As filed with the Securities and Exchange Commission on October 27, 2000.
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. 11 (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
MURRAY L. SIMPSON, 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 STRATEGIES
GOAL The Fund's investment goal is to provide investors with as high a
level of current income as is consistent with the preservation of
shareholders' capital and liquidity. The Fund also tries to maintain a stable
$1 share price.
MAIN INVESTMENT STRATEGIES
The Fund invests in high-quality, short-term U.S. dollar denominated money
market securities of domestic and foreign issuers, including:
BANK OBLIGATIONS and instruments secured by bank obligations, which include
fixed, floating or variable rate certificates of deposit, letters of credit,
time deposits, bank notes and bankers' acceptances. From time to time, the
Fund may concentrate its investments in bank obligations (such as
certificates of deposits) issued by domestic banks. Investments in
obligations of U.S. branches of foreign banks are considered domestic banks
if such branches have a federal or state charter to do business in the U.S.
and are subject to U.S. regulatory authorities.
o CERTIFICATES OF DEPOSITS, which are bank obligations that are issued
against money deposited in a banking institution for a specified period of
time at a specified interest rate.
COMMERCIAL PAPER, which is a short-term obligation of a bank, corporation or
other borrower with a maturity of up to 270 days. Commercial paper may also
be asset backed (that is, backed by a pool of assets representing the
obligations of a number of different parties). At any time, the Fund may
have a significant portion of its investments in asset-backed commercial
paper.
REPURCHASE AGREEMENTS, which are agreements 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.
U.S. GOVERNMENT SECURITIES, which 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.
PORTFOLIO MATURITY AND QUALITY 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
FINANCIAL SERVICES COMPANIES Financial services companies such as banks are
highly dependent on the supply of short-term financing. The value of
securities issued by financial services companies can be sensitive to changes
in government regulation and interest rates and to economic downturns in the
U.S. and overseas.
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.
INTEREST RATE Changes in interest rates can be sudden and unpredictable.
Rate changes occur in response to general economic conditions and also as a
result of actions by the Federal Reserve Board. A reduction in short-term
interest rates will normally result in reduced interest income to the Fund
and thus a reduction in dividends payable top shareholders. An increase in
short-term interest rates will normally have the effect of increasing
dividends to shareholders.
More detailed information about the Fund, its policies and risks 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 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 STRATEGIES
GOAL The Fund's investment goal is to provide investors with as high a
level of current income as is consistent with the preservation of
shareholders' capital and liquidity. The Fund also tries to maintain a stable
$1 share price.
MAIN INVESTMENT STRATEGIES
The Fund invests only in marketable obligations that are issued or guaranteed
by the U.S. government or that carry a guarantee that is supported by the
full faith and credit of the U.S. government, repurchase agreements
collateralized only by these securities, and stripped securities (which are
separate income and principal components of a debt security). It is the
Fund's present policy to limit its investments to U.S. Treasury bills, notes
and bonds (including stripped securities), and repurchase agreements
collateralized only by these 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.
PORTFOLIO MATURITY AND QUALITY 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.
INTEREST RATE Changes in interest rates can be sudden and unpredictable.
Rate changes occur in response to general economic conditions and also as a
result of actions by the Federal Reserve Board. A reduction in short-term
interest rates will normally result in reduced interest income to the Fund
and thus a reduction in dividends payable top shareholders. An increase in
short-term interest rates will normally have the effect of increasing
dividends to shareholders.
More detailed information about the Fund, its policies and risks 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 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 $236 billion in assets.
Each Fund pays Advisers a fee for managing the Fund's assets. For the fiscal
year ended June 30, 2000, 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 0.14% of its average daily net
assets to the manager for its services. The manager may end this arrangement
at any time upon notice to the Fund's Board of Trustees.
ITEM 7. SHAREHOLDER INFORMATION
(A) PRICING OF FUND SHARES
Each Fund calculates its net asset value (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, the Fund reserves the right, in the
case of an emergency, to make payments in securities or other assets of the
Fund, if the payment of cash proceeds by check, wire or electronic funds
transfer would be harmful to existing shareholders.
(D) DIVIDENDS AND DISTRIBUTIONS
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.
TAX CONSIDERATIONS In general, Fund distributions are taxable to
shareholders as ordinary income. This is true whether a shareholder reinvests
its distributions in additional Fund shares or receives them in cash.
BACKUP WITHHOLDING. By law, the Fund must withhold 31% of a shareholder's
taxable distributions and redemption proceeds if the shareholder does not
provide its correct taxpayer identification number and certify that it is not
subject to backup withholding, or if the IRS instructs the Fund to do so.
Every January, shareholders will receive a statement that shows the tax
status of distributions received for the previous year. Distributions
declared in December but paid in January are taxable as if they were paid in
December.
Because the Fund expects to maintain a stable $1 share price, a shareholder
should not have any gain or loss if it sells or exchanges its Fund shares.
Fund distributions generally will be subject to state and local taxes. States
generally grant tax-free status to dividends paid from interest on certain
U.S. government securities. Investment companies that invest in the Fund may
not be able to pass through to their shareholders the exempt character of
interest earned by the Fund on its U.S. government securities.
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) is 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. The series are The Money Market Portfolio (Money Fund) and The
U.S. Government Securities Money Market Portfolio (U.S. Securities Fund) (the
Money Fund and U.S. Securities Fund are individually referred to as a Fund
and collectively as the Funds.)
ITEM 12. DESCRIPTION OF THE FUND AND ITS INVESTMENTS AND RISKS
GOALS, STRATEGIES AND RISKS
Generally, the policies and restrictions discussed in this Part B and in Part
A apply when the Fund makes an investment. In most cases, the Fund is not
required to sell a security because circumstances change and the security no
longer meets one or more of the Fund's policies or restrictions. If a
percentage restriction or limitation is met at the time of investment, a
later increase or decrease in the percentage due to a change in the value or
liquidity of portfolio securities will not be considered a violation of the
restriction or limitation.
Each Fund has adopted certain 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.
A non-fundamental policy may be changed by the board of trustees without the
approval of shareholders.
As money market funds, 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.
FUNDAMENTAL INVESTMENT POLICIES
Each 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. Each Fund also tries to maintain a stable $1 share
price.
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 below.
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.
The Funds have the following additional fundamental policies:
1. 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. In accordance with procedures adopted pursuant to Rule
2a-7 under the Investment Company Act of 1940 (1940 Act), 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.
2. The U.S. Securities Fund may invest only in obligations, including
U.S. Treasury bills, notes, bonds and securities of the Government National
Mortgage Association (popularly called "GNMAs" or "Ginnie Maes") and the
Federal Housing Administration, which are issued or guaranteed by the U.S.
government or that carry a guarantee supported by the full faith and credit
of the U.S. government, repurchase agreements collateralized only by such
securities, and stripped securities.
NON-FUNDAMENTAL INVESTMENT POLICIES
1. Each Fund may not invest in real estate limited partnerships
(investments in marketable securities issued by real estate investment trusts
are not subject to this restriction) or in interests (other than publicly
traded equity securities) in oil, gas, or other mineral leases, exploration
or development program.
2. The U.S. Securities Fund only intends to buy stripped securities
that are issued or guaranteed by the U.S. Treasury.
3. The Money 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.
4. The Money Fund will invest in obligations or instruments issued by
banks and savings institutions with assets of at least $1 billion.
5. The Money Fund may not invest more than 10% of its assets in time
deposits with more than seven days to maturity.
6. 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 invest more than 25% of its assets
in certain domestic bank obligations, including U.S. branches of foreign
banks.
7. The Money Fund may not make any new investments while any
outstanding loans exceed 5% of its total assets.
8. The Money Fund may invest up to 10% of its assets in taxable
municipal securities.
9. The Money Fund may not invest more than 10% of its net assets in
illiquid securities. Notwithstanding this limitation, the Money Fund may
invest in securities that cannot be offered to the public for sale without
first being registered under the Securities Act of 1933, as amended (1933
Act) (restricted securities), where such investment is consistent with the
Money Fund's investment goal and the manager determines that there is a
liquid institutional or other market for such securities. For example,
restricted securities that may be freely transferred among qualified
institutional buyers pursuant to Rule 144A under the 1933 Act and for which a
liquid institutional market has developed will be considered liquid even
though such securities have not been registered pursuant to the 1933 Act.
10. 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.
11. The U.S. Securities Fund may invest only in U.S. Treasury bills,
notes, and bonds (including stripped securities) and repurchase agreements
collateralized only by such securities. This policy may only be changed upon
30 days' written notice to shareholders and to the National Association of
Insurance Commissioners.
INVESTMENTS, TECHNIQUES, STRATEGIES AND THEIR RISKS
In trying to achieve its investment goals, each Fund where indicated may
invest in the following types of securities or engage in the following types
of transactions, and can be subject to the following types of risks:
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 for the assets underlying the securities, how well the
entity issuing the securities 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.
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 time deposits in
banking and savings institutions up to the current limit of the insurance on
principal provided by the Federal Deposit Insurance Corporation. Time
DEPOSITS are non-negotiable deposits that are held in a banking institution
for a specified time at a stated interest rate. Deposits are frequently
combined in larger units by an intermediate bank or other institution.
COMMERCIAL PAPER The Money Fund may invest in commercial paper of domestic or
foreign issuers.
CORPORATE OBLIGATIONS in which the Money Fund may invest include fixed,
floating and variable rate bonds, debentures or notes.
CREDIT An issuer of securities may 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. Some of the Money
Fund's portfolio securities may be supported by credit enhancements, which
may be provided by either U.S. or foreign banks and insurance companies.
These securities have the credit risk of the entity providing the credit
support. Credit support provided by a foreign bank or insurance company may
be less certain because of the possibility of adverse foreign economic,
political or legal developments that may affect the ability of that entity to
meet its obligations.
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 Money Fund.
The political, economic and social structures of some countries the Money
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 Money 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.
ILLIQUID INVESTMENTS 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. The Money Fund's board
of trustees will review the determination by the manager to treat a
restricted security as a liquid security on an ongoing basis, including,
among others, the following factors: (i) the frequency of trades and quotes
for the security; (ii) the number of dealers willing to buy or sell the
security and the number of other potential buyers; (iii) dealer undertakings
to make a market in the security; and (iv) the nature of the security and
market place trades (e.g., the time needed to dispose of the security, the
method of soliciting offers, and the mechanics of transfer). To the extent
the Money Fund invests in restricted securities that are deemed liquid, the
general level of illiquidity in the Money Fund may be increased if qualified
institutional buyers become uninterested in buying these securities or the
market for these securities contracts. The Money Fund's board of trustees
will consider appropriate actions, consistent with the Money Fund's goals and
policies, if a security becomes illiquid after purchase.
INTEREST RATE As a general rule, when interest rates rise, debt securities
can lose market value. Similarly, when interest rates fall, debt securities
can gain value. However, because the length of time to maturity of the money
market instruments in a Fund's portfolio is very short, it is unlikely to be
affected by interest rate changes in this way except in the case of
unexpectedly large interest rate changes over a very short period of time.
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. Each Fund retains all or a portion of the interest received on
investment of the cash collateral or receives a fee from the borrower. Each
Fund also continues to receive any distributions paid on the loaned
securities. Each Fund may terminate a loan at any time and obtain the return
of the securities loaned within the normal settlement period for the security
involved.
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. Each Fund will loan its securities only to parties who meet
creditworthiness standards approved by a Fund's board of trustees, i.e.,
banks or broker-dealers that the manager has determined present no serious
risk of becoming involved in bankruptcy proceedings within the time frame
contemplated by the loan.
MUNICIPAL SECURITIES The Money Fund may invest in municipal securities,
which 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.
REPURCHASE AGREEMENTS Under a repurchase agreement, each 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 a 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. Each Fund 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.
STRIPPED SECURITIES are the separate income and principal components of debt
securities. Once the securities have been stripped they are referred to as
zero coupon securities. Their risks are similar to those of other money
market securities although they may be more volatile. Stripped securities do
not make periodic payments of interest prior to maturity and the stripping of
the interest coupons causes them to be offered at a discount from their face
amount. This results in the securities being subject to greater fluctuations
in response to changing interest rates than interest-paying securities of
similar maturities.
These risks also include, among others, the risk that the price movements in
the underlying securities correlate with price movements in the relevant
portion of a Fund's portfolio. A Fund either bears the risk in the same
amount as the instrument it has purchased, or there may be a negative
correlation that would result in a loss on both the underlying security and
the stripped security.
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.
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.
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, a
Fund assumes the risk that the value of the security at delivery may be more
or less than the purchase prices. When a 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. A Fund will not engage
in when-issued and delayed-delivery transactions for investment leverage
purposes.
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 name, age and address of the officers and board members, as well as their
affiliations, positions held with the Trust, and principal occupations during
the past five years are shown below.
Frank H. Abbott, III (79)
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 29 of the investment companies in Franklin
Templeton Investments; and FORMERLY, Director, MotherLode Gold Mines
Consolidated (gold mining) (until 1996) and Vacu-Dry Co. (food processing)
(until 1996).
Harris J. Ashton (68)
191 Clapboard Ridge Road, Greenwich, CT 06830
TRUSTEE
Director, RBC Holdings, Inc. (bank holding company) and Bar-S Foods (meat
packing company); director or trustee, as the case may be, of 48 of the
investment companies in Franklin Templeton Investments; and FORMERLY,
President, Chief Executive Officer and Chairman of the Board, General Host
Corporation (nursery and craft centers) (until 1998).
Robert F. Carlson (72)
2120 Lambeth Way, Carmichael, CA 95608
TRUSTEE
Vice President and past President, Board of Administration, California Public
Employees Retirement Systems (CALPERS); director or trustee, as the case may
be, of 11 of the investment companies in Franklin Templeton Investments; 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 (68)
Park Avenue at Morris County, P.O. Box 1945
Morristown, NJ 07962-1945
TRUSTEE
Member of the law firm of Pitney, Hardin, Kipp & Szuch; and director or
trustee, as the case may be, of 50 of the investment companies in Franklin
Templeton Investments.
*Charles B. Johnson (67)
777 Mariners Island Blvd., San Mateo, CA 94404
CHAIRMAN OF THE BOARD AND TRUSTEE
Chairman of the Board, Chief Executive Officer, Member - Office of the
Chairman and Director, Franklin Resources, Inc.; Chairman of the Board and
Director, Franklin Investment Advisory Services, Inc.; Vice President,
Franklin Templeton Distributors, Inc.; Director, Franklin/Templeton Investor
Services, Inc. and Franklin Templeton Services, Inc.; officer and/or director
or trustee, as the case may be, of most of the other subsidiaries of Franklin
Resources, Inc. and of 49 of the investment companies in Franklin Templeton
Investments.
*Charles E. Johnson (44)
777 Mariners Island Blvd., San Mateo, CA 94404
PRESIDENT AND TRUSTEE
President, Member - Office of the President and Director, Franklin Resources,
Inc.; Senior Vice President, Franklin Templeton Distributors, Inc.; President
and Director, Templeton Worldwide, Inc. and Franklin Advisers, Inc.;
Director, Templeton Investment Counsel, Inc.; President, Franklin Investment
Advisory 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 33 of the investment companies in Franklin
Templeton Investments.
*Rupert H. Johnson, Jr. (60)
777 Mariners Island Blvd., San Mateo, CA 94404
VICE PRESIDENT AND TRUSTEE
Vice Chairman, Member - Office of the Chairman and Director, Franklin
Resources, Inc.; Executive Vice President and Director, Franklin Templeton
Distributors, Inc.; Director, Franklin Advisers, Inc., Franklin Investment
Advisory Services, Inc. and Franklin/Templeton Investor Services, Inc.;
Senior Vice President, Franklin Advisory Services, LLC; and officer and/or
director or trustee, as the case may be, of most of the other subsidiaries of
Franklin Resources, Inc. and of 52 of the investment companies in Franklin
Templeton Investments.
Frank W.T. LaHaye (71)
20833 Stevens Creek Blvd., Suite 102, Cupertino, CA 95014
TRUSTEE
Chairman, Peregrine Venture Management Company (venture capital); Director,
The California Center for Land Recycling (redevelopment); director or
trustee, as the case may be, of 29 of the investment companies in Franklin
Templeton Investments; and FORMERLY, General Partner, Miller & LaHaye and
Peregrine Associates, the general partners of Peregrine Venture funds.
Gordon S. Macklin (72)
8212 Burning Tree Road, Bethesda, MD 20817
TRUSTEE
Director, Martek Biosciences Corporation, WorldCom, Inc. (communications
services), MedImmune, Inc. (biotechnology), Overstock.com (internet
services), White Mountains Insurance Group, Ltd. (holding company) and
Spacehab, Inc. (aerospace services); director or trustee, as the case may be,
of 48 of the investment companies in Franklin Templeton Investments; and
FORMERLY, Chairman, White River Corporation (financial services) (until 1998)
and Hambrecht & Quist Group (investment banking) (until 1992), and President,
National Association of Securities Dealers, Inc. (until 1987).
Harmon E. Burns (55)
777 Mariners Island Blvd., San Mateo, CA 94404
VICE PRESIDENT
Vice Chairman, Member - Office of the Chairman and Director, Franklin
Resources, Inc.; Executive Vice President and Director, Franklin Templeton
Distributors, Inc.; Executive Vice President, Franklin Advisers, Inc.;
Director, Franklin Investment Advisory Services, Inc., Franklin/Templeton
Investor Services, Inc. and Franklin Templeton Services, Inc.; and officer
and/or director or trustee, as the case may be, of most of the other
subsidiaries of Franklin Resources, Inc. and of 52 of the investment
companies in Franklin Templeton Investments.
Martin L. Flanagan (40)
777 Mariners Island Blvd., San Mateo, CA 94404
VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
President, Member - Office of the President, Chief Financial Officer and
Chief Operating Officer, Franklin Resources, Inc.; Executive Vice President
and Director, Franklin/Templeton Investor Services, Inc.; President and Chief
Financial Officer, 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, Franklin Advisers, Inc. and Franklin
Investment Advisory Services, Inc.; Chief Financial Officer, Franklin
Advisory Services, LLC; Chairman and Director, Franklin Templeton Services,
Inc.; officer and/or director of some of the other subsidiaries of Franklin
Resources, Inc.; and officer and/or director or trustee, as the case may be,
of 52 of the investment companies in Franklin Templeton Investments.
David P. Goss (53)
777 Mariners Island Blvd., San Mateo, CA 94404
VICE PRESIDENT
Counsel, Franklin Resources, Inc.; President, Chief Executive Officer and
Director, Franklin Select Realty Trust, Property Resources, Inc., Property
Resources Equity Trust, Franklin Real Estate Management, Inc. and Franklin
Properties, Inc.; officer and director of some of the other subsidiaries of
Franklin Resources, Inc.; officer of 53 of the investment companies in
Franklin Templeton Investments; and FORMERLY, President, Chief Executive
Officer and Director, Franklin Real Estate Income Fund and Franklin Advantage
Real Estate Income Fund (until 1996).
Barbara J. Green (53)
777 Mariners Island Blvd., San Mateo, CA 94404
VICE PRESIDENT
Vice President and Deputy General Counsel, Franklin Resources, Inc.; Senior
Vice President, Templeton Worldwide, Inc. and Templeton Global Investors,
Inc.; officer of 53 of the investment companies in Franklin Templeton
Investments; and FORMERLY, Deputy Director, Division of Investment
Management, Executive Assistant and Senior Advisor to the Chairman, Counselor
to the Chairman, Special Counsel and Attorney Fellow, U.S. Securities and
Exchange Commission (1986-1995), Attorney, Rogers & Wells (until 1986), and
Judicial Clerk, U.S. District Court (District of Massachusetts) (until 1979).
Edward V. McVey (63)
777 Mariners Island Blvd., San Mateo, CA 94404
VICE PRESIDENT
Senior Vice President, Franklin Templeton Distributors, Inc.; officer of one
of the other subsidiaries of Franklin Resources, Inc. and of 30 of the
investment companies in Franklin Templeton Investments.
Kimberley Monasterio (36)
777 Mariners Island Blvd., San Mateo, CA 94404
TREASURER AND PRINCIPAL ACCOUNTING OFFICER
Senior Vice President, Franklin Templeton Services, Inc.; and officer of 34
of the investment companies in Franklin Templeton Investments.
Murray L. Simpson (63)
777 Mariners Island Blvd., San Mateo, CA 94404
VICE PRESIDENT
Executive Vice President and General Counsel, Franklin Resources, Inc.;
officer and/or director of some of the subsidiaries of Franklin Resources,
Inc.; officer of 53 of the investment companies in Franklin Templeton
Investments; and FORMERLY, Chief Executive Officer and Managing Director,
Templeton Franklin Investment Services (Asia) Limited (until January 2000)
and Director, Templeton Asset Management Ltd. (until 1999).
R. Martin Wiskemann (73)
777 Mariners Island Blvd., San Mateo, CA 94404
VICE PRESIDENT
Executive Vice President, and Director, Franklin Advisers, Inc.; Senior Vice
President, Franklin Management, Inc.; and officer and/or director or trustee,
as the case may be, of 15 of the investment companies in Franklin Templeton
Investments; and FORMERLY, Vice President and Director, ILA Financial
Services, Inc. (until 1998).
*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. Board
members who serve on the audit committee of the Trust and other funds in
Franklin Templeton Investments receive a flat fee of $2,000 per committee
meeting attended, a portion of which is allocated to the Trust. Members of a
committee are not compensated for any committee meeting held on the day of a
board meeting. Noninterested board members may also serve as directors or
trustees of other funds in Franklin Templeton Investments and may receive fees
from these funds for their services. The fees payable to noninterested board
members by the Trust are subject to reductions resulting from fee caps limiting
the amount of fees payable to board members who serve on other boards within
Franklin Templeton Investments. The following table provides the total fees paid
to noninterested board members by Franklin Templeton Investments.
TOTAL FEES NUMBER OF BOARDS
RECEIVED FROM IN FRANKLIN
FRANKLIN TEMPLETON
NAME TEMPLETON INVESTMENTS ON
INVESTMENTS 1 ($) WHICH EACH SERVES 2
---------------------------------------------------------
Frank H. Abbott, III 156,060 29
Harris J. Ashton 363,165 48
Robert F. Carlson 89,690 11
S. Joseph Fortunato 363,238 50
Frank W.T. LaHaye 156,060 29
Gordon S. Macklin 363,165 48
1. For the calendar year ended December 31, 1999.
2. We base the number of boards on the number of registered investment
companies in Franklin Templeton Investments. This number does not include the
total number of series or funds within each investment company for which the
board members are responsible. Franklin Templeton Investments currently
includes 52 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
Franklin Templeton Investments 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 Franklin Templeton Investments. 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 Franklin Templeton Investments, as
is consistent with their individual financial goals. In February 1998, this
policy was formalized through adoption of a requirement that each such 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 2, 2000, the principal shareholders of the Funds,
beneficial or of record, were as follows:
NAME AND ADDRESS PERCENTAGE (%)
-------------------------------------------------------------
MONEY FUND
IFT Money Market Portfolio (140) 30.89
777 Mariners Island Blvd.
San Mateo, CA 94404-1584
Franklin Money Fund (111) 64.86
777 Mariners Island Blvd.
San Mateo, CA 94404-1584
U.S. SECURITIES FUND
IFT Franklin U.S. Government Securities 28.52
Money Market Portfolio (142)
777 Mariners Island Blvd.
San Mateo, CA 94404-1584
Franklin Federal Money Fund (113) 71.483
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 2, 2000, 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 Franklin Templeton Investments.
ITEM 15. INVESTMENT ADVISORY AND OTHER SERVICES
MANAGER AND SERVICES PROVIDED Each Fund's manager is Franklin Advisers, Inc.
The manager is a wholly owned subsidiary of Franklin Resources, Inc.
(Resources), a publicly owned company engaged in the financial services
industry through its subsidiaries. Charles B. Johnson and Rupert H. Johnson,
Jr. are the principal shareholders of Resources.
The manager provides investment research and portfolio management services,
and selects the securities for the 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.
Each Fund, its manager and principal underwriter have each adopted a code of
ethics, as required by federal securities laws. Under the code of ethics,
employees who are designated as access persons may engage in personal
securities transactions, including transactions involving securities that are
being considered for the Fund or that are currently held by the Fund, subject
to certain general restrictions and procedures. The personal securities
transactions of access persons of the Fund, its manager and principal
underwriter will be governed by the code of ethics. The code of ethics is on
file with, and available from, the U.S. Securities and Exchange Commission
(SEC).
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 ($)
-------------------------------------------------------------------
2000 1999 1998
-------------------------------------------------------------------
MONEY FUND 1 5,179,045 3,900,807 2,830,858
-------------------------------------------------------------------
U.S. SECURITIES FUND 2 351,386 430,179 367,433
-------------------------------------------------------------------
1. For the fiscal years ended 2000, 1999 and 1998, management fees, before any
advance waiver, totaled $5,343,198, $3,996,761 and $2,963,304,
respectively. Under an agreement by the manager to limit its fees, the Fund
paid the management fees shown.
2. For the fiscal years ended 2000, 1999 and 1998, management fees, before any
advance waiver, totaled $376,050, $437,891 and $394,321, 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. Please send all correspondence to Investor Services to P.O.
Box 33096, St. Petersburg, FL 33733-8096.
For its services, Investor Services receives a fixed fee per account. The
Funds also will reimburse Investor Services for certain out-of-pocket
expenses, which may include payments by Investor Services to entities,
including affiliated entities, that provide sub-shareholder services,
recordkeeping and/or transfer agency services to beneficial owners of the
Fund. The amount of reimbursements for these services per benefit plan
participant Fund account per year will not exceed the per account fee payable
by the 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 Funds' 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 SEC.
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 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 Franklin Templeton
Investments, 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, 2000, 1999 and 1998, the Funds did not
pay any brokerage commissions.
As of June 30, 2000, Money Fund owned the following securities issued by its
regular broker-dealers:
----------------------------------------------------------
AGGREGATE
VALUE OF
PORTFOLIO
TRANSACTIONS ($)
----------------------------------------------------------
Morgan Stanley Dean Witter 153,622,000
----------------------------------------------------------
Morgan (J.P.) Securities Inc. 24,665,000
----------------------------------------------------------
UBS Warburg 24,991,000
----------------------------------------------------------
Merrill Lynch Government Securities Inc. 74,302,000
----------------------------------------------------------
Barclays Investment Inc. 24,931,000
----------------------------------------------------------
Banc of America Securities LLC 155,000,000
----------------------------------------------------------
Salomon Smith Barney 164,514,000
----------------------------------------------------------
Dresdner Kleinwort Benson, North America 75,001,000
LLC
----------------------------------------------------------
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 (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 also may 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 (NAV) per share is determined by dividing the NAV 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
set aside on the Fund's books 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 SEC.
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 Each Fund has committed itself to pay in cash (by check)
all requests for redemption by any shareholder of record, limited in amount,
however, during any 90-day period to the lesser of $250,000 or 1% of the
value of the Fund's net assets at the beginning of the 90-day period. This
commitment is irrevocable without the prior approval of the 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.
ITEM 19. TAXATION OF THE FUND
DISTRIBUTIONS OF NET INVESTMENT INCOME The Funds typically pay dividends
from their daily net income each day that their net asset values are
calculated. 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
stable $1 share price), less the estimated expenses of the Funds. Any
distributions by a Fund from such income will be taxable to shareholders as
ordinary income, whether they receive 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
shareholders as ordinary income. Because the Funds are money funds, they do
not anticipate realizing any long-term capital gains.
MAINTAINING A $1 SHARE PRICE 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 to maintain its $1
share price. These procedures may result in under- or over-distributions by a
Fund of its 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 on the sale of debt securities
generally are treated as ordinary losses. These gains when distributed will
be taxable to the Money Fund's shareholders as ordinary income, and any
losses will reduce the Money Fund's ordinary income otherwise available for
distribution to shareholders. This treatment could increase or decrease the
Money Fund's ordinary income distributions to shareholders. The Money Fund
may be subject to foreign withholding taxes on income from certain foreign
securities. This, in turn, could reduce ordinary income distributions to
shareholders.
INFORMATION ON THE TAX CHARACTER OF DISTRIBUTIONS The Funds will inform
shareholders of the amount of their distributions at the time they are paid,
and will advise shareholders of their tax status for federal income tax
purposes shortly after the close of each calendar year. If a shareholder has
not held Fund shares for a full year, the Fund may designate and distribute
to the shareholder, as ordinary income, a percentage of income that is not
equal to the actual amount of such income earned during the period of the
shareholder's investment in the Fund.
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 (Code). Each Fund has qualified as a regulated
investment company for its most recent fiscal year, and intends to continue
to 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 shareholders. 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 shareholders. In such case, a Fund
will be subject to federal, and possibly state, corporate taxes on its
taxable income and gains, and distributions to shareholders will be taxed as
ordinary dividend income to the extent of the Fund's earnings and profits.
EXCISE TAX DISTRIBUTION REQUIREMENTS To avoid federal excise taxes, the Code
requires each Fund to distribute to its shareholders 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 distributions in December (or to pay them in January, in which case
shareholders must treat them as received in December) but can give no
assurances that its distributions will be sufficient to eliminate all taxes.
REDEMPTION OF FUND SHARES Redemptions (including redemptions in kind) and
exchanges of Fund shares are taxable transactions for federal and state
income tax purposes. Because the Funds try to maintain a stable $1 share
price, however, shareholders should not expect to realize any capital gain or
loss on the sale or exchange of their shares.
DIVIDENDS-RECEIVED DEDUCTION FOR CORPORATIONS Because each Fund's income is
derived primarily from interest rather than dividends, generally none of
their distributions will be eligible for the corporate dividends-received
deduction.
INVESTMENT IN COMPLEX SECURITIES The Funds may invest in complex securities,
including stripped securities. These investments may be subject to numerous
special and complex tax rules. These rules could affect whether gain or loss
recognized by the Fund is treated as ordinary or capital, or as interest or
dividend income. These rules could therefore affect the amount, timing or
character of the income distributed by a Fund to shareholders.
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, 2000, 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
Filing: Amendment No. 10 to
Registration Statement on Form N-1A
File No. 811-7038
Filing Date: October 30, 1999
(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
Filing: Amendment No. 10 to
Registration Statement on Form N-1A
File No. 811-7038
Filing Date: October 30, 1999
(v) Foreign Custody Manager Agreement dated July 30, 1998
Filing: Amendment No. 10 to
Registration Statement on Form N-1A
File No. 811-7038
Filing Date: October 30, 1999
(vi) Amendment dated August 30, 2000, 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
(N) RULE 18F-3 PLAN
Not Applicable
(P) Code of Ethics
(Q) POWER OF ATTORNEY
(i) Power of Attorney dated July 13, 2000
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 2000.
THE MONEY MARKET PORTFOLIOS
(Registrant)
By: /s/ David P. Goss
David P. Goss*
Vice President
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 *
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 *
Agreement dated February 27,
1998
EX-99.(g)(v) Foreign Custody Manager *
Agreement dated July 30, 1998
EX-99.(g)(vi) Amendment dated August 30, Attached
2000, 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) Code of Ethics Attached
EX-99.(q)(i) Power of Attorney dated July Attached
15, 1999
* Incorporated by reference
