensive position. To earn income
on this portion of its assets, each fund may enter into repurchase
agreements. Under a repurchase agreement, a fund agrees to buy securities
guaranteed as to payment of principal and interest by the U.S. government or
its agencies from a qualified bank or broker-dealer and then to sell the
securities back to the bank or broker-dealer after a short period of time
(generally, less than seven days) at a higher price. The bank or
broker-dealer must transfer to the fund's custodian securities with an
initial market value of at least 102% of the dollar amount invested by the
fund in each repurchase agreement. The manager will monitor the value of such
securities daily to determine that the value equals or exceeds the repurchase
price.
Repurchase agreements may involve risks in the event of default or insolvency
of the bank or broker-dealer, including possible delays or restrictions upon
a fund's ability to sell the underlying securities. The funds will enter into
repurchase agreements only with parties who meet certain creditworthiness
standards, i.e., banks or broker-dealers that the manager has determined
present no serious risk of becoming involved in bankruptcy proceedings within
the time frame contemplated by the repurchase transaction. Both funds may
enter into repurchase agreements with certain U.S. and foreign banks and
broker-dealers.
LOANS OF PORTFOLIO SECURITIES To generate additional income, each fund may
lend certain of its portfolio securities to qualified banks and
broker-dealers. These loans may not exceed 25% of the value of the Money
Fund's total assets and 10% of the value of the U.S. Securities Fund's total
assets, measured at the time of the most recent loan. For each loan, the
borrower must maintain with the Money Fund's custodian collateral (consisting
of cash) and with the U.S. Securities Fund's custodian collateral (consisting
of any combination of cash, securities issued by the U.S. government and its
agencies and instrumentalities, or irrevocable letters of credit) with a
value at least equal to 100% of the current market value of the loaned
securities. The funds retain all or a portion of the interest received on
investment of the cash collateral or receive a fee from the borrower. The
funds also continue to receive any distributions paid on the loaned
securities. The funds may terminate the loan at any time and obtain the
return of the securities loaned within the normal settlement period for the
security involved.
Where voting rights with respect to the loaned securities pass with the
lending of the securities, the manager intends to call the loaned securities
to vote proxies, or to use other practicable and legally enforceable means to
obtain voting rights, when the manager has knowledge that, in its opinion, a
material event affecting the loaned securities will occur or the manager
otherwise believes it necessary to vote. As with other extensions of credit
there are risks of delay in recovery or even loss of rights in collateral in
the event of default or insolvency of the borrower. The funds will loan their
securities only to parties who meet creditworthiness standards approved by
the funds' board of trustees, i.e., banks or broker-dealers that the manager
has determined present no serious risk of becoming involved in bankruptcy
proceedings within the time frame contemplated by the loan.
BORROWING The Money Fund may borrow up to 5% of its total assets from banks
for temporary or emergency purposes. The maximum amount the U.S. Securities
Fund may borrow from banks for such purposes is 10% of its total assets. The
funds will not make any new investments while any outstanding loans exceed 5%
of its total assets.
ILLIQUID INVESTMENTS The Money Fund's policy is not to invest more than 10%
of its net assets in illiquid securities. Illiquid securities are generally
securities that cannot be sold within seven days in the normal course of
business at approximately the amount at which the Money Fund has valued them.
OTHER LIMITATIONS The Money Fund may not invest more than 5% of its total
assets in securities of companies, including predecessors, that have been in
continuous operation for less than three years. The Money Fund also may not
invest more than 25% of its total assets in any particular industry, although
it may invest more than 25% of its assets in certain domestic bank
obligations. These limitations do not apply to U.S. government securities,
federal agency obligations, or repurchase agreements fully collateralized by
U.S. government securities. There are, however, certain tax diversification
requirements that may apply to investments in repurchase agreements and other
securities that are not treated as U.S. government securities under the
Internal Revenue Code.
INVESTMENT RESTRICTIONS Each fund has adopted the following restrictions as
fundamental policies. This means they may only be changed if the change is
approved by (i) more than 50% of the fund's outstanding shares or (ii) 67% or
more of the fund's shares present at a shareholder meeting if more than 50%
of the fund's outstanding shares are represented at the meeting in person or
by proxy, whichever is less.
Each fund may not:
1. Borrow money or mortgage or pledge any of its assets, except that
borrowings (and a pledge of assets therefor) for temporary or emergency
purposes may be made from banks in any amount up to 5% of the Money Fund's
total asset value and up to 10% of the U.S. Securities Fund's total asset
value.
2. Make loans, except (a) through the purchase of debt securities in
accordance with the investment goals and policies of the fund, (b) to the
extent the entry into a repurchase agreement is deemed to be a loan, or (c)
by the loan of its portfolio securities in accordance with the policies
described above.
3. Invest in any issuer for purposes of exercising control or
management.
4. Buy any securities "on margin" or sell any securities "short,"
except that it may use such short-term credits as are necessary for the
clearance of transactions.
5. Purchase securities, in private placements or in other
transactions, for which there are legal or contractual restrictions on resale
and are not readily marketable, or enter into a repurchase agreement with
more than seven days to maturity if, as a result, more than 10% of the total
assets of the fund would be invested in such securities or repurchase
agreements.
6. Purchase securities of other investment companies, except in
connection with a merger, consolidation, acquisition, or reorganization.
7. Invest more than 25% of its assets in securities of any industry,
although for purposes of this limitation, U.S. government obligations are not
considered to be part of any industry. This prohibition does not apply where
the policies of the fund as described in Part A specify otherwise.
8. Act as underwriter of securities issued by other persons except
insofar as the Trust may technically be deemed an underwriter under the
federal securities laws in connection with the disposition of portfolio
securities.
9. Purchase securities from or sell to the Trust's officers and
trustees, or any firm of which any officer or trustee is a member, as
principal, or retain securities of any issuer if, to the knowledge of the
Trust, one or more of the Trust's officers, trustees, or Advisers own
beneficially more than 1/2 of 1% of the securities of such issuer and all
such officers and trustees together own beneficially more than 5% of such
securities.
10. Acquire, lease or hold real estate, provided that this limitation
shall not prohibit the purchase of municipal and other debt securities
secured by real estate or interests therein.
11. Invest in commodities and commodity contracts, puts, calls,
straddles, spreads, or any combination thereof, or interests in oil, gas, or
other mineral exploration or development programs, except that it may
purchase, hold, and dispose of "obligations with puts attached" or write
covered call options in accordance with its stated investment policies.
If a percentage restriction is met at the time of investment, a later
increase or decrease in the percentage due to a change in the value or
liquidity of portfolio securities or the amount of the fund's assets will not
be considered a violation of any of the foregoing restrictions.
In addition to these fundamental policies, it is the present policy of each
fund (which may be changed without the approval of shareholders) not to
invest in real estate limited partnerships (investments in marketable
securities issued by real estate investment trusts are not subject to this
restriction) or in interests (other than publicly traded equity securities)
in oil, gas, or other mineral leases, exploration or development.
As a fundamental policy (which may not be changed without shareholder
approval), the Money Fund may not purchase any securities other than
obligations of the U.S. government, its agencies or instrumentalities, if,
immediately after such purchase, more than 5% of its total assets would be
invested in securities of any one issuer with respect to 75% of the Money
Fund's total assets, or more than 10% of the outstanding voting securities of
any one issuer would be owned by the Money Fund. In accordance with
procedures adopted pursuant to Rule 2a-7, the Money Fund will not invest more
than 5% of the Money Fund's total assets in Eligible Securities of a single
issuer, other than U.S. government securities
RISKS
There is no assurance that the funds will meet their investment goals.
Investments in securities that have potential to increase in value may be
subject to a greater degree of risk and may be more volatile than other types
of investments.
The value of your shares will increase as the value of the securities owned
by the fund increases and will decrease as the value of the fund's
investments decrease. In this way, you participate in any change in the value
of the securities owned by the fund. In addition to the factors that affect
the value of any particular security that the fund owns, the value of fund
shares may also change with movements in the stock market as a whole.
FOREIGN SECURITIES The value of foreign (and U.S.) securities that the Money
Fund may hold is affected by general economic conditions and individual
company and industry earnings prospects. While foreign securities may offer
significant opportunities for gain, they also involve additional risks that
can increase the potential for losses in the fund.
The political, economic and social structures of some countries the fund
invests in may be less stable and more volatile than those in the U.S. The
risks of investing in these countries include the possibility of the
imposition of exchange controls, expropriation, restrictions on removal of
currency or other assets, nationalization of assets and punitive taxes.
There may be less publicly available information about a foreign company or
government than about a U.S. company or public entity. Certain countries'
financial markets and services are less developed than those in the U.S. or
other major economies. As a result, they may not have uniform accounting,
auditing and financial reporting standards and may have less government
supervision of financial markets. Foreign securities markets may have
substantially lower trading volumes than U.S. markets, resulting in less
liquidity and more volatility than experienced in the U.S. Transaction costs
on foreign securities markets are generally higher than in the U.S. The
settlement practices may be cumbersome and result in delays that may affect
portfolio liquidity. The fund may have greater difficulty exercising rights,
pursuing legal remedies, and obtaining judgments with respect to foreign
investments in foreign courts than with respect to domestic issuers in U.S.
courts.
DERIVATIVES Each fund's transactions in stripped securities involve certain
risks. These risks include, among others, the risk that the price movements
in the underlying securities correlate with price movements in the relevant
portion of the fund's portfolio, or that there may be a negative correlation
that would result in a loss on both the underlying security and the
derivative security. The fund bears the risk in the same amount as the
instrument it has purchased.
13. MANAGEMENT OF THE FUND
(A) BOARD OF TRUSTEES
The trust has a board of trustees. The board is responsible for the overall
management of the trust, including general supervision and review of each
fund's investment activities. The board, in turn, elects the officers of the
trust who are responsible for administering the trust's day-to-day
operations.
(B) MANAGEMENT INFORMATION
The affiliations of the officers and board members and their principal
occupations for the past five years are shown below.
PRINCIPAL
NAME, AGE AND ADDRESS POSITIONS HELD WITH OCCUPATION(S) DURING
THE TRUST THE PAST FIVE YEARS
Frank H. Abbott, III (78)
1045 Sansome Street, San Francisco, CA 94111
TRUSTEE
President and Director, Abbott Corporation (an investment company); director
or trustee, as the case may be, of 27 of the investment companies in the
Franklin Templeton Group of Funds; and FORMERLY, Director, MotherLode Gold
Mines Consolidated (gold mining) (until 1996) and Vacu-Dry Co. (food
processing) (until 1996).
Harris J. Ashton (67)
191 Clapboard Ridge Road, Greenwich, CT 06830
TRUSTEE
Director, RBC Holdings, Inc. (bank holding company) and Bar-S Foods (meat
packing company); director or trustee, as the case may be, of 47 of the
investment companies in the Franklin Templeton Group of Funds; and FORMERLY,
President, Chief Executive Officer and Chairman of the Board, General Host
Corporation (nursery and craft centers) (until 1998).
Robert F. Carlson (71)
2120 Lambeth Way, Carmichael, CA 95608
TRUSTEE
Member and past President, Board of Administration, California Public
Employees Retirement Systems (CALPERS); director or trustee, as the case may
be, of nine of the investment companies in the Franklin Templeton Group of
Funds; and FORMERLY, member and Chairman of the Board, Sutter Community
Hospitals, member, Corporate Board, Blue Shield of California, and Chief
Counsel, California Department of Transportation.
S. Joseph Fortunato (67)
Park Avenue at Morris County, P.O. Box 1945
Morristown, NJ 07962-1945
TRUSTEE
Member of the law firm of Pitney, Hardin, Kipp & Szuch; and director or
trustee, as the case may be, of 49 of the investment companies in the
Franklin Templeton Group of Funds.
*Charles B. Johnson (66)
777 Mariners Island Blvd., San Mateo, CA 94404
CHAIRMAN OF THE BOARD AND TRUSTEE
President, Chief Executive Officer and Director, Franklin Resources, Inc.;
Chairman of the Board and Director, Franklin Advisers, Inc., Franklin
Investment Advisory Services, Inc. and Franklin Templeton Distributors, Inc.;
Director, Franklin/Templeton Investor Services, Inc. and Franklin Templeton
Services, Inc.; officer and/or director or trustee, as the case may be, of
most of the other subsidiaries of Franklin Resources, Inc. and of 48 of the
investment companies in the Franklin Templeton Group of Funds.
*Charles E. Johnson (43)
500 East Broward Blvd., Fort Lauderdale, FL 33394-3091
PRESIDENT AND TRUSTEE
Senior Vice President and Director, Franklin Resources, Inc.; Senior Vice
President, Franklin Templeton Distributors, Inc.; President and Director,
Templeton Worldwide, Inc.; Chairman and Director, Templeton Investment
Counsel, Inc.; Vice President, Franklin Advisers, Inc.; officer and/or
director of some of the other subsidiaries of Franklin Resources, Inc.; and
officer and/or director or trustee, as the case may be, of 32 of the
investment companies in the Franklin Templeton Group of Funds.
*Rupert H. Johnson, Jr. (59)
777 Mariners Island Blvd., San Mateo, CA 94404
VICE PRESIDENT AND TRUSTEE
Executive Vice President and Director, Franklin Resources, Inc. and Franklin
Templeton Distributors, Inc.; President and Director, Franklin Advisers, Inc.
and Franklin Investment Advisory Services, Inc.; Senior Vice President,
Franklin Advisory Services, LLC; Director, Franklin/Templeton Investor
Services, Inc.; and officer and/or director or trustee, as the case may be,
of most of the other subsidiaries of Franklin Resources, Inc. and of 51 of
the investment companies in the Franklin Templeton Group of Funds.
Frank W.T. LaHaye (70)
20833 Stevens Creek Blvd., Suite 102, Cupertino, CA 95014
TRUSTEE
General Partner, Miller & LaHaye, which is the General Partner of Peregrine
Ventures II (venture capital firm); director or trustee, as the case may be,
of 27 of the investment companies in the Franklin Templeton Group of Funds;
and FORMERLY, Director, Fischer Imaging Corporation (medical imaging
systems), Digital Transmission Systems, Inc. (wireless communications) and
Quarterdeck Corporation (software firm), and General Partner, Peregrine
Associates, which was the General Partner of Peregrine Ventures (venture
capital firm).
Gordon S. Macklin (71)
8212 Burning Tree Road, Bethesda, MD 20817
TRUSTEE
Director, Fund American Enterprises Holdings, Inc. (holding company), Martek
Biosciences Corporation, MCI WorldCom (information services), MedImmune, Inc.
(biotechnology), Spacehab, Inc. (aerospace services) and Real 3D (software);
director or trustee, as the case may be, of 47 of the investment companies in
the Franklin Templeton Group of Funds; and FORMERLY, Chairman, White River
Corporation (financial services) and Hambrecht and Quist Group (investment
banking), and President, National Association of Securities Dealers, Inc.
Harmon E. Burns (54)
777 Mariners Island Blvd., San Mateo, CA 94404
VICE PRESIDENT
Executive Vice President and Director, Franklin Resources, Inc., Franklin
Templeton Distributors, Inc. and Franklin Templeton Services, Inc.; Executive
Vice President, Franklin Advisers, Inc.; Director, Franklin Investment
Advisory Services, Inc. and Franklin/Templeton Investor Services, Inc.; and
officer and/or director or trustee, as the case may be, of most of the other
subsidiaries of Franklin Resources, Inc. and of 51 of the investment
companies in the Franklin Templeton Group of Funds.
Martin L. Flanagan (39)
777 Mariners Island Blvd., San Mateo, CA 94404
VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
Senior Vice President and Chief Financial Officer, Franklin Resources, Inc.,
Franklin/Templeton Investor Services, Inc. and Franklin Mutual Advisers, LLC;
Executive Vice President, Chief Financial Officer and Director, Templeton
Worldwide, Inc.; Executive Vice President, Chief Operating Officer and
Director, Templeton Investment Counsel, Inc.; Executive Vice President and
Chief Financial Officer, Franklin Advisers, Inc.; Chief Financial Officer,
Franklin Advisory Services, LLC and Franklin Investment Advisory Services,
Inc.; President and Director, Franklin Templeton Services, Inc.; officer
and/or director of some of the other subsidiaries of Franklin Resources,
Inc.; and officer and/or director or trustee, as the case may be, of 51 of
the investment companies in the Franklin Templeton Group of Funds.
Deborah R. Gatzek (50)
777 Mariners Island Blvd., San Mateo, CA 94404
VICE PRESIDENT AND SECRETARY
Senior Vice President and General Counsel, Franklin Resources, Inc.; Senior
Vice President, Franklin Templeton Services, Inc. and Franklin Templeton
Distributors, Inc.; Executive Vice President, Franklin Advisers, Inc.; Vice
President, Franklin Advisory Services, LLC and Franklin Mutual Advisers, LLC;
Vice President, Chief Legal Officer and Chief Operating Officer, Franklin
Investment Advisory Services, Inc.; and officer of 52 of the investment
companies in the Franklin Templeton Group of Funds.
Diomedes Loo-Tam (60)
777 Mariners Island Blvd., San Mateo, CA 94404
TREASURER AND PRINCIPAL ACCOUNTING OFFICER
Senior Vice President, Franklin Templeton Services, Inc.; and officer of 32
of the investment companies in the Franklin Templeton Group of Funds.
Edward V. McVey (62)
777 Mariners Island Blvd., San Mateo, CA 94404
VICE PRESIDENT
Senior Vice President and National Sales Manager, Franklin Templeton
Distributors, Inc.; and officer of 28 of the investment companies in the
Franklin Templeton Group of Funds.
R. Martin Wiskemann (72)
777 Mariners Island Blvd., San Mateo, CA 94404
VICE PRESIDENT
Senior Vice President, Portfolio Manager and Director, Franklin Advisers,
Inc.; Senior Vice President, Franklin Management, Inc.; Vice President and
Director, ILA Financial Services, Inc.; and officer and/or director or
trustee, as the case may be, of 15 of the investment companies in the
Franklin Templeton Group of Funds.
*This board member is considered an "interested person" under federal
securities laws.
Note: Charles B. Johnson and Rupert H. Johnson, Jr. are brothers and the
father and uncle, respectively, of Charles E. Johnson.
Currently, the trust does not pay fees to noninterested board members fees.
Board members who serve on the audit committee of the trust and other funds
in the Franklin Templeton Group of Funds receive a flat fee of $2,000 per
committee meeting attended, a portion of which is allocated to the trust.
Members of a committee are not compensated for any committee meeting held on
the day of a board meeting. Noninterested board members may also serve as
directors or trustees of other funds in the Franklin Templeton Group of Funds
and may receive fees from these funds for their services. The fees payable to
noninterested board members by the trust are subject to reductions resulting
from fee caps limiting the amount of fees payable to board members who serve
on other boards within the Franklin Templeton Group of Funds. The following
table provides the total fees paid to noninterested board members by the
Franklin Templeton Group of Funds.
NUMBER OF BOARDS
TOTAL FEES IN THE FRANKLIN
RECEIVED FROM TEMPLETON GROUP
THE FRANKLIN OF FUNDS ON
NAME TEMPLETON GROUP WHICH EACH
OF FUNDS 1 ($) SERVES 2
- ---------------------------------------------------------
Frank H. Abbott, III 166,614 27
Harris J. Ashton 361,157 47
Robert F. Carlson 78,052 9
S. Joseph Fortunato 367,835 49
Frank W.T. LaHaye 171,536 27
Gordon S. Macklin 361,157 47
1. For the calendar year ended December 31, 1998.
2. We base the number of boards on the number of registered investment
companies in the Franklin Templeton Group of Funds. This number does not
include the total number of series or funds within each investment company
for which the board members are responsible. The Franklin Templeton Group of
Funds currently includes 53 registered investment companies, with
approximately 156 U.S. based funds or series.
Noninterested board members are reimbursed for expenses incurred in
connection with attending board meetings, paid pro rata by each fund in the
Franklin Templeton Group of Funds for which they serve as director or
trustee. No officer or board member received any other compensation,
including pension or retirement benefits, directly or indirectly from the
fund or other funds in the Franklin Templeton Group of Funds. Certain
officers or board members who are shareholders of Franklin Resources, Inc.
may be deemed to receive indirect remuneration by virtue of their
participation, if any, in the fees paid to its subsidiaries.
Board members historically have followed a policy of having substantial
investments in one or more of the funds in the Franklin Templeton Group of
Funds, as is consistent with their individual financial goals. In February
1998, this policy was formalized through adoption of a requirement that each
board member invest one-third of fees received for serving as a director or
trustee of a Templeton fund in shares of one or more Templeton funds and
one-third of fees received for serving as a director or trustee of a Franklin
fund in shares of one or more Franklin funds until the value of such
investments equals or exceeds five times the annual fees paid such board
member. Investments in the name of family members or entities controlled by a
board member constitute fund holdings of such board member for purposes of
this policy, and a three year phase-in period applies to such investment
requirements for newly elected board members. In implementing such policy, a
board member's fund holdings existing on February 27, 1998, are valued as of
such date with subsequent investments valued at cost.
ITEM 14. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
(a) As of October 15, 1999, the principal shareholders of the funds,
beneficial or of record, were as follows:
NAME AND ADDRESS PERCENTAGE (%)
- -------------------------------------------------------------
MONEY FUND
IFT Money Market Portfolio (140) 12.93
777 Mariners Island Blvd.
San Mateo, CA 94404-1584
Franklin Money Fund (111) 79.85
777 Mariners Island Blvd.
San Mateo, CA 94404-1584
U.S. SECURITIES FUND
IFT Franklin U.S. Government Securities 34.97
Money Market Portfolio (142)
777 Mariners Island Blvd.
San Mateo, CA 94404-1584
Franklin Federal Money Fund (113) 65.03
777 Mariners Island Blvd.
San Mateo, CA 94404-1584
Franklin Money Fund and Franklin Federal Money Fund could each be deemed to
control the respective fund, as that term is defined under the Investment
Company Act of 1940 Act. Franklin Money Fund and Franklin Federal Money Fund
were both organized as California corporations and are located at the address
of the registrant set forth on the cover of this amendment to the
registration statement.
(b) Except for the companies referred to above, no other person was known to
hold beneficially or of record more than 5% of either fund's outstanding
shares.
(c) As of October 15, 1999, the officers and board members did not own of
record or beneficially any shares of either fund. The board members may own
shares in other funds in the Franklin Templeton Group of Funds.
ITEM 15. INVESTMENT ADVISORY AND OTHER SERVICES
MANAGER AND SERVICES PROVIDED Each fund's manager is Franklin Advisers, Inc.
The manager is wholly owned by Franklin Resources, Inc. (Resources), a
publicly owned company engaged in the financial services industry through its
subsidiaries. Charles B. Johnson and Rupert H. Johnson, Jr. are the principal
shareholders of Resources.
The manager provides investment research and portfolio management services,
and selects the securities for the fund to buy, hold or sell. The manager
also selects the brokers who execute the fund's portfolio transactions. The
manager provides periodic reports to the board, which reviews and supervises
the manager's investment activities. To protect the fund, the manager and its
officers, directors and employees are covered by fidelity insurance.
The manager and its affiliates manage numerous other investment companies and
accounts. The manager may give advice and take action with respect to any of
the other funds it manages, or for its own account, that may differ from
action taken by the manager on behalf of the fund. Similarly, with respect to
the fund, the manager is not obligated to recommend, buy or sell, or to
refrain from recommending, buying or selling any security that the manager
and access persons, as defined by applicable federal securities laws, may buy
or sell for its or their own account or for the accounts of any other fund.
The manager is not obligated to refrain from investing in securities held by
the fund or other funds it manages. Of course, any transactions for the
accounts of the manager and other access persons will be made in compliance
with the fund's code of ethics.
Under the fund's code of ethics, employees of the Franklin Templeton Group
who are access persons may engage in personal securities transactions subject
to the following general restrictions and procedures: (i) the trade must
receive advance clearance from a compliance officer and must be completed by
the close of the business day following the day clearance is granted; (ii)
copies of all brokerage confirmations and statements must be sent to a
compliance officer; (iii) all brokerage accounts must be disclosed on an
annual basis; and (iv) access persons involved in preparing and making
investment decisions must, in addition to (i), (ii) and (iii) above, file
annual reports of their securities holdings each January and inform the
compliance officer (or other designated personnel) if they own a security
that is being considered for a fund or other client transaction or if they
are recommending a security in which they have an ownership interest for
purchase or sale by a fund or other client.
The manager also provides certain administrative services and facilities for
each fund. These include preparing and maintaining books, records, and tax
and financial reports, and monitoring compliance with regulatory requirements.
MANAGEMENT FEES Each fund pays the manager a fee equal to an annual rate of
0.15%.
The fee is computed at the close of business each day.
For the last three fiscal years ended June 30, the funds paid the following
management fees:
MANAGEMENT FEES PAID ($)
- --------------------------------------------------------------------
1999 1998 1997
MONEY FUND 1 3,900,807 2,830,858 2,429,509
U.S. SECURITIES FUND 2 430,179 367,433 364,509
- --------------------------------------------------------------------
1. For the fiscal years ended 1999, 1998 and 1997, management fees, before
any advance waiver, totaled $3,996,761, $2,963,304 and $2,547,891,
respectively. Under an agreement by the manager to limit its fees, the
fund paid the management fees shown.
2. For the fiscal years ended 1998, 1997 and 1996, management fees, before
any advance waiver, totaled $437,891, $394,321 and $404,358, respectively.
Under an agreement by the manager to limit its fees, the fund paid the
management fees shown.
SHAREHOLDER SERVICING AND TRANSFER AGENT Franklin/Templeton Investor
Services, Inc. (Investor Services) is the funds' shareholder servicing agent
and acts as the funds' transfer agent and dividend-paying agent. Investor
Services is located at 777 Mariners Island Blvd., P.O. Box 7777, San Mateo,
CA 94403-7777.
For its services, Investor Services receives a fixed fee per account. The
funds may also reimburse Investor Services for certain out-of-pocket
expenses, which may include payments by Investor Services to entities,
including affiliated entities, that provide sub-shareholder services,
recordkeeping and/or transfer agency services to beneficial owners of the
fund. The amount of reimbursements for these services per benefit plan
participant fund account per year may not exceed the per account fee payable
by the fund to Investor Services in connection with maintaining shareholder
accounts.
CUSTODIAN Bank of New York, Mutual Funds Division, 90 Washington Street, New
York, NY 10286, acts as custodian of the fund's securities and other assets.
AUDITOR PricewaterhouseCoopers LLP, 333 Market Street, San Francisco, CA
94105, is the funds' independent auditor. The auditor gives an opinion on the
financial statements included in the trust's Annual Report to Shareholders
and reviews the trust's registration statement filed with the U.S. Securities
and Exchange Commission (SEC).
MISCELLANEOUS INFORMATION The Information Services & Technology division of
Franklin Resources, Inc. (Resources) established a Year 2000 Project Team in
1996. This team has been making necessary software changes to help the
computer systems that service the fund and its shareholders to be Year 2000
compliant. After completing these modifications, comprehensive tests are
conducted in one of Resources' U.S. test labs to verify their effectiveness.
Resources continues to seek reasonable assurances from all major hardware,
software or data-services suppliers that they will be Year 2000 compliant on
a timely basis. Resources is also developing a contingency plan, including
identification of those mission critical systems for which it is practical to
develop a contingency plan. However, in an operation as complex and
geographically distributed as Resources' business, the alternatives to use of
normal systems, especially mission critical systems, or supplies of
electricity or long distance voice and data lines are limited.
16. BROKERAGE ALLOCATION AND OTHER POLICIES
Since most purchases by the funds are principal transactions at net prices,
the funds incur little or no brokerage costs. The funds deal directly with
the selling or buying principal or market maker without incurring charges for
the services of a broker on its behalf, unless it is determined that a better
price or execution may be obtained by using the services of a broker.
Purchases of portfolio securities from underwriters will include a commission
or concession paid by the issuer to the underwriter, and purchases from
dealers will include a spread between the bid and ask prices. The funds seek
to obtain prompt execution of orders at the most favorable net price.
Transactions may be directed to dealers in return for research and
statistical information, as well as for special services provided by the
dealers in the execution of orders.
It is not possible to place a dollar value on the special executions or on
the research services the manager receives from dealers effecting
transactions in portfolio securities. The allocation of transactions in order
to obtain additional research services allows the manager to supplement its
own research and analysis activities and to receive the views and information
of individuals and research staffs of other securities firms. As long as it
is lawful and appropriate to do so, the manager and its affiliates may use
this research and data in their investment advisory capacities with other
clients. If the funds' officers are satisfied that the best execution is
obtained, the sale of fund shares, as well as shares of other funds in the
Franklin Templeton Group of Funds, also may be considered a factor in the
selection of broker-dealers to execute the funds' portfolio transactions.
If purchases or sales of securities of the funds and one or more other
investment companies or clients supervised by the manager are considered at
or about the same time, transactions in these securities will be allocated
among the several investment companies and clients in a manner deemed
equitable to all by the manager, taking into account the respective sizes of
the funds and the amount of securities to be purchased or sold. In some cases
this procedure could have a detrimental effect on the price or volume of the
security so far as the funds are concerned. In other cases it is possible
that the ability to participate in volume transactions may improve execution
and reduce transaction costs to the funds.
During the fiscal years ended June 30, 1999, 1998 and 1997, the funds did not
pay any brokerage commissions.
As of June 30, 1999, Money Fund owned the following securities issued by its
regular broker-dealers:
AGGREGATE VALUE OF
PORTFOLIO
TRANSACTIONS ($)
- -------------------------------------------------------------
American Express Service Corp. 124,421,000
Ford Motor Credit Corp. 98,913,000
Morgan Stanley Dean Witter 49,762,000
Salomon Smith Barney 49,722,000
Societe Generale Sec. Corp. 49,658,000
Wachovia Bank 25,000,000
Except as noted, the funds did now own securities issued by their regular
broker-dealers as of the end of the fiscal year.
17. CAPITAL STOCK AND OTHER SECURITIES
The funds are diversified series of The Money Market Portfolios (the
"Trust"), an open-end management investment company, commonly called a mutual
fund. The Trust was organized as a Delaware business trust on June 16, 1992,
and is registered with the SEC.
The trust does not intend to hold annual shareholder meetings. The trust or a
series of the trust may hold special meetings, however, for matters requiring
shareholder approval. A meeting may be called by the board to consider the
removal of a board member if requested in writing by shareholders holding at
least 10% of the outstanding shares. In certain circumstances, we are
required to help you communicate with other shareholders about the removal of
a board member. A special meeting may also be called by the board in its
discretion.
18. PURCHASE, REDEMPTION, AND PRICING OF SHARES
PRICING SHARES 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.
Each fund calculates its NAV per share each business day at 3:00 p.m. pacific
time. The funds do not calculate the NAV on days the New York Stock Exchange
(NYSE) is closed for trading, which include New Year's Day, Martin Luther
King Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day.
The valuation of each fund's portfolio securities, including any securities
held in a separate account maintained for when-issued securities, is based on
the amortized cost of the securities, which does not take into account
unrealized capital gains or losses. This method involves valuing an
instrument at its cost and thereafter assuming a constant amortization to
maturity of any discount or premium, regardless of the impact of fluctuating
interest rates on the market value of the instrument. While this method
provides certainty in calculation, it may result in periods during which
value, as determined by amortized cost, is higher or lower than the price the
funds would receive if it sold the instrument. During periods of declining
interest rates, the daily yield on shares of the funds computed as described
above may tend to be higher than a like computation made by a fund with
identical investments but using a method of valuation based upon market
prices and estimates of market prices for all of its portfolio instruments.
Thus, if the use of amortized cost by the fund resulted in a lower aggregate
portfolio value on a particular day, a prospective investor in the funds
would be able to obtain a somewhat higher yield than would result from an
investment in a fund using only market values, and existing investors in the
funds would receive less investment income. The opposite would be true in a
period of rising interest rates.
The funds' use of amortized cost, which helps the funds maintain a $1 share
price, is permitted by a rule adopted by the U.S. Securities and Exchange
Commission (SEC). Under this rule, the funds must adhere to certain
conditions. The funds must maintain a dollar-weighted average portfolio
maturity of 90 days or less and only buy instruments with remaining
maturities of 397 days or less. The funds also must invest only in those U.S.
dollar-denominated securities that the manager, in accordance with procedures
adopted by the board, determines present minimal credit risks and that are
rated in one of the top two ratings by U.S. nationally recognized rating
services (or comparable unrated securities), or are instruments issued by an
issuer that, with respect to an outstanding issue of short-term debt that is
comparable in priority and protection, has received a rating within the two
highest ratings. Securities subject to floating or variable interest rates
with demand features that comply with applicable SEC rules may have stated
maturities in excess of 397 days.
The board has established procedures designed to stabilize, to the extent
reasonably possible, each fund's price per share at $1, as computed for the
purpose of sales and redemptions. These procedures include a review of the
fund's holdings by the board, at such intervals as it may deem appropriate,
to determine if the fund's net asset value calculated by using available
market quotations deviates from $1 per share based on amortized cost. The
extent of any deviation will be examined by the board. If a deviation exceeds
1/2 of 1%, the board will promptly consider what action, if any, will be
initiated. If the board determines that a deviation exists that may result in
material dilution or other unfair results to investors or existing
shareholders, it will take corrective action that it regards as necessary and
appropriate, which may include selling portfolio instruments before maturity
to realize capital gains or losses or to shorten average portfolio maturity,
withholding dividends, redeeming shares in kind, or establishing a net asset
value per share by using available market quotations.
REDEMPTIONS IN KIND The trust has committed itself to pay in cash (by check)
all requests for redemption by any shareholder of record, limited in amount,
however, during any 90-day period to the lesser of $250,000 or 1% of the
value of the fund's net assets at the beginning of the 90-day period. This
commitment is irrevocable without the prior approval of the U.S. Securities
and Exchange Commission (SEC). In the case of redemption requests in excess
of these amounts, the board reserves the right to make payments in whole or
in part in securities or other assets of the fund, in case of an emergency,
or if the payment of such a redemption in cash would be detrimental to the
existing shareholders of the fund. In these circumstances, the securities
distributed would be valued at the price used to compute the fund's net
assets and you may incur brokerage fees in converting the securities to cash.
Redemptions in kind are taxable transactions.
ITEM 19. TAXATION OF THE FUND
DISTRIBUTIONS OF NET INVESTMENT INCOME The funds declare dividends for each
day that the funds' net asset value is calculated. These dividends will
equal all of the funds' daily net income payable to shareholders of record as
of the close of business the preceding day. The funds' daily net income
includes accrued interest and any original issue or acquisition discount,
plus or minus any gain or loss on the sale of portfolio securities and
changes in unrealized appreciation or depreciation in portfolio securities
(to the extent required to maintain a constant net asset value per share),
less the estimated expenses of the funds.
The funds receive income generally in the form of interest on their
investments. This income, less expenses incurred in the operation of a fund,
constitutes a fund's net investment income from which dividends may be paid
to investors. Any distributions by a fund from such income will be taxable
to investors as ordinary income, whether you take them in cash or in
additional shares.
DISTRIBUTIONS OF CAPITAL GAINS The funds may derive capital gains and losses
in connection with sales or other dispositions of their portfolio
securities. Distributions from net short-term capital gains will be taxable
to investors as ordinary income. Because the funds are money market funds,
they do not anticipate realizing any long-term capital gains.
MAINTENANCE OF $1.00 NET ASSET VALUE Gains and losses on the sale of
portfolio securities and unrealized appreciation or depreciation in the value
of these securities may require a fund to adjust distributions in order to
maintain a $1.00 net asset value. These procedures may result in under- or
over-distributions of net investment income.
EFFECT OF FOREIGN INVESTMENTS ON DISTRIBUTIONS The Money Fund is authorized
to invest in foreign securities. Most foreign exchange gains realized on the
sale of debt securities are treated as ordinary income by the Money Fund.
Similarly, foreign exchange losses realized by the Money Fund on the sale of
debt securities are generally treated as ordinary losses. These gains when
distributed will be taxable to the Money Fund as ordinary dividends, and any
losses will reduce the Money Fund's ordinary income otherwise available for
distribution to investors. This treatment could increase or reduce the Money
Fund's ordinary income distributions to investors.
INFORMATION ON THE TAX CHARACTER OF DISTRIBUTIONS The funds will inform
investors of the amount of their distributions at the time they are paid, and
will advise investors of their tax status for federal income tax purposes
shortly after the close of each calendar year.
ELECTION TO BE TAXED AS A REGULATED INVESTMENT COMPANY Each fund has elected
to be treated as a regulated investment company under Subchapter M of the
Internal Revenue Code, has qualified as such for its most recent fiscal year,
and intends to so qualify during the current fiscal year. As regulated
investment companies, the funds generally pay no federal income tax on the
income and gains they distribute to investors. The board reserves the right
not to maintain the qualification of a fund as a regulated investment company
if it determines such course of action to be beneficial to investors. In
such case, a fund will be subject to federal, and possibly state, corporate
taxes on its taxable income and gains, and distributions to investors will be
taxed as ordinary dividend income to the extent of such fund's earnings and
profits.
EXCISE TAX DISTRIBUTION REQUIREMENTS To avoid federal excise taxes, the
Internal Revenue Code requires a fund to distribute to investors by December
31 of each year, at a minimum, the following amounts: 98% of its taxable
ordinary income earned during the calendar year; 98% of its capital gain net
income earned during the twelve month period ending October 31; and 100% of
any undistributed amounts from the prior year. Each fund intends to declare
and pay these amounts in December (or in January for amounts that are treated
by investors as received in December) to avoid these excise taxes, but can
give no assurances that its distributions will be sufficient to eliminate all
taxes.
REDEMPTION OF FUND SHARES Redemptions and exchanges of fund shares are
taxable transactions for federal and state income tax purposes. However,
because the funds seek to maintain a constant $1.00 per share net asset
value, investors should not expect to realize a capital gain or loss upon
redemption or exchange of their fund shares.
U.S. GOVERNMENT OBLIGATIONS Many states grant tax-free status to dividends
paid to investors from interest earned on direct obligations of the U.S.
government, subject in some states to minimum investment requirements that
must be met by a fund. Investments in Government National Mortgage
Association or Federal National Mortgage Association securities, bankers'
acceptances, commercial paper and repurchase agreements collateralized by
U.S. government securities do not generally qualify for tax-free treatment.
The rules on exclusion of this income are different for corporations.
DIVIDENDS-RECEIVED DEDUCTION FOR CORPORATIONS Because each fund's income is
derived primarily from interest, no portion of its distributions generally
will be eligible for the dividends-received deduction. None of the dividends
paid by the funds for the most recent fiscal year qualified for such
deduction, and it is anticipated that none of the current year's dividends
will so qualify.
INVESTMENT IN COMPLEX SECURITIES The funds may invest in complex
securities. These investments may be subject to numerous special and complex
tax rules. These rules could affect whether gains and losses recognized by a
fund are treated as ordinary income or capital gain, accelerate the
recognition of income to a fund and/or defer a fund's ability to recognize
losses, and, in limited cases, subject the Money Fund to U.S. federal income
tax on income from certain of its foreign securities. In turn, these rules
may affect the amount, timing or character of the income distributed to
investors by a fund.
ITEM 20. UNDERWRITERS
Not Applicable
ITEM 21. CALCULATION OF PERFORMANCE DATA
Not Applicable
ITEM 22. FINANCIAL STATEMENTS
The audited financial statements and auditor's report in the trust's Annual
Report to Shareholders, for the fiscal year ended June 30, 1999, are
incorporated herein by reference.
THE MONEY MARKET PORTFOLIOS
FORM N-1A
PART C: OTHER INFORMATION
ITEM 23. EXHIBITS.
The following exhibits are incorporated by reference to the
previous filed document indicated below, except as noted.
(A) ARTICLES OF INCORPORATION
(i) Agreement and Declaration of Trust dated June 16, 1992
Filing: Amendment No. 6 to
Registration Statement on Form N-1A
File No. 811-7038
Filing Date: October 31, 1995
(ii) Certificate of Trust dated June 16, 1992
Filing: Amendment No. 6 to
Registration Statement on Form N-1A
File No. 811-7038
Filing Date: October 31, 1995
(B) BY-LAWS
(i) By-Laws
Filing: Amendment No. 6 to
Registration Statement on Form N-1A
File No. 811-7038
Filing Date: October 31, 1995
(ii) Amendment to By-Laws dated April 19, 1994
(C) INSTRUMENTS DEFINING RIGHTS OF SECURITY HOLDERS
Not Applicable
(D) INVESTMENT ADVISORY CONTRACTS
(i) Management Agreement between Registrant and Franklin
Advisers, Inc. dated August 27, 1992
Filing: Amendment No. 6 to
Registration Statement on Form N-1A
File No. 811-7038
Filing Date: October 31, 1995
(ii) Amendment to Management Agreement dated August 1, 1995 to
the Management Agreement dated August 27, 1992
Filing: Amendment No. 7 to
Registration Statement on Form N-1A
File No. 811-7038
Filing Date: October 30, 1996
(E) UNDERWRITING CONTRACTS
Not Applicable
(F) BONUS OR PROFIT SHARING CONTRACTS
Not Applicable
(G) CUSTODIAN AGREEMENTS
(i) Master Custody Agreement between Registrant and Bank of
New York dated February 16, 1996
Filing: Amendment No. 7 to
Registration Statement on Form N-1A
File No. 811-7038
Filing Date: October 30, 1996
(ii) Terminal Link Agreement between Registrant and Bank of
New York dated February 16, 1996
Filing: Amendment No. 7 to
Registration Statement on Form N-1A
File No. 811-7038
Filing Date: October 30, 1996
(iii)Amendment dated May 7, 1997 to Master Custody Agreement
dated February 16, 1996 between Registrant and Bank of
New York
Filing: Amendment No. 8 to
Registration Statement on Form N-1A
File No. 811-7038
Filing Date: October 30, 1997
(iv) Amendment to Master Custody Agreement dated February 27,
1998
(v) Foreign Custody Manager Agreement dated July 30, 1998
(vi) Amendment dated September 16, 1999, to Exhibit A of the
Master Custody Agreement between Registrant and Bank of
New York dated February 16, 1996
(H) OTHER MATERIAL CONTRACTS
Not Applicable.
(I) LEGAL OPINION
Not Applicable
(J) OTHER OPINIONS
Not Applicable
(K) OMITTED FINANCIAL STATEMENTS
Not Applicable
(L) INITIAL CAPITAL AGREEMENTS
(i) Letters of Understanding dated July 22, 1992
Filing: Amendment No. 6 to
Registration Statement on Form N-1A
File No. 811-7038
Filing Date: October 31, 1995
(M) RULE 12B-1 PLAN
Not Applicable
(O) RULE 18F-3 PLAN
Not Applicable
(P) POWER OF ATTORNEY
(i) Power of Attorney dated July 15, 1999
(ii) Certificate of Secretary dated October 25, 1999
ITEM 24 PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
None
ITEM 25 INDEMNIFICATION
Reference is made to Article VI of the Registrant's By-Laws (Exhibit b).
Pursuant to Rule 484 under the Securities Act of 1933, as amended, the
Registrant furnishes the following undertaking:
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to trustees, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a trustee, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such trustee, officer or controlling
person in connection with the securities being registered, the Registrant
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
Notwithstanding the provisions contained in the Registrant's By-Laws, in
the absence of authorization by the appropriate court on the merits pursuant
to Section 5 of Article VI of said By-Laws, any indemnification under said
Article shall be made by Registrant only if authorized in the manner provided
in either subsection (a) or (b) of Section 6 of Article VI.
ITEM 26 BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT ADVISER
Franklin Advisers, Inc., a wholly owned subsidiary of Franklin
Resources, Inc., the investment manager for the Registrant, is the investment
manager or administrator for numerous other U.S. registered open-end and
closed-end investment companies. The officers and directors of the
Registrant's investment advisor also serve as officers and/or directors,
and/or portfolio managers for (1) the advisor's corporate parent, Franklin
Resources, Inc., and/or (2) other investment companies in the Franklin
Templeton Group of Funds. For additional information please see Part B and
Schedules A and D of Form ADV of the Funds' investment manager (SEC File
801-26292), incorporated herein by reference, which sets forth the officers
and directors of the investment manager and information as to any business,
profession, vocation or employment of a substantial nature engaged in by
those officers and directors during the past two years.
ITEM 27 PRINCIPAL UNDERWRITERS
Not Applicable
ITEM 28 LOCATIONS OF ACCOUNTS AND RECORDS
The accounts, books or other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules thereunder
are kept by the Registrant or its shareholder services agent,
Franklin/Templeton Investor Services, Inc., at their respective principal
business offices, both of which are at 777 Mariners Island Blvd., San Mateo,
California 94404.
ITEM 29 MANAGEMENT SERVICES
There are no management-related service contracts not discussed in Part
A or Part B.
ITEM 30 UNDERTAKING
Not Applicable
SIGNATURE
Pursuant to the requirements of the Investment Company Act of 1940, as amended,
the Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of San Mateo,
the State of California, on the 27th day of October 1999.
THE MONEY MARKET PORTFOLIOS
(Registrant)
By: Charles E. Johnson*
President
*By: /s/ Leiann Nuzum
Leiann Nuzum
Attorney in Fact
(Pursuant to Power of Attorney filed herewith)
THE MONEY MARKET PORTFOLIOS
REGISTRATION STATEMENT
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION LOCATION
EX-99.(a)(i) Agreement and Declaration of *
Trust of The Money Market
Portfolios dated June 16, 1992
EX-99.(a)(ii) Certificate of Trust of The *
Money Market Portfolios dated
June 16, 1992
EX-99.(b)(i) By-Laws *
EX-99.(b)(ii) Amendment to By-Laws dated Attached
April 19, 1994
EX-99.(c)(i) Management Agreement between *
Registrant and Franklin
Advisers, Inc. dated August 27,
1992
EX-99.(c)(ii) Amendment to Management *
Agreement dated August 1, 1995
to the Management Agreement
dated August 27, 1995
EX-99.(g)(i) Master Custody Agreement *
between Registrant and Bank of
New York dated February 16, 1996
EX-99.(g)(ii) Terminal Link Agreement between *
Registrant and Bank of New York
dated February 16, 1996
EX-99.(g)(iii) Amendment dated May 7, 1997 to *
the Master Custody Agreement
dated February 16, 1996 between
Registrant and Bank of New York
EX-99.(g)(iv) Amendment to Master Custody Attached
Agreement dated February 27,
1998
EX-99.(g)(v) Foreign Custody Manager Attached
Agreement dated July 30, 1998
EX-99.(g)(vi) Amendment dated September 26, Attached
1999, to Exhibit A of the
Master Custody Agreement
between Registrant and Bank of
New York dated February 16, 1996
EX-99.(l)(i) Letter of Understanding dated *
July 22, 1992
EX-99.(p)(i) Power of Attorney dated July Attached
15, 1999
EX-99.(p)(ii) Certificate of Secretary dated Attached
October 25, 1999
* Incorporated by reference
CERTIFICATE OF SECRETARY
I, Deborah R. Gatzek, Secretary of The Money Market Portfolios, a
business trust organized under the laws of the State of Delaware, do hereby
certify that the following resolution was adopted by a majority of the
trustees present at a meeting held at the offices of the trust at 777
Mariners Island Boulevard, San Mateo, California, on April 19, 1994:
WHEREAS, the Board of Trustees has determined that it is advisable and
in the best interests of the shareholders of the Trust to revise the
Trust's By-Laws to specifically provide for the use of proxies which are
communicated by an electronic, telephonic, computerized or
telecommunications method;
NOW THEREFORE, BE IT RESOLVED, that Section 10 of Article II is hereby
resolved to read as follows:
"Section 10. PROXIES. Every person entitled to vote for Trustees or
on any other matter shall have the right to do so in person or by
one or more agents. Except as otherwise provided in the Agreement
and Declaration of Trust or these By-Laws, matters relating to the
giving, voting or validity of proxies will be governed by the
Delaware General Corporation Law relating to proxies, and Delaware
judicial interpretations thereunder, as if the Trust were a
Delaware corporation and Shareholders of the Trust were
shareholders of a Delaware corporation."
IN WITNESS WHEREOF, I have subscribed my name this 27th day of October, 1994.
/s/ Deborah R. Gatzek
Secretary
Amendment to Master Custody Agreement
Effective February 27, 1998, The Bank of New York and each of the Investment
Companies listed in the Attachment appended to this Amendment, for themselves
and each series listed in the Attachment, hereby amend the Master Custody
Agreement dated as of February 16, 1996 by:
1. Replacing Exhibit A with the attached; and
2. Only with respect to the Investment Companies and series thereof listed in
the Attachment, deleting paragraphs (a) and (b) of Subsection 3.5 and
replacing them with the following:
(a) Promptly after each purchase of Securities by the Fund, the Fund shall
deliver to the Custodian Proper Instructions specifying with respect to
each such purchase: (a) the Series to which such Securities are to be
specifically allocated; (b) the name of the issuer and the title of the
Securities; (c) the number of shares or the principal amount purchased and
accrued interest, if any; (d) the date of purchase and settlement; (e) the
purchase price per unit; (f) the total amount payable upon such purchase;
(g) the name of the person from whom or the broker through whom the
purchase was made, and the name of the clearing broker, if any; and (h) the
name of the broker to whom payment is to be made. The Custodian shall, upon
receipt of Securities purchased by or for the Fund, pay to the broker
specified in the Proper Instructions out of the money held for the account
of such Series the total amount payable upon such purchase, provided that
the same conforms to the total amount payable as set forth in such Proper
Instructions.
(b) Promptly after each sale of Securities by the Fund, the Fund shall
deliver to the Custodian Proper Instructions specifying with respect to
each such sale: (a) the Series to which such Securities were specifically
allocated; (b) the name of the issuer and the title of the Security; (c)
the number of shares or the principal amount sold, and accrued interest, if
any; (d) the date of sale; (e) the sale price per unit; (f) the total
amount payable to the Fund upon such sale; (g) the name of the broker
through whom or the person to whom the sale was made, and the name of the
clearing broker, if any; and (h) the name of the broker to whom the
Securities are to be delivered. The Custodian shall deliver the Securities
specifically allocated to such Series to the broker specified in the Proper
Instructions against payment of the total amount payable to the Fund upon
such sale, provided that the same conforms to the total amount payable as
set forth in such Proper Instructions.
Investment Companies The Bank of New York
By: /s/ Elizabeth N. Cohernour By: /s/ Stephen E. Grunston
-------------------------- -----------------------
Name: Elizabeth N. Cohernour Name: Stephen E. Grunston
Title: Authorized Officer Title: Vice President
Attachment
INVESTMENT COMPANY SERIES
Franklin Mutual Series Fund Inc. Mutual Shares Fund
Mutual Qualified Fund
Mutual Beacon Fund
Mutual Financial Services Fund
Mutual European Fund
Mutual Discovery Fund
Franklin Valuemark Funds Mutual Discovery Securities Fund
Mutual Shares Securities Fund
Templeton Variable Products Series Fund Mutual Shares Investments Fund
Mutual Discovery Investments Fund
<TABLE>
<CAPTION>
THE BANK OF NEW YORK
MASTER CUSTODY AGREEMENT
EXHIBIT A
The following is a list of the Investment Companies and their respective Series for which the Custodian shall serve under the Master
Custody Agreement dated as of February 16, 1996.
- ------------------------------------------- -------------------------------- -------------------------------------------------------
INVESTMENT COMPANY ORGANIZATION SERIES ---(IF APPLICABLE)
- ------------------------------------------- -------------------------------- -------------------------------------------------------
<S> <C> <C>
Adjustable Rate Securities Portfolios Delaware Business Trust U.S. Government Adjustable Rate Mortgage Portfolio
Adjustable Rate Securities Portfolio
Franklin Asset Allocation Fund Delaware Business Trust
Franklin California Tax-Free Income Maryland Corporation
Fund, Inc.
Franklin California Tax-Free Trust Massachusetts Business Trust Franklin California Insured Tax-Free Income Fund
Franklin California Tax-Exempt Money Fund
Franklin California Intermediate-Term Tax-Free
Income Fund
Franklin Custodian Funds, Inc. Maryland Corporation Growth Series
Utilities Series
Dynatech Series
Income Series
U.S. Government Securities Series
Franklin Equity Fund California Corporation
Franklin Federal Money Fund California Corporation
Franklin Federal Tax- Free Income Fund California Corporation
- ------------------------------------------- -------------------------------- -------------------------------------------------------
- ------------------------------------------- -------------------------------- -------------------------------------------------------
INVESTMENT COMPANY ORGANIZATION SERIES ---(IF APPLICABLE)
- ------------------------------------------- -------------------------------- -------------------------------------------------------
<S> <C> <C>
Franklin Gold Fund California Corporation
Franklin Government Securities Trust Massachusetts Business Trust
Franklin High Income Trust Delaware Business Trust AGE High Income Fund
Franklin Investors Securities Trust Massachusetts Business Trust Franklin Global Government Income Fund
Franklin Short-Intermediate U.S. Govt Securities Fund
Franklin Convertible Securities Fund
Franklin Adjustable U.S. Government Securities Fund
Franklin Equity Income Fund
Franklin Adjustable Rate Securities Fund
Franklin Managed Trust Massachusetts Business Trust Franklin Corporate Qualified Dividend Fund
Franklin Rising Dividends Fund
Franklin Investment Grade Income Fund
Franklin Money Fund California Corporation
Franklin Municipal Securities Trust Delaware Business Trust Franklin Hawaii Municipal Bond Fund
Franklin California High Yield Municipal Fund
Franklin Washington Municipal Bond Fund
Franklin Tennessee Municipal Bond Fund
Franklin Arkansas Municipal Bond Fund
- ------------------------------------------- -------------------------------- -------------------------------------------------------
- ------------------------------------------- -------------------------------- -------------------------------------------------------
INVESTMENT COMPANY ORGANIZATION SERIES ---(IF APPLICABLE)
- ------------------------------------------- -------------------------------- -------------------------------------------------------
<S> <C> <C>
Franklin Mutual Series Fund Inc. Maryland Corporation Mutual Shares Fund
Mutual Qualified Fund
Mutual Beacon Fund
Mutual Financial Services Fund
Mutual European Fund
Mutual Discovery Fund
Franklin New York Tax-Free Income Fund Delaware Business Trust
Franklin New York Tax-Free Trust Massachusetts Business Trust Franklin New York Tax-Exempt Money Fund
Franklin New York Intermediate-Term Tax-Free
Income Fund
Franklin New York Insured Tax-Free Income Fund
Franklin Real Estate Securities Trust Delaware Business Trust Franklin Real Estate Securities Fund
Franklin Strategic Mortgage Portfolio Delaware Business Trust
Franklin Strategic Series Delaware Business Trust Franklin California Growth Fund
Franklin Strategic Income Fund
Franklin MidCap Growth Fund
Franklin Global Utilities Fund
Franklin Small Cap Growth Fund
Franklin Global Health Care Fund
Franklin Natural Resources Fund
Franklin Blue Chip Fund
Franklin Biotechnology Discovery Fund
Franklin Tax-Exempt Money Fund California Corporation
- ------------------------------------------- -------------------------------- -------------------------------------------------------
- ------------------------------------------- -------------------------------- -------------------------------------------------------
INVESTMENT COMPANY ORGANIZATION SERIES---(IF APPLICABLE)
- ------------------------------------------- -------------------------------- -------------------------------------------------------
<S> <C> <C>
Franklin Tax-Free Trust Massachusetts Business Trust Franklin Massachusetts Insured Tax-Free Income Fund
Franklin Michigan Insured Tax-Free Income Fund
Franklin Minnesota Insured Tax-Free Income Fund
Franklin Insured Tax-Free Income Fund
Franklin Ohio Insured Tax-Free Income Fund
Franklin Puerto Rico Tax-Free Income Fund
Franklin Arizona Tax-Free Income Fund
Franklin Colorado Tax-Free Income Fund
Franklin Georgia Tax-Free Income Fund
Franklin Pennsylvania Tax-Free Income Fund
Franklin High Yield Tax-Free Income Fund
Franklin Missouri Tax-Free Income Fund
Franklin Oregon Tax-Free Income Fund
Franklin Texas Tax-Free Income Fund
Franklin Virginia Tax-Free Income Fund
Franklin Alabama Tax-Free Income Fund
Franklin Florida Tax-Free Income Fund
Franklin Connecticut Tax-Free Income Fund
Franklin Indiana Tax-Free Income Fund
Franklin Louisiana Tax-Free Income Fund
Franklin Maryland Tax-Free Income Fund
Franklin North Carolina Tax-Free Income Fund
Franklin New Jersey Tax-Free Income Fund
Franklin Kentucky Tax-Free Income Fund
Franklin Federal Intermediate-Term Tax-Free Income
Fund
Franklin Arizona Insured Tax-Free Income Fund
Franklin Florida Insured Tax-Free Income fund
Franklin Michigan Tax-Free Income Fund
- ------------------------------------------- -------------------------------- -------------------------------------------------------
- ------------------------------------------- -------------------------------- -------------------------------------------------------
INVESTMENT COMPANY ORGANIZATION SERIES ---(IF APPLICABLE)
- ------------------------------------------- -------------------------------- -------------------------------------------------------
<S> <C> <C>
Franklin Templeton Fund Allocator Series Delaware Business Trust Franklin Templeton Conservative Target Fund
Franklin Templeton Moderate Target Fund
Franklin Templeton Growth Target Fund
Franklin Templeton Global Trust Delaware Business Trust Franklin Templeton German Government Bond Fund
Franklin Templeton Global Currency Fund
Franklin Templeton Hard Currency Fund
Franklin Templeton High Income Currency Fund
Franklin Templeton International Trust Delaware Business Trust Templeton Pacific Growth Fund
Templeton Foreign Smaller Companies Fund
Franklin Templeton Money Fund Trust Delaware Business Trust Franklin Templeton Money Fund II
Franklin Value Investors Trust Massachusetts Business Trust Franklin Balance Sheet Investment Fund
Franklin MicroCap Value Fund
Franklin Value Fund
Franklin Valuemark Funds Massachusetts Business Trust Money Market Fund
Growth and Income Fund
Natural Resources Securities Fund
Real Estate Securities Fund
Global Utilities Securities Fund
High Income Fund
Templeton Global Income Securities Fund
Income Securities Fund
U.S. Government Securities Fund
Zero Coupon Fund - 2000
Zero Coupon Fund - 2005
Zero Coupon Fund - 2010
Rising Dividends Fund
- ------------------------------------------- -------------------------------- -------------------------------------------------------
- ------------------------------------------- -------------------------------- -------------------------------------------------------
INVESTMENT COMPANY ORGANIZATION SERIES ---(IF APPLICABLE)
- ------------------------------------------- -------------------------------- -------------------------------------------------------
<S> <C> <C>
Franklin Valuemark Funds (cont.) Massachusetts Business Trust Templeton Pacific Growth Fund
Templeton International Equity Fund
Templeton Developing Markets Equity Fund
Templeton Global Growth Fund
Templeton Global Asset Allocation Fund
Small Cap Fund
Capital Growth Fund
Templeton International Smaller Companies Fund
Mutual Discovery Securities Fund
Mutual Shares Securities Fund
Global Health Care Securities Fund
Value Securities Fund
- ------------------------------------------- -------------------------------- -------------------------------------------------------
Institutional Fiduciary Trust Massachusetts Business Trust Money Market Portfolio
Franklin U.S. Government Securities Money Market
Portfolio
Franklin U.S. Treasury Money Market Portfolio
Franklin Institutional Adjustable U.S. Government
Securities Fund
Franklin Institutional Adjustable Rate Securities Fund
Franklin U.S. Government Agency Money Market Fund
Franklin Cash Reserves Fund
The Money Market Portfolios Delaware Business Trust The Money Market Portfolio
The U.S. Government Securities Money Market Portfolio
Templeton Variable Products Series Fund Mutual Shares Investments Fund
Mutual Discovery Investments Fund
Franklin Growth Investments Fund
- ------------------------------------------- -------------------------------- -------------------------------------------------------
- ------------------------------------------- -------------------------------- -------------------------------------------------------
INVESTMENT COMPANY ORGANIZATION SERIES---(IF APPLICABLE)
- ------------------------------------------- -------------------------------- -------------------------------------------------------
<S> <C> <C>
CLOSED END FUNDS:
Franklin Multi-Income Trust Massachusetts Business Trust
Franklin Principal Maturity Trust Massachusetts Business Trust
Franklin Universal Trust Massachusetts Business Trust
INTERVAL FUND
Franklin Floating Rate Trust Delaware Business Trust
- ------------------------------------------- -------------------------------- -------------------------------------------------------
</TABLE>
FOREIGN CUSTODY MANAGER AGREEMENT
AGREEMENT made as of July 30, 1998, effective as of February 27, 1998
(the "Effective Date"), between Each of the Investment Companies Listed on
Schedule I attached hereto (each a "Fund") and The Bank of New York ("BNY").
WITNESSETH:
WHEREAS, the Fund desires to appoint BNY as a Foreign Custody Manager
on the terms and conditions contained herein;
WHEREAS, BNY desires to serve as a Foreign Custody Manager and perform
the duties set forth herein on the terms and condition contained herein;
NOW THEREFORE, in consideration of the mutual promises hereinafter
contained in this Agreement, the Fund and BNY hereby agree as follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the following meanings:
1. "BOARD" shall mean the board of directors or board of trustees,
as the case may be, of the Fund.
2. "ELIGIBLE FOREIGN CUSTODIAN" shall have the meaning provided in
the Rule.
3. "MONITORING SYSTEM" shall mean a system established by BNY to
fulfill the Responsibilities specified in clauses l(b)(i) and l(b)(ii) and
l(d) of Article III of this Agreement.
4. "QUALIFIED FOREIGN BANK" shall have the meaning provided in the
Rule.
5. "RESPONSIBILITIES" shall mean the responsibilities delegated to
BNY as a Foreign Custody Manager with respect to each Specified Country and
each Eligible Foreign Custodian selected by BNY, as such responsibilities are
more fully described in Article III of this Agreement.
6. "RULE" shall mean Rule 17f-5 under the Investment Company Act of
1940, as amended, as such Rule became effective on June 16, 1997.
7. "SECURITIES DEPOSITORY" shall mean any securities depository or
clearing agency within the meaning of Section (a)(1)(ii) or (a)(1)(iii) of
the Rule.
8. "COMPULSORY DEPOSITORY" shall mean a Securities Depository the
use of which is mandatory by law or regulation or because securities cannot
be withdrawn from such Securities Depository, or because maintaining
securities outside the Securities Depository would not permit purchases and
sales of these securities to occur in accordance with routine settlement
timing and procedures in the relevant market.
9. "SPECIFIED COUNTRY" shall mean each country listed on Schedule 2
attached hereto and each country, other than the United States, constituting
the primary market for a security with respect to which the Fund has given
settlement instructions to The Bank of New York as custodian (the
"Custodian") under its Custody Agreement with the Fund.
ARTICLE II
BNY AS A FOREIGN CUSTODY MANAGER
1. The Fund on behalf of its Board hereby delegates to BNY with
respect to each Specified Country the Responsibilities.
2. BNY accepts the Board's delegation of Responsibilities with
respect to each Specified Country and agrees in performing the
Responsibilities as a Foreign Custody Manager to exercise reasonable care,
prudence and diligence such as a person having responsibility for the
safekeeping of the Fund's assets would exercise.
3. BNY shall provide to the Board at such times as the Board deems
reasonable and appropriate based on the circumstances of the Fund's foreign
custody arrangements written reports notifying the Board of the placement of
assets of the Fund with a particular Eligible Foreign Custodian within a
Specified Country and of any material change in the arrangements (including,
in the case of Qualified Foreign Banks, any material change in any contract
governing such arrangements and in the case of Securities Depositories, any
material change in the established practices or procedures of such Securities
Depositories) with respect to assets of the Fund with any such Eligible
Foreign Custodian.
ARTICLE III
RESPONSIBILITIES
1 . (a) Subject to the provisions of this Agreement, BNY shall with
respect to each Specified Country select an Eligible Foreign Custodian (other
than a Compulsory Depository) which is not functioning as the Fund's Eligible
Foreign Custodian as of the Effective Date. In connection therewith, BNY
shall: (i) determine that assets of the Fund held by such Eligible Foreign
Custodian will be subject to reasonable care, based on the standards
applicable to custodians in the relevant market in which such Eligible
Foreign Custodian operates, after considering all factors relevant to the
safekeeping of such assets, including, without limitation, those contained in
Section (c)(1) of the Rule; (ii) determine that the Fund's foreign custody
arrangements with each Qualified Foreign Bank are governed by a written
contract with the Custodian (or, in the case of a Securities Depository other
than a Compulsory Depository, by such a contract, by the rules or established
practices or procedures of the Securities Depository, or by any combination
of the foregoing) which will provide reasonable care for the Fund's assets
based on the standards specified in paragraph (c)(1) of the Rule; and (ii)
determine that each contract with a Qualified Foreign Bank shall include the
provisions specified in paragraph (c)(2)(i)(A) through (F) of the Rule or,
alternatively, in lieu of any or all of such (c)(2)(i)(A) through (F)
provisions, such other provisions as BNY determines will provide, in their
entirety, the same or a greater level of care and protection for the assets
of the Fund as such specified provisions.
(b) In addition, subject to the provisions of this Agreement, BNY
shall with respect to each Eligible Foreign Custodian (other than a
Compulsory Depository), regardless of when and by whom selected, (i)
monitor pursuant to the Monitoring System the appropriateness of
maintaining the assets of the Fund with a particular Eligible Foreign
Custodian pursuant to paragraph (c)(1) of the Rule and in the case of a
Qualified Foreign Bank, any material change in the contract governing such
arrangement and in the case of a Securities Depository, any material change
in the established practices or procedures of such Securities Depository;
and (ii) advise the Fund whenever an arrangement (including, in the case of
a Qualified Foreign Bank, any material change in the contract governing
such arrangement and in the case of a Securities Depository, any material
change in the established practices or procedures of such Securities
Depository) described in preceding clause (b)(i) no longer meets the
requirements of the Rule, it being understood that BNY shall provide such
advice promptly upon learning of such noncompliance.
(c) Subject to the provisions of this Agreement, after execution of
this Agreement with respect to each Compulsory Depository which has been
established, as of the Effective Date, in countries in which BNY has
appointed a Subcustodian and thereafter in connection with each new or
additional Compulsory Depository established in countries in which BNY
appoints, or has appointed, as the case may be, a Subcustodian, BNY shall
determine, with respect to each such Compulsory Depository, that:
(i) the Eligible Foreign Custodian which is utilizing the services of
the Compulsory Depository has undertaken to adhere to the rules,
practices and procedures of such Compulsory Depository;
(ii)no regulatory authority with oversight responsibility for the
Compulsory Depository has issued a public notice that the Compulsory
Depository is not in compliance with any material capital, solvency,
insurance or other similar financial strength requirements imposed by
such authority or, in the case of such notice having been issued,
that such notice has been withdrawn or the remedy of such
noncompliance has been publicly announced by the Compulsory
Depository;
(iii) no regulatory authority with oversight responsibility over
the Compulsory Depository has issued a public notice that the
Compulsory Depository is not in compliance with any material internal
controls requirement imposed by such authority or, in the case such
notice having been issued, that such notice has been withdrawn or the
remedy of such noncompliance has been publicly announced by the
Compulsory Depository;
(iv)the Compulsory Depository maintains the assets of the Fund's
Eligible Foreign Custodian which is utilizing the services of the
Compulsory Depository under no less favorable safekeeping conditions
than those that apply generally to other participants in the
Compulsory Depository;
(v) the Compulsory Depository maintains records that segregate the
Compulsory Depository's own assets from the assets of participants in
the Compulsory Depository;
(vi)the Compulsory Depository maintains records that identify the
assets of each of its participants;
(vii) the Compulsory Depository provides periodic reports to its
participants with respect to the safekeeping of assets maintained by
the Compulsory Depository, including, by way of example, notification
of any transfer to or from a participant's account; and
(viii) the Compulsory Depository is subject to periodic review,
such as audits by independent accountants or inspections by
regulatory authorities.
BNY shall make the foregoing determinations (i) with respect to each
Compulsory Depository which has been established as of the Effective Date in
countries in which BNY has appointed a Subcustodian by September 30, 1998 and
(ii) with respect to each new or additional Compulsory Depository established
in countries in which BNY appoints, or has appointed, as the case may be, a
Subcustodian, to the extent feasible in light of the circumstances then
prevailing within ninety (90) days of the date such Compulsory Depository
commences operations; and, in each case, shall advise the Fund and its
investment advisor promptly after each such determination is made.
In the event that the US Securities and Exchange Commission ("SEC")
adopts standards or criteria different from those set forth above, the
above provisions shall be deemed to be amended to conform to the standards
or criteria adopted by the SEC.
(d) Subject to the provisions of this Agreement, with respect to each
Compulsory Depository in which Fund's assets are maintained at any time
during the term of this Agreement, BNY shall monitor, pursuant to the
Monitoring System, each such Compulsory Depository's compliance with the
criteria set forth in clause l(c) of this Article III and, upon determining
that any Compulsory Depository is not in compliance with any of such
criteria, shall promptly advise the Fund and its investment advisor of such
non-compliance.
2. (a) For purposes of clauses (a)(i), (a)(ii) and (c) of preceding
Section I of this Article, BNY's determination with respect to each
Securities Depository will be based upon publicly available information,
which may be limited, plus any other information which is made available by
each such Securities Depository to BNY or its Qualified Foreign Bank.
(b) For purposes of clause (b)(i) of preceding Section I of
this Article, BNY's determination of appropriateness shall not include, nor
be deemed to include, any evaluation of Country Risks associated with
investment in a particular country. For purposes hereof, "Country Risks"
shall mean systemic risks of holding assets in a particular country
including, but not limited to, (i) the use of Compulsory Depositories, (ii)
such country's financial infrastructure, (iii) such country's prevailing
custody and settlement practices, (iv) nationalization, expropriation or
other governmental actions, (v) regulation of the banking or securities
industry, (vi) currency controls, restrictions, devaluations or
fluctuations, and (vii) market conditions which affect the orderly
execution of securities transactions or affect the value of securities.
ARTICLE IV
REPRESENTATIONS
1. The Fund hereby represents that: (a) this Agreement has been duly
authorized, executed and delivered by the Fund, constitutes a valid and
legally binding obligation of the Fund enforceable in accordance with its
terms, and no statute, regulation, rule, order, judgment or contract binding
on the Fund prohibits the Fund's execution or performance of this Agreement;
(b) this Agreement has been approved and ratified by the Board at a meeting
duly called and at which a quorum was at all times present; and (c) the Board
or its investment advisor has considered the Country Risks associated with
investment in each Specified Country and will have considered such risks
prior to any settlement instructions being given to the Custodian with
respect to any other Specified Country.
2. BNY hereby represents that: (a) BNY is duly organized and
existing under the laws of the State of New York, with full power to carry on
its businesses as now conducted, and to enter into this Agreement and to
perform its obligations hereunder; (b) this Agreement has been duly
authorized, executed and delivered by BNY, constitutes a valid and legally
binding obligation of BNY enforceable in accordance with its terms, and no
statute, regulation, rule, order, judgment or contract binding on BNY
prohibits BNY's execution or performance of this Agreement; and (c) BNY has
established the Monitoring System.
ARTICLE V
CONCERNING BNY
1 . BNY shall not be liable for any costs, expenses, damages,
liabilities or claims, including attorneys' and accountants' fees, sustained
or incurred by, or asserted against, the Fund except to the extent the same
arises out of the failure of BNY to exercise the care, prudence and diligence
required by Section 2 of Article II hereof. In no event shall BNY be liable
to the Fund, the Board, or any third party for special, indirect or
consequential damages, or for lost profits or loss of business, arising in
connection with this Agreement.
2. The Fund shall indemnify BNY and hold it harmless from and
against any and all costs, expenses, damages, liabilities or claims,
including attorneys' and accountants' fees, sustained or incurred by, or
asserted against, BNY by reason or as a result of any action or inaction, or
arising out of BNY's performance hereunder, provided that the Fund shall not
indemnify BNY to the extent any such costs, expenses, damages, liabilities or
claims arises out of BNY's failure to exercise the reasonable care, prudence
and diligence required by Section 2 of Article II hereof.
3. For its services hereunder, the Fund agrees to pay to BNY such
compensation and out-of-pocket expenses as shall be mutually agreed.
4. BNY shall have only such duties as are expressly set forth
herein. In no event shall BNY be liable for any Country Risks associated
with investments in a particular country.
ARTICLE VI
MISCELLANEOUS
1 This Agreement constitutes the entire agreement between the Fund
and BNY, and no provision in the Custody Agreement between the Fund and the
Custodian shall affect the duties and obligations of BNY hereunder, nor shall
any provision in this Agreement affect the duties or obligations of the
Custodian under the Custody Agreement.
2. Any notice or other instrument in writing, authorized or required
by this Agreement to be given to BNY, shall be sufficiently given if received
by it at its offices at 90 Washington Street, New York, New York 10286, or at
such other place as BNY may from time to time designate in writing.
3. Any notice or other instrument in writing, authorized or required
by this Agreement to be given to the Fund shall be sufficiently given if
received by it at its offices at Franklin Resources, 777 Mariners Island
Boulevard, San Mateo, California, 94404, Attn: Deborah R. Gatzek, General
Counsel and Senior Vice President, or at such other place as the Fund may
from time to time designate in writing.
4. In case any provision in or obligation under this Agreement shall
be invalid, illegal or unenforceable in any jurisdiction, the validity,
legality and enforceability of the remaining provisions shall not in any way
be affected thereby. This Agreement may not be amended or modified in any
manner except by a written agreement executed by both parties. This
Agreement shall extend to and shall be binding upon the parties hereto, and
their respective successors and assigns; provided however, that this
Agreement shall not be assignable by either party without the written consent
of the other.
5. This Agreement shall be construed in accordance with the
substantive laws of the State of New York, without regard to conflicts of
laws principles thereof
6. The parties hereto agree that in performing hereunder, BNY is
acting solely on behalf of the Fund and no contractual or service
relationship shall be deemed to be established hereby between BNY and any
other person.
7. This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original, but such counterparts shall,
together, constitute only one instrument.
8. This Agreement shall terminate simultaneously with the
termination of the Custody Agreement between the Fund and the Custodian, and
may otherwise be terminated by either party giving to the other party a
notice in writing specifying the date of such termination, which shall be not
less than thirty (30) days after the date of such notice.
IN WITNESS WHEREOF, the Fund and BNY have caused this Agreement to be
executed by their respective officers, thereunto duly authorized, as of the
date first above written.
EACH INVESTMENT COMPANY
LISTED ON SCHEDULE 1 ATTACHED
HERETO.
By: /s/ Deborah R. Gatzek
---------------------
Deborah R. Gatzek
Title: Vice President
Of Each Such Investment Company
THE BANK OF NEW YORK
By: /s/ Stephen E. Grunston
-----------------------
Stephen E. Grunston
Title: Vice President
SCHEDULE 1
<TABLE>
<CAPTION>
INVESTMENT COMPANY SERIES
<S> <C>
Franklin Gold Fund
Franklin Asset Allocation Fund
Franklin Equity Fund
Franklin High Income Trust AGE High Income Fund
Franklin Custodian Funds, Inc. Growth Series
Utilities Series
DynaTech Series
Income Series
Franklin Investors Securities Trust Franklin Global Government Income Fund
Franklin Convertible Securities Fund
Franklin Equity Income Fund
Franklin Bond Fund
Franklin Value Investors Trust Franklin Balance Sheet Investment
Franklin MicroCap Value Fund
Franklin Value Fund
Franklin Strategic Mortgage Portfolio
Franklin Managed Trust Franklin Rising Dividends Fund
Franklin Investment Grade Income Fund
Franklin Strategic Series Franklin Strategic Income Fund
Franklin MidCap Growth Fund
Franklin Global Utilities Fund
Franklin Small Cap Growth Fund
Franklin Global Health Care Fund
Franklin Natural Resources Fund
Franklin Blue Chip Fund
Franklin Biotechnology Discovery Fund
Franklin Templeton International Trust Templeton Pacific Growth Fund
Franklin Real Estate Securities Trust Franklin Real Estate Securities Fund
INVESTMENT COMPANY SERIES
Franklin Valuemark Funds Money Market Fund
Growth and Income Fund
Natural Resources Securities Fund
Real Estate Securities Fund
Global Utilities Securities Fund
High Income Fund
Templeton Global Income Securities Fund
Income Securities Fund
U.S. Government Securities Fund
Zero Coupon Fund - 2000
Zero Coupon Fund - 2005
Zero Coupon Fund - 20 1 0
Rising Dividends Fund
Templeton Pacific Growth Fund
Templeton International Equity Fund
Small Cap Fund
Capital Growth Fund
Mutual Discovery Securities Fund
Mutual Shares Securities Fund
Global Health Care Securities Fund
Value Securities Fund
Franklin Universal Trust
Franklin Multi-Income Trust
Franklin Floating Rate Trust
Franklin Templeton Fund Allocator Series Franklin Templeton Conservative Target Fund
Franklin Templeton Moderate Target Fund
Franklin Templeton Growth Target Fund
SCHEDULE 2
- ----------------------------------------------------------- ---------------------------------------------------------
Country/ Country/
Market Subcustodian(s) Market Subcustodian(s)
- ----------------------------------------------------------- ---------------------------------------------------------
- ----------------------------------------------------------- ---------------------------------------------------------
<S> <C> <C> <C>
Argentina BankBoston, N.A. Hungary Citibank Budapest Rt.
Australia Conunonwealth Bank of Australia/ Iceland Landsbanki Islands
National Australia Bank Limited
Austria Creditanstalt AG India The Hongkong and Shanghai Banking
Corporation Limited/Deutsche Bank AG
Bahrain The British Bank of the Middle East Indonesia The Hongkong and Shanghai
Banking
Bangladesh Standard Chartered Bank Corporation Limited
Belgium Banque Bruxelles Lambert Ireland Allied Irish Banks, plc
Bermuda Bank of Bermuda Limited Israel Bank Leumi LE - Israel B.M.
Italy Banca Commerciale Italiana/
Botswana Stanbic Bank Botswana Limited Banque Paribas S.A.
Brazil BankBoston, N.A. Ivory Coast Societe Geneale de Banque en Cete d'Ivoire
Bulgaria ING Bank-Sofia
Jamaica CIBC Trust & Merchant Bank Jamaica Litd
Canada Royal Bank of Canada
Chile BankBoston, N.A. Japan The Bank of Tokyo-Mitsubishi Limited/
China Standard Chartered Bank The Fuji Bank, Limited
Colombia Cititrust Colombia S.A. Jordan The British Bank of the Middle East
Costa Rica Banco BCT Kenya Stanbic Bank Kenya Limited
Croatia Pfivredna Banka Zagreb d.d. Latvia Societe Generale Riga
Cyprus Bank of Cyprus Lebanon The British Bank of the Middle East
Czech Republic Ceskoslovenska Obchodni Banka A.S. Lithuania Vilniaus Bankas
Denmark Den Danske Bank Luxembourg Banque Internationale a Luxembourg
Malaysia Hongkong Bank Malaysia Berhad
EASDAQ Banque Bruxelles Lambert Malta Mid-Med Bank Pic
Ecuador Citibank, N.A. Mauritius The Hongkong and Shanghai
Egypt Citibank, N.A. Banking
Estonia Hansabank Limited. Corporation Limited
Euromarket Cedel Bank Mexico Banco Nacional de Mexico
Euromarket Euroclear Morocco Banque Commerciale du Maroc
Finland MeTita Bank Ltd. Namibia Stanbic Bank Namibia Limited
France Banque Paribas S.A./ Netherlands Mees Pierson
Credit Commercial de France New Zealand Australia and New Zealand Banking Group
Germany Dresdner Bank AG
Ghana Merchant Bank (Ghana) Limited Nigeria Stanbic Merchant Bank Nigeria Limited
Greece National Bank of Greece SA Norway Den norske Bank ASA
Oman The British Bank of the Middle East
Hong Kong The Hongkong and Shanghai Banking
Corporation Limited Pakistan Standard Chartered Bank
Portugal Banco Comercial Portugues/ Peru Citibank, N.A.
Banco Espirito Santo Philippines The Hongkong and Shanghai Banking
Romania ING Bank Bucharest Branch Corporation Limited
Poland Bank Handlowy W Warszawie S.A
Russia Vneshtorgbank (Min Fin Bonds only)/
Credit Suisse First Boston Limited/ Switzerland Union Bank of Switzerland/
Unexim Bank Bank Leu Ltd.
Singapore United Overseas Bank Limited/ Taiwan The Hongkong and Shanghai Banking
The Development Bank of Singapore Ltd Corporation Limited
Slovakia Ceskoslovenska Obchodna Banka, a.s Thailand Standard Chartered Bank
Slovenia Banka Creditsanstalt D.D., Ljubljana Bangkok Bank Public Company Limited
South Africa The Standard Bank of South Africa Tunisia Banque Internationale Arabe de Tunisie
Limited
Turkey Osmanli Bankasi A.S. (Ottoman Bank)
South Korea Standard Chartered Bank Ukraine Bank Ukraina
Spain Banco Bilbao Vizcaya United Kingdom The Bank of New York, N.A./
SriLanka Standard Chartered Bank First Chicago Clearing Center
Swaziland Stanbic Bank Swaziland Limited United States The Bank of New York, N.A.
Sweden Skandinaviska Enskilda Banken Uruguay BankBoston, N.A.
Venezuela Citibank, N.A.
Zambia Stanbic Bank Zambia Limited
Zimbabwe Stanbic Bank Zimbabwe Limited
</TABLE>
MASTER CUSTODY AGREEMENT
EXHIBIT A
The following is a list of the Investment Companies and their respective
Series for which the Custodian shall serve under the Master Custody Agreement
dated as of February 16, 1996.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
INVESTMENT COMPANY ORGANIZATION SERIES ---(IF APPLICABLE)
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Adjustable Rate Securities Delaware Business U.S. Government Adjustable Rate Mortgage
Portfolios Trust Portfolio
Franklin Asset Allocation Fund Delaware Business
Trust
Franklin California Tax-Free Maryland Corporation
Income
Fund, Inc.
Franklin California Tax-Free Massachusetts Franklin California Insured Tax-Free
Trust Business Trust Income Fund
Franklin California Tax-Exempt Money Fund
Franklin California Intermediate-Term
Tax-Free
Income Fund
Franklin Custodian Funds, Inc. Maryland Corporation Growth Series
Utilities Series
Dynatech Series
Income Series
U.S. Government Securities Series
Franklin Equity Fund California
Corporation
Franklin Federal Money Fund California
Corporation
Franklin Federal Tax- Free California
Income Fund Corporation
- -----------------------------------------------------------------------------------------------
INVESTMENT COMPANY ORGANIZATION SERIES ---(IF APPLICABLE)
- -----------------------------------------------------------------------------------------------
Franklin Gold Fund California
Corporation
Franklin High Income Trust Delaware Business AGE High Income Fund
Trust
Franklin Investors Securities Massachusetts Franklin Global Government Income Fund
Trust Business Trust Franklin Short-Intermediate U.S. Govt
Securities Fund
Franklin Convertible Securities Fund
Franklin Adjustable U.S. Government
Securities Fund
Franklin Equity Income Fund
Franklin Bond Fund
Franklin Managed Trust Delaware Business Franklin Rising Dividends Fund
Trust
Franklin Money Fund California
Corporation
Franklin Municipal Securities Delaware Business Franklin California High Yield Municipal
Trust Trust Fund
Franklin Tennessee Municipal Bond Fund
Franklin Mutual Series Fund Maryland Corporation Mutual Shares Fund
Inc. Mutual Beacon Fund
Mutual Qualified Fund
Mutual Discovery Fund
Mutual European Fund
Mutual Financial Services Fund
- -----------------------------------------------------------------------------------------------
INVESTMENT COMPANY ORGANIZATION SERIES ---(IF APPLICABLE)
Franklin New York Tax-Free Delaware Business
Income Fund Trust
Franklin New York Tax-Free Massachusetts Franklin New York Tax-Exempt Money Fund
Trust Business Trust Franklin New York Intermediate-Term
Tax-Free
Income Fund
Franklin New York Insured Tax-Free
Income Fund
Franklin Real Estate Delaware Business Franklin Real Estate Securities Fund
Securities Trust Trust
Franklin Strategic Mortgage Delaware Business
Portfolio Trust
Franklin Strategic Series Delaware Business Franklin California Growth Fund
Trust Franklin Strategic Income Fund
Franklin MidCap Growth Fund
Franklin Global Utilities Fund
Franklin Small Cap Growth Fund
Franklin Global Health Care Fund
Franklin Natural Resources Fund
Franklin Blue Chip Fund
Franklin Biotechnology Discovery Fund
Franklin U.S. Long-Short Fund
Franklin Large Cap Growth Fund
Franklin Aggressive Growth Fund
Franklin Tax-Exempt Money Fund California
Corporation
- -----------------------------------------------------------------------------------------------
INVESTMENT COMPANY ORGANIZATION SERIES---(IF APPLICABLE)
Franklin Tax-Free Trust Massachusetts Franklin Massachusetts Insured Tax-Free
Business Trust Income Fund
Franklin Michigan Insured Tax-Free
Income Fund
Franklin Minnesota Insured Tax-Free
Income Fund
Franklin Insured Tax-Free Income Fund
Franklin Ohio Insured Tax-Free Income
Fund
Franklin Puerto Rico Tax-Free Income Fund
Franklin Arizona Tax-Free Income Fund
Franklin Colorado Tax-Free Income Fund
Franklin Georgia Tax-Free Income Fund
Franklin Pennsylvania Tax-Free Income
Fund
Franklin High Yield Tax-Free Income Fund
Franklin Missouri Tax-Free Income Fund
Franklin Oregon Tax-Free Income Fund
Franklin Texas Tax-Free Income Fund
Franklin Virginia Tax-Free Income Fund
Franklin Alabama Tax-Free Income Fund
Franklin Florida Tax-Free Income Fund
Franklin Connecticut Tax-Free Income Fund
Franklin Louisiana Tax-Free Income Fund
Franklin Maryland Tax-Free Income Fund
Franklin North Carolina Tax-Free Income
Fund
Franklin New Jersey Tax-Free Income Fund
Franklin Kentucky Tax-Free Income Fund
Franklin Federal Intermediate-Term
Tax-Free Income
Fund
Franklin Arizona Insured Tax-Free Income
Fund
Franklin Florida Insured Tax-Free Income
fund
- -----------------------------------------------------------------------------------------------
INVESTMENT COMPANY ORGANIZATION SERIES ---(IF APPLICABLE)
Franklin Templeton Fund Delaware Business Franklin Templeton Conservative Target
Allocator Series Trust Fund
Franklin Templeton Moderate Target Fund
Franklin Templeton Growth Target Fund
Franklin Templeton Global Trust Delaware Business Franklin Templeton Global Currency Fund
Trust Franklin Templeton Hard Currency Fund
Franklin Templeton Delaware Business Templeton Pacific Growth Fund
International Trust Trust Templeton Foreign Smaller Companies Fund
Franklin Templeton Money Fund Delaware Business Franklin Templeton Money Fund
Trust Trust
Franklin Value Investors Trust Massachusetts Franklin Balance Sheet Investment Fund
Business Trust Franklin MicroCap Value Fund
Franklin Value Fund
Franklin Templeton Variable Massachusetts Franklin Money Market Fund
Insurance Products Trust Business Trust Franklin Growth and Income Fund
Franklin Natural Resources Securities
Fund
Franklin Real Estate Fund
Franklin Global Communications
Securities Fund
Franklin High Income Fund
Templeton Global Income Securities Fund
Franklin Income Securities Fund
Franklin U.S. Government Fund
Zero Coupon Fund - 2000
Zero Coupon Fund - 2005
Zero Coupon Fund - 2010
Franklin Rising Dividends Securities Fund
- -----------------------------------------------------------------------------------------------
INVESTMENT COMPANY ORGANIZATION SERIES ---(IF APPLICABLE)
Franklin Templeton Variable Massachusetts Templeton Pacific Growth Fund
Insurance Products Trust Business Trust Templeton International Equity Fund
(cont.) Templeton Developing Markets Equity Fund
Templeton Global Growth Fund
Templeton Global Asset Allocation Fund
Franklin Small Cap Fund
Franklin Large Cap Growth Securities Fund
Templeton International Smaller
Companies Fund
Mutual Discovery Securities Fund
Mutual Shares Securities Fund
Franklin Global Health Care Securities
Fund
Franklin Value Securities Fund
Franklin Aggressive Growth Securities
Fund
- -----------------------------------------------------------------------------------------------
Institutional Fiduciary Trust Massachusetts Money Market Portfolio
Business Trust Franklin U.S. Government Securities
Money Market
Portfolio
Franklin Cash Reserves Fund
The Money Market Portfolios Delaware Business The Money Market Portfolio
Trust The U.S. Government Securities Money
Market Portfolio
Templeton Variable Products Franklin Growth Investments Fund
Series Fund Mutual Shares Investments Fund
Mutual Discovery Investments Fund
Franklin Small Cap Investments Fund
- -----------------------------------------------------------------------------------------------
INVESTMENT COMPANY ORGANIZATION SERIES---(IF APPLICABLE)
- -----------------------------------------------------------------------------------------------
CLOSED END FUNDS:
Franklin Multi-Income Trust Massachusetts
Business Trust
Franklin Universal Trust Massachusetts
Business Trust
Franklin Floating Rate Trust Delaware Business
Trust
- -----------------------------------------------------------------------------------------------
</TABLE>
POWER OF ATTORNEY
The undersigned officers and trustees of THE MONEY MARKET PORTFOLIOS (the
"Registrant") hereby appoint MARK H. PLAFKER, HARMON E. BURNS, DEBORAH R.
GATZEK, KAREN L. SKIDMORE AND LEIANN NUZUM (with full power to each of them
to act alone) his attorney-in-fact and agent, in all capacities, to execute,
file or withdraw any of the documents referred to below relating to
Post-Effective Amendments to the Registrant's registration statement on Form
N-1A under the Investment Company Act of 1940, as amended, and under the
Securities Act of 1933 covering the sale of shares by the Registrant under
prospectuses becoming effective after this date, including any amendment or
amendments increasing or decreasing the amount of securities for which
registration is being sought, with all exhibits and any and all documents
required to be filed with respect thereto with any regulatory authority.
Each of the undersigned grants to each of said attorneys, full authority to
do every act necessary to be done in order to effectuate the same as fully,
to all intents and purposes as he could do if personally present, thereby
ratifying all that said attorneys-in-fact and agents, may lawfully do or
cause to be done by virtue hereof.
The undersigned officers and trustees hereby execute this Power of Attorney
as of this 15th day of July, 1999.
/s/ Charles E. Johnson /s/ Charles B. Johnson
Charles E. Johnson, Charles B. Johnson,
Principal Executive Officer Trustee
and Trustee
/s/ Frank H. Abbott, III /s/ Harris J. Ashton
Frank H. Abbott, III, Harris J. Ashton,
Trustee Trustee
/s/ Robert F. Carlson /s/ S. Joseph Fortunato
Robert F. Carlson, S. Joseph Fortunato,
Trustee Trustee
/s/ Rupert H. Johnson, Jr. /s/ Frank W.T. LaHaye
Rupert H. Johnson, Jr., Frank W.T. LaHaye,
Trustee Trustee
/s/ Gordon S. Macklin /s/ Martin L. Flanagan
Gordon S. Macklin, Martin L. Flanagan,
Trustee Principal Financial Officer
/s/ Diomedes Loo-Tam
Diomedes Loo-Tam,
Principal Accounting Officer
CERTIFICATE OF SECRETARY
I, Deborah R. Gatzek, certify that I am Secretary of THE MONEY MARKET
PORTFOLIOS (the "Trust").
As Secretary of the Trust, I further certify that the following resolution
was adopted by a majority of the Trustees of the Trust present at a meeting
held at 777 Mariners Island Boulevard, San Mateo, California 94404, on July
15, 1999.
RESOLVED, that a Power of Attorney, substantially in the form of
the Power of Attorney presented to this Board, appointing Harmon E.
Burns, Deborah R. Gatzek, Karen L. Skidmore, Leiann Nuzum and Mark
H. Plafker as attorneys-in-fact for the purpose of filing documents
with the Securities and Exchange Commission, be executed by each
Trustee and designated officer.
I declare under penalty of perjury that the matters set forth in this
certificate are true and correct of my own knowledge.
Dated: October 25, 1999 /s/ Deborah R. Gatzek
Secretary
