INSTITUTIONAL FIDUCIARY TRUST, 497, 1998-11-05

INSTITUTIONAL FIDUCIARY TRUST
497, 1998-11-05

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PROSPECTUS

INSTITUTIONAL
FIDUCIARY
TRUST

NOVEMBER 1, 1998

INVESTMENT STRATEGY

INCOME

Money Market Portfolio
Franklin U.S. Government Securities Money Market Portfolio

Please read this prospectus before investing, and keep it for future reference.
It contains important information, including how each fund invests and the
services available to shareholders.

To learn more about each fund and its policies, you may request a copy of the
funds' Statement of Additional Information ("SAI"), dated November 1, 1998,
which we may amend from time to time. We have filed the SAI with the SEC and
have incorporated it by reference into this prospectus. For a free copy of the
SAI or a larger print version of this prospectus, contact your investment
representative or call 1-800/321-8563.

AN INVESTMENT IN A FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THERE CAN BE NO ASSURANCE THAT THE FUNDS WILL BE ABLE TO MAINTAIN A
STABLE $1 SHARE PRICE.

MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY OF THE U.S.
GOVERNMENT. MUTUAL FUND SHARES INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE
LOSS OF PRINCIPAL.

LIKE ALL MUTUAL FUND SHARES, THE SEC HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.

INSTITUTIONAL FIDUCIARY TRUST

Unlike most funds that invest directly in securities, the Money Market Portfolio
(the "Money Fund") seeks to achieve its investment goal by investing all of its
assets in shares of The Money Market Portfolio (the "Money Portfolio") and the
Franklin U.S. Government Securities Money Market Portfolio (the "U.S. Securities
Fund") by investing in The U.S. Government Securities Money Market Portfolio
(the "U.S. Securities Portfolio"). The Money Portfolio and the U.S. Securities
Portfolio are series of The Money Market Portfolios ("Money Market"). References
in the prospectus to the "Portfolio," unless the context indicates that an
individual portfolio is being referenced, are to both the Money Portfolio and
the U.S. Securities Portfolio. Their investment goals are the same as the
funds'.

THIS PROSPECTUS IS NOT AN OFFERING OF THE SECURITIES HEREIN DESCRIBED IN ANY
STATE, JURISDICTION OR COUNTRY IN WHICH THE OFFERING IS NOT AUTHORIZED. NO SALES
REPRESENTATIVE, DEALER, OR OTHER PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR
MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS. FURTHER
INFORMATION MAY BE OBTAINED FROM DISTRIBUTORS.

INSTITUTIONAL
FIDUCIARY
TRUST

November 1, 1998

When reading this prospectus, you will see certain terms beginning with capital
letters. This means the term is explained in our glossary section.

TABLE OF CONTENTS

ABOUT THE FUNDS

Expense Summary ..................................................... 2
Financial Highlights ................................................ 3
How Do the Funds Invest Their Assets? ............................... 5
What Are the Risks of Investing in the Funds? ....................... 9
Who Administers the Funds? .......................................... 10
How Taxation Affects the Funds and Their Shareholders................ 12
How Is the Trust Organized? ......................................... 13

ABOUT YOUR ACCOUNT
How Do I Buy Shares? ................................................ 14
May I Exchange Shares for Shares of Another Fund? ................... 16
How Do I Sell Shares? ............................................... 19
What Distributions Might I Receive From the Funds? .................. 20
Transaction Procedures and Special Requirements ..................... 21
Services to Help You Manage Your Account ............................ 25
What If I Have Questions About My Account? .......................... 26

Glossary

Useful Terms and Definitions ........................................ 27

777 Mariners Island Blvd.
P.O. Box 7777
San Mateo
CA 94403-7777

1-800/321-8563

ABOUT THE FUNDS

EXPENSE SUMMARY

This table is designed to help you understand the costs of investing in a fund.
These estimated expenses are based on each fund's historical expenses, including
its proportionate share of the Portfolio's expenses, for the fiscal year ended
June 30, 1998. Each fund's actual expenses may vary.

MONEY U.S. SECURITIES
FUND FUND
- ------------------------------------------------------------------------------

A. SHAREHOLDER TRANSACTION EXPENSES +

Exchange Fee (per transaction).......... None* None*

B. ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)

Management and Administration Fees**.... 0.35% 0.35%
Rule 12b-1 Fees***...................... 0.00% 0.00%
Other Expenses of the Fund and the Portfolio 0.04% 0.06%
-----------------
Total Fund Operating Expenses**......... 0.39% 0.41%
=================

C. EXAMPLE

Assume each fund's annual return is 5%, operating expenses are as
described above, and you sell your shares after the number of years shown.
These are the projected expenses for each $1,000 that you invest in a fund.

FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------------------------------------------------------------------------------

Money Fund...................... $4 $13 $22 $49

U.S. Securities Fund............ $4 $13 $23 $52

THIS IS JUST AN EXAMPLE. IT DOES NOT REPRESENT PAST OR FUTURE EXPENSES OR
RETURNS. ACTUAL EXPENSES AND RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN.
Each fund pays its operating expenses. The effects of these expenses are
reflected in its Net Asset Value or dividends and are not directly charged to
your account.

+If your transaction is processed through your Securities Dealer, you may be
charged a fee by your Securities Dealer for this service.
*There is a $5.00 fee for exchanges by Market Timers.
**For the period shown, Advisers had agreed in advance to waive or limit its
management and administration fees. With this reduction, for the Money Fund,
management fees of the Portfolio would have been 0.14%, administration fees of
the fund would have been 0.17% and total operating expenses would have been
0.35%; for the U.S. Securities Fund, management fees of the Portfolio would have
been 0.14%, administration fees of the fund would have been 0.15% and total
operating expenses would have been 0.35%.
***The funds have not been required to make payments for 12b-1 expenses.

FINANCIAL HIGHLIGHTS

This table summarizes each fund's financial history. The information has been
audited by PricewaterhouseCoopers LLP, the funds' independent auditor. The audit
report covering each of the most recent five years appears in the Trust's Annual
Report to Shareholders for the fiscal year ended June 30, 1998. The Annual
Report to Shareholders also includes more information about each fund's
performance. For a free copy, please call Institutional Services at
1-800/321-8563.

MONEY FUND

YEAR ENDED JUNE 30,
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
----------------------------------------------------------------------------------------------

PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)

Net asset value,
beginning of year. $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
-----------------------------------------------------------------------------------------------

Income from investment
operations -
net investment income .054 .053 .055 .053 .033 .033 .046 .071 .083 .086

Less distributions from
net investment income (.054) (.053) (.055) (.053) (.033) (.033) (.046) (.071) (.083) (.086)

Net asset value,
end of year $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
================================================================================================

Total return* 5.58% 5.42% 5.61% 5.46% 3.35% 3.30% 4.72% 7.28% 8.65% 8.97%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of year
(in millions) $176 $185 $341 $272 $218 $222 $189 $232 $236 $122

Ratios to average net assets:
Expenses .20% 1 .20% 1 .19% 1 .15% 1 .15% 1 .20% 1 .25% .25% .25% .25%

Expenses excluding waiver
and payments by affiliate .24% 1 .24% 1 .24% 1 .24% 1 .25% 1 .49% 1 .74% .71% .07% .08%

Net investment income 5.44% 5.27% 5.45% 5.40% 3.24% 3.25% 4.69% 7.11% 8.27% 8.68%
</TABLE>

U.S. SECURITIES FUND

Per share operating performance
(for a share outstanding throughout the year)

Net asset value,
beginning of year. $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
-----------------------------------------------------------------------------------------------

Income from investment
operations -
net investment income .054 .052 .054 .052 .032 .031 .045 .070 .084 .080

Less distributions from net
investment income (.054) (.052) (.054) (.052) (.032) (.031) (.045) (.070) (.084) (.080)

Net asset value,
end of year $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
===============================================================================================

Total return* 5.51% 5.29% 5.50% 5.32% 3.25% 3.18% 4.55% 7.13% 8.68% 8.28%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of year
(in millions) $131 $137 $152 $335 $219 $310 $195 $373 $203 $54

Ratios to average net assets:
Expenses .20% 1 .20% 1 .19% 1 .15% 1 .15% 1 .19 1 .25% .25% .21% -

Expenses excluding waiver
and payments by affiliate .26% 1 .26% 1 .26% 1 .23 1 .25% 1 .45% 1 .59% .56% .62% .70%

Net investment income 5.34% 5.14% 5.44% 5.26% 3.20% 3.12% 4.59% 6.79% 8.27% 8.37%
</TABLE>

*TOTAL RETURN IS NOT ANNUALIZED.
1THE EXPENSE RATIO INCLUDES THE FUND'S SHARE OF THE PORTFOLIO'S ALLOCATED
EXPENSES.

HOW DO THE FUNDS INVEST THEIR ASSETS?

WHAT ARE THE FUNDS' GOALS?

The investment goal of the Money Fund and the U.S. Securities 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 that it may not be changed without shareholder approval. Each fund
also tries to maintain a stable Net Asset Value of $1 per share.

THE FUNDS' INVESTMENT IN THE PORTFOLIO

The Money Fund seeks to achieve its investment goal by investing all of its
assets in the Money Portfolio. The U.S. Securities Fund seeks to achieve its
investment goal by investing all of its assets in the U.S. Securities Portfolio.
The Portfolio has the same investment goal as the funds and, it too, is
fundamental. Each fund's investment policies are also substantially similar to
the Portfolio's except each fund may pursue its policies by investing in an
open-end management investment company with the same investment goal and
substantially similar policies and restrictions as the fund. Each fund buys
shares of the Portfolio at Net Asset Value. An investment in a fund is an
indirect investment in the Portfolio.

It is possible that a fund may have to withdraw its investments in the Portfolio
and subsequently invest in another open-end management investment company with
the same investment goal and substantially similar policies. This could happen
if the Portfolio changes its investment goal or if the Board, at any time,
considers it in the fund's best interest.

The funds' structure, where each fund invests all of its assets in the
Portfolio, is sometimes called a "Master/Feeder" structure. You will find more
detailed information about this structure and the potential risks associated
with it in the SAI.

WHAT KINDS OF SECURITIES DOES THE PORTFOLIO BUY?

Because the Portfolio limits its investments to high-quality securities, it will
generally earn lower yields than a portfolio with lower quality securities that
are subject to greater risk. Accordingly, the yield to shareholders in the
Portfolio, and thus the funds, will likely be relatively lower.

QUALITY, MATURITY AND DIVERSIFICATION STANDARDS. The Portfolio, like all money
funds, follows SEC guidelines on the quality, maturity and diversification of
its investments. These guidelines are designed to help reduce a money fund's
risks so that it is more likely to keep its share price at $1.

o The Portfolio only buys securities that Advisers determines present minimal
credit risks and that are rated in one of the top two short-term rating
categories or that are comparable unrated securities in Advisers' opinion.

o The Portfolio only buys securities with remaining maturities of 397 calendar
days or less and maintains a dollar-weighted average portfolio maturity of 90
days or less.

o Generally, the Portfolio may not invest more than 5% of its total assets in
the securities of a single issuer, other than in U.S. government
securities.

More information about the Portfolio's diversification policies, and details of
the credit quality ratings are included in the SAI.

THE U.S. SECURITIES PORTFOLIO

The U.S. Securities Portfolio seeks to achieve its investment goal by investing
only in marketable securities issued or guaranteed by the U.S. government, by
various agencies of the U.S. government and by various instrumentalities that
have been established or sponsored by the U.S. government or in repurchase
agreements (as described below) collateralized by such securities. As a
fundamental policy subject to change only by shareholder approval, the U.S.
Securities Portfolio will 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 with respect to obligations issued or guaranteed by the
U.S. government and supported by the full faith and credit of the U.S.
government are included within this fundamental policy.

At the present time, it is the U.S. Securities Portfolio's policy to limit its
investments to U.S. Treasury bills, notes and bonds (including stripped
securities as described below) and to 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.

These U.S. government securities and repurchase agreements are specifically
permitted for investment through mutual funds by California local agencies under
California Government Code Sections 53601 and 53635. The California Government
Code requires each investment decision made by or on behalf of a California
local agency to be made consistently with the directives of the local agency's
legislative body and any other statutory or contractual limitations applicable
to the moneys being invested. Therefore, any person making such a decision
should first consult with expert counsel to assure the decision is being made in
compliance with those directives and limitations.

THE MONEY PORTFOLIO

The Money Portfolio seeks to achieve its investment goal by investing in
high-quality, short-term money market securities of domestic and foreign
issuers, including U.S. government securities and repurchase agreements.

U.S. GOVERNMENT SECURITIES in which the Money Portfolio may invest include
marketable fixed, floating and variable rate securities issued or guaranteed by
the U.S. government or its agencies, or by various instrumentalities that have
been established or sponsored by the U.S. government. Some of these securities,
including U.S. Treasury bills, notes and bonds and securities of the Government
National Mortgage Association and the Federal Housing Administration, are issued
or guaranteed by the U.S. government or carry a guarantee that is supported by
the full faith and credit of the U.S. government. Other U.S. government
securities are issued or guaranteed by federal agencies or government-sponsored
enterprises and are not considered direct obligations of the U.S. government.
Instead, they involve sponsorship or guarantees by government agencies or
enterprises. For example, some securities are supported by the right of the
issuer to borrow from the U.S. Treasury, such as obligations of the Federal Home
Loan Bank. Others, such as obligations of the Federal National Mortgage
Association, are supported only by the credit of the instrumentality.

BANK OBLIGATIONS, or instruments secured by bank obligations, include fixed,
floating or variable rate CDs, letters of credit, time deposits, bank notes and
bankers' acceptances. The Money Portfolio 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 Portfolio
may not invest more than 10% of its assets in time deposits with more than seven
days to maturity.

The Money Portfolio may invest in obligations of U.S. banks, foreign branches of
U.S. or foreign banks, and U.S. branches of foreign banks that have a federal or
state charter to do business in the U.S. and are subject to U.S. regulatory
authorities. The Money Portfolio 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 Portfolio may, however, invest more than 25% of its
assets in certain domestic bank obligations, including U.S. branches of foreign
banks.

COMMERCIAL PAPER typically refers to short-term obligations of banks,
corporations and other borrowers with maturities of up to 270 days. The Money
Portfolio may invest in commercial paper of domestic or foreign issuers.

ASSET-BACKED SECURITIES in which the Money Portfolio 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.

CORPORATE OBLIGATIONS may include fixed, floating and variable rate bonds,
debentures or notes.

STRIPPED SECURITIES are the separate income and principal components of a debt
security. Once the securities have been stripped they are referred to as zero
coupon securities. Their risks are similar to those of other money market
securities although they may be more volatile. Stripped securities do not make
periodic payments of interest prior to maturity and the stripping of the
interest coupons causes them to be offered at a discount from their face amount.
This results in the securities being subject to greater fluctuations in response
to changing interest rates than interest-paying securities of similar
maturities.

The Portfolio 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.

WHAT ARE SOME OF THE PORTFOLIO'S OTHER INVESTMENT STRATEGIES AND PRACTICES?

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Money Portfolio may buy and
sell securities on a "when-issued" and "delayed delivery" basis, 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 Money Portfolio assumes the risk that the value of the security at delivery
may be more or less than the purchase price.

REPURCHASE AGREEMENTS. The Portfolio will generally have a portion of its assets
in cash or cash equivalents. To earn income on this portion of its assets, the
Portfolio may enter into repurchase agreements with certain banks and
broker-dealers. Under a repurchase agreement, the Portfolio agrees to buy a U.S.
government security from one of these issuers and then to sell the security back
to the issuer after a short period of time (generally, less than seven days) at
a higher price. The bank or broker-dealer must transfer to the Portfolio's
custodian securities with an initial value of at least 102% of the dollar amount
invested by the Portfolio in each repurchase agreement.

The U.S. Securities Portfolio may not enter into a repurchase agreement with
more than seven days to maturity if, as a result, more than 10% of the market
value of its total assets would be invested in repurchase agreements, together
with any other investments for which market quotations are not readily
available.

PORTFOLIO TRADING. The Portfolio may actively trade securities in its portfolio,
without any limits, if Advisers believes that yields can be increased by doing
so. Advisers considers current market conditions, cash requirements and its
revised evaluations of a security when determining whether or not to hold
securities until maturity. The yield on some securities held by the Portfolio
may decline if the securities are sold before maturity.

OTHER POLICIES AND RESTRICTIONS. Each fund and the Portfolio have a number of
additional investment policies and restrictions that govern their activities.
Those that are identified as fundamental may only be changed with shareholder
approval. The others may be changed by the Board or the Board of Trustees of
Money Market alone. For a list of these restrictions and more information about
each fund's and the Portfolio's investment policies, including those described
above, please see "How Do the Funds Invest Their Assets?" and "Investment
Restrictions" in the SAI.

Generally, the policies and restrictions discussed in this prospectus and in the
SAI apply when a fund or the Portfolio makes an investment. In most cases, a
fund and the Portfolio are not required to sell a security because circumstances
change and the security no longer meets one or more of the fund's or the
Portfolio's policies or restrictions.

WHAT ARE THE RISKS OF INVESTING IN THE FUNDS?

Like all investments, an investment in a fund involves risk. The risks of each
fund are basically the same as those of other investments in money market
securities. The short duration and high credit quality of the securities in
which the Portfolio, and thus each fund, invests may help reduce the risks
detailed below.

There is no assurance that a fund or the Portfolio will meet its investment
goal. Although each fund tries to maintain a stable share price of $1, there is
no assurance that it will be able to do so.

INTEREST RATE RISK is the risk that changes in interest rates can reduce the
value of a security. Generally when interest rates rise, the value of a security
falls. The opposite is also true: security prices rise when interest rates fall.

INCOME RISK is the risk that the Portfolio's, and thus each fund's, income will
decrease due to falling interest rates. Since a fund can only distribute what it
earns, the fund's distributions to its shareholders may decline when interest
rates fall.

CREDIT RISK is the possibility that an issuer will be unable to make interest
payments or repay principal. Changes in an issuer's financial strength or in a
security's credit rating may affect its value.

MARKET RISK is the risk that a security's value will be reduced by market
activity or the results of supply and demand. This is a basic risk associated
with all securities. When there are more sellers than buyers, prices tend to
fall. Likewise, when there are more buyers, prices tend to rise.

FOREIGN SECURITIES. Investments in securities of foreign issuers, including
obligations of foreign branches of U.S. and foreign banks and obligations of
U.S. branches of foreign banks, involve special risks. These risks include
future unfavorable political and economic developments, possible withholding
taxes, seizure of foreign deposits, currency controls, interest limitations, or
other governmental restrictions that may affect the payment of principal or
interest on securities held by the Money Portfolio. In addition, there may be
less publicly available information about foreign issuers.

WHO ADMINISTERS THE FUNDS?

THE BOARD. The Board oversees the management of each fund and elects its
officers. The officers are responsible for each fund's day-to-day operations.

The Board, with approval of all disinterested and interested Board members, has
adopted written procedures designed to deal with potential conflicts of interest
that may arise from each fund and Money Market having substantially the same
boards. These procedures call for an annual review of each fund's relationship
with the Portfolio. If a conflict exists, the boards may take action, which may
include the establishment of a new board. The Board has determined that there
are no conflicts of interest at the present time. For more information, please
see "Summary of Procedures to Monitor Conflicts of Interest" and "Officers and
Trustees" in the SAI.

INVESTMENT MANAGER AND ADMINISTRATOR. Advisers manages the Portfolio's assets
and makes its investment decisions. Advisers also performs similar services for
other funds. It is wholly owned by Resources, a publicly owned company engaged
in the financial services industry through its subsidiaries. Charles B. Johnson
and Rupert H. Johnson, Jr. are the principal shareholders of Resources.
Together, Advisers and its affiliates manage over $207 billion in assets.
Advisers is also the administrator of each fund. Please see "Investment
Management and Other Services" and "Miscellaneous Information" in the SAI for
information on securities transactions and a summary of the funds' Code of
Ethics.

MANAGEMENT FEES. You will bear a portion of the Portfolio's operating expenses,
including its management fees, to the extent that a fund, as a shareholder of
the Portfolio, bears these expenses. The portion of the Portfolio's expenses
borne by a fund depends on the fund's proportionate share of the Portfolio's net
assets.

During the fiscal year ended June 30, 1998, each fund's proportionate share of
the Portfolio's management fees and the fund's administration fees paid to
Advisers and total operating expenses, as a percentage of average daily net
assets, were as follows:

Management Administration Total Operating
Fees* Fees* Expenses*
- ------------------------------------------------------------------------------

Money Fund ........... 0.14% 0.02% 0.20%
U.S. Securities Fund.. 0.14% 0.00% 0.20%

*Management fees, before any advance waiver, totaled 0.15% for each Portfolio.
Administration fees, before any advance waiver, were 0.05% for each fund. Total
operating expenses were 0.24% for the Money Fund and 0.26% for the U.S.
Securities Fund. Under an agreement by Advisers to waive or limit its fees, the
funds paid the fees and expenses shown.

PORTFOLIO TRANSACTIONS. Advisers tries to obtain the best execution on all
transactions. If Advisers believes more than one broker or dealer can provide
the best execution, it may consider research and related services and the sale
of fund shares, as well as shares of other funds in the Franklin Templeton Group
of Funds, when selecting a broker or dealer. Please see "How Does The Portfolio
Buy Securities for Its Portfolio?" in the SAI for more information.

YEAR 2000 ISSUE. Like other mutual funds, the funds could be adversely affected
if the computer systems used by Advisers and other service providers do not
properly process date-related information on or after January 1, 2000 ("Year
2000 Issue"). The Year 2000 Issue, and in particular foreign service providers'
responsiveness to the issue, could affect portfolio and operational areas
including securities trade processing, interest and dividend payments,
securities pricing, shareholder account services, reporting, custody functions,
and others. While there can be no assurance that the funds will not be adversely
affected, Advisers and its affiliated service providers are taking steps that
they believe are reasonably designed to address the Year 2000 Issue, including
seeking reasonable assurances from the funds' other major service providers.

THE RULE 12B-1 PLAN

Each fund has a distribution plan or "Rule 12b-1 Plan" under which it may pay or
reimburse Distributors or others for the expenses of activities that are
primarily intended to sell shares of the fund. These expenses may include, among
others, distribution or service fees paid to Securities Dealers or others who
have executed a servicing agreement with the fund, Distributors or its
affiliates; a prorated portion of Distributors' overhead expenses; and the
expenses of printing prospectuses and reports used for sales purposes, and
preparing and distributing sales literature and advertisements.

Payments by each fund under the plan may not exceed 0.15% per year of the fund's
average daily net assets. All distribution expenses over this amount will be
borne by those who have incurred them. For more information, please see "The
Funds' Underwriter" in the SAI.

HOW TAXATION AFFECTS THE FUNDS AND THEIR SHAREHOLDERS

TAXATION OF THE FUNDS. As a regulated investment company, a fund generally pays
no federal income tax on the income and gains that it distributes to you.

DISTRIBUTIONS. Distributions from a fund, whether you receive them in cash or in
additional shares, are generally subject to income tax. A fund will send you a
statement in January of each year that reflects the amount of ordinary dividends
you received from the fund in the prior year. This statement will include
distributions declared in December and paid to you in January of the following
year, but which are taxable as if paid on December 31 of the prior year. The IRS
requires you to report these amounts on your income tax return for the prior
year.

DISTRIBUTIONS TO RETIREMENT PLANS. Distributions by a fund received by your
qualified retirement plan, such as a section 401(k) plan or IRA, are generally
tax-deferred; this means that you are not required to report distributions by a
fund on your income tax return when paid to your plan, but, rather, when your
plan makes payments to you. Special rules apply to payouts from Roth and
Education IRAs.

DIVIDENDS-RECEIVED DEDUCTION. It is anticipated that no portion of a fund's
distributions will qualify for the corporate dividends-received deduction.

REDEMPTIONS AND EXCHANGES. Because each fund expects to maintain a $1.00 Net
Asset Value per share, you should not have any gain or loss on the redemption or
exchange of shares in a fund.

MUNICIPAL INVESTORS. A municipality that invests the proceeds of a bond offering
in a fund should be aware that some or all of the earnings distributed by the
fund may need to be paid to the U.S. as a rebate of arbitrage profits. You may
wish to contact your tax advisor to determine the effect, if any, of payments by
a fund with respect to the arbitrage rebate requirements.

NON-U.S. INVESTORS. Ordinary dividends generally will be subject to U.S. income
tax withholding. Your home country may also tax ordinary dividends. Shares in a
fund held by the estate of a non-U.S. investor may be subject to U.S. estate
tax. You may wish to contact your tax advisor to determine the U.S. and non-U.S.
tax consequences of your investment in a fund.

STATE TAXES. Ordinary dividends that you receive from a fund will generally be
subject to state and local income tax. It is anticipated that no portion of a
fund's distributions will qualify for the exemption from state and local income
tax as dividends paid from interest earned on direct obligations of the U.S.
government. The holding of a fund's shares may also be subject to state and
local intangibles taxes. You may wish to contact your tax advisor to determine
the state and local tax consequences of your investment in a fund.

BACKUP WITHHOLDING. When you open an account, IRS regulations require that you
provide your taxpayer identification number ("TIN"), certify that it is correct,
and certify that you are not subject to backup withholding under IRS rules. If
you fail to provide a correct TIN or the proper tax certifications, a fund is
required to withhold 31% of all taxable distributions (including ordinary
dividends and capital gain distributions), and redemption proceeds paid to you.
A fund is also required to begin backup withholding on your account if the IRS
instructs the fund to do so. A fund reserves the right not to open your account,
or, alternatively, to redeem your shares at the current Net Asset Value, less
any taxes withheld, if you fail to provide a correct TIN, fail to provide the
proper tax certifications, or the IRS instructs the fund to begin backup
withholding on your account.

THIS TAX DISCUSSION IS FOR GENERAL INFORMATION ONLY. PROSPECTIVE INVESTORS
SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE FEDERAL, STATE, LOCAL OR
FOREIGN TAX CONSEQUENCES OF AN INVESTMENT IN A FUND. A MORE COMPLETE DISCUSSION
OF THESE RULES AND RELATED MATTERS IS CONTAINED IN THE SECTION ENTITLED
"ADDITIONAL INFORMATION ON DISTRIBUTIONS AND TAXES" IN THE SAI. YOU MAY REQUEST
A FREE FRANKLIN TEMPLETON TAX INFORMATION HANDBOOK BY CONTACTING FUND
INFORMATION AT 1-800/DIAL BEN(R).

HOW IS THE TRUST ORGANIZED?

Each fund is a no-load, diversified series of Institutional Fiduciary Trust (the
"Trust"), an open-end management investment company, commonly called a mutual
fund. It was organized as a Massachusetts business trust on January 15, 1985,
and is registered with the SEC. Shares of each series of the Trust have equal
and exclusive rights to dividends and distributions declared by that series and
the net assets of the series in the event of liquidation or dissolution. Shares
of each fund are considered Class I shares for redemption, exchange and other
purposes. Additional series may be offered in the future.

The Trust has noncumulative voting rights. This gives holders of more than 50%
of the shares voting the ability to elect all of the members of the Board. If
this happens, holders of the remaining shares voting will not be able to elect
anyone to the Board.

The Trust does not intend to hold annual shareholder meetings. The Trust or a
series of the Trust may hold special meetings, however, for matters requiring
shareholder approval. A meeting may also be called by the Board in its
discretion or by shareholders holding at least 10% of the outstanding shares. In
certain circumstances, we are required to help you communicate with other
shareholders about the removal of a Board member.

ABOUT YOUR ACCOUNT

HOW DO I BUY SHARES?

OPENING YOUR ACCOUNT

Each fund is available for investment by individuals and institutional
investors, such as corporations, banks, savings and loan associations, trust
companies, and other institutional and government entities, for investment of
their own capital and of monies held in accounts for which they act in a
fiduciary, advisory, agency, custodial, or other similar capacity. THE U.S.
SECURITIES FUND IS ALSO DESIGNED FOR GOVERNMENT AUTHORITIES AND AGENCIES. Fund
shares are offered without a sales charge.

To open your account, please follow the steps below. This will help avoid any
delays in processing your request.

1. Read this prospectus carefully.

2. Determine how much you would like to invest. The funds' minimum
investments are:

o To open your account: $100,000

o To add to your account: No minimum

States, counties, cities, and their instrumentalities, departments,
agencies and authorities may open an account in each fund with a minimum
initial investment of $1,000.

We reserve the right to change the amount of these minimums from time to
time or to waive or lower these minimums for certain purchases. We also
reserve the right to refuse any order to buy shares.

3. Carefully complete and sign an Institutional Account application. It is
important that we receive a signed application since we will not be able
to process any redemptions from your account until we receive your signed
application.

4. Make your investment using the table below.

METHOD STEPS TO FOLLOW
- ------------------------------------------------------------------------------
BY MAIL For an initial investment:

Return the application to the fund with your check, Federal
Reserve draft or negotiable bank draft made payable to the
fund. Instruments drawn on other investment companies may
not be accepted.

For additional investments:

1. Send a check or use the deposit slips included with your
monthly statement.

2. If you send a check, please include your account number
on the check.
- ------------------------------------------------------------------------------
BY WIRE

See "Holiday Schedule" under "Transaction Procedures and Special Requirements"

1. Call Institutional Services at 1-800/321-8563 or
1-650/312-3600 by 11:15 a.m. Pacific time for the
Money Fund and by 1:30 p.m. Pacific time for the U.S.
Securities Fund to receive that day's credit and be
eligible to receive that day's dividend. The fund
will supply a wire control number for the investment.
You need a new wire control number every time you
wire money into your account. If you do not have a
currently effective wire control number, we will
return the money to the bank, and we will not credit
the purchase to your account.

2. On the same day, wire the funds to Bank of America, ABA
routing number 121000358, for credit to Money Market
Portfolio or Franklin U.S. Government Securities Money
Market Portfolio, A/C 1493304779. Your name and wire
control number must be included.

3. For an initial investment you must also return your
signed Institutional Account application to the fund.
For investments over $50,000, you also need to complete
the Institutional Telephone Privileges
Agreement.
- ------------------------------------------------------------------------------
THROUGH
YOUR DEALER Call your investment representative
- ------------------------------------------------------------------------------

Many of the funds' investments, through the Portfolio, must be paid for in
federal funds, which are monies held by the funds' custodian bank on deposit at
the Federal Reserve Bank of San Francisco and elsewhere. A fund generally cannot
invest money received from you until it is converted into and is available to
the fund in federal funds. Therefore, your purchase order may not be considered
in proper form until the money received from you is available in federal funds,
which may take up to two days. If the fund is able to make investments
immediately (within one business day), it may accept your order with payment in
other than federal funds.

When you buy shares, if you submit a check or a draft that is returned unpaid to
the fund we may impose a $10 charge against your account for each returned item.

The investment authority of certain investors may be restricted by law. If you
are such an investor, you should consult your legal advisor to determine whether
and to what extent shares of the funds are legal investments for you. If you are
a municipal investor considering investing proceeds of bond offerings, you
should consult with expert counsel to determine the effect, if any, of payments
by the funds on arbitrage rebate calculations.

MORE INFORMATION ABOUT BUYING SHARES BY WIRE

If a fund receives your order in proper form before 3:00 p.m. Pacific time, we
will credit the purchase to your account that day. Orders received after 3:00
p.m. will be credited the following business day.

Wire trades placed by the above deadlines will receive same day credit so long
as funds are received as described above. Prior business day notification of a
trade may be required. Requests to begin a wire order after the cut off time for
each fund will not be in proper form for that day's purchase and will receive
credit on the next business day.

PAYMENTS TO SECURITIES DEALERS

If you buy shares through a Securities Dealer, Distributors may make a payment
to the Securities Dealer out of its own resources. Please contact Institutional
Services for more information.

MAY I EXCHANGE SHARES FOR SHARES OF ANOTHER FUND?

We offer a wide variety of funds. The shares of most of these funds are offered
to the public with a sales charge. If you would like, you can move your
investment from your fund account to an existing or new account in another
Franklin Templeton Fund (an "exchange"). Because it is technically a sale and a
purchase of shares, an exchange is a taxable transaction.

Before making an exchange, please read the prospectus of the fund you are
interested in. This will help you learn about the fund, its investment goal and
policies, and its rules and requirements for exchanges. For example, some
Franklin Templeton Funds do not accept exchanges and others may have different
investment minimums.

METHOD STEPS TO FOLLOW
- ------------------------------------------------------------------------------
BY MAIL 1. Send us signed written instructions
- ------------------------------------------------------------------------------
BY PHONE Call Institutional Services at 1-800/321-8563 or
1-650/312-3567

For requests over $50,000, you must complete an
Institutional Telephone Privileges Agreement. Call
Institutional Services to receive a copy.
- ------------------------------------------------------------------------------
THROUGH
YOUR DEALER Call your investment representative
- ------------------------------------------------------------------------------

Please refer to "Transaction Procedures and Special Requirements" for other
important information on how to exchange shares.

WILL SALES CHARGES APPLY TO MY EXCHANGE?

You will generally pay the applicable front-end sales charge of the fund you are
exchanging into, unless you acquired your fund shares under the exchange
privilege. These charges may not apply if you qualify to buy shares without a
sales charge. For example, certain institutional investors, such as government
entities, certain employee benefit plans, trust companies, and bank trust
departments, may buy Class I shares of other Franklin Templeton Funds without a
sales charge.

HOW WE PROCESS YOUR EXCHANGE

FROM THE FUND INTO ANY OTHER SERIES OF THE TRUST. The exchange will be processed
the day your request is received, prior to 11:15 a.m. Pacific time for the Money
Fund and 1:30 p.m. Pacific time for the U.S. Securities Fund, with payment for
the purchased shares processed on the following business day when the funds are
made available from the fund.

FROM THE FUND INTO CLASS I SHARES OF OTHER FRANKLIN TEMPLETON FUNDS. The
exchange will be effected at the respective Net Asset Value or offering price of
the funds involved next computed on the day on which the request is received in
proper form prior to the above deadlines. Requests received after the deadlines
will be effective at the next day's price.

FROM ANOTHER FUND IN THE FRANKLIN TEMPLETON FUNDS INTO THE FUND. The transaction
will be processed as a liquidation from the other fund on the day the exchange
is received in proper form prior to the time of valuation for that fund (as
noted in that fund's prospectus) and shares of the fund will be bought on the
following business day when the money for purchase is available.

RETIREMENT PLANS

Retirement plan participants may exchange shares in accordance with the options
available under, and the requirements of, their plan and plan administrator.
Retirement plan administrators may charge a fee in connection with exchanges.

EXCHANGE RESTRICTIONS

Please be aware that the following restrictions apply to exchanges:

o You must meet the applicable minimum investment amount of the fund you are
exchanging into, or exchange 100% of your fund shares.

o You may only exchange shares within the SAME CLASS, except as noted below.

o The accounts must be identically registered.

o The fund you are exchanging into must be eligible for sale in your state.

o We may modify or discontinue our exchange policy if we give you 60 days'
written notice.

o Your exchange may be restricted or refused if you have: (i) requested an
exchange out of the fund within two weeks of an earlier exchange request,
(ii) exchanged shares out of the fund more than twice in a calendar quarter,
or (iii) exchanged shares equal to at least $5 million, or more than 1% of
the fund's net assets. Shares under common ownership or control are combined
for these limits. If you have exchanged shares as described in this
paragraph, you will be considered a Market Timer. Each exchange by a Market
Timer, if accepted, will be charged $5.00. Some of our funds do not allow
investments by Market Timers.

Because excessive trading can hurt fund performance, operations and
shareholders, we may refuse any exchange purchase if (i) we believe the fund
would be harmed or unable to invest effectively, or (ii) the fund receives or
anticipates simultaneous orders that may significantly affect the fund.

LIMITED EXCHANGES BETWEEN DIFFERENT CLASSES OF SHARES

Certain funds in the Franklin Templeton Funds offer classes of shares not
offered by the funds, such as "Advisor Class" or "Class Z" shares. Because the
funds do not currently offer an Advisor Class, you may exchange Advisor Class
shares of any Franklin Templeton Fund for shares of the funds at Net Asset
Value. If you do so and you later decide you would like to exchange into a fund
that offers an Advisor Class, you may exchange your fund shares for Advisor
Class shares of that fund. Certain shareholders of Class Z shares of Franklin
Mutual Series Fund Inc. may also exchange their Class Z shares for shares of the
funds at Net Asset Value.

HOW DO I SELL SHARES?

You may sell (redeem) your shares at any time.

METHOD STEPS TO FOLLOW
- ------------------------------------------------------------------------------
BY MAIL 1. Send us signed written instructions

2. Provide a signature guarantee if required

3. Corporate, partnership and trust accounts may need to send
additional documents. Accounts under court jurisdiction
may have other requirements.
- ------------------------------------------------------------------------------
BY PHONE

See "Holiday Schedule" under "Transaction Procedures and Special Requirements"

1. Call Institutional Services at 1-800/321-8563

2. For requests over $50,000, you must complete an
Institutional Telephone Privileges Agreement. Call
Institutional Services to receive a copy.

Telephone requests will be accepted unless the address on your
account was changed by phone within the last 15 days.
- ------------------------------------------------------------------------------
THROUGH
YOUR DEALER Call your investment representative
- ------------------------------------------------------------------------------

We will send your redemption check within seven days after we receive your
request in proper form. If you would like the check sent to an address other
than the address of record or made payable to someone other than the registered
owners on the account, send us written instructions signed by all account
owners, with a signature guarantee. We are not able to receive or pay out cash
in the form of currency.

The wiring of redemption proceeds is a special service that we make available
whenever possible. Redemption proceeds may also be wired directly to a
commercial bank previously designated by you on an application, or in a
signature guaranteed letter of instruction.

A payment may be transmitted by wire the same business day if the phone request
is received before 11:15 a.m. Pacific time for the Money Fund and 1:30 p.m.
Pacific time for the U.S. Securities Fund. For later requests, payments will be
transmitted by wire on the following business day. If you anticipate requesting
a same day wire redemption over $5 million, please notify the fund about this on
the prior business day. In order to maximize efficient fund management, please
request your same day wire redemption (regardless of size) as early in the day
as possible. Prior business day notification of the trade may be required. By
offering this service to you, the fund is not bound to meet any redemption
request in less than the seven day period prescribed by law. Neither the fund
nor its agents shall be liable to you or any other person if, for any reason, a
redemption request by wire is not processed as described in this section.

If you sell shares you recently purchased with a check or draft, we may delay
sending you the proceeds until your check or draft has cleared, which may take
seven business days or more. A certified or cashier's check may clear in less
time.

Under unusual circumstances, we may suspend redemptions or postpone payment for
more than seven days as permitted by federal securities law.

Please refer to "Transaction Procedures and Special Requirements" for other
important information on how to sell shares.

CONTINGENT DEFERRED SALES CHARGE

Most Franklin Templeton Funds impose a Contingent Deferred Sales Charge on
certain investments if you sell all or a part of the investment within the
Contingency Period. While the funds generally do not impose a Contingent
Deferred Sales Charge, they will do so if you sell shares that were exchanged
into a fund from another Franklin Templeton Fund and those shares would have
been assessed a Contingent Deferred Sales Charge in the other fund. The charge
is 1% of the value of the shares sold or the Net Asset Value at the time of
purchase, whichever is less. The time the shares are held in a fund does not
count towards the completion of any Contingency Period.

We will first redeem any shares in your account that are not subject to the
charge. If there are not enough of these to meet your request, we will redeem
shares subject to the charge in the order they were purchased.

Unless otherwise specified, when you request to sell a stated DOLLAR AMOUNT, we
will redeem additional shares to cover any Contingent Deferred Sales Charge. For
requests to sell a stated NUMBER OF SHARES, we will deduct the amount of the
Contingent Deferred Sales Charge, if any, from the sale proceeds.

WHAT DISTRIBUTIONS MIGHT I RECEIVE FROM THE FUNDS?

Each fund declares dividends each day that its Net Asset Value is calculated and
pays them to shareholders of record as of the close of business that day. The
daily allocation of net investment income begins on the day we receive your
money or settlement of a wire order trade and continues to accrue through the
day we receive your request to sell your shares or the settlement of a wire
order trade.

The amount of these dividends will vary, depending on changes in a fund's net
investment income, and there is no guarantee the fund will pay dividends. THE
FUNDS DO NOT PAY "INTEREST" OR GUARANTEE ANY AMOUNT OF DIVIDENDS OR RETURN ON AN
INVESTMENT IN THEIR SHARES.

DIVIDEND OPTIONS

Dividends will automatically be reinvested monthly in the form of additional
shares of the fund at the Net Asset Value per share at the close of business on
or about the last business day of the month. You may, however, choose to receive
dividends in cash. To do so, please notify the fund or Institutional Services.
Certain restrictions may apply to retirement plans.

Since the net income of each fund is declared as a dividend each time the net
income is determined, the Net Asset Value per share of the fund is expected to
remain at $1 per share immediately after each such determination and dividend
declaration. Any increase in the value of your investment in the fund,
representing the reinvestment of dividend income, is reflected by an increase in
the number of shares in your account.

TRANSACTION PROCEDURES AND SPECIAL REQUIREMENTS

SHARE PRICE

You buy and sell shares at Net Asset Value. We will use the Net Asset Value next
calculated after we receive your transaction request in proper form. If you buy
or sell shares through your Securities Dealer, however, we will use the Net
Asset Value next calculated after your Securities Dealer receives your request,
which is promptly transmitted to the fund.

HOW AND WHEN SHARES ARE PRICED

The funds are open for business each day that both the NYSE and the Federal
Reserve Bank of San Francisco are open. We determine the Net Asset Value per
share at 12:30 p.m. Pacific time for the Money Fund and 3.00 p.m. Pacific time
for the U.S. Securities Fund. To calculate a fund's Net Asset Value per share,
the fund's assets are valued and totaled, liabilities are subtracted, and the
balance, called net assets, is divided by the number of shares outstanding. Each
fund's assets are valued as described under "How Are Fund Shares Valued?" in the
SAI.

HOLIDAY SCHEDULE

In order to receive same day credit for transactions, you need to transmit your
request to buy, sell or exchange shares before 11:15 a.m. Pacific time for the
Money Fund and before 1:30 p.m. Pacific time for the U.S. Securities Fund,
except on holidays or the day before or after a holiday.

The funds are informed that the NYSE and/or the Federal Reserve Bank of San
Francisco observe the following holidays: New Year's Day, Dr. Martin Luther King
Jr. Day, Presidents' Day, Good Friday, Memorial Day (observed), Independence
Day, Labor Day, Columbus Day (observed), Veterans' Day, Thanksgiving Day and
Christmas Day. Although the funds expect the same holiday schedule to be
observed in the future, the Federal Reserve Bank of San Francisco or the NYSE
may modify its holiday schedule at any time. On any day before or after a NYSE
or Federal Reserve Bank of San Francisco holiday, or on any day when the Public
Securities Association recommends an early closing, the funds reserve the right
to set an earlier time for notice and receipt of wire order purchase and
redemption orders submitted for same day credit or redemption. Please place your
trades as early in the day as possible on a day before or after a holiday. To
the extent a fund's portfolio securities are traded in other markets on days the
Federal Reserve Bank of San Francisco or the NYSE is closed, the fund's Net
Asset Value may be affected when investors do not have access to the fund to buy
or sell shares. Other Franklin Templeton Funds may follow different holiday
closing schedules.

WRITTEN INSTRUCTIONS

Written instructions must be signed by all registered owners. To avoid any delay
in processing your transaction, they should include:

o Your name,

o The fund's name,

o A description of the request,

o For exchanges, the name of the fund you are exchanging into,

o Your account number,

o The dollar amount or number of shares, and

o A telephone number where we may reach you during the day, or in the evening
if preferred.

JOINT ACCOUNTS. For accounts with more than one registered owner, we accept
written instructions signed by only one owner for certain types of transactions
or account changes. These include transactions or account changes that you could
also make by phone, such as certain redemptions of $50,000 or less, exchanges
between identically registered accounts, and changes to the address of record.
For most other types of transactions or changes, written instructions must be
signed by all registered owners.

Please keep in mind that if you have previously told us that you do not want
telephone exchange or redemption privileges on your account, then we can only
accept written instructions to exchange or redeem shares if they are signed by
all registered owners on the account.

SIGNATURE GUARANTEES

For our mutual protection, we require a signature guarantee in the following
situations:

1) You wish to sell over $50,000 worth of shares,

2) You want the proceeds to be paid to someone other than the registered
owners,

3) The proceeds are not being sent to the address of record, preauthorized bank
account, or preauthorized brokerage firm account,

4) We receive instructions from an agent, not the registered owners,

5) We believe a signature guarantee would protect us against potential claims
based on the instructions received.

A signature guarantee verifies the authenticity of your signature. You should be
able to obtain a signature guarantee from a bank, broker, credit union, savings
association, clearing agency, or securities exchange or association.
A NOTARIZED SIGNATURE IS NOT SUFFICIENT.

SHARE CERTIFICATES

We will credit your shares to your fund account. We do not issue share
certificates. This eliminates the costly problem of replacing lost, stolen or
destroyed certificates.

TELEPHONE TRANSACTIONS

You may initiate many transactions and changes to your account by phone. Please
refer to the sections of this prospectus that discuss the transaction you would
like to make or call Institutional Services at 1-800/321-8563.

When you call, we will request personal, corporate or other identifying
information to confirm that instructions are genuine. We may also record calls.
If our lines are busy or you are otherwise unable to reach us by phone, you may
wish to ask your investment representative for assistance or send us written
instructions, as described elsewhere in this prospectus.

For your protection, we may delay a transaction or not implement one if we are
not reasonably satisfied that the instructions are genuine. If this occurs, we
will not be liable for any loss. We also will not be liable for any loss if we
follow instructions by phone that we reasonably believe are genuine or if you
are unable to execute a transaction by phone.

RETIREMENT PLANS. The telephone transaction options available to retirement
plans are limited to those that are provided under the plan.

ACCOUNT REGISTRATIONS AND REQUIRED DOCUMENTS

When you open an account, we need you to tell us how you want your shares
registered. How you register your account will affect your ownership rights and
ability to make certain transactions. If you have questions about how to
register your account, you should consult your investment representative or
legal advisor. Please keep the following information in mind when registering
your account.

JOINT OWNERSHIP. If you open an account with two or more owners, we register the
account as "joint tenants with rights of survivorship" unless you tell us
otherwise. An account registered as "joint tenants with rights of survivorship"
is shown as "Jt Ten" on your account statement. For any account with two or more
owners, we cannot accept instructions to change owners on the account unless ALL
owners agree in writing, even if the law in your state says otherwise. If you
would like another person or owner to sign for you, please send us a current
power of attorney.

GIFTS AND TRANSFERS TO MINORS. You may set up a custodial account for a minor
under your state's Uniform Gifts/Transfers to Minors Act. Other than this form
of registration, a minor may not be named as an account owner.

TRUSTS. You should register your account as a trust only if you have a valid
written trust document. This avoids future disputes or possible court action
over who owns the account.

REQUIRED DOCUMENTS. For corporate, partnership and trust accounts, please send
us the following documents when you open your account. This will help avoid
delays in processing your transactions while we verify who may sign on the
account.

TYPE OF ACCOUNT DOCUMENTS REQUIRED
- ------------------------------------------------------------------------------
CORPORATION Corporate Resolution
- ------------------------------------------------------------------------------

PARTNERSHIP 1. The pages from the partnership agreement that identify
the general partners, or

2. A certification for a partnership agreement
- ------------------------------------------------------------------------------
TRUST 1. The pages from the trust document that identify the
trustees, or

2. A certification for trust
- ------------------------------------------------------------------------------

STREET OR NOMINEE ACCOUNTS. If you have fund shares held in a "street" or
"nominee" name account with your Securities Dealer, you may transfer the shares
to the street or nominee name account of another Securities Dealer. Both dealers
must have an agreement with Distributors or we cannot process the transfer.
Contact your Securities Dealer to initiate the transfer. We will process the
transfer after we receive authorization in proper form from your delivering
Securities Dealer. Accounts may be transferred electronically through the NSCC.
For accounts registered in street or nominee name, we may take instructions
directly from the Securities Dealer or your nominee.

IMPORTANT INFORMATION IF YOU HAVE AN INVESTMENT REPRESENTATIVE

If there is a Securities Dealer or other representative of record on your
account, we are authorized: (1) to provide confirmations, account statements and
other information about your account directly to your dealer and/or
representative; and (2) to accept telephone and electronic instructions directly
from your dealer or representative, including instructions to exchange or redeem
your shares. Electronic instructions may be processed through established
electronic trading systems and programs used by the fund. Telephone instructions
directly from your representative will be accepted unless you have told us that
you do not want telephone privileges to apply to your account.

KEEPING YOUR ACCOUNT OPEN

Due to the relatively high cost of maintaining a small account, we may close
your account if the value of your shares is less than $20,000 ($500 for states,
counties, cities and their instrumentalities, departments, agencies and
authorities). We will only do this if the value of your account fell below this
amount because you voluntarily sold your shares and your account has been
inactive (except for the reinvestment of distributions) for at least six months.
Before we close your account, we will notify you and give you 30 days to
increase the value of your account to the above minimums.

SERVICES TO HELP YOU MANAGE YOUR ACCOUNT

CUMULATIVE QUANTITY DISCOUNTS

You may include the cost or current value (whichever is higher) of your fund
shares when determining if you may buy shares of another Franklin Templeton Fund
at a discount. You may also include your fund shares towards the completion of a
Letter of Intent established in connection with the purchase of shares of
another Franklin Templeton Fund.

For additional information regarding these programs, please call Institutional
Services at 1-800/321-8563.

TELEFACTS(R)

From a touch-tone phone, you may call our TeleFACTS(R) system (day or night) at
1-800/247-1753 to:

o obtain information about your account;

o obtain price and performance information about any Franklin Templeton Fund;
and

o request duplicate statements and deposit slips for Franklin Templeton
accounts.

You will need each fund's code number to use TeleFACTS(R). The Money Fund's code
number is 140 and the U.S. Securities Fund's code number is 142.

STATEMENTS AND REPORTS TO SHAREHOLDERS

We will send you the following statements and reports on a regular basis:

o Confirmation and account statements reflecting transactions in your account,
including additional purchases and dividend reinvestments. Please verify the
accuracy of your statements when you receive them.

o Financial reports of the funds will be sent every six months. To reduce fund
expenses, we attempt to identify related shareholders within a household and
send only one copy of a report. Call Institutional Services if you would like
an additional free copy of the funds' financial reports.

SPECIAL SERVICES

Investor Services may charge separate fees to shareholders, to be negotiated
directly with such shareholders, for providing special services in connection
with their accounts, such as subaccounting, processing a large number of wires,
or other special handling which a shareholder may request. Such special services
to certain shareholders will not increase the expenses borne by the funds.

AVAILABILITY OF THESE SERVICES

The services above are available to most shareholders. If, however, your shares
are held by a financial institution, in a street name account, or networked
through the NSCC, the funds may not be able to offer these services directly to
you. Please contact your investment representative.

GENERAL

Government Accounting Standards Board (GASB) Statement No. 3 pertaining to
Deposits with Financial Institutions provides, in paragraph 69, that investments
in mutual funds should be disclosed, but not categorized.

WHAT IF I HAVE QUESTIONS ABOUT MY ACCOUNT?

If you have any questions about your account, you may write to Institutional
Services at 777 Mariners Island Blvd., P.O. Box 7777, San Mateo, California
94403-7777. The funds, Distributors and Advisers are also located at this
address. You may also contact us by phone at 1-800/321-8563 Monday through
Friday, from 6:00 a.m. to 5:00 p.m. Pacific time.

Your phone call may be monitored or recorded to ensure we provide you with high
quality service. You will hear a regular beeping tone if your call is being
recorded.

GLOSSARY

USEFUL TERMS AND DEFINITIONS

ADVISERS - Franklin Advisers, Inc., each Portfolio's investment manager and
the funds' administrator

BOARD - The Board of Trustees of the Trust

CLASS I - Certain funds in the Franklin Templeton Funds offer multiple classes
of shares. The different classes have proportionate interests in the same
portfolio of investment securities. They differ, however, primarily in their
sales charge structures and Rule 12b-1 plans. Shares of the funds are considered
Class I shares for redemption, exchange and other purposes.

CODE - Internal Revenue Code of 1986, as amended

CONTINGENCY PERIOD - The 12 month period during which a Contingent Deferred
Sales Charge may apply. The holding period begins on the day you buy your
shares. For example, if you buy shares on the 18th of the month, they will age
one month on the 18th day of the next month and each following month.

CONTINGENT DEFERRED SALES CHARGE (CDSC) - A sales charge of 1% that may apply if
you sell your shares within the Contingency Period.

DISTRIBUTORS - Franklin/Templeton Distributors, Inc., the funds' principal
underwriter. The SAI lists the officers and Board members who are affiliated
with Distributors. See "Officers and Trustees."

FRANKLIN TEMPLETON FUNDS - The U.S. registered mutual funds in the Franklin
Group of Funds(R) and the Templeton Group of Funds except Franklin Valuemark
Funds, Templeton Capital Accumulator Fund, Inc., and Templeton Variable Products
Series Fund

FRANKLIN TEMPLETON GROUP - Franklin Resources, Inc., a publicly owned holding
company, and its various subsidiaries

FRANKLIN TEMPLETON GROUP OF FUNDS - All U.S. registered investment companies in
the Franklin Group of Funds(R) and the Templeton Group of Funds

INSTITUTIONAL SERVICES - Franklin Templeton Institutional Services Department

INVESTOR SERVICES - Franklin/Templeton Investor Services, Inc., the funds'
shareholder servicing and transfer agent

IRS - Internal Revenue Service

MARKET TIMERS - Market Timers generally include market timing or asset
allocation services, accounts administered so as to buy, sell or exchange shares
based on predetermined market indicators, or any person or group whose
transactions seem to follow a timing pattern or whose transactions include
frequent or large exchanges.

NET ASSET VALUE (NAV) - The value of a mutual fund is determined by deducting
the fund's liabilities from the total assets of the portfolio. The net asset
value per share is determined by dividing the net asset value of the fund by the
number of shares outstanding.

NSCC - National Securities Clearing Corporation

NYSE - New York Stock Exchange

RESOURCES - Franklin Resources, Inc.

SAI - Statement of Additional Information

SEC - U.S. Securities and Exchange Commission

SECURITIES DEALER - A financial institution that, either directly or through
affiliates, has an agreement with Distributors to handle customer orders and
accounts with the fund. This reference is for convenience only and does not
indicate a legal conclusion of capacity.

TELEFACTS(R) - Franklin Templeton's automated customer servicing system

WE/OUR/US - Unless the context indicates a different meaning, these terms refer
to the funds and/or Institutional Services, Investor Services, Distributors, or
other wholly owned subsidiaries of Resources.

PROSPECTUS

FRANKLIN CASH
RESERVES FUND

INVESTMENT STRATEGY

INCOME

NOVEMBER 1, 1998

INSTITUTIONAL FIDUCIARY TRUST

Please read this prospectus before investing, and keep it for future reference.
It contains important information, including how the fund invests and the
services available to shareholders.

To learn more about the fund and its policies, you may request a copy of the
fund's Statement of Additional Information ("SAI"), dated November 1, 1998,
which we may amend from time to time. We have filed the SAI with the SEC and
have incorporated it by reference into this prospectus. For a free copy of the
SAI or a larger print version of this prospectus, contact your investment
representative or call 1-800/321-8563.

AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO MAINTAIN A
STABLE $1 SHARE PRICE.

LIKE ALL MUTUAL FUND SHARES, THE SEC HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.

Franklin Cash Reserves Fund

Unlike most funds that invest directly in securities, the fund seeks to achieve
its investment goal by investing all of its assets in shares of The Money Market
Portfolio (the "Portfolio"). The Portfolio is a series of The Money Market
Portfolios ("Money Market"). Its investment goal is the same as the fund's.

This prospectus is not an offering of the securities herein described in any
state, jurisdiction or country in which the offering is not authorized. No sales
representative, dealer, or other person is authorized to give any information or
make any representations other than those contained in this prospectus. Further
information may be obtained from Distributors.

FRANKLIN CASH RESERVES FUND

NOVEMBER 1, 1998

When reading this prospectus, you will see certain terms beginning with capital
letters. This means the term is explained in our glossary section

TABLE OF CONTENTS

ABOUT THE FUND

Expense Summary ...................................................... 2

Financial Highlights ................................................. 3

How Does the Fund Invest Its Assets? ................................. 4

What Are the Risks of Investing in the Fund? ......................... 7

Who Administers the Fund? ............................................ 8

How Taxation Affects the Fund and Its Shareholders ................... 9

How Is the Trust Organized? .......................................... 11

ABOUT YOUR ACCOUNT

How Do I Buy Shares? ................................................. 11

May I Exchange Shares for Shares of Another Fund? .................... 13

How Do I Sell Shares? ................................................ 15

What Distributions Might I Receive From the Fund? .................... 17

Transaction Procedures and Special Requirements ...................... 18

Services to Help You Manage Your Account ............................. 20

What If I Have Questions About My Account? ........................... 21

GLOSSARY

Useful Terms and Definitions ......................................... 22

777 Mariners Island Blvd.
P.O. Box 7777
San Mateo
CA 94403-7777

1-800/321-8563

ABOUT THE FUND

EXPENSE SUMMARY

This table is designed to help you understand the costs of investing in the
fund. It is based on the fund's historical expenses, including its proportionate
share of the Portfolio's expenses, for the fiscal year ended June 30, 1998. The
fund's actual expenses may vary.

A. SHAREHOLDER TRANSACTION EXPENSES+

Exchange Fee (per transaction) .............. None*

B. ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)

Management and Administration Fees .......... 0.40%**

Rule 12b-1 Fees ............................. 0.25%***

Other Expenses of the Fund and the Portfolio. 0.11%
-----

Total Fund Operating Expenses ............... 0.76%**
=======

C. EXAMPLE

Assume the fund's annual return is 5%, operating expenses are as described
above, and you sell your shares after the number of years shown. These are the
projected expenses for each $1,000 that you invest in the fund.

1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------------------------------------------

$8 $24 $42 $94

THIS IS JUST AN EXAMPLE. IT DOES NOT REPRESENT PAST OR FUTURE EXPENSES OR
RETURNS. ACTUAL EXPENSES AND RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN. The
fund pays its operating expenses. The effects of these expenses are reflected in
its Net Asset Value or dividends and are not directly charged to your account.

+If your transaction is processed through your Securities Dealer, you may be
charged a fee by your Securities Dealer for this service.
*There is a $5.00 fee for exchanges by Market Timers.
**For the period shown, Advisers had agreed in advance to limit its management
and administration fees. With this reduction, management fees of the Portfolio
were 0.14% and administration fees of the fund were 0%. Total fund operating
expenses were 0.50%. The total fund operating expenses are different than the
ratio of expenses to average net assets shown under "Financial Highlights" due
to a timing difference between the end of the 12b-1 plan year and the fund's
fiscal year end.
***These fees may not exceed 0.25%.

FINANCIAL HIGHLIGHTS

This table summarizes the fund's financial history. The information has been
audited by PricewaterhouseCoopers LLP, the fund's independent auditor. The audit
report covering the periods shown below appears in the fund's Annual Report to
Shareholders for the fiscal year ended June 30, 1998. The Annual Report to
Shareholders also includes more information about the fund's performance. For a
free copy, please call 1-800/321-8563.

YEAR ENDED JUNE 30,
1998 1997 1996 1995
- -------------------------------------------------------------------------------
Per share operating performance
(for a share outstanding throughout the year)

Net asset value, beginning of year....... $1.00 $1.00 $1.00 $1.00
Income from investment operations -
net investment income ................... .051 .050 .052 .052
Less distributions from net
investment income ....................... (.051) (.050) (.052) (.052)
--------------------------------------
Net asset value, end of year............. $1.00 $1.00 $1.00 $1.00
======================================
Total Return* ........................... 5.28% 5.11% 5.35% 5.34%

Ratios/supplemental data
Net assets, end of year (000's).......... $119,585 $76,510 $30,381 $14,545
Ratios to average net assets:
Expenses1 .............................. .50% .50% .49% .40%
Expenses, excluding waiver
and payments by affiliate .............. .77% .69% .73% .79%
Net investment income .................. 5.14% 5.00% 5.10% 5.69%

*Total return is not annualized.
1 The expense ratio includes the fund's share of the Portfolio's allocated
expenses.

HOW DOES THE FUND INVEST ITS ASSETS?

WHAT IS THE FUND'S GOAL?

The investment goal of the 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 that it may not be changed
without shareholder approval. The fund also tries to maintain a stable Net Asset
Value of $1 per share.

THE FUND'S INVESTMENT IN THE PORTFOLIO

The fund seeks to achieve its investment goal by investing all of its assets in
the Portfolio. The Portfolio has the same investment goal as the fund and it,
too, is fundamental. The fund's investment policies are also substantially
similar to the Portfolio's except the fund may pursue its policies by investing
in an open-end management investment company with the same investment goal and
substantially similar policies and restrictions as the fund. The fund buys
shares of the Portfolio at Net Asset Value. An investment in the fund is an
indirect investment in the Portfolio.

It is possible that the fund may have to withdraw its investment in the
Portfolio and subsequently invest in another open-end management investment
company with the same investment goal and substantially similar policies. This
could happen if the Portfolio changes its investment goal or if the Board, at
any time, considers it in the fund's best interest.

The fund's structure, where it invests all of its assets in the Portfolio, is
sometimes called a "Master/Feeder" structure. You will find more detailed
information about this structure and the potential risks associated with it in
the SAI.

WHAT KINDS OF SECURITIES DOES THE PORTFOLIO BUY?

The Portfolio seeks to achieve its investment goal by investing in high-quality,
short-term money market securities of domestic and foreign issuers, including
U.S. government securities and repurchase agreements. Because the Portfolio
limits its investments to high-quality securities, it will generally earn lower
yields than a portfolio with lower quality securities that are subject to
greater risk. Accordingly, the yield to shareholders in the Portfolio, and thus
the fund, will likely be relatively lower.

o The Portfolio only buys securities with remaining maturities of 397 calendar
days or less and maintains a dollar-weighted average portfolio maturity of 90
days or less.

o Generally, the Portfolio may not invest more than 5% of its total assets in
the securities of a single issuer, other than in U.S. government
securities.

More information about the Portfolio's diversification policies, and details of
the credit quality ratings are included in the SAI.

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. Some of these securities, including U.S. Treasury bills, notes and
bonds and securities of the Government National Mortgage Association and the
Federal Housing Administration, are issued or guaranteed by the U.S. government
or carry a guarantee that is supported by the full faith and credit of the U.S.
government. Other U.S. government securities are issued or guaranteed by federal
agencies or government-sponsored enterprises and are not considered direct
obligations of the U.S. government. Instead, they involve sponsorship or
guarantees by government agencies or enterprises. For example, some securities
are supported by the right of the issuer to borrow from the U.S. Treasury, such
as obligations of the Federal Home Loan Bank. Others, such as obligations of the
Federal National Mortgage Association, are supported only by the credit of the
instrumentality.

BANK OBLIGATIONS, or instruments secured by bank obligations, include fixed,
floating or variable rate CDs, letters of credit, time deposits, bank notes and
bankers' acceptances. The Portfolio 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 Portfolio may
not invest more than 10% of its assets in time deposits with more than seven
days to maturity.

The Portfolio may invest in obligations of U.S. banks, foreign branches of U.S.
or foreign banks, and U.S. branches of foreign banks that have a federal or
state charter to do business in the U.S. and are subject to U.S. regulatory
authorities. The Portfolio 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 Portfolio may, however, invest more than 25% of its assets in
certain domestic bank obligations, including U.S. branches of foreign banks.

COMMERCIAL PAPER typically refers to short-term obligations of banks,
corporations and other borrowers with maturities of up to 270 days. The
Portfolio may invest in commercial paper of domestic or foreign issuers.

ASSET-BACKED SECURITIES are typically commercial paper backed by the loans or
accounts receivable of an entity, such as a bank or credit card company. 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.

CORPORATE OBLIGATIONS may include fixed, floating and variable rate bonds,
debentures or notes.

The Portfolio 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.

WHAT ARE SOME OF THE PORTFOLIO'S OTHER INVESTMENT STRATEGIES AND PRACTICES?

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS are those where payment and
delivery for the security take place at a future date. Since the market price of
the security may fluctuate during the time before payment and delivery, the
Portfolio assumes the risk that the value of the security at delivery may be
more or less than the purchase price.

OTHER POLICIES AND RESTRICTIONS. The fund and the Portfolio have a number of
additional investment policies and restrictions that govern their activities.
Those that are identified as "fundamental" may only be changed with shareholder
approval. The others may be changed by the Board or the Board of Trustees of
Money Market alone. For a list of these restrictions and more information about
the fund's and the Portfolio's investment policies, including those described
above, please see "How Does the Fund Invest Its Assets?" and "Investment
Restrictions" in the SAI.

Generally, the policies and restrictions discussed in this prospectus and in the
SAI apply when the fund or the Portfolio makes an investment. In most cases, the
fund and the Portfolio are not required to sell a security because circumstances
change and the security no longer meets one or more of the fund's or the
Portfolio's policies or restrictions.

WHAT ARE THE RISKS OF INVESTING IN THE FUND?

Like all investments, an investment in the fund involves risk. The risks of the
fund are basically the same as those of other investments in money market
securities. The short duration and high credit quality of the securities in
which the Portfolio, and thus the fund, invests may help reduce the risks
detailed below.

There is no assurance that the fund or the Portfolio will meet its investment
goal. Although the fund tries to maintain a stable share price of $1, there is
no assurance that it will be able to do so.

INCOME RISK is the risk that the Portfolio's, and thus the fund's, income will
decrease due to falling interest rates. Since the fund can only distribute what
it earns, the fund's distributions to its shareholders may decline when interest
rates fall.

MARKET RISK is the risk that a security's value will be reduced by market
activity or the results of supply and demand. This a basic risk associated with
all securities. When there are more sellers than buyers, prices tend to fall.
Likewise, when there are more buyers, prices tend to rise.

FOREIGN SECURITIES. Investments in securities of foreign issuers, including
obligations of foreign branches of U.S. and foreign banks and obligations of
U.S. branches of foreign banks, involve special risks. These risks include
future unfavorable political and economic developments, possible withholding
taxes, seizure of foreign deposits, currency controls, interest limitations, or
other governmental restrictions that may affect the payment of principal or
interest on securities held by the Portfolio. In addition, there may be less
publicly available information about foreign issuers.

WHO ADMINISTERS THE FUND?

THE BOARD. The Board oversees the management of the fund and elects its
officers. The officers are responsible for the fund's day-to-day operations.

The Board, with approval of all disinterested and interested Board members, has
adopted written procedures designed to deal with potential conflicts of interest
that may arise from the Trust and Money Market having the same boards. These
procedures call for an annual review of the fund's relationship with the
Portfolio. If a conflict exists, the boards may take action, which may include
the establishment of a new board. The Board has determined that there are no
conflicts of interest at the present time. For more information, please see
"Summary of Procedures to Monitor Conflicts of Interest" and "Officers and
Trustees" in the SAI.

INVESTMENT MANAGER AND ADMINISTRATOR. Advisers manages the Portfolio's assets
and makes its investment decisions. Advisers also performs similar services for
other funds. It is wholly owned by Resources, a publicly owned company engaged
in the financial services industry through its subsidiaries. Charles B. Johnson
and Rupert H. Johnson, Jr. are the principal shareholders of Resources.
Together, Advisers and its affiliates manage over $236 billion in assets.
Advisers is also the administrator of the fund. Please see "Investment
Management and Other Services" and "Miscellaneous Information" in the SAI for
information on securities transactions and a summary of the fund's Code of
Ethics.

MANAGEMENT FEES. You will bear a portion of the Portfolio's operating expenses,
including its management fees, to the extent that the fund, as a shareholder of
the Portfolio, bears these expenses. The portion of the Portfolio's expenses
borne by the fund depends on the fund's proportionate share of the Portfolio's
net assets. During the fiscal year ended June 30, 1998, the fund's proportionate
share of the Portfolio's management fees, before any advance waiver, totaled
0.15% of the average daily net assets of the fund. The fund's administration
fees, before any advance waiver, totaled 0.25%. Total operating expenses,
including fees paid to Advisers before any advance waiver, were 0.76%. Under an
agreement by Advisers to limit its fees, the fund paid a proportionate share of
the Portfolio's management fees totaling 0.14% and no administration fees. Total
expenses of the fund were 0.50%. Advisers may end this arrangement at any time
upon notice to the Board.

PORTFOLIO TRANSACTIONS. Advisers tries to obtain the best execution on all
transactions. If Advisers believes more than one broker or dealer can provide
the best execution, it may consider research and related services and the sale
of fund shares, as well as shares of other funds in the Franklin Templeton Group
of Funds, when selecting a broker or dealer. Please see "How Does the Portfolio
Buy Securities for Its Portfolio?" in the SAI for more information.

YEAR 2000 ISSUE. Like other mutual funds, the fund could be adversely affected
if the computer systems used by Advisers and other service providers do not
properly process date-related information on or after January 1, 2000 ("Year
2000 Issue"). The Year 2000 Issue, and in particular foreign service providers'
responsiveness to the issue, could affect portfolio and operational areas
including securities trade processing, interest and dividend payments,
securities pricing, shareholder account services, reporting, custody functions,
and others. While there can be no assurance that the fund will not be adversely
affected, Advisers and its affiliated service providers are taking steps that
they believe are reasonably designed to address the Year 2000 Issue, including
seeking reasonable assurances from the fund's other major service providers.

THE RULE 12B-1 PLAN

The fund has a distribution plan or "Rule 12b-1 Plan" under which it may
reimburse Distributors or others for the expenses of activities that are
primarily intended to sell shares of the fund. These expenses may include, among
others, distribution or service fees paid to Securities Dealers or others who
have executed a servicing agreement with the fund, Distributors or its
affiliates; a prorated portion of Distributors' overhead expenses; and the
expenses of printing prospectuses and reports used for sales purposes, and
preparing and distributing sales literature and advertisements.

Payments by the fund under the plan may not exceed 0.25% per year of the fund's
average daily net assets. All distribution expenses over this amount will be
borne by those who have incurred them. For more information, please see "The
Fund's Underwriter" in the SAI.

HOW TAXATION AFFECTS THE FUND AND ITS SHAREHOLDERS

TAXATION OF THE FUND. As a regulated investment company, the fund generally pays
no federal income tax on the income and gains that it distributes to you.

DISTRIBUTIONS. Distributions from the fund, whether you receive them in cash or
in additional shares, are generally subject to income tax. The fund will send
you a statement in January of each year that reflects the amount of ordinary
dividends you received from the fund in the prior year. This statement will
include distributions declared in December and paid to you in January of the
following year, but which are taxable as if paid on December 31 of the prior
year. The IRS requires you to report these amounts on your income tax return for
the prior year.

DISTRIBUTIONS TO RETIREMENT PLANS. Fund distributions received by your qualified
retirement plan, such as a section 401(k) plan or IRA, are generally
tax-deferred; this means that you are not required to report fund distributions
on your income tax return when paid to your plan, but, rather, when your plan
makes payments to you. Special rules apply to payouts from Roth and Education
IRAs.

DIVIDENDS-RECEIVED DEDUCTION. It is anticipated that no portion of the fund's
distributions will qualify for the corporate dividends-received deduction.

REDEMPTIONS AND EXCHANGES. Because the fund expects to maintain a $1.00 Net
Asset Value per share, you should not have any gain or loss on the redemption or
exchange of fund shares.

MUNICIPAL INVESTORS. A municipality that invests the proceeds of a bond offering
in the fund should be aware that some or all of the earnings distributed by the
fund may need to be paid to the U.S. as a rebate of arbitrage profits. You may
wish to contact your tax advisor to determine the effect, if any, of payments by
the fund with respect to the arbitrage rebate requirements.

NON-U.S. INVESTORS. Ordinary dividends generally will be subject to U.S. income
tax withholding. Your home country may also tax ordinary dividends. Fund shares
held by the estate of a non-U.S. investor may be subject to U.S. estate tax. You
may wish to contact your tax advisor to determine the U.S. and non-U.S. tax
consequences of your investment in the fund.

STATE TAXES. Ordinary dividends that you receive from the fund will generally be
subject to state and local income tax. It is anticipated that no portion of the
fund's distributions will qualify for exemption from state and local income tax
as dividends paid from interest earned on direct obligations of the U.S.
government. The holding of fund shares may also be subject to state and local
intangibles taxes. You may wish to contact your tax advisor to determine the
state and local tax consequences of your investment in the fund.

BACKUP WITHHOLDING. When you open an account, IRS regulations require that you
provide your taxpayer identification number ("TIN"), certify that it is correct,
and certify that you are not subject to backup withholding under IRS rules. If
you fail to provide a correct TIN or the proper tax certifications, the fund is
required to withhold 31% of all taxable distributions (including ordinary
dividends and capital gain distributions), and redemption proceeds paid to you.
The fund is also required to begin backup withholding on your account if the IRS
instructs the fund to do so. The fund reserves the right not to open your
account, or, alternatively, to redeem your shares at the current Net Asset
Value, less any taxes withheld, if you fail to provide a correct TIN, fail to
provide the proper tax certifications, or the IRS instructs the fund to begin
backup withholding on your account.

THIS TAX DISCUSSION IS FOR GENERAL INFORMATION ONLY. PROSPECTIVE INVESTORS
SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE FEDERAL, STATE, LOCAL OR
FOREIGN TAX CONSEQUENCES OF AN INVESTMENT IN THE FUND. A MORE COMPLETE
DISCUSSION OF THESE RULES AND RELATED MATTERS IS CONTAINED IN THE SECTION
ENTITLED "ADDITIONAL INFORMATION ON DISTRIBUTIONS AND TAXES" IN THE SAI. YOU MAY
REQUEST A FREE FRANKLIN TEMPLETON TAX INFORMATION HANDBOOK BY CALLING FUND
INFORMATION AT 1-800/DIAL BEN.

HOW IS THE TRUST ORGANIZED?

The fund is a no-load, diversified series of Institutional Fiduciary Trust (the
"Trust"), an open-end management investment company, commonly called a mutual
fund. It was organized as a Massachusetts business trust on January 15, 1985 and
is registered with the SEC. Shares of each series of the Trust have equal and
exclusive rights to dividends and distributions declared by that series and the
net assets of the series in the event of liquidation or dissolution. Shares of
the fund are considered Class I shares for redemption, exchange and other
purposes. Additional series may be offered in the future.

ABOUT YOUR ACCOUNT

HOW DO I BUY SHARES?

OPENING YOUR ACCOUNT

You may buy shares of the fund without a sales charge. The fund is available
exclusively to retirement plan participants and other institutional investors,
including corporations, banks, savings and loan associations, and government
entities. Individuals may not otherwise buy shares of the fund. In the case of
retirement plans, there is no required minimum initial investment amount and
shares of the fund must be registered at the omnibus level. Although the amount
that may be contributed to the various investment options under a retirement
plan in any one year is subject to certain limitations, assets already held by a
retirement plan may be invested in the fund without regard to the limitations.
Certain institutional investors, such as corporations, banks, and savings and
loan associations, may also purchase shares of the fund subject to a minimum
initial investment of $100,000. Government entities, however, including states,
counties, cities, and their instrumentalities, departments, agencies, and
authorities may open an account in the fund with a minimum initial investment of
$1,000. Subsequent purchases are not subject to a minimum purchase requirement.
We reserve the right to change the amount of these minimums from time to time or
to waive or lower these minimums for certain purchases. We also reserve the
right to refuse any order to buy shares.

To open your account, please follow the steps below. This will help avoid any
delays in processing your request.

Make your investment using the table below.

Method Steps to Follow
- ------------------------------------------------------------------------------

BY MAIL 1. For an initial investment, complete and sign an
application.

2. Return the application to the fund with your check,
Federal Reserve draft or negotiable bank draft made
payable to the fund. Instruments drawn on other investment
companies may not be accepted.
- ------------------------------------------------------------------------------

BY WIRE 1. Call Institutional Services at 1-800/321-8563 or
650/312-3600 to receive a wire control number. You need
a new wire control number every time you wire money
into your account. If you do not have a currently
effective wire control number, we will return the money
to the bank, and we will not credit the purchase to
your account.

2. Wire the funds to Bank of America, ABA routing number
121000358, for credit to Institutional Fiduciary
Trust-Franklin Cash Reserves Fund, A/C 1493-3-04779. Your
name, account number, and wire control number must
be included.

3. For an initial investment you must also return your signed
application to the fund. For investments over $50,000, you
also need to complete the Institutional Telephone
Privileges Agreement.
- ------------------------------------------------------------------------------

THROUGH YOUR DEALER Call your investment representative
- ------------------------------------------------------------------------------

See "Holiday Schedule" under "Transaction Procedures and Special
Requirements."If the fund receives your order in proper form before 3:00 p.m.
Pacific time, we will credit the purchase to your account that day. Orders
received after 3:00 p.m. will be credited the following business day.

Many of the fund's investments, through the Portfolio, must be paid for in
federal funds, which are monies held by the fund's custodian bank on deposit at
the Federal Reserve Bank of San Francisco and elsewhere. The fund generally
cannot invest money received from you until it is converted into and is
available to the fund in federal funds. Therefore, your purchase order may not
be considered in proper form until the money received from you is available in
federal funds, which may take up to two days. If the fund is able to make
investments immediately (within one business day), it may accept your order with
payment in other than federal funds.

When you buy shares, if you submit a check or a draft that is returned unpaid to
the fund we may impose a $10 charge against your account for each returned item.

The investment authority of certain investors may be restricted by law. If you
are such an investor, you should consult your legal advisor to determine whether
and to what extent shares of the fund are legal investments for you. If you are
a municipal investor considering investing proceeds of bond offerings, you
should consult with expert counsel to determine the effect, if any, of payments
by the fund on arbitrage rebate calculations.

PAYMENTS TO SECURITIES DEALERS

If you buy shares through a Securities Dealer, Distributors may make a payment
to the Securities Dealer out of its own resources. Please contact Institutional
Services for more information.

MAY I EXCHANGE SHARES FOR SHARES OF ANOTHER FUND?

Method Steps to Follow
- ------------------------------------------------------------------------------

BY MAIL Send us signed written instructions
- ------------------------------------------------------------------------------

BY PHONE 1. Call Institutional Services at 1-800/321-8563

2. For requests over $50,000, you must complete an
Institutional Telephone Privileges Agreement.
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THROUGH YOUR DEALER Call your investment representative
- ------------------------------------------------------------------------------

Please refer to "Transaction Procedures and Special Requirements" for other
important information on how to exchange shares.

WILL SALES CHARGES APPLY TO MY EXCHANGE?

You will generally pay the applicable front-end sales charge of the fund you are
exchanging into, unless you acquired your fund shares under the exchange
privilege. These charges may not apply if you qualify to buy shares without a
sales charge. For example, certain institutional investors such as government
entities, certain retirement plans, trust companies, and bank trust departments,
may buy Class I shares of other Franklin Templeton Funds without a sales charge.

RETIREMENT PLANS

EXCHANGE RESTRICTIONS

Please be aware that the following restrictions apply to exchanges:

o You must meet the applicable minimum investment amount of the fund you are
exchanging into, or exchange 100% of your fund shares.

o You may only exchange shares within the SAME CLASS, except as noted below.

o The accounts must be identically registered.

o The fund you are exchanging into must be eligible for sale in your state.

o We may modify or discontinue our exchange policy if we give you 60 days'
written notice.

LIMITED EXCHANGES BETWEEN DIFFERENT CLASSES OF SHARES

Certain funds in the Franklin Templeton Funds offer classes of shares not
offered by the fund, such as "Advisor Class" or "Class Z" shares. Because the
fund does not currently offer an Advisor Class, you may exchange Advisor Class
shares of any Franklin Templeton Fund for shares of the fund at Net Asset Value.
If you do so and you later decide you would like to exchange into a fund that
offers an Advisor Class, you may exchange your fund shares for Advisor Class
shares of that fund. Certain shareholders of Class Z shares of Franklin Mutual
Series Fund Inc. may also exchange their Class Z shares for shares of the fund
at Net Asset Value.

HOW DO I SELL SHARES?

You may sell (redeem) your shares at any time.

Method Steps to Follow
- ------------------------------------------------------------------------------

BY MAIL 1. Send us signed written instructions.

2. Provide a signature guarantee if required

BY PHONE Call Institutional Services at 1-800/321-8563

o You may exceed $50,000 by completing a separate
agreement. Call Institutional Services to receive a copy.

o Telephone requests will be accepted unless the address on
your account was changed by phone within the last 15
days.
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THROUGH YOUR DEALER Call your investment representative
- ------------------------------------------------------------------------------

See "Holiday Schedule" under "Transaction Procedures and Special
Requirements."We will send your redemption check within seven days after we
receive your request in proper form. We are not able to receive or pay out cash
in the form of currency. If you sell your shares by phone, the check may only be
made payable to all registered owners on the account and sent to the address of
record. If requested, redemption proceeds may also be wired directly to a
commercial bank previously designated by you on an application, or in a
signature-guaranteed letter of instruction.

Telephone redemption orders may not be used to direct payments to another party
or non-designated account. Written instructions will be required.

The wiring of redemption proceeds is a special service that we make available
whenever possible. Generally, if we receive your request in proper form before
3:00 p.m. Pacific time, your wire payment will be sent the next business day.
For requests received in proper form after 3:00 p.m. Pacific time, the payment
will be sent the second business day. By offering this service to you, the fund
is not bound to meet any redemption request in less than the seven-day period
prescribed by law. Neither the fund nor its agents shall be liable to you or any
other person if, for any reason, a redemption request by wire is not processed
as described in this section.

For non-retirement plan participants, payment may be transmitted by wire the
same business day, if the phone request is received before 11:15 a.m. Pacific
time that day. For later requests, payment will be transmitted by wire the next
business day. If you anticipate requesting a same-day wire redemption over $5
million, please notify the fund about this on the prior business day. In order
to maximize efficient fund management, please request your same-day wire
redemption of any size as early in the day as possible. Prior business day
notification of the trade may be required.

Under unusual circumstances, we may suspend redemptions or postpone payment for
more than seven days as permitted by federal securities law.

Please refer to "Transaction Procedures and Special Requirements" for other
important information on how to sell shares.

CONTINGENT DEFERRED SALES CHARGE

Most Franklin Templeton Funds impose a Contingent Deferred Sales Charge on
certain investments if you sell all or a part of the investment within the
Contingency Period. While the fund generally does not impose a Contingent
Deferred Sales Charge, it will do so if you sell shares that were exchanged into
the fund from another Franklin Templeton Fund and those shares would have been
assessed a Contingent Deferred Sales Charge in the other fund. The charge is 1%
of the value of the shares sold or the Net Asset Value at the time of purchase,
whichever is less. The time the shares are held in the fund does not count
towards the completion of any Contingency Period.

WHAT DISTRIBUTIONS MIGHT I RECEIVE FROM THE FUND?

The fund declares dividends each day that its Net Asset Value is calculated and
pays them monthly. The daily allocation of net investment income begins on the
day after you make an investment and continues through the day you redeem your
shares or the settlement of a wire order trade.

The amount of these dividends will vary, depending on changes in the fund's net
investment income, and there is no guarantee the fund will pay dividends. THE
FUND DOES NOT PAY "INTEREST" OR GUARANTEE ANY AMOUNT OF DIVIDENDS OR RETURN ON
AN INVESTMENT IN ITS SHARES.

DIVIDEND OPTIONS

Dividends will automatically be reinvested monthly in the form of additional
shares of the fund at the Net Asset Value per share at the close of business on
or about the last business day of the month. You may also choose to receive
dividends in cash. To do so, please notify the fund or Institutional Services.
Certain restrictions may apply to retirement plans.

Since the net income of the fund is declared as a dividend each time the net
income is determined, the Net Asset Value per share of the fund is expected to
remain at $1.00 per share immediately after each such determination and dividend
declaration. Any increase in the value of your investment in the fund,
representing the reinvestment of dividend income, is reflected by an increase in
the number of shares in your account.

TRANSACTION PROCEDURES AND SPECIAL REQUIREMENTS

SHARE PRICE

You buy and sell shares at Net Asset Value. We will use the Net Asset Value next
calculated after we receive your transaction request in proper form.

HOW AND WHEN SHARES ARE PRICED

The fund is open for business each day that both the NYSE and the Federal
Reserve Bank of San Francisco are open. We determine the Net Asset Value per
share at 3:00 p.m. Pacific time. To calculate Net Asset Value per share, the
fund's assets are valued and totaled, liabilities are subtracted, and the
balance, called net assets, is divided by the number of shares outstanding. The
fund's assets are valued as described under "How Are Fund Shares Valued?" in the
SAI.

HOLIDAY SCHEDULE

The fund is informed that the NYSE and/or the Federal Reserve Bank of San
Francisco observe the following holidays: New Year's Day, Martin Luther King Jr.
Day, Presidents' Day, Good Friday, Memorial Day (observed), Independence Day,
Labor Day, Columbus Day (observed), Veterans' Day, Thanksgiving Day and
Christmas Day. Although the fund expects the same holiday schedule to be
observed in the future, the Federal Reserve Bank of San Francisco or the NYSE
may modify its holiday schedule at any time. Please place your trades as early
in the day as possible on a day before or after a holiday. To the extent that
the fund's portfolio securities are traded in other markets on days the Federal
Reserve Bank of San Francisco or the NYSE is closed, the fund's Net Asset Value
may be affected when investors do not have access to the fund to buy or sell
shares. Other Franklin Templeton Funds may follow different holiday closing
schedules.

WRITTEN INSTRUCTIONS

Written instructions must be signed by all registered owners. To avoid any delay
in processing your transaction, they should include:

o Your name,

o The fund's name,

o A description of the request,

o For exchanges, the name of the fund you are exchanging into,

o Your account number,

o The dollar amount or number of shares, and

o A telephone number where we may reach you during the day, or in the evening
if preferred.

SIGNATURE GUARANTEES

For our mutual protection, we require a signature guarantee in the following
situations:

1) You wish to sell over $50,000 worth of shares,

2) You want the proceeds to be paid to someone other than the registered owners,

3) The proceeds are not being sent to the address of record, preauthorized bank
account, or preauthorized brokerage firm account,

4) We receive instructions from an agent, not the registered owners,

5) We believe a signature guarantee would protect us against potential claims
based on the instructions received.

SHARE CERTIFICATES

We will credit your shares to your fund account. We do not issue share
certificates. This eliminates the costly problem of replacing lost, stolen or
destroyed certificates.

TELEPHONE TRANSACTIONS

You may initiate many transactions and changes to your account by phone,
including by facsimile or computer. Please refer to the sections of this
prospectus that discuss the transaction you would like to make or call
Institutional Services at 1-800/321-8563.

When you call, we will request personal, corporate, or other identifying
information to confirm that instructions are genuine. We may also record calls.

RETIREMENT PLANS. The telephone transaction options available to retirement
plans are limited to those that are provided under the plan.

Type of Account Documents Required
- ------------------------------------------------------------------------------

CORPORATION Corporate Resolution
- ------------------------------------------------------------------------------

PARTNERSHIP 1. The pages from the partnership agreement that
identify the general partners, or

2. A certification for a partnership agreement
- ------------------------------------------------------------------------------

TRUST 1. The pages from the trust document that identify
the trustees, or

2. A certification for trust
- ------------------------------------------------------------------------------

KEEPING YOUR ACCOUNT OPEN

Due to the relatively high cost of maintaining a small account, we may close
your account if the value of your shares is less than $20,000 (or one-half the
minimum required investment, whichever is less). We will only do this if the
value of your account fell below this amount because you voluntarily sold your
shares and your account has been inactive (except for the reinvestment of
distributions) for at least six months. Before we close your account, we will
notify you and give you 30 days to increase the value of your account to the
minimum amount.

SERVICES TO HELP YOU MANAGE YOUR ACCOUNT

CUMULATIVE QUANTITY DISCOUNTS

For additional information regarding these programs, please call Institutional
Services at 1-800/321-8563.

STATEMENTS AND REPORTS TO SHAREHOLDERS

We will send you the following statements and reports on a regular basis:

o Confirmation and account statements reflecting transactions in your account,
including additional purchases and dividend reinvestments. PLEASE VERIFY THE
ACCURACY OF YOUR STATEMENTS WHEN YOU RECEIVE THEM.

o Financial reports of the fund will be sent every six months. Call
Institutional Services if you would like an additional free copy of the
fund's financial reports.

SPECIAL SERVICES

AVAILABILITY OF THESE SERVICES

The services above are available to most shareholders. If, however, your shares
are held by a financial institution or in a street name account, the fund may
not be able to offer these services directly to you. In particular, retirement
plans that use the services of Franklin's ValuSelect or another administrative
service should follow their standard procedures. Otherwise, retirement plans
will receive detailed instructions on how to access or make use of the various
options offered by the fund.

GENERAL

WHAT IF I HAVE QUESTIONS ABOUT MY ACCOUNT?

If you have any questions about your account, you may write to Institutional
Services at 777 Mariners Island Blvd., P.O. Box 7777, San Mateo, California
94403-7777. The fund, Distributors, and Advisers are also located at this
address. You may also contact us by phone at 1-800/321-8563, Monday through
Friday, from 6:00 a.m. to 5:00 p.m. Pacific time.

If you are a ValuSelect plan participant you may obtain current price, yield and
performance information regarding the Franklin Templeton Funds included in the
plan by calling KeyFACTSSM at 1-800/KEY-2110.

Your phone call may be monitored or recorded to ensure we provide you with high
quality service. You will hear a regular beeping tone if your call is being
recorded.

GLOSSARY

USEFUL TERMS AND DEFINITIONS

ADVISERS - Franklin Advisers, Inc., the Portfolio's investment manager and
the fund's administrator

BOARD - The Board of Trustees of the Trust

CLASS I - Certain funds in the Franklin Templeton Funds offer multiple classes
of shares. The different classes have proportionate interests in the same
portfolio of investment securities. They differ, however, primarily in their
sales charge structures and Rule 12b-1 plans. Shares of the fund are considered
Class I shares for redemption, exchange and other purposes.

CODE - Internal Revenue Code of 1986, as amended

CONTINGENT DEFERRED SALES CHARGE (CDSC) - A sales charge of 1% that may apply if
you sell your shares within the Contingency Period.

DISTRIBUTORS - Franklin/Templeton Distributors, Inc., the fund's principal
underwriter. The SAI lists the officers and Board members who are affiliated
with Distributors. See "Officers and Trustees."

FRANKLIN TEMPLETON GROUP - Franklin Resources, Inc., a publicly owned holding
company, and its various subsidiaries

FRANKLIN TEMPLETON GROUP OF FUNDS - All U.S. registered investment companies
in the Franklin Group of Funds(R) and the Templeton Group of Funds

INSTITUTIONAL SERVICES - Franklin Templeton Institutional Services Department

INVESTOR SERVICES - Franklin/Templeton Investor Services, Inc., the fund's
shareholder servicing and transfer agent

IRS - Internal Revenue Service

NYSE - New York Stock Exchange

RESOURCES - Franklin Resources, Inc.

SAI - Statement of Additional Information

SEC - U.S. Securities and Exchange Commission

WE/OUR/US - Unless the context indicates a different meaning, these terms refer
to the fund and/or Institutional Services, Investor Services, Distributors, or
other wholly owned subsidiaries of Resources.

FGF09/98 149 P 11/98

INSTITUTIONAL
FIDUCIARY TRUST

MONEY MARKET PORTFOLIO
FRANKLIN U.S. GOVERNMENT SECURITIES
MONEY MARKET PORTFOLIO

STATEMENT OF
ADDITIONAL INFORMATION

NOVEMBER 1, 1998

777 MARINERS ISLAND BLVD., P.O. BOX 7777
SAN MATEO, CA 94403-7777 1-800/321-8563

TABLE OF CONTENTS

How Do the Funds Invest Their Assets? ......................... 2

Investment Restrictions ....................................... 4

Officers and Trustees ......................................... 6

Investment Management and
Other Services ............................................... 10

How Does The Portfolio Buy
Securities for Its Portfolio? ................................ 12

How Do I Buy, Sell
and Exchange Shares? ......................................... 13

How Are Fund Shares Valued? ................................... 14

Additional Information on
Distributions and Taxes ...................................... 15

The Funds' Underwriter ........................................ 17

How Do the Funds
Measure Performance? ......................................... 18

Miscellaneous Information ..................................... 19

Financial Statements .......................................... 21

Useful Terms and Definitions .................................. 21

Appendices

Summary of Procedures to
Monitor Conflicts of Interest ............................... 21

California Government Code
Section 53601 ............................................... 22

California Government Code
Section 53635 ............................................... 25

Description of Ratings ....................................... 28

- ------------------------------------------------------------------------------
When reading this SAI, you will see certain terms beginning with capital
letters. This means the term is explained under "Useful Terms and
Definitions."
- ------------------------------------------------------------------------------

The Money Market Portfolio (the "Money Fund") and the Franklin U.S. Government
Securities Money Market Portfolio (the "U.S. Securities Fund") are no-load,
diversified series of Institutional Fiduciary Trust (the "Trust"), an open-end
management investment company. The Prospectus, dated November 1, 1998, which we
may amend from time to time, contains the basic information you should know
before investing in a fund. For a free copy, call 1-800/321-8563.

THIS SAI IS NOT A PROSPECTUS. IT CONTAINS INFORMATION IN ADDITION TO AND IN MORE
DETAIL THAN SET FORTH IN THE PROSPECTUS. THIS SAI IS INTENDED TO PROVIDE YOU
WITH ADDITIONAL INFORMATION REGARDING THE ACTIVITIES AND OPERATIONS OF EACH
FUND, AND SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS.

- ------------------------------------------------------------------------------
MUTUAL FUNDS, ANNUITIES, AND OTHER INVESTMENT PRODUCTS:

o ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY OF THE U.S. GOVERNMENT;

o ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY BANK;

o ARE SUBJECT TO INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL
- -------------------------------------------------------------------------------

HOW DO THE FUNDS INVEST THEIR ASSETS?

WHAT ARE THE FUNDS' GOALS?

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 that it may not be changed
without shareholder approval. Each fund also tries to maintain a stable Net
Asset Value of $1 per share. The Money Fund seeks to achieve its investment goal
by investing all of its assets in shares of The Money Market Portfolio (the
"Money Portfolio") and the U.S. Securities Fund by investing in The U.S.
Government Securities Money Market Portfolio (the "U.S. Securities Portfolio").
The Money Portfolio and the U.S. Securities Portfolio are series of The Money
Market Portfolios ("Money Market"). References in the SAI to the "Portfolio,"
unless the context indicates that an individual portfolio is being referenced,
are to both the Money Portfolio and the U.S. Securities Portfolio. Their
investment goals are the same as the funds'.

The following gives more detailed information about the Portfolio's investment
policies and the types of securities that it may buy. Please read this
information together with the section "How Do the Funds Invest Their Assets?" in
the Prospectus.

MORE INFORMATION ABOUT THE
KINDS OF SECURITIES THE PORTFOLIO BUYS

BANK OBLIGATIONS. The Money Portfolio may invest in certain bank obligations or
instruments secured by bank obligations. 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.

VARIABLE MASTER DEMAND NOTES are a type of commercial paper in which the Money
Portfolio 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 Portfolio, 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 Portfolio 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 Portfolio'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,
Advisers considers, among other things, the earnings power, cash flow and other
liquidity ratios of the issuer.

ASSET-BACKED SECURITIES. The Money Portfolio may invest in asset-backed
securities. 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.

MUNICIPAL SECURITIES. The Money Portfolio may invest up to 10% of its assets in
taxable municipal securities. Municipal securities are issued by or on behalf of
states, territories or possessions of the U.S., the District of Columbia, or
their political subdivisions, agencies or instrumentalities. They are generally
issued to raise money for various public purposes, such as constructing public
facilities and making loans to public institutions. Certain types of municipal
securities are issued to provide funding for privately operated facilities and
are generally taxable.

DIVERSIFICATION. The Money Portfolio is a diversified fund. As fundamental
policies: (a) the Money Portfolio may not buy a security if, with respect to 75%
of its total assets, more than 5% would be invested in the securities of any one
issuer, and (b) the Money Portfolio may not invest in a security if the Money
Portfolio would own more than 10% of the outstanding voting securities of any
one issuer. These limitations do not apply to obligations issued or guaranteed
by the U.S. government or its instrumentalities.

As a money market fund, however, the Portfolio must follow certain procedures
required by federal securities laws that may be more restrictive than some of
the Portfolio's other policies or investment restrictions. With respect to
diversification, these procedures require that the Portfolio not invest more
than 5% of its total assets in securities of a single issuer, other than U.S.
government securities, although it may invest up to 25% of its total assets in
securities of a single issuer that are rated in the highest rating category for
a period of up to three business days after purchase. The Portfolio also must
not invest more than (a) the greater of 1% of its total assets or $1 million in
securities issued by a single issuer that are rated in the second highest rating
category; and (b) 5% of its total assets in securities rated in the second
highest rating category. These procedures are fundamental policies of the
Portfolio.

MORE INFORMATION ABOUT SOME OF THE PORTFOLIOS'
OTHER INVESTMENT STRATEGIES AND PRACTICES

WHEN-ISSUED OR DELAYED-DELIVERY TRANSACTIONS. When the Money Portfolio 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 Portfolio will
not engage in when-issued and delayed-delivery transactions for investment
leverage purposes.

REPURCHASE AGREEMENTS. Under a repurchase agreement, the seller is required to
maintain the value of the securities subject to the repurchase agreement at not
less than the repurchase price. Advisers 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 seller, including possible delays or restrictions upon the
Portfolio's ability to dispose of the underlying securities. The Portfolio will
enter into repurchase agreements only with parties who meet creditworthiness
standards approved by Money Market's Board of Trustees, i.e., banks or
broker-dealers that have been determined by Advisers to present no serious risk
of becoming involved in bankruptcy proceedings within the time frame
contemplated by the repurchase transaction.

LOANS OF PORTFOLIO SECURITIES. Consistent with procedures approved by the Board
of Trustees of Money Market and subject to the following conditions, the
Portfolio may lend its portfolio securities to qualified securities dealers or
other institutional investors, if such loans do not exceed 25% of the value of
the Money Portfolio's total assets and 10% of the value of the U.S. Securities
Portfolio's total assets at the time of the most recent loan. The Portfolio,
however, currently intends to limit its lending of securities to no more than 5%
of it total assets. The borrower must deposit with the Portfolio's custodian
bank collateral with an initial market value of at least 102% of the market
value of the securities loaned, including any accrued interest, with the value
of the collateral and loaned securities marked-to-market daily to maintain
collateral coverage of at least 100%. For the Money Portfolio, this collateral
shall consist of cash; for the U.S. Securities Portfolio, this collateral shall
consist of cash, securities issued by the U.S. government, its agencies or
instrumentalities, or irrevocable letters of credit. The lending of securities
is a common practice in the securities industry. The Portfolio may engage in
security loan arrangements with the primary objective of increasing the
Portfolio's income either through investing cash collateral in short-term
interest-bearing obligations or by receiving a loan premium from the borrower.
Under the securities loan agreement, the Portfolio continues to be entitled to
all dividends or interest on any loaned securities. As with any extension of
credit, there are risks of delay in recovery and loss of rights in the
collateral should the borrower of the security fail financially.

BORROWING. The Money Portfolio may borrow up to 5% of its total assets from
banks for temporary or emergency purposes. The maximum amount the U.S.
Securities Portfolio may borrow from banks for such purposes is 10% of its total
assets. The Portfolio will not make any new investments while any outstanding
loans exceed 5% of its total assets.

ILLIQUID INVESTMENTS. The Money Portfolio'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 Portfolio has valued
them.

OTHER LIMITATIONS. The Money Portfolio 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 Portfolio 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 Code.

THE FUNDS' MASTER/FEEDER STRUCTURE

Each fund's structure, where it invests all of its assets in the Portfolio, is
sometimes known as a "Master/Feeder" structure. By investing all of its assets
in shares of the Portfolio, each fund, other mutual funds and institutional
investors can pool their assets. This may result in asset growth and lower
expenses, although there is no guarantee that this will happen.

If a fund, as a shareholder of the Portfolio, has to vote on a matter relating
to the Portfolio, it will hold a meeting of fund shareholders and will cast its
votes in the same proportion as the fund's shareholders voted.

There are some risks associated with the funds' Master/Feeder structure. If
other shareholders in the Portfolio sell their shares, the corresponding fund's
expenses may increase. Additionally, any economies of scale a fund has achieved
as a result of the structure may be diminished. Institutional investors in the
Portfolio that have a greater pro rata ownership interest in the Portfolio than
the corresponding fund could also have effective voting control.

If the Portfolio changes its investment goal or any of its fundamental policies
and fund shareholders do not approve the same change for the corresponding fund,
the fund may need to withdraw its investment from the Portfolio. Likewise, if
the Board considers it to be in a fund's best interest, it may withdraw the
fund's investment from the Portfolio at any time. If either situation occurs,
the Board will decide what action to take. Possible solutions might include
investing all of a fund's assets in another pooled investment entity with the
same investment goal and substantially similar policies as the fund, or hiring
an investment advisor to manage the fund's investments. Either circumstance
could increase a fund's expenses.

INVESTMENT RESTRICTIONS

Each fund has adopted the following restrictions as fundamental policies. These
restrictions may not be changed without the approval of a majority of the
outstanding voting securities of the fund. Under the 1940 Act, this means the
approval of (i) more than 50% of the outstanding shares of a fund or (ii) 67% or
more of the shares of a fund present at a shareholder meeting if more than 50%
of the outstanding shares of a fund 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 objectives 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,
except that, to the extent this restriction is applicable, all or substantially
all of the assets of the fund may be invested in another registered investment
company having the same investment objectives and policies as the fund.

(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, except that, to the extent
this restriction is applicable, the fund may purchase, in private placements,
shares of another registered investment company having the same investment
objectives and policies as the fund.

(6) Purchase securities of other investment companies, except in connection
with a merger, consolidation, acquisition or reorganization; provided that all
or substantially all of the assets of the fund may be invested in another
registered investment company having the same investment objectives and policies
as the fund.

(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 the Prospectus, 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; except that all
or substantially all of the assets of the fund may be invested in another
registered investment company having the same investment objectives and policies
as the fund.

(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 investment adviser own beneficially more than 1/2
of 1% of the securities of such issuer and all such officers and trustees
together own beneficially more than 5% of such securities.

(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.

In addition to the above restrictions, the funds have the following fundamental
policies, which may only be changed with shareholder approval: i) the U.S.
Securities Fund may invest only in marketable securities issued or guaranteed by
the U.S. government, by various agencies of the U.S. government and by various
instrumentalities that have been established or sponsored by the U.S.
government, including U.S. Treasury bills, notes, bonds and securities of the
Government National Mortgage Association ("GNMA") and the Federal Housing
Administration, which are issued or guaranteed by the U.S. government or which
carry a guarantee supported by the full faith and credit of the U.S. government;
or in another open-end investment company (such as the U.S. Securities
Portfolio) that has a fundamental policy to invest in these types of securities;
ii) each fund will invest 100% of its assets in securities with remaining
maturities of 397 days or less, or in another open-end management investment
company that has the same fundamental investment policy; iii) the Money Fund
will invest primarily in various types of money market instruments, such as U.S.
government and federal agency obligations, certificates of deposit, banker's
acceptances, time deposits of major financial institutions, high grade
commercial paper, high grade short-term corporate obligations, taxable municipal
securities and repurchase agreements (secured by U.S. government securities) and
may seek its objectives by investing all or substantially all of its assets in
an open-end management investment company with the same investment objectives
and policies; iv) the Money Fund may not purchase the securities of any one
issuer (other than obligations of the U.S. government, its agencies or
instrumentalities) if, immediately thereafter, more than 5% of the value of its
total assets would be invested in the securities of any one issuer with respect
to 75% of the Money Fund's total assets (pursuant to an operating policy on
diversification adopted by the Board and the Board of Trustees of Money Market
to comply with requirements under SEC Rule 2a-7, the 5% limitation applies to
the Portfolio's total assets and is more restrictive than the fund's fundamental
policy), or more than 10% of the outstanding voting securities of any one issuer
would be owned by the Money Fund, except that this policy does not apply to the
extent all or substantially all of the assets of the Money Fund may be invested
in another registered investment company having the same investment objectives
and policies as the Money Fund; and v) the Money Fund may not invest more than
5% of its total assets in the securities of companies (including predecessors)
that have been in continuous operation for less than three years, nor invest
more than 25% of its total assets in any particular industry, except that this
policy is inapplicable to the extent all or substantially all of the assets of
the Money Fund may be invested in another registered investment company having
the same investment objectives and policies as the Money Fund.

In addition to these fundamental policies, it is the present policy of the
funds, which may be changed without shareholder approval, 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 program.

To continue its money market status in Texas, the Money Fund and its respective
Portfolio will comply with Section 123.3 of the Texas Administrative Code (as
stated in Conditions 1-7 listed in Form 133.26, entitled "Request for
Determination as a Money Market Fund," with the understanding that Condition 4
excludes expenses of the Money Fund's transfer agent associated with shareholder
recordkeeping and reporting).

If a 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 assets will not be considered a violation
of any of the foregoing restrictions.

Money Market's trustees have elected to value the Portfolio's assets in
accordance with SEC Rule 2a-7. This rule also imposes various restrictions on
the Portfolio which are, in some cases, more restrictive than the Portfolio's
other stated fundamental policies and investment restrictions. The Portfolio
must comply with these provisions unless its shareholders vote to change its
policy of being a money market fund.

OFFICERS AND TRUSTEES

The Board has the responsibility for the overall management of each fund,
including general supervision and review of its investment activities. The
Board, in turn, elects the officers of each fund who are responsible for
administering the fund's day-to-day operations. The affiliations of the officers
and Board members and their principal occupations for the past five years are
shown below. Members of the Board who are considered "interested persons" of
each fund under the 1940 Act are indicated by an asterisk (*).

Frank H. Abbott, III (77) Trustee
1045 Sansome Street
San Francisco, CA 94111

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) and Vacu-Dry Co. (food processing).

Harris J. Ashton (66) Trustee
191 Clapboard Ridge Road
Greenwich, CT 06830

Director, RBC Holdings, Inc. (a bank holding company) and Bar-S Foods (a meat
packing company); director or trustee, as the case may be, of 49 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).

Robert F. Carlson (70) Trustee
2120 Lambeth Way
Carmichael, CA 95608

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,
Sacramento, CA, member, Corporate Board, Blue Shield of California, and Chief
Counsel, California Department of Transportation.

S. Joseph Fortunato (66) Trustee
Park Avenue at Morris County
P.O. Box 1945
Morristown, NJ 07962-1945

Member of the law firm of Pitney, Hardin, Kipp & Szuch; director or trustee, as
the case may be, of 51 of the investment companies in the Franklin Templeton
Group of Funds; and FORMERLY, Director, General Host Corporation (nursery and
craft centers).

* Charles B. Johnson (65) Chairman
777 Mariners Island Blvd. of the Board
San Mateo, CA 94404 and Trustee

President, Chief Executive Officer and Director, Franklin Resources, Inc.;
Chairman of the Board and Director, Franklin Advisers, Inc., Franklin Advisory
Services, 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 50 of the investment companies in the Franklin Templeton Group of
Funds; and FORMERLY, Director, General Host Corporation (nursery and craft
centers).

* Charles E. Johnson (42) President
500 East Broward Blvd. and Trustee
Fort Lauderdale, FL
33394-3091

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 34 of the investment companies in
the Franklin Templeton Group of Funds.

* Rupert H. Johnson, Jr. (58) Vice President
777 Mariners Island Blvd. and Trustee
San Mateo, CA 94404

Executive Vice President and Director, Franklin Resources, Inc. and Franklin
Templeton Distributors, Inc.; President and Director, Franklin Advisers, Inc.;
Senior Vice President and Director, Franklin Advisory Services, Inc. and
Franklin Investment Advisory Services, Inc.; 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 53 of
the investment companies in the Franklin Templeton Group of Funds.

Frank W.T. LaHaye (69) Trustee
20833 Stevens Creek Blvd.
Suite 102
Cupertino, CA 95014

General Partner, Miller & LaHaye, which is the General Partner of Peregrine
Ventures II (venture capital firm); Chairman of the Board and Director,
Quarterdeck Corporation (software firm); Director, Digital Transmission Systems,
Inc. (wireless communications); 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) and
General Partner, Peregrine Associates, which was the General Partner of
Peregrine Ventures (venture capital firm).

Gordon S. Macklin (70) Trustee
8212 Burning Tree Road
Bethesda, MD 20817

Director, Fund American Enterprises Holdings, Inc., MCI Communications
Corporation, MedImmune, Inc. (biotechnology), Spacehab, Inc. (aerospace
services) and Real 3D (software); director or trustee, as the case may be, of 49
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 (53) Vice President
777 Mariners Island Blvd.
San Mateo, CA 94404

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/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 53 of the
investment companies in the Franklin Templeton Group of Funds.

Martin L. Flanagan (38) Vice President
777 Mariners Island Blvd. and Chief
San Mateo, CA 94404 Financial Officer

Senior Vice President and Chief Financial Officer, Franklin Resources, Inc.;
Executive Vice President 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, Inc. and Franklin
Investment Advisory Services, Inc.; President and Director, Franklin Templeton
Services, Inc.; Senior Vice President and Chief Financial Officer,
Franklin/Templeton Investor 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 53 of the investment companies in the
Franklin Templeton Group of Funds.

Deborah R. Gatzek (49) Vice President
777 Mariners Island Blvd. and Secretary
San Mateo, CA 94404

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, Inc.; Vice President, Chief Legal Officer
and Chief Operating Officer, Franklin Investment Advisory Services, Inc.; and
officer of 53 of the investment companies in the Franklin Templeton Group of
Funds.

Diomedes Loo-Tam (59) Treasurer and
777 Mariners Island Blvd. Principal
San Mateo, CA 94404 Accounting
Officer

Senior Vice President, Franklin Templeton Services, Inc.; and officer of 32 of
the investment companies in the Franklin Templeton Group of Funds.

Thomas J. Runkel (40) Vice President
777 Mariners Island Blvd.
San Mateo, CA 94404

Vice President, Franklin Advisers, Inc.; and officer of four of the investment
companies in the Franklin Templeton Group of Funds.

The officers and Board members of the fund are also officers and trustees of
Money Market, except as follows: Thomas J. Runkel, Vice President of the Trust,
is not an officer or trustee of Money Market; and Edward V. McVey and R. Martin
Wiskemann are officers of Money Market but not the Trust.

Edward V. McVey (61) Vice President
777 Mariners Island Blvd.
San Mateo, CA 94404

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 (71) Vice President
777 Mariners Island Blvd.
San Mateo, CA 94404

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.

The tables above show the officers, Board members and the trustees of Money
Market who are affiliated with Distributors and Advisers. As of June 1, 1998,
nonaffiliated members of the Board are paid $310 per month plus $225 per meeting
attended. Also as of June 1, 1998, nonaffiliated trustees of Money Market are no
longer paid any fees. As shown above, the nonaffiliated Board members and
trustees of Money Market also serve as directors or trustees of other investment
companies in the Franklin Templeton Group of Funds. They may receive fees from
these funds for their services. The fees payable to nonaffiliated 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 nonaffiliated Board members and trustees of Money Market by the Trust,
by Money Market, and by other funds in the Franklin Templeton Group of Funds.

NUMBER OF BOARDS
TOTAL FEES IN THE FRANKLIN
TOTAL FEES TOTAL FEES RECEIVED FROM THE TEMPLETON GROUP
RECEIVED FROM RECEIVED FROM FRANKLIN TEMPLETON OF FUNDS ON WHICH
NAME THE TRUST* MONEY MARKET* GROUP OF FUNDS** EACH SERVES***
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Frank H. Abbott, III .... $4,810 $1,100 $165,937 27
Harris J. Ashton ........ 4,626 1,050 344,642 49
Robert Carlson .......... 2,335 450 17,680 9
S. Joseph Fortunato ..... 4,599 1,050 361,562 51
David W. Garbellano+ .... 800 200 91,317 N/A
Frank W.T. LaHaye ....... 4,810 1,100 141,433 27
Gordon S. Macklin ....... 4,626 1,050 337,292 49
</TABLE>

*For the fiscal year ended June 30, 1998. During the period from July 1, 1997
through May 31, 1998, fees at the rate of $200 per month plus $200 per meeting
attended were in effect for the Trust and fees at the rate of $50 per month plus
$50 per meeting attended were in effect for Money Market.
**For the calendar year ended December 31, 1997.
***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 and trustees of Money Market are responsible. The Franklin Templeton
Group of Funds currently includes 54 registered investment companies, with
approximately 168 U.S. based funds or series.
+Deceased, September 27, 1997.

Nonaffiliated members of the Board and trustees of Money Market 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 or trustee of Money Market
received any other compensation, including pension or retirement benefits,
directly or indirectly from the funds, Money Market or other funds in the
Franklin Templeton Group of Funds. Certain officers or Board members and
trustees of Money Market who are shareholders of Resources may be deemed to
receive indirect remuneration by virtue of their participation, if any, in the
fees paid to its subsidiaries.

As of August 4, 1998, the officers and Board members, as a group, owned of
record and beneficially approximately 4,350,281 shares, or 1.9% of the Money
Fund's total outstanding shares. As of August 4, 1998, the officers and Board
members did not own of record or beneficially any shares of the U.S.
Securities Fund. Many of the Board members also own shares in other funds in
the Franklin Templeton Group of Funds. Charles B. Johnson and Rupert H.
Johnson, Jr. are brothers and the father and uncle, respectively, of Charles
E. Johnson.

INVESTMENT MANAGEMENT AND OTHER SERVICES

INVESTMENT MANAGER AND ADMINISTRATOR AND SERVICES PROVIDED. Advisers is the
investment manager of the Portfolio and is also the administrator of the fund.
Advisers provides investment research and portfolio management services,
including the selection of securities for the Portfolio to buy, hold or sell and
the selection of brokers through whom the Portfolio's portfolio transactions are
executed. Advisers' activities are subject to the review and supervision of the
Board of Trustees of Money Market to whom Advisers renders periodic reports of
the Portfolio's investment activities. Advisers and its officers, directors and
employees are covered by fidelity insurance for the protection of each fund and
the Portfolio.

Advisers and its affiliates act as investment manager to numerous other
investment companies and accounts. Advisers 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 Advisers on behalf of the Portfolio. Similarly, with
respect to the Portfolio, Advisers is not obligated to recommend, buy or sell,
or to refrain from recommending, buying or selling any security that Advisers
and access persons, as defined by the 1940 Act, may buy or sell for its or their
own account or for the accounts of any other fund. Advisers is not obligated to
refrain from investing in securities held by the Portfolio or other funds that
it manages. Of course, any transactions for the accounts of Advisers and other
access persons will be made in compliance with the Portfolio's Code of Ethics.
Please see "Miscellaneous Information - Summary of Code of Ethics."

MANAGEMENT AND ADMINISTRATION FEES. Under its management agreement, the
Portfolio pays Advisers a management fee equal to an annual rate of 0.15 of 1%
of the Portfolio's average daily net assets. The fee is computed at the close of
business on the last business day of each month .

Advisers provides various administrative, statistical, and other services to the
funds. Under its administration agreement, each fund pays Advisers an
administration fee equal to an annual rate of 0.20 of 1% of the value of the
fund's average daily net assets. The fee is computed at the close of business on
the last business day of each month.

For the periods shown, Advisers had agreed in advance to waive all or a portion
of its management and administration fees. The tables below show the management
fees of the Portfolio and administration fees of each fund, before any advance
waiver, and the management fees paid by the Portfolio and administration fees
paid by each fund for the fiscal years ended June 30, 1998, 1997, and 1996.

MANAGEMENT
FEES BEFORE MANAGEMENT
ADVANCE WAIVER FEES PAID
- -----------------------------------------------------------------------
1998
Money Portfolio $2,963,304 $2,830,858
U.S. Securities Portfolio 394,321 367,433

1997
Money Portfolio 2,547,891 $2,429,509
U.S. Securities Portfolio 404,358 364,509

1996
Money Portfolio 2,162,519 $2,034,014
U.S. Securities Portfolio 484,382 424,848

ADMINISTRATION
FEES BEFORE ADMINISTRATION
ADVANCE WAIVER FEES PAID
- -----------------------------------------------------------------------
1998
Money Fund $104,796 $39,173
U.S. Securities Fund 66,469 0

1997
Money Fund 150,356 70,428
U.S. Securities Fund 70,196 1,694

1996
Money Fund 154,740 28,073
U.S. Securities Fund 98,326 0

MANAGEMENT AGREEMENT. The management agreement for the Portfolio is in effect
until February 28, 1999. It may continue in effect for successive annual periods
if its continuance is specifically approved at least annually by a vote of the
Board of Trustees of Money Market or by a vote of the holders of a majority of
the Portfolio's outstanding voting securities, and in either event by a majority
vote of the trustees of Money Market who are not parties to the management
agreement or interested persons of any such party (other than as members of the
Board of Trustees of Money Market), cast in person at a meeting called for that
purpose. The management agreement may be terminated without penalty at any time
by the Board of Trustees of Money Market or by a vote of the holders of a
majority of the Portfolio's outstanding voting securities on 30 days' written
notice to Advisers, or by Advisers on 60 days' written notice to the Portfolio,
and will automatically terminate in the event of its assignment, as defined in
the 1940 Act.

SHAREHOLDER SERVICING AGENT. Investor Services, a wholly-owned subsidiary of
Resources, is the funds' shareholder servicing agent and acts as the funds'
transfer agent and dividend-paying agent. Investor Services is compensated on
the basis of a fixed fee per account. Each fund 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. Investor Services, in its capacity as the transfer agent for the
Portfolio, effectively acts as the fund's custodian and holds the fund's shares
of the corresponding Portfolio on its books. Bank of New York, Mutual Funds
Division, 90 Washington Street, New York, New York 10286, acts as custodian of
each fund's cash, pending investment in shares of the Portfolio. Bank of New
York also acts as custodian of the securities and other assets of the Portfolio.
The custodian does not participate in decisions relating to the purchase and
sale of portfolio securities.

AUDITOR. PricewaterhouseCoopers LLP, 333 Market Street, San Francisco,
California 94105, is the funds' independent auditor. During the fiscal year
ended June 30, 1998, the auditor's services consisted of rendering an opinion on
the financial statements of the Trust included in the Trust's Annual Report to
Shareholders for the fiscal year ended June 30, 1998.

HOW DOES THE PORTFOLIO
BUY SECURITIES FOR ITS PORTFOLIO?

The funds will not incur any brokerage or other costs in connection with their
purchase or redemption of shares of the Portfolio.

Since most purchases by the Portfolio are principal transactions at net prices,
the Portfolio incurs little or no brokerage costs. The Portfolio deals directly
with the selling or buying principal or market maker without incurring charges
for the services of a broker on its behalf, unless it is determined that a
better price or execution may be obtained by using the services of a broker.
Purchases of portfolio securities from underwriters will include a commission or
concession paid by the issuer to the underwriter, and purchases from dealers
will include a spread between the bid and ask prices. The Portfolio seeks to
obtain prompt execution of orders at the most favorable net price. Transactions
may be directed to dealers in return for research and statistical information,
as well as for special services provided by the dealers in the execution of
orders.

It is not possible to place a dollar value on the special executions or on the
research services Advisers receives from dealers effecting transactions in
portfolio securities. The allocation of transactions in order to obtain
additional research services permits Advisers 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, Advisers 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, may also be considered a factor in the selection of broker-dealers to
execute the Portfolio's transactions.

If purchases or sales of securities of the Portfolio and one or more other
investment companies or clients supervised by Advisers 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 Advisers, taking into account the respective sizes of the funds and the
amount of securities to be purchased or sold. In some cases this procedure could
have a detrimental effect on the price or volume of the security so far as the
Portfolio is concerned. In other cases it is possible that the ability to
participate in volume transactions may improve execution and reduce transaction
costs to the Portfolio.

Depending on Advisers' view of market conditions, the Portfolio may or may not
buy securities with the expectation of holding them to maturity, although its
general policy is to hold securities to maturity. The Portfolio may, however,
sell securities before maturity to meet redemptions or as a result of a revised
management evaluation of the issuer.

During the fiscal years ended June 30, 1998, 1997 and 1996, the Portfolio paid
no brokerage commissions.

As of June 30, 1998, The Money Market Portfolio owned securities issued by
Morgan Stanley Dean Witter & Co. valued in the aggregate at $80 million, J.P.
Morgan & Co. valued in the aggregate at $49 million, and Swiss Bank Corp.,
valued in the aggregate at $25 million. Morgan Stanley Dean Witter & Co, J.P.
Morgan & Co. and Swiss Bank Corp. are regular broker-dealers of the
Portfolio. Except as noted, neither the funds nor the corresponding Portfolio
owned securities issued by their regular broker-dealers as of the end of the
fiscal year.

HOW DO I BUY, SELL AND EXCHANGE SHARES?

ADDITIONAL INFORMATION ON BUYING SHARES

The funds continuously offer their shares through Securities Dealers who have an
agreement with Distributors. Banks and financial institutions that sell shares
of the funds may be required by state law to register as Securities Dealers.

All purchases of fund shares will be credited to you, in full and fractional
shares of the fund (rounded to the nearest 1/100 of a share), in an account
maintained for you by the fund's transfer agent. No share certificates will be
issued. The offering of shares of the funds may be suspended at any time and
resumed at any time thereafter.

ADDITIONAL INFORMATION ON EXCHANGING SHARES

If a substantial number of shareholders should, within a short period, sell
their shares of a fund under the exchange privilege, the fund might have to sell
portfolio securities it might otherwise hold and incur the additional costs
related to such transactions.

The proceeds from the sale of shares of an investment company are generally not
available until the seventh day following the sale. The funds you are seeking to
exchange into may delay issuing shares pursuant to an exchange until that
seventh day. The sale of fund shares to complete an exchange will be effected at
Net Asset Value at the close of business on the day the request for exchange is
received in proper form. Please see "May I Exchange Shares for Shares of Another
Fund?" in the Prospectus.

ADDITIONAL INFORMATION ON SELLING SHARES

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.

GENERAL INFORMATION

If dividend checks are returned to the funds marked "unable to forward" by the
postal service, we will consider this a request by you to change your dividend
option to reinvest all distributions. The proceeds will be reinvested in
additional shares at Net Asset Value until we receive new instructions.

Distribution or redemption checks sent to you do not earn interest or any other
income during the time the checks remain uncashed. Neither the funds nor their
affiliates will be liable for any loss caused by your failure to cash such
checks. The funds are not responsible for tracking down uncashed checks, unless
a check is returned as undeliverable.

In most cases, if mail is returned as undeliverable we are required to take
certain steps to try to find you free of charge. If these attempts are
unsuccessful, however, we may deduct the costs of any additional efforts to find
you from your account. These costs may include a percentage of the account when
a search company charges a percentage fee in exchange for its location services.

All wires sent and received by the custodian bank and reported by the custodian
bank to a fund prior to 3:00 p.m. Pacific time, except on holidays, the day
before a holiday or the day after a holiday, are normally effective on the same
day, provided the fund is notified on time as provided in the Prospectus. All
wire payments received or reported by the custodian bank to a fund after 3:00
p.m. will be effective on the next business day. All checks or other negotiable
bank drafts will normally be effective within two business days for checks drawn
on a member bank of the Federal Reserve System and longer for most other checks.

All checks, drafts, wires and other payment mediums used to buy or sell shares
of a fund must be denominated in U.S. dollars, drawn on a U.S. bank, and are
accepted subject to collection at full face value. Checks drawn in U.S. funds on
foreign banks will not be credited to your account and dividends will not begin
accruing until the proceeds are collected, which may take a long period of time.
We may, in our sole discretion, either (a) reject any order to buy or sell
shares denominated in any other currency or (b) honor the transaction or make
adjustments to your account for the transaction as of a date and with a foreign
currency exchange factor determined by the drawee bank.

SPECIAL SERVICES. Investor Services may pay certain financial institutions that
maintain omnibus accounts with the funds on behalf of numerous beneficial owners
for recordkeeping operations performed with respect to such owners. For each
beneficial owner in the omnibus account, a fund may reimburse Investor Services
an amount not to exceed the per account fee that the fund normally pays Investor
Services. These financial institutions may also charge a fee for their services
directly to their clients.

Special procedures have been designed for banks and other institutions wishing
to open multiple accounts. An institution may open a single master account by
filing one application form with the fund, signed by personnel authorized to act
for the institution. Individual sub-accounts may be opened at the time the
master account is filed by listing them, or instructions may be provided to the
fund at a later date. These sub-accounts may be established by the institution
with registration either by name or number. The investment minimums applicable
to the fund are applicable to each sub-account. The fund will provide each
institution with a written confirmation for each transaction in a sub-account
and arrangements may be made at no additional charge for the transmittal of
duplicate confirmations to the beneficial owner of the sub-account.

The fund will provide to each institution, on a quarterly basis or more
frequently if requested, a statement setting forth each sub-account's share
balance, income earned for the period, income earned for the year to date, and
total current market value.

HOW ARE FUND SHARES VALUED?

The valuation of the Portfolio's securities, including any securities held in a
separate account maintained for when-issued securities, is based on the
amortized cost of the securities, which does not take into account unrealized
capital gains or losses. This method involves valuing an instrument at its cost
and thereafter assuming a constant amortization to maturity of any discount or
premium, regardless of the impact of fluctuating interest rates on the market
value of the instrument. While this method provides certainty in calculation, it
may result in periods during which value, as determined by amortized cost, is
higher or lower than the price the Portfolio would receive if it sold the
instrument. During periods of declining interest rates, the daily yield on
shares of the Portfolio computed as described above may tend to be higher than a
like computation made by a fund with identical investments but utilizing a
method of valuation based upon market prices and estimates of market prices for
all of its portfolio instruments. Thus, if the use of amortized cost by the
Portfolio resulted in a lower aggregate portfolio value on a particular day, a
prospective investor in the Portfolio would be able to obtain a somewhat higher
yield than would result from an investment in a fund utilizing only market
values, and existing investors in the Portfolio would receive less investment
income. The opposite would be true in a period of rising interest rates.

The Portfolio's use of amortized cost, which helps the Portfolio maintain its
Net Asset Value per share of $1, is permitted by a rule adopted by the SEC.
Under this rule, the Portfolio must adhere to certain conditions. The Portfolio
must maintain a dollar-weighted average portfolio maturity of 90 days or less
and only buy instruments having remaining maturities of 397 calendar days or
less. The Portfolio must also invest only in those U.S. dollar-denominated
securities that the Board of Trustees of Money Market determines present minimal
credit risks and that are rated in one of the two highest short-term rating
categories by nationally recognized rating services, or if unrated are deemed
comparable in quality, 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 rating categories.
Securities subject to floating or variable interest rates with demand features
that comply with applicable SEC rules may have stated maturities in excess of
one year.

The Board of Trustees of Money Market has established procedures designed to
stabilize, to the extent reasonably possible, the Portfolio's price per share at
$1, as computed for the purpose of sales and redemptions. These procedures
include a review of the Portfolio's holdings by the Board of Trustees of Money
Market, at such intervals as it may deem appropriate, to determine if the
Portfolio's Net Asset Value calculated by using available market quotations
deviates from $1 per share based on amortized cost. The extent of any deviation
will be examined by the Board of Trustees of Money Market. If a deviation
exceeds 1/2 of 1%, the trustees will promptly consider what action, if any, will
be initiated. If the Board of Trustees of Money Market 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.

ADDITIONAL INFORMATION
ON DISTRIBUTIONS AND TAXES

DISTRIBUTIONS

DISTRIBUTIONS OF NET INVESTMENT INCOME. A fund declares dividends for each day
that its Net Asset Value is calculated. These dividends will equal all of the
fund's daily net income payable to shareholders of record as of the close of
business the preceding day. A fund's daily net income includes its pro rata
share of the corresponding Portfolio's net income, less the estimated expenses
of the fund. The corresponding Portfolio's income consists of accrued interest
and any original issue or acquisition discount, plus or minus any gain or loss
on the sale of securities held by the corresponding Portfolio and changes in
unrealized appreciation or depreciation in securities held by the corresponding
Portfolio (to the extent required to maintain a constant net amount value), less
the estimated expenses of the corresponding Portfolio.

A fund earns income and gains on its investment in the corresponding Portfolio.
A Portfolio, in turn, earns income generally in the form of interest, original
issue, market and acquisition discount, and other income derived from its
investments. This income less expenses incurred in the operation of a Portfolio,
is paid to the corresponding fund as ordinary dividend income. The ordinary
dividend income received from a Portfolio, less expenses incurred in the
operation of the corresponding fund, constitute a fund's net investment income
from which dividends may be paid to you. Any distributions by a fund from such
income will be taxable to you as ordinary income, whether you take them in cash
or in additional shares.

DISTRIBUTIONS OF CAPITAL GAINS. A fund may receive capital gain distributions
from the corresponding Portfolio, consisting of the excess of any net long-term
capital gain over net short-term capital loss realized by the corresponding
Portfolio on the sale or disposition of its underlying portfolio securities. A
fund may also derive capital gains and losses in connection with the sale of
corresponding Portfolio shares. Distributions derived from the excess of net
short-term capital gain over net long-term capital loss will be taxable to you
as ordinary income. Distributions derived from the excess of net long-term
capital gain over net short-term capital loss, including capital gain
distributions received from a Portfolio, will be taxable to you as long-term
capital gain, regardless of how long you have held your shares in the fund. Any
net short-term or long-term capital gains realized by a fund (net of any capital
loss carryovers) generally will be distributed once each year, and may be
distributed more frequently, if necessary, in order to reduce or eliminate
federal excise or income taxes on such fund. Because each fund and its
corresponding Portfolio is a money market fund, it does not anticipate realizing
any long-term capital gains, however.

CERTAIN DISTRIBUTIONS PAID IN JANUARY. Distributions which are declared in
October, November or December and paid to you in January of the following year
will be treated for tax purposes as if they had been received by you on December
31 of the year in which they were declared. A fund will report this income to
you on your Form 1099-DIV for the year in which these distributions were
declared.

MAINTENANCE OF $1.00 NET ASSET VALUE. Gains and losses on the sale of
corresponding Portfolio shares and unrealized appreciation or depreciation in
the value of these shares may require a fund to distribute income or make
distribution adjustments in order to maintain a $1.00 Net Asset Value. These
procedures may result in under- or over-distributions of net investment income.

INFORMATION ON THE TAX CHARACTER OF DISTRIBUTIONS. A fund will inform you of the
amount and character of your distributions at the time they are paid, and will
advise you of the tax status for federal income tax purposes of such
distributions shortly after the close of each calendar year.

TAXES

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 Code, has
qualified as such for its most recent fiscal year, and intends so to qualify
during the current fiscal year. 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 its 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 you will be taxed as ordinary dividend income to
the extent of the fund's available earnings and profits.

In order to qualify as a regulated investment company for tax purposes, a fund
must meet certain specific requirements, including:

o A fund must maintain a diversified portfolio of securities, wherein no
security (other than U.S. government securities and securities of other
regulated investment companies) can exceed 25% of the fund's total assets,
and, with respect to 50% of the fund's total assets, no investment (other
than cash and cash items, U.S. government securities and securities of other
regulated investment companies) can exceed 5% of the fund's total assets or
10% of the outstanding voting securities of the issuer;

o A fund must derive at least 90% of its gross income from dividends, interest,
payments with respect to securities loans, and gains from the sale or
disposition of stock, securities or foreign currencies, or other income
derived with respect to its business of investing in such stock, securities,
or currencies; and a fund must distribute to its shareholders at least 90% of
its investment company taxable income (i.e., net investment income plus net
short-term capital gains) and net tax-exempt income for each of its fiscal
years.

EXCISE TAX DISTRIBUTION REQUIREMENTS. The Code requires each fund to distribute
at least 98% of its taxable ordinary income earned during the calendar year and
98% of its capital gain net income earned during the twelve month period ending
October 31 (in addition to undistributed amounts from the prior year) to you by
December 31 of each year in order to avoid federal excise taxes. Each fund
intends to declare and pay sufficient dividends in December (or in January of
the following year that are treated by you as received in December of the prior
year) but does not guarantee and can give no assurances that its distributions
will be sufficient to eliminate all such taxes.

REDEMPTION OF FUND SHARES. Redemptions and exchanges of a fund's shares are
taxable transactions for federal and state income tax purposes. The tax law
requires that you recognize a gain or loss in an amount equal to the difference
between your tax basis and the amount you received in exchange for your shares,
subject to the rules described below. If you hold your shares as a capital
asset, the gain or loss that you realize will be capital gain or loss, and will
be long-term for federal income tax purposes if you have held your shares for
more than one year at the time of redemption or exchange. Any loss incurred on
the redemption or exchange of shares held for six months or less will be treated
as a long-term capital loss to the extent of any long-term capital gains
distributed to you by a fund on those shares.

All or a portion of any loss that you realize upon the redemption of your fund
shares will be disallowed to the extent that you purchase other shares in the
fund (through reinvestment of dividends or otherwise) within 30 days before or
after your share redemption. Any loss disallowed under these rules will be added
to your tax basis in the new shares you purchase. Because each fund seeks to
maintain a constant $1.00 per share Net Asset Value, you should not expect to
realize a gain or loss upon redemption of your fund shares, however.

U.S. GOVERNMENT OBLIGATIONS. Many states grant tax-free status to dividends paid
to shareholders 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 GNMA/FNMA securities, bankers' acceptances,
commercial paper and repurchase agreements collateralized by U.S. government
securities do not generally qualify for tax-free treatment. It is anticipated,
however, that no portion of a fund's distributions will qualify for exemption
from state and local income tax as dividends paid from interest earned on direct
obligations of the U.S. government. At the end of each calendar year, a fund
will provide you with the percentage of any dividends paid that may qualify for
tax-free treatment on your personal income tax return. You should consult with
your own tax advisor to determine the application of your state and local laws
to these distributions. Because the rules on exclusion of this income are
different for corporations, corporate shareholders should consult with their
corporate tax advisors about whether any of their distributions may be exempt
from corporate income or franchise taxes.

MUNICIPAL INVESTORS. Municipalities may invest surplus money subject to the
arbitrage rebate requirements of section 148 of the Code in a fund. Section
115(1) of the Code provides, in part, that gross income does not include income
accruing to a state, territory, or any political subdivision thereof that is
derived from the exercise of any essential government function. To the extent
that an investment by a municipality in a fund is made in connection with such
functions, the municipality will not be liable for federal income tax on income
or gains derived from its investment. A municipality that invests money subject
to the arbitrage rebate requirements in a fund should be aware that some or all
of the earnings distributed by the fund may need to be paid to the U.S. as a
rebate of arbitrage profits.

DIVIDENDS-RECEIVED DEDUCTION FOR CORPORATIONS. Because a fund's income is
derived primarily from interest rather than dividends, no portion of its
distributions will generally be eligible for the intercorporate
dividends-received deduction. None of the dividends paid by a fund for the most
recent fiscal year qualified for such deduction, and it is anticipated that none
of the current year's dividends will so qualify.

THE FUNDS' UNDERWRITER

Pursuant to an underwriting agreement, Distributors acts as principal
underwriter in a continuous public offering of each fund's shares. The
underwriting agreement will continue in effect for successive annual periods if
its continuance is specifically approved at least annually by a vote of the
Board or by a vote of the holders of a majority of the fund's outstanding voting
securities, and in either event by a majority vote of the Board members who are
not parties to the underwriting agreement or interested persons of any such
party (other than as members of the Board), cast in person at a meeting called
for that purpose. The underwriting agreement terminates automatically in the
event of its assignment and may be terminated by either party on 90 days'
written notice.

Distributors may be entitled to reimbursement under the Rule 12b-1 plans for the
funds, as discussed below. Distributors received no compensation from the funds
for acting as underwriter.

THE RULE 12B-1 PLANS

Each fund has adopted a distribution plan or "Rule 12b-1 plan" pursuant to Rule
12b-1 of the 1940 Act. Under the plans, each fund may pay up to a maximum of
0.15% per year of its average daily net assets, payable quarterly, for expenses
incurred in the promotion and distribution of its shares.

In addition to the payments that Distributors or others are entitled to under
each plan, each plan also provides that to the extent the fund, Advisers or
Distributors or other parties on behalf of the fund, Advisers or Distributors
make payments that are deemed to be for the financing of any activity primarily
intended to result in the sale of fund shares within the context of Rule 12b-1
under the 1940 Act, then such payments shall be deemed to have been made
pursuant to the plan.

In no event shall the aggregate asset-based sales charges, which include
payments made under each plan, plus any other payments deemed to be made
pursuant to the plan, exceed the amount permitted to be paid under the rules of
the NASD.

The terms and provisions of the plans relating to required reports, term, and
approval are consistent with Rule 12b-1. The plans do not permit unreimbursed
expenses incurred in a particular year to be carried over to or reimbursed in
later years.

To the extent fees are for distribution or marketing functions, as distinguished
from administrative servicing or agency transactions, certain banks will not be
entitled to participate in the plans as a result of applicable federal law
prohibiting certain banks from engaging in the distribution of mutual fund
shares. These banking institutions, however, are permitted to receive fees under
the plans for administrative servicing or for agency transactions. If you are a
customer of a bank that is prohibited from providing these services, you would
be permitted to remain a shareholder of the fund, and alternate means for
continuing the servicing would be sought. In this event, changes in the services
provided might occur and you might no longer be able to avail yourself of any
automatic investment or other services then being provided by the bank. It is
not expected that you would suffer any adverse financial consequences as a
result of any of these changes.

Each plan has been approved in accordance with the provisions of Rule 12b-1. The
plans are renewable annually by a vote of the Board, including a majority vote
of the Board members who are not interested persons of the fund and who have no
direct or indirect financial interest in the operation of the plans, cast in
person at a meeting called for that purpose. It is also required that the
selection and nomination of such Board members be done by the non-interested
members of the Board. The plans and any related agreement may be terminated at
any time, without penalty, by vote of a majority of the non-interested Board
members on not more than 60 days' written notice, by Distributors on not more
than 60 days' written notice, by any act that constitutes an assignment of the
administration or management agreement with Advisers, or the underwriting
agreement with Distributors, or by vote of a majority of each fund's outstanding
shares. Distributors or any dealer or other firm may also terminate their
respective distribution or service agreement at any time upon written notice.

The plans and any related agreements may not be amended to increase materially
the amount to be spent for distribution expenses without approval by a majority
of the outstanding shares of the fund, and all material amendments to the plans
or any related agreements shall be approved by a vote of the non-interested
members of the Board, cast in person at a meeting called for the purpose of
voting on any such amendment.

Distributors is required to report in writing to the Board at least quarterly on
the amounts and purpose of any payment made under the plans and any related
agreements, as well as to furnish the Board with such other information as may
reasonably be requested in order to enable the Board to make an informed
determination of whether the plans should be continued.

For the fiscal year ended June 30, 1998, the funds did not incur any expenses
pursuant to the plans.

HOW DO THE FUNDS MEASURE PERFORMANCE?

Performance quotations are subject to SEC rules. These rules require the use of
standardized performance quotations or, alternatively, that every
non-standardized performance quotation furnished by a fund be accompanied by
certain standardized performance information computed as required by the SEC.
Current yield and effective yield quotations used by the funds are based on the
standardized methods of computing performance mandated by the SEC. An
explanation of these and other methods used by the funds to compute or express
performance follows. Regardless of the method used, past performance does not
guarantee future results.

YIELD

CURRENT YIELD. Current yield shows the income per share earned by a fund. It is
calculated by determining the net change, excluding capital changes, in the
value of a hypothetical pre-existing account having a balance of one share at
the beginning of the period, subtracting a hypothetical charge reflecting
deductions from shareholder accounts, and dividing the difference by the value
of the account at the beginning of the base period to obtain the base period
return. The result is then annualized by multiplying the base period return by
(365/7). The current yield for the seven day period ended June 30, 1998, was
5.41% for the Money Fund and 5.39% for the U.S. Securities Fund.

EFFECTIVE YIELD. Each fund's effective yield is calculated in the same manner
as its current yield, except the annualization of the return for the seven
day period reflects the results of compounding. The effective yield for the
seven day period ended June 30, 1998, was 5.55% for the Money Fund and 5.54%
for the U.S. Securities Fund.

This figure was obtained using the following SEC formula:

365/7
Effective Yield = [(Base Period Return + 1) ] - 1

OTHER PERFORMANCE QUOTATIONS

The funds may include in their advertising or sales material information
relating to investment goals and performance results of funds belonging to the
Franklin Templeton Group of Funds. Resources is the parent company of the
advisors and underwriter of the Franklin Templeton Group of Funds.

COMPARISONS

To help you better evaluate how an investment in the funds may satisfy your
investment goal, advertisements and other materials about the funds may discuss
certain measures of fund performance as reported by various financial
publications. Materials may also compare performance (as calculated above) to
performance as reported by other investments, indices, and averages. These
comparisons may include, but are not limited to, the following examples:

a) IBC Money Fund Report(R) - industry averages for seven-day annualized and
compounded yields of taxable, tax-free, and government money funds.

b) Bank Rate Monitor - a weekly publication that reports various bank
investments such as CD rates, average savings account rates and average loan
rates.

c) Lipper - Mutual Fund Performance Analysis, Lipper - Fixed Income Fund
Performance Analysis, and Lipper - Mutual Fund Yield Survey - measure total
return and average current yield for the mutual fund industry and rank
individual mutual fund performance over specified time periods, assuming
reinvestment of all distributions, exclusive of any applicable sales charges.

d) Salomon Brothers Bond Market Roundup - a weekly publication that reviews
yield spread changes in the major sectors of the money, government agency,
futures, options, mortgage, corporate, Yankee, Eurodollar, municipal, and
preferred stock markets and summarizes changes in banking statistics and reserve
aggregates.

e) Consumer Price Index (or Cost of Living Index), published by the U.S. Bureau
of Labor Statistics - a statistical measure of change, over time, in the price
of goods and services in major expenditure groups.

f) Stocks, Bonds, Bills, and Inflation published by Ibbotson Associates - a
historical measure of yield, price, and total return for common and small
company stock, long term government bonds, Treasury bills and inflation.

g) Financial publications: THE WALL STREET JOURNAL, AND BUSINESS WEEK, CHANGING
TIMES, FINANCIAL WORLD, FORBES, FORTUNE, AND MONEY MAGAZINES provide performance
statistics over specified time periods.

Advertisements or information may also compare a fund's performance to the
return on CDs or other investments. You should be aware, however, that an
investment in a fund involves the risk of fluctuation of principal value, a risk
generally not present in an investment in a CD issued by a bank. CDs are
frequently insured by an agency of the U.S. government. An investment in a fund
is not insured by any federal, state or private entity.

In assessing comparisons of performance, you should keep in mind that the
composition of the investments in the reported indices and averages is not
identical to the funds' portfolios, the indices and averages are generally
unmanaged, and the items included in the calculations of the averages may not be
identical to the formula used by the funds to calculate their figures. In
addition, there can be no assurance that the funds will continue their
performance as compared to these other averages.

MISCELLANEOUS INFORMATION

The funds may help you achieve various investment goals such as accumulating
money for retirement, saving for a down payment on a home, college costs and
other long-term goals. The Franklin College Costs Planner may help you in
determining how much money must be invested on a monthly basis in order to have
a projected amount available in the future to fund a child's college education.
(Projected college cost estimates are based upon current costs published by the
College Board.) The Franklin Retirement Planning Guide leads you through the
steps to start a retirement savings program. Of course, an investment in a fund
cannot guarantee that these goals will be met.

Each fund is a member of the Franklin Templeton Group of Funds, one of the
largest mutual fund organizations in the U.S., and may be considered in a
program for diversification of assets. Founded in 1947, Franklin, one of the
oldest mutual fund organizations, has managed mutual funds for over 50 years and
now services more than 3 million shareholder accounts. In 1992, Franklin, a
leader in managing fixed-income mutual funds and an innovator in creating
domestic equity funds, joined forces with Templeton, a pioneer in international
investing. The Mutual Series team, known for its value-driven approach to
domestic equity investing, became part of the organization four years later.
Together, the Franklin Templeton Group has over $207 billion in assets under
management for more than 6 million U.S. based mutual fund shareholder and other
accounts. The Franklin Templeton Group of Funds offers 117 U.S. based open-end
investment companies to the public. Each fund may identify itself by its NASDAQ
symbol or CUSIP number.

As of August 4, 1998, the principal shareholders of each fund, beneficial or of
record, were as follows:

SHARE PER-
NAME AND ADDRESS AMOUNT CENTAGE
- -----------------------------------------------------------------------
Money Fund

Franklin Resources, Inc.
777 Mariners Island Blvd.
San Mateo, CA
94404-1584 53,052,708.960 22.8%

Bank of Stockton
Trust Department
P.O. Box 1110
Stockton, CA
95201-1110 28,239,589.770 12.1%

Suffolk County
National Bank
Trust & Investment Division
295 N. Sea Rd.
Southampton, NY
11968-2038 16,628,496.610 7.1%

Franklin Templeton
Distributors, Inc.
777 Mariners Island Blvd.
San Mateo, CA
94404-1584 29,578,467.910 12.7%

SHARE PER-
NAME AND ADDRESS AMOUNT CENTAGE
- -----------------------------------------------------------------------
U.S. Securities Fund
Carroll County Bank
& Trust, Co.
Trust Division
45 W. Main St.
P.O. Box 1100
Westminster, MD
21158-0199 19,158,272.640 11.5%

City of Anaheim C/O
Rd A 1992 Loan Fund
201 South Anaheim Blvd.
#901
City Hall West
Anaheim, CA 92805 16,206,177.900 9.8%

From time to time, the number of fund shares held in the "street name" accounts
of various Securities Dealers for the benefit of their clients or in centralized
securities depositories may exceed 5% of the total shares outstanding.

As a shareholder of a Massachusetts business trust, you could, under certain
circumstances, be held personally liable as a partner for its obligations. The
funds' Agreement and Declaration of Trust, however, contains an express
disclaimer of shareholder liability for acts or obligations of a fund. The
Declaration of Trust also provides for indemnification and reimbursement of
expenses out of a fund's assets if you are held personally liable for
obligations of the fund. The Declaration of Trust provides that a fund shall,
upon request, assume the defense of any claim made against you for any act or
obligation of the fund and satisfy any judgment thereon. All such rights are
limited to the assets of the fund. The Declaration of Trust further provides
that a fund may maintain appropriate insurance (for example, fidelity bonding
and errors and omissions insurance) for the protection of the fund, its
shareholders, trustees, officers, employees and agents to cover possible tort
and other liabilities. Furthermore, the activities of a fund as an investment
company, as distinguished from an operating company, would not likely give rise
to liabilities in excess of the fund's total assets. Thus, the risk that you
would incur financial loss on account of shareholder liability is limited to the
unlikely circumstance in which both inadequate insurance exists and the fund
itself is unable to meet its obligations.

In the event of disputes involving multiple claims of ownership or authority to
control your account, each fund has the right (but has no obligation) to: (a)
freeze the account and require the written agreement of all persons deemed by
the fund to have a potential property interest in the account, before executing
instructions regarding the account; (b) interplead disputed funds or accounts
with a court of competent jurisdiction; or (c) surrender ownership of all or a
portion of the account to the IRS in response to a Notice of Levy.

Distributors and/or its affiliates provide financial support to various
Securities Dealers that sell shares of the Franklin Templeton Group of Funds.
This support is based primarily on the amount of sales of fund shares. The
amount of support may be affected by: total sales; net sales; levels of
redemptions; the proportion of a Securities Dealer's sales and marketing efforts
in the Franklin Templeton Group of Funds; a Securities Dealer's support of, and
participation in, Distributors' marketing programs; a Securities Dealer's
compensation programs for its registered representatives; and the extent of a
Securities Dealer's marketing programs relating to the Franklin Templeton Group
of Funds. Financial support to Securities Dealers may be made by payments from
Distributors' resources, from Distributors' retention of underwriting
concessions and, in the case of funds that have Rule 12b-1 plans, from payments
to Distributors under such plans. In addition, certain Securities Dealers may
receive brokerage commissions generated by fund portfolio transactions in
accordance with the NASD's rules.

SUMMARY OF CODE OF ETHICS. Employees of the Franklin Templeton Group who are
access persons under the 1940 Act are permitted to 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.

FINANCIAL STATEMENTS

The audited financial statements contained in the Annual Report to Shareholders
of the Trust, for the fiscal year ended June 30, 1998, including the auditor's
report, are incorporated herein by reference.

USEFUL TERMS AND DEFINITIONS

1940 ACT - Investment Company Act of 1940, as amended

ADVISERS - Franklin Advisers, Inc., the Portfolio's investment manager and
the funds' administrator

BOARD - The Board of Trustees of the Trust

CD - Certificate of deposit

CODE - Internal Revenue Code of 1986, as amended

DISTRIBUTORS - Franklin/Templeton Distributors, Inc., the funds' principal
underwriter

FITCH - Fitch Investors Service, Inc.

FRANKLIN TEMPLETON GROUP - Franklin Resources, Inc., a publicly owned holding
company, and its various subsidiaries

FRANKLIN TEMPLETON GROUP OF FUNDS - All U.S. registered investment companies
in the Franklin Group of Funds(R) and the Templeton Group of Funds

INVESTOR SERVICES - Franklin/Templeton Investor Services, Inc., the funds'
shareholder servicing and transfer agent

IRS - Internal Revenue Service

MOODY'S - Moody's Investors Service, Inc.

NASD - National Association of Securities Dealers, Inc.

NYSE - New York Stock Exchange

PROSPECTUS - The prospectus for the funds dated November 1, 1998, which we may
amend from time to time

RESOURCES - Franklin Resources, Inc.

SAI - Statement of Additional Information

S&P - Standard & Poor's Corporation

SEC - U.S. Securities and Exchange Commission

SECURITIES DEALER - A financial institution that, either directly or through
affiliates, has an agreement with Distributors to handle customer orders and
accounts with the funds. This reference is for convenience only and does not
indicate a legal conclusion of capacity.

WE/OUR/US - Unless a different meaning is indicated by the context, these terms
refer to the funds and/or Institutional Services, Investor Services,
Distributors, or other wholly owned subsidiaries of Resources.

APPENDICES

SUMMARY OF PROCEDURES TO
MONITOR CONFLICTS OF INTEREST

The Board of Trustees of Money Market, on behalf of its series ("master funds"),
and the Board of the funds ("feeder funds"), (both of which are composed of the
same individuals) recognize that there is the potential for certain conflicts of
interest to arise between the master fund and the feeder fund in this format.
These potential conflicts of interest could include, among others: the creation
of additional feeder funds with different fee structures; the creation of
additional feeder funds that could have controlling voting interests in any
pass-through voting which could affect investment and other policies; a proposal
to increase fees at the master fund level; and any consideration of changes in
fundamental policies at the master fund level that may or may not be acceptable
to a particular feeder fund.

In recognition of the potential for conflicts of interest to develop, the Board
of Trustees of Money Market and the Board of the funds have adopted certain
procedures under which i) management of the master fund and the feeder fund
will, on a yearly basis, report to each board, including the independent members
of each board, on the operation of the master/feeder fund structure; ii) the
independent members of each board will have ongoing responsibility for reviewing
all proposals at the master fund level to determine whether any proposal
presents a potential for a conflict of interest and to the extent any other
potential conflicts arise before the normal annual review, they will act
promptly to review the potential conflict; iii) if the independent members of
each board determine that a situation or proposal presents a potential conflict,
they will request a written analysis from the master fund management describing
whether the apparent potential conflict of interest will impede the operation of
the constituent feeder fund and the interests of the feeder fund's shareholders;
and iv) upon receipt of the analysis, the independent members of each board
shall review the analysis and present their conclusion to the full boards.

If no actual conflict is deemed to exist, the independent board members will
recommend that no further action be taken. If the analysis is inconclusive, they
may submit the matter to and be guided by the opinion of independent legal
counsel issued in a written opinion. If a conflict is deemed to exist, they may
recommend one or more of the following actions: i) suggest a course of action
designed to eliminate the potential conflict of interest; ii) if appropriate,
request that the full boards submit the potential conflict to shareholders for
resolution; iii) recommend to the full boards that the affected feeder fund no
longer invest in its designated master fund and propose either a search for a
new master fund in which to invest the feeder fund's assets or the hiring of an
investment manager to manage the feeder fund's assets in accordance with its
investment goals and policies; iv) recommend to the full boards that a new board
be recommended to shareholders for approval; or v) recommend such other action
as may be considered appropriate.

CALIFORNIA GOVERNMENT CODE SECTION 53601. Securities authorized for investment;
text of section effective on July 7, 1988, amended in 1992, 1995 and 1996.

The legislative body of a local agency having money in a sinking fund of, or
surplus money in, its treasury not required for the immediate necessities of the
local agency may invest any portion of the money which it deems wise or
expedient in those investments set forth below. A local agency purchasing or
obtaining any securities prescribed in this section, in a negotiable, bearer,
registered, or nonregistered format, shall require delivery of the securities to
the local agency, including those purchased for the agency by financial
advisors, consultants, or managers using the agency's funds, by book entry,
physical delivery or by third party custodial agreement. The transfer of
securities to the counterparty bank's customer book entry account may be used
for book entry delivery. For purposes of this section "counterparty" means the
other party to the transaction. A counterparty bank's trust department or
separate safekeeping department may be used for the physical delivery of the
security if the security is held in the name of the local agency. Where this
section does not specify a limitation on the term or remaining maturity at the
time of the investment, no investment shall be made in any security, other than
a security underlying a repurchase or reverse repurchase agreement authorized by
this section, that at the time of the investment has a term remaining to
maturity in excess of five years, unless the legislative body has granted
express authority to make that investment either specifically or as a part of an
investment program approved by the legislative body no less than three months
prior to the investment:

(a) Bonds issued by the local agency, including bonds payable solely out of the
revenues from a revenue-producing property owned, controlled, or operated by the
local agency or by a department, board, agency, or authority of the local
agency.

(b) United States Treasury notes, bonds, bills, or certificates of indebtedness,
or those for which the faith and credit of the United States are pledged for the
payment of principal and interest.

(c) Registered state warrants or Treasury notes or bonds of this state,
including bonds payable solely out of the revenues from a revenue-producing
property owned, controlled, or operated by the state or by a department, board,
agency, or authority of the state.

(d) Bonds, notes, warrants, or other evidences of indebtedness of any local
agency within this state, including bonds payable solely out of the revenues
from a revenue-producing property owned, controlled or operated by the local
agency, or by a department, board, agency, or authority of the local agency.

(e) Obligations issued by banks for cooperatives, federal land banks, federal
intermediate credit banks, federal home loan banks, the Federal Home Loan Bank
Board, the Tennessee Valley Authority, or in obligations, participations, or
other instruments of, or issued by, or fully guaranteed as to principal and
interest by, the Federal National Mortgage Association; or in guaranteed
portions of Small Business Administration notes; or in obligations,
participations, or other instruments of, or issued by, a federal agency or a
United States government-sponsored enterprise.

(f) Bills of exchange or time drafts drawn on and accepted by a commercial bank,
otherwise known as banker's acceptances. Purchases of banker's acceptances may
not exceed 270 days maturity or 40 percent of the agency's surplus money that
may be invested pursuant to this section. However, no more than 30 percent of
the agency's surplus funds may be invested in the banker's acceptances of any
one commercial bank pursuant to this section.

This subdivision does not preclude a municipal utility district from investing
any surplus money in its treasury in any manner authorized by the Municipal
Utility District Act, (Division 6 (commencing with Section 11501) of the Public
Utilities Code).

(g) Commercial paper of "prime" quality of the highest ranking or of the highest
letter and numerical rating as provided for by Moody's Investors Service, Inc.,
or Standard and Poor's Corporation. Eligible paper is further limited to issuing
corporations that are organized and operating within the United States and
having total assets in excess of five hundred million dollars ($500,000,000) and
having an "A" or higher rating for the issuer's debt, other than commercial
paper, if any, as provided for by Moody's Investors Service, Inc. or Standard
and Poor's Corporation. Purchases of eligible commercial paper may not exceed
180 days maturity nor represent more than 10 percent of the outstanding paper of
an issuing corporation. Purchases of commercial paper may not exceed 15 percent
of the agency's surplus money that may be invested pursuant to this section. An
additional 15 percent, or a total of 30 percent of the agency's surplus money,
may be invested pursuant to this subdivision. The additional 15 percent may be
so invested only if the dollar-weighted average maturity of the entire amount
does not exceed 31 days. "Dollar-weighted average maturity" means the sum of the
amount of each outstanding commercial paper investment multiplied by the number
of days to maturity, divided by the total amount of outstanding commercial
paper.

(h) Negotiable certificates of deposit issued by a nationally or state-chartered
bank or a state or federal association (as defined by Section 5102 of the
Financial Code) or by a state-licensed branch of a foreign bank. Purchases of
negotiable certificates of deposit may not exceed 30 percent of the agency's
surplus money which may be invested pursuant to this section. For purposes of
this section, negotiable certificates of deposits do not come within Article 2
(commencing with Section 53630) of Chapter 4 of Part 1 of Division 2 of Title 5,
except that the amount so invested shall be subject to the limitations of
Section 53638.

(i) (1) Investments in repurchase agreements or reverse repurchase agreements of
any securities authorized by this section as long as the agreements are subject
to this subdivision, including, the delivery requirements specified in this
section.

(2) Investments in repurchase agreements may be made, on any investment
authorized in this section when the term of the agreement does not exceed one
year. The market value of securities that underlay a repurchase agreement shall
be valued at 102 percent or greater of the funds borrowed against those
securities and the value shall be adjusted no less than quarterly.

(3) Reverse repurchase agreements may be utilized only when either of the
following conditions are met:

(A) The security was owned or specifically committed to purchase, by the local
agency prior to December 31, 1994, and was sold using a reverse repurchase
agreement on December 31, 1994.

(B) The security to be sold on reverse repurchase agreement has been owned and
fully paid for by the local agency for a minimum of 30 days prior to sale; the
total of all reverse repurchase agreements on investments owned by the local
agency not purchased or committed to purchase, prior to December 31, 1994, does
not exceed 20 percent of the base value of the portfolio; and the agreement does
not exceed a term of 92 days, unless the agreement includes a written codicil
guaranteeing a minimum earning or spread for the entire period between the sale
of a security using a reverse repurchase agreement and the final maturity date
of the same security.

(4) After December 31, 1994, a reverse repurchase agreement may not be entered
into with securities not sold on a reverse repurchase agreement and purchased,
or committed to purchase, prior to that date, as a means of financing or paying
for the security sold on a reverse repurchase agreement, but may only be entered
into with securities owned and previously paid for a minimum of 30 days prior to
the settlement of the reverse repurchase agreement, in order to supplement the
yield on securities owned and previously paid for or to provide funds for the
immediate payment of a local agency obligation. Funds obtained or funds within
the pool of an equivalent amount to that obtained from selling a security to a
counterparty by way of a reverse repurchase agreement, on securities originally
purchased subsequent to December 31, 1994, shall not be used to purchase another
security with a maturity longer than 92 days from the initial settlement date of
the reverse repurchase agreement, unless the reverse repurchase agreement
includes a written codicil guaranteeing a minimum earning or spread for the
entire period between the sale of a security using a reverse repurchase
agreement and the final maturity date of the same security. Reverse repurchase
agreements specified in subparagraph (B) of paragraph (3) may not be entered
into unless the percentage restrictions specified in that subparagraph are met,
including the total of any reverse repurchase agreements specified in
subparagraph (A) of paragraph (3).

(5) Investments in reverse repurchase agreements or similar investments in which
the local agency sells securities prior to purchase, with a simultaneous
agreement to repurchase the security, may only be made upon prior approval of
the governing body of the local agency and shall only be made with primary
dealers of the Federal Reserve Bank of New York.

(6) (A) "Repurchase agreement" means a purchase of securities by the local
agency pursuant to an agreement by which the counterparty seller will repurchase
the securities on or before a specified date and for a specified amount and the
counterparty will deliver the underlying securities to the local agency by book
entry, physical delivery, or by third party custodial agreement. The transfer of
underlying securities to the counterparty bank's customer book-entry account may
be used for book-entry delivery.

(B) "Securities," for purpose of repurchase under this subdivision, means
securities of the same issuer, description, issue date, and maturity.

(C) "Reverse repurchase agreement" means a sale of securities by the local
agency pursuant to an agreement by which the local agency will repurchase the
securities on or before a specified date and includes other comparable
agreements.

(D) For purposes of this section, the base value of the local agency's pool
portfolio shall be that dollar amount obtained by totaling all cash balances
placed in the pool by all pool participants, excluding any amounts obtained
through selling securities by way of reverse repurchase agreements or other
similar borrowing methods.

(E) For purposes of this section, the spread is the difference between the cost
of funds obtained using the reverse repurchase agreement and the earnings
obtained on the reinvestment of the funds.

(j) Medium-term notes of a maximum of five years maturity issued by corporations
organized and operating within the United States or by depository institutions
licensed by the United States or any state and operating within the United
States. Notes eligible for investment under this subdivision shall be rated in a
rating category of "A" or its equivalent or better by a nationally recognized
rating service. Purchases of medium-term notes may not exceed 30 percent of the
agency's surplus money which may be invested pursuant to this section.

(k) (1) Shares of beneficial interest issued by diversified management companies
that invest in the securities and obligations as authorized by subdivisions (a)
to (j), inclusive, or subdivisions (m) or (n) and that comply with the
investment restrictions of this article and Article 2 (commencing with Section
53630). However, notwithstanding these restrictions, a counterparty to a reverse
repurchase agreement is not required to be a primary dealer of the Federal
Reserve Bank of New York if the company's board of directors finds that the
counterparty presents a minimal risk of default, and the value of the securities
underlying a repurchase agreement may be 100 percent of the sales price if the
securities are marked to market daily.

(2) Shares of beneficial interest issued by diversified management companies
that are money market funds registered with the Securities and Exchange
Commission under the Investment Company Act of 1940 (15 U.S.C. Sec. 80a-1, et
seq.).

(3) If investment is in shares issued pursuant to paragraph (1), the company
shall have met either of the following criteria:

(A) Attained the highest ranking or the highest letter and numerical rating
provided by not less than two nationally recognized statistical rating
organizations.

(B) Retained an investment adviser registered or exempt from registration with
the Securities and Exchange Commission with not less than five years' experience
investing in the securities and obligations authorized by subdivisions (a) to
(j), inclusive, or subdivisions (m) or (n) and with assets under management in
excess of five hundred million dollars ($500,000,000).

(4) If investment is in shares issued pursuant to paragraph (2), the company
shall have met either of the following criteria:

(A) Attained the highest ranking or the highest letter and numerical rating
provided by not less than two nationally recognized statistical rating
organizations.

(B) Retained an investment adviser registered or exempt from registration with
the Securities and Exchange Commission with not less than five years' experience
managing money market mutual funds with assets under management in excess of
five hundred million dollars ($500,000,000).

(5) The purchase price of shares of beneficial interest purchased pursuant to
this subdivision shall not include any commission that the companies may charge
and shall not exceed 20 percent of the agency's surplus money that may be
invested pursuant to this section. However, no more than 10 percent of the
agency's surplus funds may be invested in shares of beneficial interest of any
one mutual fund pursuant to paragraph (1).

(l) Notwithstanding anything to the contrary contained in this section, Section
53635 or any other provision of law, money held by a trustee or fiscal agent and
pledged to the payment or security of bonds or other indebtedness, or
obligations under a lease, installment sale, or other agreement of a local
agency, or certificates of participation in those bonds, indebtedness, lease
installment sale, or other agreements, may be invested in accordance with the
statutory provisions governing the issuance of those bonds, indebtedness, lease
installment sale, or other agreement, or to the extent not inconsistent
therewith or if there are no specific statutory provisions, in accordance with
the ordinance, resolution, indenture, or agreement of the local agency providing
for the issuance.

(m) Notes, bonds, or other obligations that are at all times secured by a valid
first priority security interest in securities of the types listed by Section
53651 as eligible securities for the purpose of securing local agency deposits
having a market value at least equal to that required by Section 53652 for the
purpose of securing local agency deposits. The securities serving as collateral
shall be placed by delivery or book entry into the custody of a trust company or
the trust department of a bank which is not affiliated with the issuer of the
secured obligation, and the security interest shall be perfected in accordance
with the requirements of the Uniform Commercial Code or federal regulations
applicable to the types of securities in which the security interest is granted.

(n) Any mortgage pass-through security, collateralized mortgage obligation,
mortgage-backed or other pay-through bond, equipment lease-backed certificate,
consumer receivable pass-through certificate, or consumer receivable-backed bond
of a maximum of five years maturity. Securities eligible for investment under
this subdivision shall be issued by an issuer having an "A" or higher rating for
the issuer's debt as provided by a nationally recognized rating service and
rated in a rating category of "AA" or its equivalent or better by a nationally
recognized rating service. Purchase of securities authorized by this subdivision
may not exceed 20 percent of the agency's surplus money that may be invested
pursuant to this section.

CALIFORNIA GOVERNMENT CODE SECTION 53635. Funds of local agency; deposit or
investment. Text of section effective July 7, 1988, amended in 1995 and 1996.

As far as possible, all money belonging to, or in the custody of, a local
agency, including money paid to the treasurer or other official to pay the
principal, interest or penalties of bonds, shall be deposited for safekeeping in
state or national banks, savings associations or federal associations, credit
unions, or federally insured industrial loan companies in this state selected by
the treasurer or other official having the legal custody of the money; or,
unless otherwise directed by the legislative body pursuant to Section 53601, may
be invested in the investments set forth below. A local agency purchasing or
obtaining any securities described in this section, in a negotiable, bearer,
registered, or nonregistered format, shall require delivery of all the
securities to the local agency, including those purchased for the agency by
financial advisors, consultants, or managers using the agency's funds, by book
entry, physical delivery, or by third-party custodial agreement. The transfer of
securities to the counterparty bank's customer book entry account may be used
for book-entry delivery. For purposes of this section, "counterparty" means the
other party to the transaction. A counterparty bank's trust department or
separate safekeeping department may be used for the physical delivery of the
security if the security is held in the name of the local agency.

(b) United States Treasury notes, bonds, bills, or certificates of indebtedness,
or those for which the faith and credit of the United States are pledged for the
payment of principal and interest.

(d) Bonds, notes, warrants, or other evidences of indebtedness of any local
agency within this state, including bonds payable solely out of the revenues
from a revenue-producing property owned, controlled, or operated by the local
agency, or by a department, board, agency, or authority of the local agency.

(e) Obligations issued by banks for cooperatives, federal land banks, federal
intermediate credit banks, federal home loan banks, the Federal Home Loan Bank,
the Tennessee Valley Authority, or in obligations, participations, or other
instruments of, or issued by, or fully guaranteed as to principal and interest
by, the Federal National Mortgage Association; or in guaranteed portions of
Small Business Administration notes; or in obligations, participations, or other
instruments of, or issued by, a federal agency or a United States
government-sponsored enterprise.

(f) Bills of exchange or time drafts drawn on and accepted by a commercial bank,
otherwise known as banker's acceptances, which are eligible for purchase by the
Federal Reserve System. Purchases of banker's acceptances may not exceed 270
days maturity or 40 percent of the agency's surplus funds which may be invested
pursuant to this section. No more than 30 percent of the agency's surplus funds,
however, may be invested in the banker's acceptances of any one commercial bank
pursuant to this section.

This subdivision does not preclude a municipal utility district from investing
any surplus money in its treasury in any manner authorized by the Municipal
Utility District Act, Division 6 (commencing with Section 11501) of
the Public Utilities Code.

(g) Commercial paper of "prime" quality of the highest ranking or of the highest
letter and numerical rating as provided for by Moody's Investors Service, Inc.
or Standard and Poor's Corporation. Eligible paper is further limited to issuing
corporations that are organized and operating within the United States and
having total assets in excess of five hundred million dollars ($500,000,000) and
having an "A" or higher rating for the issuer's debt, other than commercial
paper, if any, as provided for by Moody's Investors Service, Inc. or Standard
and Poor's Corporation. Purchases of eligible commercial paper may not exceed
180 days maturity nor represent more than 10 percent of the outstanding paper of
an issuing corporation. Purchases of commercial paper may not exceed 15 percent
of the agency's surplus money which may be invested pursuant to this section. An
additional 15 percent, or a total of 30 percent of the agency's money or money
in its custody, may be invested pursuant to this subdivision. The additional 15
percent may be so invested only if the dollar-weighted average maturity of the
entire amount does not exceed 31 days. "Dollar-weighted average maturity" means
the sum of the amount of each outstanding commercial paper investment multiplied
by the number of days to maturity, divided by the total amount of outstanding
commercial paper.

(h) Negotiable certificates of deposit issued by a nationally or state-chartered
bank or a savings association or federal association or a state or federal
credit union or by a state-licensed branch of a foreign bank. Purchases of
negotiable certificates of deposit may not exceed 30 percent of the agency's
surplus money which may be invested pursuant to this section. For purposes of
this section, negotiable certificates of deposit do not come within Article 2
(commencing with Section 53630) of Chapter 4 of Part 1 of Division 2 of Title 5,
except that the amount so invested shall be subject to the limitations of
Section 53638. For purposes of this section, the legislative body of a local
agency and the treasurer or other official of the local agency having legal
custody of the money are prohibited from depositing or investing local agency
funds, or funds in the custody of the local agency, in negotiable certificates
of deposit issued by a state or federal credit union if a member of the
legislative body of the local agency, or an employee of the administrative
officer, manager's office, budget office, auditor-controller's office, or
treasurer's office of the local agency also serves on the board of directors, or
any committee appointed by the board of directors, the credit committee or
supervisory committee of the state or federal credit union issuing the
negotiable certificates of deposit.

(i) (1) Investments in repurchase agreements or reverse repurchase agreements of
any securities authorized by this section, so long as the agreements are subject
to this subdivision, including the delivery requirements specified in this
section.

(3) Reverse repurchase agreements may be utilized only when either of the
following conditions are met:

(A) The security was owned or specifically committed to purchase, by the local
agency, prior to repurchase agreement on December 31, 1994, and was sold using a
reverse repurchase agreement on December 31, 1994.

(B) The security to be sold on reverse repurchase agreement has been owned and
fully paid for by the local agency for a minimum of 30 days prior to sale, the
total of all reverse repurchase agreements on investments owned by the local
agency not purchased or committed to purchase, prior to December 31, 1994, does
not exceed 20 percent of the base value of the portfolio, and the agreement does
not exceed a term of 92 days, unless the agreement includes a written codicil
guaranteeing a minimum earning or spread for the entire period between the sale
or a security using a reverse repurchase agreement and the final maturity date
of the same security.

(4) After December 31, 1994, a reverse repurchase agreement may not be entered
into with securities not sold on a reverse repurchase agreement and purchased,
or committed to purchase, prior to that date, as a means of financing or paying
for the security sold on a reverse repurchase agreement, but may only be entered
into with securities owned and previously paid for, for a minimum of 30 days
prior to the settlement of the reverse repurchase agreement, in order or
supplement the yield on securities owned and previously paid for or to provide
funds for the immediate payment of a local agency obligation. Funds obtained or
funds within the pool of an equivalent amount to that obtained from selling a
security to a counterparty by way of a reverse repurchase agreement, on
securities originally purchased subsequent to December 31, 1994, shall not be
used to purchase another security with a maturity longer than 92 days from the
initial settlement date of the reverse repurchase agreement, unless the reverse
repurchase agreement includes a written codicil guaranteeing a minimum earning
or spread for the entire period between the sale of a security using a reverse
repurchase agreement and the final maturity date of the same security. Reverse
repurchase agreements specified in subparagraph (B) of paragraph (3) may not be
entered into unless the percentage restrictions specified in that subparagraph
are met, including the total of any reverse repurchase agreements specified in
subparagraph (A) of paragraph (3).

(6) (A) "Repurchase agreement" means a purchase of securities by the local
agency pursuant to an agreement by which the counterparty seller will repurchase
the securities on or before a specified date and for a specified amount, and the
counterparty will deliver the underlying securities to the local agency by book
entry, physical delivery, or by third party custodial agreement. The transfer of
underlying securities to the counterparty's bank's customer book-entry account
may be used for book-entry delivery.

(B) "Securities," for purpose of repurchase under this subdivision, means
securities of the same issuer, description, issue date, and maturity.

(C) "Reverse repurchase agreement" means a sale of securities by the local
agency, pursuant to an agreement by which the local agency will repurchase the
securities on or before a specified date and includes other comparable
agreements.

(E) For purposes of this section, the spread is the difference between the costs
of funds obtained using the reverse repurchase agreement and the earnings
obtained on the reinvestment of the funds.

(k) (1) Shares of beneficial interest issued by diversified management companies
that invest in the securities and obligations as authorized by sub divisions (a)
to (i), inclusive, or subdivisions (l) or (m) and that comply with the
investment restrictions of this article and Article 2 (commencing with Section
53600). However, notwithstanding these restrictions, a counterparty to a reverse
repurchase agreement is not required to be a primary dealer of the Federal
Reserve Bank of New York if the company's board of directors finds that the
counterparty presents a minimal risk of default, and the value of the securities
underlying a repurchase agreement may be 100 percent of the sales price if the
securities are marked to market daily.

(3) If investment is in shares issued pursuant to paragraph (1), the company
shall have met either of the following criteria:

(A) Attained the highest ranking or the highest letter and numerical rating
provided by not less than two nationally recognized statistical rating
organizations.

(B) Retained an investment adviser registered or exempt from registration with
the Securities and Exchange Commission with not less than five years' experience
investing in the securities and obligations authorized by subdivisions (a) to
(j), inclusive, or subdivisions (l) or (m) and with assets under management in
excess of five hundred million dollars ($500,000,000).

(4) If investment is in shares issued pursuant to paragraph (2), the company
shall have met either of the following criteria:

(A) Attained the highest ranking or the highest letter and numerical rating
provided by not less than two nationally recognized statistical rating
organizations.

(l) Notes, bonds, or other obligations which are at all times secured by a valid
first priority security interest in securities of the types listed by Section
53651 as eligible securities for the purpose of securing local agency deposits
having a market value at least equal to that required by Section 53652 for the
purpose of securing local agency deposits. The securities serving as collateral
shall be placed by delivery or book entry into the custody of a trust company or
the trust department of a bank which is not affiliated with the issuer of the
secured obligation, and the security interest shall be perfected in accordance
with the requirements of the Uniform Commercial Code or federal regulations
applicable to the types of securities in which the security interest is granted.

(m) Any mortgage pass-through security, collateralized mortgage obligation,
mortgage-backed or other pay-through bond, equipment lease-backed certificate,
consumer receivable pass-through certificate, or consumer receivable-backed bond
of a maximum of five years maturity. Securities eligible for investment under
this subdivision shall be issued by an issuer having an "A" or higher rating for
the issuer's debt as provided by a nationally recognized rating service and
rated in a rating category of "AA" or its equivalent or better by a nationally
recognized rating service. Purchase of securities authorized by this subdivision
may not exceed 20 percent of the agency's surplus money that may be invested
pursuant to this section.

DESCRIPTION OF RATINGS

CORPORATE BOND RATINGS

MOODY'S

AAA - Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as
"gilt-edged." Interest payments are protected by a large or exceptionally stable
margin, and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.

AA - Bonds rated Aa are judged to be high quality by all standards. Together
with the Aaa group, they comprise what are generally known as high-grade bonds.
They are rated lower than the best bonds because margins of protection may not
be as large, fluctuation of protective elements may be of greater amplitude, or
there may be other elements present that make the long-term risks appear
somewhat larger.

A - Bonds rated A possess many favorable investment attributes and are
considered upper medium-grade obligations. Factors giving security to principal
and interest are considered adequate, but elements may be present that suggest a
susceptibility to impairment sometime in the future.

BAA - Bonds rated Baa are considered medium-grade obligations. They are neither
highly protected nor poorly secured. Interest payments and principal security
appear adequate for the present but certain protective elements may be lacking
or may be characteristically unreliable over any great length of time. These
bonds lack outstanding investment characteristics and, in fact, have speculative
characteristics as well.

BA - Bonds rated Ba are judged to have predominantly speculative elements and
their future cannot be considered well assured. Often the protection of interest
and principal payments is very moderate and, thereby, not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.

Note: Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
classification in its corporate bond ratings. The modifier 1 indicates that the
security ranks in the higher end of its generic rating category; modifier 2
indicates a mid-range ranking; and modifier 3 indicates that the issue ranks in
the lower end of its generic rating category.

S&P

AAA - This is the highest rating assigned by S&P to a debt obligation and
indicates an extremely strong capacity to pay principal and interest.

AA - Bonds rated AA also qualify as high-quality debt obligations. Capacity to
pay principal and interest is very strong and, in the majority of instances,
differ from AAA issues only in a small degree.

A - Bonds rated A have a strong capacity to pay principal and interest, although
they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.

BBB - Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay principal and interest for bonds in this category
than for bonds in the A category.

PLUS (+) OR MINUS (-): The ratings from "AA" to "BBB" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.

MUNICIPAL BOND RATINGS

MOODY'S

AAA: Municipal bonds rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as
"gilt-edged." Interest payments are protected by a large or exceptionally stable
margin, and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.

AA: Municipal bonds rated Aa are judged to be high quality by all standards.
Together with the Aaa group, they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large, fluctuation of protective elements may be of
greater amplitude, or there may be other elements present that make the
long-term risks appear somewhat larger.

A: Municipal bonds rated A possess many favorable investment attributes and are
considered upper medium-grade obligations. Factors giving security to principal
and interest are considered adequate, but elements may be present that suggest a
susceptibility to impairment sometime in the future.

BAA: Municipal bonds rated Baa are considered medium-grade obligations. They are
neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present, but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
These bonds lack outstanding investment characteristics and, in fact, have
speculative characteristics as well.

S&P

AAA: Municipal bonds rated AAA are the highest-grade obligations. They possess
the ultimate degree of protection as to principal and interest. In the market,
they move with interest rates and, hence, provide the maximum safety on all
counts.

AA: Municipal bonds rated AA also qualify as high-grade obligations, and in the
majority of instances differ from AAA issues only in a small degree. Here, too,
prices move with the long-term money market.

A: Municipal bonds rated A are regarded as upper medium-grade. They have
considerable investment strength but are not entirely free from adverse effects
of changes in economic and trade conditions. Interest and principal are regarded
as safe. They predominantly reflect money rates in their market behavior but
also, to some extent, economic conditions.

BBB: Municipal bonds rated BBB are regarded as having an adequate capacity to
pay principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for bonds in
this category than for bonds in the A category.

PLUS (+) OR MINUS (-): The ratings from "AA" to "BBB" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.

FITCH

AAA: Municipal bonds rated AAA are considered to be investment grade and of the
highest credit quality. The obligor has an exceptionally strong ability to pay
interest and repay principal that is unlikely to be affected by reasonably
foreseeable events.

AA: Municipal bonds rated AA are considered to be investment grade and of very
high credit quality. The obligor's ability to pay interest and repay principal
is very strong although not quite as strong as bonds rated AAA and not
significantly vulnerable to foreseeable future developments.

A: Municipal bonds rated A are considered to be investment grade and of high
credit quality. The obligor's ability to pay interest and repay principal is
considered to be strong, but may be more vulnerable to adverse changes in
economic conditions and circumstances than bonds with higher ratings.

BBB: Municipal bonds rated BBB are considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay interest and repay
principal is considered adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have an adverse impact on these
bonds, and therefore impair timely payment. The likelihood that the ratings of
these bonds will fall below investment grade is higher than for bonds with
higher ratings.

Plus (+) or minus (-) signs are used with a rating symbol to indicate the
relative position of a credit within the rating category. Plus or minus signs
are not used with the AAA category.

MUNICIPAL NOTE RATINGS

MOODY'S

Moody's ratings for state, municipal and other short-term obligations will be
designated Moody's Investment Grade ("MIG"). This distinction is in recognition
of the differences between short-term credit risk and long-term risk. Factors
affecting the liquidity of the borrower are uppermost in importance in
short-term borrowing; factors of the first importance in long-term borrowing
risk are of lesser importance in the short run. Symbols used will be as follows:

MIG 1: Notes are of the best quality enjoying strong protection from established
cash flows of funds for their servicing or from established and broad-based
access to the market for refinancing, or both.

MIG 2: Notes are of high quality, with margins of protection ample, although not
so large as in the preceding group.

MIG 3: Notes are of favorable quality, with all security elements accounted for,
but lacking the undeniable strength of the preceding grades. Market access for
refinancing, in particular, is likely to be less well established.

MIG 4: Notes are of adequate quality, carrying specific risk but having
protection and not distinctly or predominantly speculative.

S&P

Until June 29, 1984, S&P used the same rating symbols for notes and bonds. After
June 29, 1984, for new municipal note issues due in three years or less, the
ratings below will usually be assigned. Notes maturing beyond three years will
most likely receive a bond rating of the type recited above.

SP-1: Issues carrying this designation have a very strong or strong capacity to
pay principal and interest. Issues determined to possess overwhelming safety
characteristics will be given a "plus" (+) designation.

SP-2: Issues carrying this designation have a satisfactory capacity to pay
principal and interest.

SHORT-TERM & COMMERCIAL PAPER RATINGS

MOODY'S

Moody's short-term debt ratings are opinions of the ability of issuers to repay
punctually senior debt obligations. These obligations have an original maturity
not exceeding one year, unless explicitly noted. Moody's commercial paper
ratings, which are also applicable to municipal paper investments permitted to
be made by the fund, are opinions of the ability of issuers to repay punctually
their promissory obligations not having an original maturity in excess of nine
months. Moody's employs the following designations, judged to be investment
grade, used for both short-term debt and commercial paper to indicate the
relative repayment capacity of rated issuers:

P-1 (PRIME-1): Superior capacity for repayment.

P-2 (PRIME-2): Strong capacity for repayment.

S&P

S&P's ratings are a current assessment of the likelihood of timely payment of
debt having an original maturity of no more than 365 days - including commercial
paper. Ratings are graded into four categories, ranging from "A" for the highest
quality obligations to "D" for the lowest. Issues within the "A" category are
delineated with the numbers 1, 2 and 3 to indicate the relative degree of
safety, as follows:

A-1: This designation indicates the degree of safety regarding timely payment is
very strong. A "plus" (+) designation indicates an even stronger likelihood of
timely payment.

A-2: Capacity for timely payment on issues with this designation is strong. The
relative degree of safety, however, is not as overwhelming as for issues
designated A-1.

A-3: Issues carrying this designation have a satisfactory capacity for timely
payment. They are, however, somewhat more vulnerable to the adverse effects of
changes in circumstances than obligations carrying the higher designations.

FITCH

Fitch's short-term ratings apply to debt obligations that are payable on demand
or have original maturities of generally up to three years, including commercial
paper, CDs, medium-term notes, and municipal and investment notes. The
short-term rating places greater emphasis than a long-term rating on the
existence of liquidity necessary to meet the issuer's obligations in a timely
manner.

F-1+: Exceptionally strong credit quality. Regarded as having the strongest
degree of assurance for timely payment.

F-1: Very strong credit quality. Reflect an assurance of timely payment only
slightly less in degree than issues rated F-1+.

F-2: Good credit quality. A satisfactory degree of assurance for timely payment,
but the margin of safety is not as great as for issues assigned F-1+ and F-1
ratings.

F-3: Fair credit quality. Have characteristics suggesting that the degree of
assurance for timely payment is adequate; however, near-term adverse changes
could cause these securities to be rated below investment grade.

LOC: The symbol LOC indicates that the rating is based on a letter of credit
issued by a commercial bank.

FRANKLIN CASH
RESERVES FUND

INSTITUTIONAL FIDUCIARY TRUST

STATEMENT OF
ADDITIONAL INFORMATION

NOVEMBER 1, 1998

777 MARINERS ISLAND BLVD., P.O. BOX 7777
SAN MATEO, CA 94403-7777 1-800/321-8563

TABLE OF CONTENTS

How Does the Fund Invest Its Assets? .......................... 2

Investment Restrictions ....................................... 4

Officers and Trustees ......................................... 5

Investment Management and
Other Services ............................................... 9

How Does the Portfolio Buy
Securities for Its Portfolio? ................................ 10

How Do I Buy, Sell
and Exchange Shares? ......................................... 11

How Are Fund Shares Valued? ................................... 12

Additional Information on
Distributions and Taxes ...................................... 12

The Fund's Underwriter ........................................ 15

How Does the Fund
Measure Performance? ......................................... 16

Miscellaneous Information ..................................... 17

Financial Statements .......................................... 19

Useful Terms and Definitions .................................. 19

Appendices

Summary of Procedures to Monitor
Conflicts of Interest ....................................... 19

Description of Ratings ....................................... 20

The fund is a no-load, diversified series of Institutional Fiduciary Trust (the
"Trust"), an open-end management investment company. The Prospectus, dated
November 1, 1998, which we may amend from time to time, contains the basic
information you should know before investing in the fund. For a free copy, call
1-800/321-8563.

THIS SAI IS NOT A PROSPECTUS. IT CONTAINS INFORMATION IN ADDITION TO AND IN MORE
DETAIL THAN SET FORTH IN THE PROSPECTUS. THIS SAI IS INTENDED TO PROVIDE YOU
WITH ADDITIONAL INFORMATION REGARDING THE ACTIVITIES AND OPERATIONS OF THE FUND,
AND SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS.

- ------------------------------------------------------------------------------
MUTUAL FUNDS, ANNUITIES, AND OTHER INVESTMENT PRODUCTS:

o ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY OF THE U.S. GOVERNMENT;

o ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY BANK;

o ARE SUBJECT TO INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL
- ------------------------------------------------------------------------------

HOW DOES THE FUND INVEST ITS ASSETS?

WHAT IS THE FUND'S GOAL?

The investment goal of the fund is to provide investors with as high a level of
current income as is consistent with preservation of shareholders' capital and
liquidity. This goal is fundamental, which means that it may not be changed
without shareholder approval. The fund also tries to maintain a stable Net Asset
Value of $1 per share. The fund seeks to achieve its investment goal by
investing all of its assets in shares of The Money Market Portfolio (the
"Portfolio"). The Portfolio is a series of The Money Market Portfolios ("Money
Market"). Its investment goal is the same as the fund's.

MORE INFORMATION ABOUT THE
KINDS OF SECURITIES THE PORTFOLIO BUYS

BANK OBLIGATIONS. The Portfolio may invest in certain bank obligations or
instruments secured by bank obligations. 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.

VARIABLE MASTER DEMAND NOTES are a type of commercial paper. They are direct
arrangements between a lender and a borrower that allow daily changes to the
amount borrowed and to the interest rate. The Portfolio, 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 Portfolio 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 Portfolio'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,
Advisers considers, among other things, the earnings power, cash flow and other
liquidity ratios of the issuer.

ASSET-BACKED SECURITIES. 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.

MUNICIPAL SECURITIES. The Portfolio may invest up to 10% of its assets in
taxable municipal securities. Municipal securities are issued by or on behalf of
states, territories or possessions of the U.S., the District of Columbia, or
their political subdivisions, agencies or instrumentalities. They are generally
issued to raise money for various public purposes, such as constructing public
facilities and making loans to public institutions. Certain types of municipal
securities are issued to provide funding for privately operated facilities and
are generally taxable.

DIVERSIFICATION. The Portfolio is a diversified fund. As fundamental policies:
(a) the Portfolio may not buy a security if, with respect to 75% of its total
assets, more than 5% would be invested in the securities of any one issuer, and
(b) the Portfolio may not invest in a security if the Portfolio 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.

MORE INFORMATION ABOUT SOME OF THE PORTFOLIO'S OTHER INVESTMENT STRATEGIES
AND PRACTICES

WHEN-ISSUED OR DELAYED-DELIVERY TRANSACTIONS. When the Portfolio 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 Portfolio will not engage in
when-issued and delayed-delivery transactions for investment leverage purposes.

REPURCHASE AGREEMENTS. Under a repurchase agreement, the seller is required to
maintain the value of the securities subject to the repurchase agreement at not
less than the repurchase price. Advisers will monitor the value of such
securities daily to determine that the value equals or exceed the repurchase
price. Repurchase agreements may involve risks in the event of default or
insolvency of the seller, including possible delays or restrictions upon the
Portfolio's ability to dispose of the underlying securities. The Portfolio will
enter into repurchase agreements only with parties who meet creditworthiness
standards approved by the Board of Trustees of Money Market, i.e., banks or
broker-dealers that have been determined by Advisers to present no serious risk
of becoming involved in bankruptcy proceedings within the time frame
contemplated by the repurchase transaction.

LOANS OF PORTFOLIO SECURITIES. Consistent with procedures approved by the Board
of Trustees of Money Market and subject to the following conditions, the
Portfolio may lend its portfolio securities to qualified securities dealers or
other institutional investors, if such loans do not exceed 25% of the value of
the Portfolio's total assets at the time of the most recent loan. The Portfolio,
however, currently intends to limit its lending of securities to no more than 5%
of it total assets. The borrower must deposit with the Portfolio's custodian
bank collateral with an initial market value of at least 102% of the market
value of the securities loaned, including any accrued interest, with the value
of the collateral and loaned securities marked-to-market daily to maintain
collateral coverage of at least 100%. This collateral shall consist of cash. The
lending of securities is a common practice in the securities industry. The
Portfolio may engage in security loan arrangements with the primary objective of
increasing the Portfolio's income either through investing cash collateral in
short-term interest-bearing obligations or by receiving a loan premium from the
borrower. Under the securities loan agreement, the Portfolio continues to be
entitled to all dividends or interest on any loaned securities. As with any
extension of credit, there are risks of delay in recovery and loss of rights in
the collateral should the borrower of the security fail financially.

BORROWING. The Portfolio may borrow up to 5% of its total assets from banks for
temporary or emergency purposes. The Portfolio will not make any new investments
while any outstanding loans exceed 5% of its total assets.

ILLIQUID INVESTMENTS. The Portfolio'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 Portfolio has valued them.

OTHER LIMITATIONS. The Portfolio 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 Portfolio 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 Code.

THE FUND'S MASTER/FEEDER STRUCTURE

The fund's structure, where it invests all of its assets in the Portfolio, is
sometimes known as a "Master/Feeder" structure. By investing all of its assets
in shares of the Portfolio, the fund, other mutual funds and institutional
investors can pool their assets. This may result in asset growth and lower
expenses, although there is no guarantee that this will happen.

If the fund, as a shareholder of the Portfolio, has to vote on a matter relating
to the Portfolio, it will hold a meeting of fund shareholders and will cast its
votes in the same proportion as the fund's shareholders voted.

There are some risks associated with the fund's Master/Feeder structure. If
other shareholders in the Portfolio sell their shares, the fund's expenses may
increase. Additionally, any economies of scale the fund has achieved as a result
of the structure may be diminished. Institutional investors in the Portfolio
that have a greater pro rata ownership interest in the Portfolio than the fund
could also have effective voting control.

If the Portfolio changes its investment goal or any of its fundamental policies
and fund shareholders do not approve the same change for the fund, the fund may
need to withdraw its investment from the Portfolio. Likewise, if the Board
considers it to be in the fund's best interest, it may withdraw the fund's
investment from the Portfolio at any time. If either situation occurs, the Board
will decide what action to take. Possible solutions might include investing all
of the fund's assets in another pooled investment entity with the same
investment goal and substantially similar policies as the fund, or hiring an
investment advisor to manage the fund's investments. Either circumstance could
increase the fund's expenses.

INVESTMENT RESTRICTIONS

The fund has adopted the following restrictions as fundamental policies. These
restrictions may not be changed without the approval of a majority of the
outstanding voting securities of the fund. Under the 1940 Act, this means the
approval of (i) more than 50% of the outstanding shares of the fund or (ii) 67%
or more of the shares of the fund present at a shareholder meeting if more than
50% of the outstanding shares of the fund are represented at the meeting in
person or by proxy, whichever is less. The fund MAY NOT:

(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 that are not
readily marketable, or enter into a repurchase agreement with more than seven
days to maturity if, as a result, more than 10% of the total assets of the fund
would be invested in such securities or repurchase agreements, except that, to
the extent this restriction is applicable, the fund may purchase, in private
placements, shares of another registered investment company having the same
investment objectives and policies as the fund.

(6) Purchase securities of other investment companies, except in connection
with a merger, consolidation, acquisition, or reorganization; provided that all
or substantially all of the assets of the fund may be invested in another
registered investment company having the same investment objectives and policies
as the fund.

(7) Invest more than 25% of its assets in securities of any industry, except
that this policy is inapplicable where the fund's policies, as described in its
current Prospectus, state otherwise, and further to the extent all or
substantially all of the assets of the fund may be invested in another
registered investment company having the same investment objectives and policies
as the fund. For purposes of this limitation, U.S. government obligations are
not considered to be part of any industry.

(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" in accordance with its stated
investment policies.

The investment restrictions of the Portfolio are substantially similar to the
investment restrictions of the fund, except as necessary to reflect the policy
of the fund to invest all of its assets in shares of the Portfolio.

OFFICERS AND TRUSTEES

The Board has the responsibility for the overall management of the fund,
including general supervision and review of its investment activities. The
Board, in turn, elects the officers of the Trust who are responsible for
administering the fund's day-to-day operations. The affiliations of the officers
and Board members and their principal occupations for the past five years are
shown below. Members of the Board who are considered "interested persons" of the
fund under the 1940 Act are indicated by an asterisk (*).

Frank H. Abbott, III (77)
1045 Sansome Street
San Francisco, CA 94111

Trustee

Harris J. Ashton (66)
191 Clapboard Ridge Road
Greenwich, CT 06830

Trustee

Robert F. Carlson (70)
2120 Lambeth Way
Carmichael, CA 95608

Trustee

Member and past President, Board of Administration, California Public Employees
Retirement Systems (CALPERS); former member and past Chairman of the Board,
Sutter Community Hospitals, Sacramento, CA; former member, Corporate Board, Blue
Shield of California; former Chief Counsel, California Department of
Transportation; and director or trustee, as the case may be, of nine of the
investment companies in the Franklin Templeton Group of Funds.

S. Joseph Fortunato (66)
Park Avenue at Morris County
P.O. Box 1945
Morristown, NJ 07962-1945

Trustee

* Charles B. Johnson (65)
777 Mariners Island Blvd.
San Mateo, CA 94404

Chairman of
the Board
and Trustee

* Charles E. Johnson (42)
500 East Broward Blvd.
Fort Lauderdale, FL
33394-3091

President
and Trustee

* Rupert H. Johnson, Jr. (58)
777 Mariners Island Blvd.
San Mateo, CA 94404

Vice President
and Trustee

Frank W.T. LaHaye (69)
20833 Stevens Creek Blvd.
Suite 102
Cupertino, CA 95014

Trustee

Gordon S. Macklin (70)
8212 Burning Tree Road
Bethesda, MD 20817

Trustee

Harmon E. Burns (53)
777 Mariners Island Blvd.
San Mateo, CA 94404

Vice President

Martin L. Flanagan (38)
777 Mariners Island Blvd.
San Mateo, CA 94404

Vice President
and Chief
Financial Officer

Deborah R. Gatzek (49)
777 Mariners Island Blvd.
San Mateo, CA 94404

Vice President
and Secretary

Diomedes Loo-Tam (59)
777 Mariners Island Blvd.
San Mateo, CA 94404

Treasurer and
Principal
Accounting
Officer

Senior Vice President, Franklin Templeton Services, Inc.; and officer of 32 of
the investment companies in the Franklin Templeton Group of Funds.

Thomas J. Runkel (40)
777 Mariners Island Blvd.
San Mateo, CA 94404

Vice President

Vice President, Franklin Advisers, Inc.; and officer of four of the investment
companies in the Franklin Templeton Group of Funds.

The officers and Board members are also officers and trustees of Money Market,
except as follows: Thomas J. Runkel, Vice President of the Trust, is not an
officer or trustee of Money Market; and Edward V. McVey and R. Martin Wiskemann
are officers of Money Market but not the Trust.

Positions and Offices Principal Occupation
Name, Age and Address with Money Market During the Past Five Years
- --------------------------------------------------------------------------------
Edward V. McVey (61)
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 (71)
777 Mariners Island Blvd.
San Mateo, CA 94404

Vice President

<TABLE>
<CAPTION>
TOTAL FEES NUMBER OF BOARDS
RECEIVED FROM IN THE FRANKLIN
TOTAL FEES TOTAL FEES THE FRANKLIN TEMPLETON GROUP OF
RECEIVED RECEIVED FROM TEMPLETON GROUP FUNDS ON WHICH
NAME FROM THE TRUST*** MONEY MARKET*** OF FUNDS**** EACH SERVES*****
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Frank H. Abbott, III $4,810 $1,100 $165,937 27
Harris J. Ashton 4,626 1,050 344,642 49
Robert F. Carlson* 2,335 450 17,680 9
S. Joseph Fortunato 4,599 1,050 361,562 51
David W. Garbellano** 800 200 91,317 N/A
Frank W.T. LaHaye 4,810 1,100 141,433 27
Gordon S. Macklin 4,626 1,050 337,292 49
</TABLE>

*Elected January 15, 1998.
**Deceased, September 27, 1997.
***For the fiscal year ended June 30, 1998. During the period from July 1, 1997
through May 31, 1998, fees at the rate of $200 per month plus $200 per meeting
attended were in effect for the Trust and fees at the rate of $50 per month plus
$50 per meeting attended were in effect for Money Market.
****For the calendar year ended December 31, 1997.
*****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 and trustees of Money Market are responsible. The Franklin
Templeton Group of Funds currently includes 54 registered investment companies,
with approximately 168 U.S. based funds or series.

Nonaffiliated members of the Board and trustees of Money Market 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 or trustee of Money Market
received any other compensation, including pension or retirement benefits,
directly or indirectly from the fund, Money Market or other funds in the
Franklin Templeton Group of Funds. Certain officers or Board members and
trustees of Money Market who are shareholders of Resources may be deemed to
receive indirec remuneration by virtue of their participation, if any, in the
fees paid to its subsidiaries.

As of August 4, 1998, the officers and Board members did not own of record or
beneficially any shares of the fund. Many of the Board members own shares in
other funds in the Franklin Templeton Group of Funds. Charles B. Johnson and
Rupert H. Johnson, Jr. are brothers and the father and uncle, respectively,
of Charles E. Johnson.

INVESTMENT MANAGEMENT AND OTHER SERVICES

MANAGEMENT AND ADMINISTRATION FEES. Under its management agreement, the
Portfolio pays Advisers a management fee equal to an annual rate of 0.15% of the
fund's average daily net assets.The fee is computed at the close of business on
the last business day of each month.

Advisers provides various administrative, statistical, and other services to the
fund. Under its administration agreement, the fund pays Advisers an
administration fee equal to an annual rate of 0.25% of the value of the fund's
average daily net assets. The fee is computed at the close of business on the
last business day of each month.

For the fiscal years ended June 30, 1998, 1997 and 1996, management fees of the
Portfolio, before any advance waiver, totaled, $2,963,304, $2,547,891 and
$2,162,519, respectively. Administration fees of the fund, before any advance
waiver, totaled $292,245, $148,055 and $61,531. Under an agreement by Advisers
to limit its fees, the Portfolio paid management fees totaling $2,830,858,
$2,429,509 and $2,034,014, and the fund paid administration fees totaling $0,
$43,899 and $5,315, for the same periods.

SHAREHOLDER SERVICING AGENT. Investor Services, a wholly owned subsidiary of
Resources, is the fund's shareholder servicing agent and acts as the fund's
transfer agent and dividend-paying agent. Investor Services is compensated on
the basis of a fixed fee per account. The fund 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. Investor Services, in its capacity as the transfer agent for the
Portfolio, effectively acts as the fund's custodian and holds the fund's shares
of the Portfolio on its books. Bank of New York, Mutual Funds Division, 90
Washington Street, New York, New York 10286, acts as custodian of the fund's
cash, pending investment in shares of the Portfolio. Bank of New York also acts
as custodian of the securities and other assets of the Portfolio. The custodians
do not participate in decisions relating to the purchase and sale of portfolio
securities.

AUDITOR. PricewaterhouseCoopers LLP, 333 Market Street, San Francisco,
California 94105, is the fund's independent auditor. During the fiscal year
ended June 30, 1998, the auditor's services consisted of rendering an opinion on
the financial statements of the fund included in the fund's Annual Report to
Shareholders for the fiscal year ended June 30, 1998.

HOW DOES THE PORTFOLIO
BUY SECURITIES FOR ITS PORTFOLIO?

The fund will not incur any brokerage or other costs in connection with its
purchase or redemption of shares of the Portfolio.

It is not possible to place a dollar value on the special executions or on the
research services Advisers receives from dealers effecting transactions in
portfolio securities. The allocation of transactions in order to obtain
additional research services permits Advisers 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, Advisers and its affiliates may use this research and data
in their investment advisory capacities with other clients. If the Trust's
officers are satisfied that the best execution is obtained, the sale of fund
shares, as well as shares of other funds in the Franklin Templeton Group of
Funds, may also be considered a factor in the selection of broker-dealers to
execute the fund's portfolio transactions.

During the fiscal years ended June 30, 1998, 1997 and 1996, the Portfolio paid
no brokerage commissions.

As of June 30, 1998, the Portfolio owned securities issued by Morgan Stanley
Dean Witter & Co. valued in the aggregate at $80 million, J.P. Morgan & Co.
valued in the aggregate at $49 million, and Swiss Bank Corp. valued in the
aggregate at $25 million. Morgan Stanley Dean Witter & Co, J.P. Morgan & Co.
and Swiss Bank Corp. are regular broker-dealers of the Portfolio. Except as
noted, neither the fund nor the Portfolio owned securities of its regular
broker-dealers as of the end of the fiscal year.

HOW DO I BUY, SELL AND EXCHANGE SHARES?

ADDITIONAL INFORMATION ON BUYING SHARES

The fund continuously offers its shares through Securities Dealers who have an
agreement with Distributors. Banks and financial institutions that sell shares
of the fund may be required by state law to register as Securities Dealers.

The offering of shares of the fund may be suspended at any time and resumed at
any time thereafter.

ADDITIONAL INFORMATION ON EXCHANGING SHARES

If a substantial number of shareholders should, within a short period, sell
their shares of the fund under the exchange privilege, the fund might have to
sell portfolio securities it might otherwise hold and incur the additional costs
related to such transactions.

ADDITIONAL INFORMATION ON SELLING SHARES

REDEMPTIONS IN KIND. The fund has committed itself to pay in cash (by check) all
requests for redemption by any shareholder of record, limited in amount,
however, during any 90-day period to the lesser of $250,000 or 1% of the value
of the fund's net assets at the beginning of the 90-day period. This commitment
is irrevocable without the prior approval of the 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.

SHAREHOLDER REDEMPTIONS

The fund will attempt to make payment for all shares redeemed on the day your
request is submitted, provided the fund is timely notified as described in the
fund's Prospectus, but in no event later than seven days after receipt by the
fund of your redemption request in proper form. The fund reserves the right,
however, to suspend redemptions or postpone the date of payment during any
period when (1) trading on the NYSE is closed for periods other than weekends
and holidays; (2) trading on the NYSE is restricted or an emergency exists, as
determined by the SEC, so that disposal of portfolio securities or valuation of
the net assets of the fund is not reasonably practicable; or (3) for such other
period as the SEC, by order, may permit for the protection of the fund's
shareholders. At various times, the fund may be requested to redeem shares for
which it has not yet received proper payment. Accordingly, the fund may delay
the sending of redemption proceeds until such time as it has assured itself that
proper payment has been collected for the purchase of such shares.

GENERAL INFORMATION

If dividend checks are returned to the fund marked "unable to forward" by the
postal service, we will consider this a request by you to change your dividend
option to reinvest all distributions. The proceeds will be reinvested in
additional shares at Net Asset Value until we receive new instructions.

Distribution or redemption checks sent to you do not earn interest or any other
income during the time the checks remain uncashed. Neither the fund nor its
affiliates will be liable for any loss caused by your failure to cash such
checks. The fund is not responsible for tracking down uncashed checks, unless a
check is returned as undeliverable.

All wires sent and received by the custodian bank and reported by the custodian
bank to the fund prior to 3:00 p.m. Pacific time, except on holidays, the day
before a holiday or the day after a holiday, are normally effective on the same
day, provided the fund is notified on time as provided in the Prospectus. All
wire payments received or reported by the custodian bank to the fund after 3:00
p.m. will be effective on the next business day. All checks or other negotiable
bank drafts will normally be effective within two business days for checks drawn
on a member bank of the Federal Reserve System and longer for most other checks.
All checks, drafts, wires and other payment mediums used to buy or sell shares
of the fund must be denominated in U.S. dollars, drawn on a U.S. bank, and are
accepted subject to collection at full face value. Checks drawn in U.S. funds on
foreign banks will not be credited to your account and dividends will not begin
accruing until the proceeds are collected, which may take a long period of time.
We may, in our sole discretion, either (a) reject any order to buy or sell
shares denominated in any other currency or (b) honor the transaction or make
adjustments to your account for the transaction as of a date and with a foreign
currency exchange factor determined by the drawee bank.

HOW ARE FUND SHARES VALUED?

The valuation of the Portfolio's portfolio securities, including any securities
held in a separate account maintained for when-issued securities, is based on
the amortized cost of the securities, which does not take into account
unrealized capital gains or losses. This method involves valuing an instrument
at its cost and thereafter assuming a constant amortization to maturity of any
discount or premium, regardless of the impact of fluctuating interest rates on
the market value of the instrument. While this method provides certainty in
calculation, it may result in periods during which value, as determined by
amortized cost, is higher or lower than the price the Portfolio would receive if
it sold the instrument. During periods of declining interest rates, the daily
yield on shares of the Portfolio computed as described above may tend to be
higher than a like computation made by a fund with identical investments but
utilizing a method of valuation based upon market prices and estimates of market
prices for all of its portfolio instruments. Thus, if the use of amortized cost
by the Portfolio resulted in a lower aggregate portfolio value on a particular
day, a prospective investor in the Portfolio would be able to obtain a somewhat
higher yield than would result from an investment in a fund utilizing only
market values, and existing investors in the Portfolio would receive less
investment income. The opposite would be true in a period of rising interest
rates.

The Portfolio's use of amortized cost, which helps the Portfolio maintain its
Net Asset Value per share of $1, is permitted by a rule adopted by the SEC.
Under this rule, the Portfolio must adhere to certain conditions. The Portfolio
must maintain a dollar-weighted average portfolio maturity of 90 days or less
and only buy instruments having remaining maturities of 397 calendar days or
less. The Portfolio must also invest only in those U.S. dollar-denominated
securities that the Board of Trustees of Money Market determines present minimal
credit risks and that are rated in one of the two highest short-term rating
categories by nationally recognized rating services, or if unrated, are deemed
comparable in quality, 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 rating categories.
Securities subject to floating or variable interest rates with demand features
that comply with applicable SEC rules may have stated maturities in excess of
one year.

ADDITIONAL INFORMATION
ON DISTRIBUTIONS AND TAXES

DISTRIBUTIONS

DISTRIBUTIONS OF NET INVESTMENT INCOME. The fund declares dividends for each day
that the fund's Net Asset Value is calculated. These dividends will equal all of
the fund's daily net income payable to shareholders of record as of the close of
business the preceding day. The fund's daily net income includes its pro rata
share of the Portfolio's income plus or minus any gain or loss on the sale of
Portfolio shares and changes in unrealized appreciation or depreciation in
Portfolio shares (to the extent required to maintain a constant Net Asset Value
per share), less the estimated expenses of the fund. The Portfolio's income
consists of accrued interest and any original issue or acquisition discount,
plus or minus any gain or loss on the sale of securities held by the Portfolio
and changes in unrealized appreciation or depreciation in securities held by the
Portfolio, less the estimated expenses of the Portfolio.

The fund earns income and gains on its investment in the Portfolio. The
Portfolio, in turn, earns income generally in the form of interest, original
issue, market and acquisition discount, and other income derived from its
investments. This income, together with the excess of any net short-term capital
gain over net long-term capital loss realized by the Portfolio, less expenses
incurred in the operation of the Portfolio, is paid to the fund as ordinary
dividend income. The ordinary dividend income received from the Portfolio, less
expenses incurred in the operation of the fund, constitute the fund's net
investment income from which dividends may be paid to you. Any distributions by
the fund from such income will be taxable to you as ordinary income, whether you
take them in cash or in additional shares.

DISTRIBUTIONS OF CAPITAL GAINS. The fund may receive capital gain distributions
from the Portfolio, consisting of the excess of any net long-term capital gain
over net short-term capital loss realized by the Portfolio on the sale or
disposition of its underlying portfolio securities. The fund may also derive
capital gains and losses in connection with the sale of Portfolio shares.
Distributions derived from the excess of net short-term capital gain over net
long-term capital loss will be taxable to you as ordinary income. Distributions
derived from the excess of net long-term capital gain over net short-term
capital loss, including capital gain distributions received from the Portfolio,
will be taxable to you as long-term capital gain, regardless of how long you
have held your shares in the fund. Any net short-term or long-term capital gains
realized by the fund (net of any capital loss carryovers) generally will be
distributed once each year, and may be distributed more frequently, if
necessary, in order to reduce or eliminate federal excise or income taxes on the
fund. Because the fund is a money market fund, it does not anticipate realizing
any long-term capital gains, however.

CERTAIN DISTRIBUTIONS PAID IN JANUARY. Distributions which are declared in
October, November or December and paid to you in January of the following year
will be treated for tax purposes as if they had been received by you on December
31 of the year in which they were declared. The fund will report this income to
you on your Form 1099-DIV for the year in which these distributions were
declared.

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 the fund to distribute income or make distribution
adjustments in order to maintain a $1.00 Net Asset Value. These procedures may
result in under- or over-distributions of net investment income.

INFORMATION ON THE TAX CHARACTER OF DISTRIBUTIONS. The fund will inform you of
the amount and character of your distributions at the time they are paid, and
will advise you of the tax status for federal income tax purposes of such
distributions shortly after the close of each calendar year.

TAXES

ELECTION TO BE TAXED AS A REGULATED INVESTMENT COMPANY. The fund has elected to
be treated as a regulated investment company under Subchapter M of the Code, has
qualified as such for its most recent fiscal year, and intends so to qualify
during the current fiscal year. The Board reserves the right not to maintain the
qualification of the fund as a regulated investment company if it determines
such course of action to be beneficial to its shareholders. In such case, the
fund will be subject to federal, and possibly state, corporate taxes on its
taxable income and gains, and distributions to you will be taxed as ordinary
dividend income to the extent of the fund's available earnings and profits.

In order to qualify as a regulated investment company for tax purposes, the fund
must meet certain specific requirements, including:

o The fund must maintain a diversified portfolio of securities, wherein no
security (other than U.S. government securities and securities of other
regulated investment companies) can exceed 25% of the fund's total assets,
and, with respect to 50% of the fund's total assets, no investment (other
than cash and cash items, U.S. government securities and securities of other
regulated investment companies) can exceed 5% of the fund's total assets or
10% of the outstanding voting securities of the issuer;

o The fund must derive at least 90% of its gross income from dividends,
interest, payments with respect to securities loans, and gains from the sale
or disposition of stock, securities or foreign currencies, or other income
derived with respect to its business of investing in such stock, securities,
or currencies; and

o The fund must distribute to its shareholders at least 90% of its investment
company taxable income (i.e., net investment income plus net short-term
capital gains) and net tax-exempt income for each of its fiscal years.

EXCISE TAX DISTRIBUTION REQUIREMENTS. The Code requires the fund to distribute
at least 98% of its taxable ordinary income earned during the calendar year and
98% of its capital gain net income earned during the twelve month period ending
October 31 (in addition to undistributed amounts from the prior year) to you by
December 31 of each year in order to avoid federal excise taxes. The fund
intends to declare and pay sufficient dividends in December (or in January of
the following year that are treated by you as received in December of the prior
year) but does not guarantee and can give no assurances that its distributions
will be sufficient to eliminate all such taxes.

REDEMPTION OF FUND SHARES. Redemptions and exchanges of fund shares are taxable
transactions for federal and state income tax purposes. The tax law requires
that you recognize a gain or loss in an amount equal to the difference between
your tax basis and the amount you received in exchange for your shares, subject
to the rules described below. If you hold your shares as a capital asset, the
gain or loss that you realize will be capital gain or loss, and will be
long-term for federal income tax purposes if you have held your shares for more
than one year at the time of redemption or exchange. Any loss incurred on the
redemption or exchange of shares held for six months or less will be treated as
a long-term capital loss to the extent of any long-term capital gains
distributed to you by the fund on those shares.

All or a portion of any loss that you realize upon the redemption of your fund
shares will be disallowed to the extent that you purchase other shares in the
fund (through reinvestment of dividends or otherwise) within 30 days before or
after your share redemption. Any loss disallowed under these rules will be added
to your tax basis in the new shares you purchase. Because the fund seeks to
maintain a constant $1.00 per share Net Asset Value, you should not expect to
realize a gain or loss upon redemption of your fund shares, however.

U.S. GOVERNMENT OBLIGATIONS. Many states grant tax-free status to dividends paid
to shareholders from interest earned on direct obligations of the U.S.
government, subject in some states to minimum investment requirements that must
be met by the fund. Investments in Government National Mortgage
Association/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. It is
anticipated, however, that no portion of the fund's distributions will qualify
for exemption from state and local income tax as dividends paid from interest
earned on direct obligations of the U.S. government. At the end of each calendar
year, the fund will provide you with the percentage of any dividends paid that
may qualify for tax-free treatment on your personal income tax return. You
should consult with your own tax advisor to determine the application of your
state and local laws to these distributions. Because the rules on exclusion of
this income are different for corporations, corporate shareholders should
consult with their corporate tax advisors about whether any of their
distributions may be exempt from corporate income or franchise taxes.

MUNICIPAL INVESTORS. Municipalities may invest surplus money subject to the
arbitrage rebate requirements of section 148 of the Code in the fund. Section
115(1) of the Code provides, in part, that gross income does not include income
accruing to a state, territory, or any political subdivision thereof that is
derived from the exercise of any essential government function. To the extent
that an investment by a municipality in the fund is made in connection with such
functions, the municipality will not be liable for federal income tax on income
or gains derived from its investment. A municipality that invests money subject
to the arbitrage rebate requirements in the fund should be aware that some or
all of the earnings distributed by the fund may need to be paid to the U.S. as a
rebate of arbitrage profits.

DIVIDENDS-RECEIVED DEDUCTION FOR CORPORATIONS. Because the fund's income is
derived primarily from interest rather than dividends, no portion of its
distributions will generally be eligible for the intercorporate
dividends-received deduction. None of the dividends paid by the fund for the
most recent fiscal year qualified for such deduction, and it is anticipated that
none of the current year's dividends will so qualify.

THE FUND'S UNDERWRITER

Pursuant to an underwriting agreement, Distributors acts as principal
underwriter in a continuous public offering of the fund's shares. The
underwriting agreement will continue in effect for successive annual periods if
its continuance is specifically approved at least annually by a vote of the
Board or by a vote of the holders of a majority of the fund's outstanding voting
securities, and in either event by a majority vote of the Board members who are
not parties to the underwriting agreement or interested persons of any such
party (other than as members of the Board), cast in person at a meeting called
for that purpose. The underwriting agreement terminates automatically in the
event of its assignment and may be terminated by either party on 90 days'
written notice.

Distributors pays the expenses of the distribution of fund shares, including
advertising expenses and the costs of printing sales material and prospectuses
used to offer shares to the public. The fund pays the expenses of preparing and
printing amendments to its registration statements and prospectuses (other than
those necessitated by the activities of Distributors) and of sending
prospectuses to existing shareholders. Distributors may be entitled to
reimbursement under the Rule 12b-1 plan for the fund, as discussed below. Except
as noted, Distributors received no other compensation from the fund for acting
as underwriter.

THE RULE 12B-1 PLAN

The fund has a distribution plan or "Rule 12b-1 plan" that was adopted pursuant
to Rule 12b-1 of the 1940 Act.

Under the plan, the fund pays Distributors up to 0.25% per year of the fund's
average daily net assets, payable quarterly, for distribution and related
expenses. These fees may be used to compensate Distributors or others for
providing distribution or related services and bearing certain fund expenses.
All distribution expenses over this amount will be borne by those who have
incurred them without reimbursement by the fund.

In addition to the payments that Distributors or others are entitled to under
the plan, the plan also provides that to the extent the fund, Advisers or
Distributors or other parties on behalf of the fund, Advisers or Distributors
make payments that are deemed to be for the financing of any activity primarily
intended to result in the sale of fund shares within the context of Rule 12b-1
under the 1940 Act, then such payments shall be deemed to have been made
pursuant to the plan. The terms and provisions of the plan relating to required
reports, term, and approval are consistent with Rule 12b-1.

In no event shall the aggregate asset-based sales charges, which include
payments made under the plan, plus any other payments deemed to be made pursuant
to the plan, exceed the amount permitted to be paid under the rules of the NASD.

The plan does not permit unreimbursed expenses incurred in a particular year to
be carried over to or reimbursed in later years.

To the extent fees are for distribution or marketing functions, as distinguished
from administrative servicing or agency transactions, certain banks will not be
entitled to participate in the plan as a result of applicable federal law
prohibiting certain banks from engaging in the distribution of mutual fund
shares. These banking institutions, however, are permitted to receive fees under
the plan for administrative servicing or for agency transactions. If you are a
customer of a bank that is prohibited from providing these services, you would
be permitted to remain a shareholder of the fund, and alternate means for
continuing the servicing would be sought. In this event, changes in the services
provided might occur and you might no longer be able to avail yourself of any
automatic investment or other services then being provided by the bank. It is
not expected that you would suffer any adverse financial consequences as a
result of any of these changes.

The plan has been approved in accordance with the provisions of Rule 12b-1. The
plan is renewable annually by a vote of the Board, including a majority vote of
the Board members who are not interested persons of the fund and who have no
direct or indirect financial interest in the operation of the plan, cast in
person at a meeting called for that purpose. It is also required that the
selection and nomination of such Board members be done by the non-interested
members of the Board. The plan and any related agreement may be terminated at
any time, without penalty, by vote of a majority of the non-interested Board
members on not more than 60 days' written notice, by Distributors on not more
than 60 days' written notice, by any act that constitutes an assignment of the
administration agreement between the Trust and Advisers or the management
agreement between Money Market and Advisers, or by vote of a majority of the
fund's outstanding shares. Distributors or any dealer or other firm may also
terminate their respective distribution or service agreement at any time upon
written notice.

The plan and any related agreements may not be amended to increase materially
the amount to be spent for distribution expenses without approval by a majority
of the outstanding shares of the fund, and all material amendments to the plan
or any related agreements shall be approved by a vote of the non-interested
members of the Board, cast in person at a meeting called for the purpose of
voting on any such amendment.

Distributors is required to report in writing to the Board at least quarterly on
the amounts and purpose of any payment made under the plan and any related
agreements, as well as to furnish the Board with such other information as may
reasonably be requested in order to enable the Board to make an informed
determination of whether the plan should be continued.

For the fiscal year ended June 30, 1998, Distributors had eligible expenditures
of $287,888 for advertising, printing, and payments to underwriters and
broker-dealers pursuant to the plan, of which the fund paid Distributors
$272,527 under the plan.

HOW DOES THE FUND MEASURE PERFORMANCE?

Performance quotations are subject to SEC rules. These rules require the use of
standardized performance quotations or, alternatively, that every
non-standardized performance quotation furnished by the fund be accompanied by
certain standardized performance information computed as required by the SEC.
Current yield and effective yield quotations used by the fund are based on the
standardized methods of computing performance mandated by the SEC. An
explanation of these and other methods used by the fund to compute or express
performance follows. Regardless of the method used, past performance does not
guarantee future results.

YIELD

CURRENT YIELD. Current yield shows the income per share earned by the fund. It
is calculated by determining the net change, excluding capital changes, in the
value of a hypothetical pre-existing account having a balance of one share at
the beginning of the period, subtracting a hypothetical charge reflecting
deductions from shareholder accounts, and dividing the difference by the value
of the account at the beginning of the base period to obtain the base period
return. The result is then annualized by multiplying the base period return by
(365/7). The fund's current yield for the seven day period ended June 30, 1998,
was 5.14%.

EFFECTIVE YIELD. The fund's effective yield is calculated in the same manner as
its current yield, except the annualization of the return for the seven day
period reflects the results of compounding. The fund's effective yield for the
seven day period ended June 30, 1998, was 5.27%.

This figure was obtained using the following SEC formula:

365/7
Effective Yield = [(Base Period Return + 1) ] - 1

OTHER PERFORMANCE QUOTATIONS

The fund may include in its advertising or sales material information relating
to investment goals and performance results of funds belonging to the Franklin
Templeton Group of Funds. Resources is the parent company of the advisors and
underwriter of the Franklin Templeton Group of Funds.

COMPARISONS

To help you better evaluate how an investment in the fund may satisfy your
investment goal, advertisements and other materials about the fund may discuss
certain measures of fund performance as reported by various financial
publications. Materials may also compare performance (as calculated above) to
performance as reported by other investments, indices and averages. These
comparisons may include, but are not limited to, the following examples:

a) IBC Money Fund Report(R) - industry averages for seven-day annualized and
compounded yields of taxable, tax-free, and government money funds.

b) Bank Rate Monitor - a weekly publication that reports various bank
investments such as CD rates, average savings account rates and average loan
rates.

f) Stocks, Bonds, Bills, and Inflation, published by Ibbotson Associates - a
historical measure of yield, price, and total return for common and small
company stock, long term government bonds, Treasury bills, and inflation.

g) Financial publications: THE WALL STREET JOURNAL AND BUSINESS WEEK, CHANGING
TIMES, FINANCIAL WORLD, FORBES, FORTUNE, AND MONEY MAGAZINES provide performance
statistics over specified time periods.

Advertisements or information may also compare the fund's performance to the
return on CDs or other investments. You should be aware, however, that an
investment in the fund involves the risk of fluctuation of principal value, a
risk generally not present in an investment in a CD issued by a bank. CDs are
frequently insured by an agency of the U.S. government. An investment in the
fund is not insured by any federal, state or private entity.

In assessing comparisons of performance, you should keep in mind that the
composition of the investments in the reported indices and averages is not
identical to the fund's portfolio, the indices and averages are generally
unmanaged, and the items included in the calculations of the averages may not be
identical to the formula used by the fund to calculate its figures. In addition,
there can be no assurance that the fund will continue its performance as
compared to these other averages.

MISCELLANEOUS INFORMATION

The fund may help you achieve various investment goals such as accumulating
money for retirement, saving for a down payment on a home, college costs and
other long-term goals. The Franklin College Costs Planner may help you in
determining how much money must be invested on a monthly basis in order to have
a projected amount available in the future to fund a child's college education.
(Projected college cost estimates are based upon current costs published by the
College Board.) The Franklin Retirement Planning Guide leads you through the
steps to start a retirement savings program. Of course, an investment in the
fund cannot guarantee that these goals will be met.

The fund is a member of the Franklin Templeton Group of Funds, one of the
largest mutual fund organizations in the U.S., and may be considered in a
program for diversification of assets. Founded in 1947, Franklin, one of the
oldest mutual fund organizations, has managed mutual funds for over 50 years and
now services more than 3 million shareholder accounts. In 1992, Franklin, a
leader in managing fixed-income mutual funds and an innovator in creating
domestic equity funds, joined forces with Templeton, a pioneer in international
investing. The Mutual Series team, known for its value-driven approach to
domestic equity investing, became part of the organization four years later.
Together, the Franklin Templeton Group has over $207 billion in assets under
management for more than 6 million U.S. based mutual fund shareholder and other
accounts. The Franklin Templeton Group of Funds offers 117 U.S. based open-end
investment companies to the public. The fund may identify itself by its NASDAQ
symbol or CUSIP number.

MISCELLANEOUS - The fund may be used in shareholder newsletters as an example of
how investors can meet long-term investment goals. Advertisements may indicate
how Franklin Gift Certificates may be used to purchase shares of the fund.

The fund may be listed as a member of the Franklin Templeton Group of Funds in
shareholder newsletters.

The fund may be used in shareholder newsletters as an example of the benefits of
diversification.

The fund may be used to demonstrate the benefits offered by professional
management.

Advertisements may indicate that as an established presence in the municipal
securities industry, the Franklin Templeton Group currently manages over $49
billion in municipal bond assets. Its municipal bond experience and knowledge of
municipal issuers allows the Franklin Templeton Group to offer investment
vehicles and services tailored to the needs of government investors.

Of course, an investment in the fund cannot guarantee that the shareholder's
goals will be met.

As of August 4, 1998, the principal shareholders of the fund, beneficial or of
record, were as follows:

SHARE PER-
NAME AND ADDRESS AMOUNT CENTAGE
- ---------------------------------------------------------------------
FTTC Ttee for
ValuSelect 12,330,955.460 9.43%
CACI-MMF
Attn: Trading
P.O. Box 2438
Rancho Cordova, CA
95741-2438

City National Bank
as Ttee 8,510,549.390 6.51%
c/o BAC/Plan
Member Services
Attn: Kerry Dunbar
1200 5th Avenue, Suite 600
Seattle WA 98101-1188

The Bank of New York
Ttee 9,864,175.940 7.55%
Budget Group Inc.
Savings Plus Plan
Attn: Daphne Bethea
1 Wall Street
New York, NY 10005-2500

As a shareholder of a Massachusetts business trust, you could, under certain
circumstances, be held personally liable as a partner for its obligations. The
fund's Agreement and Declaration of Trust, however, contains an express
disclaimer of shareholder liability for acts or obligations of the fund. The
Declaration of Trust also provides for indemnification and reimbursement of
expenses out of the fund's assets if you are held personally liable for
obligations of the fund. The Declaration of Trust provides that the fund shall,
upon request, assume the defense of any claim made against you for any act or
obligation of the fund and satisfy any judgment thereon. All such rights are
limited to the assets of the fund. The Declaration of Trust further provides
that the fund may maintain appropriate insurance (for example, fidelity bonding
and errors and omissions insurance) for the protection of the fund, its
shareholders, trustees, officers, employees and agents to cover possible tort
and other liabilities. Furthermore, the activities of the fund as an investment
company, as distinguished from an operating company, would not likely give rise
to liabilities in excess of the fund's total assets. Thus, the risk that you
would incur financial loss on account of shareholder liability is limited to the
unlikely circumstance in which both inadequate insurance exists and the fund
itself is unable to meet its obligations.

In the event of disputes involving multiple claims of ownership or authority to
control your account, the fund has the right (but has no obligation) to: (a)
freeze the account and require the written agreement of all persons deemed by
the fund to have a potential property interest in the account, before executing
instructions regarding the account; (b) interplead disputed funds or accounts
with a court of competent jurisdiction; or (c) surrender ownership of all or a
portion of the account to the IRS in response to a Notice of Levy.

FINANCIAL STATEMENTS

The audited financial statements contained in the Annual Report to Shareholders
of the fund for the fiscal year ended June 30, 1998, including the auditor's
report, are incorporated herein by reference.

USEFUL TERMS AND DEFINITIONS

1940 ACT - Investment Company Act of 1940, as amended

ADVISERS - Franklin Advisers, Inc., the Portfolio's investment manager and
the fund's administrator

BOARD - The Board of Trustees of the Trust

CD - Certificate of deposit

CODE - Internal Revenue Code of 1986, as amended

DISTRIBUTORS - Franklin/Templeton Distributors, Inc., the fund's principal
underwriter

FITCH - Fitch Investors Service, Inc.

FRANKLIN TEMPLETON GROUP - Franklin Resources, Inc., a publicly owned holding
company, and its various subsidiaries

FRANKLIN TEMPLETON GROUP OF FUNDS - All U.S. registered investment companies
in the Franklin Group of Funds(R) and the Templeton Group of Funds

INVESTOR SERVICES - Franklin/Templeton Investor Services, Inc., the fund's
shareholder servicing and transfer agent

IRS - Internal Revenue Service

MOODY'S - Moody's Investors Service, Inc.

NASD - National Association of Securities Dealers, Inc.

NYSE - New York Stock Exchange

PROSPECTUS - The prospectus for the fund dated November 1, 1998, which we may
amend from time to time

RESOURCES - Franklin Resources, Inc.

SAI - Statement of Additional Information

S&P - Standard & Poor's Corporation

SEC - U.S. Securities and Exchange Commission

WE/OUR/US - Unless a different meaning is indicated by the context, these terms
refer to the fund and/or Investor Services, Distributors, or other wholly owned
subsidiaries of Resources.

APPENDICES

SUMMARY OF PROCEDURES
TO MONITOR CONFLICTS OF INTEREST

The Board of Trustees of Money Market, on behalf of its series ("master funds"),
and the Board of the fund ("feeder fund"), (both of which are composed of the
same individuals) recognize that there is the potential for certain conflicts of
interest to arise between the master fund and the feeder fund in this format.
These potential conflicts of interest could include, among others: the creation
of additional feeder funds with different fee structures; the creation of
additional feeder funds that could have controlling voting interests in any
pass-through voting which could affect investment and other policies; a proposal
to increase fees at the master fund level; and any consideration of changes in
fundamental policies at the master fund level that may or may not be acceptable
to a particular feeder fund.

In recognition of the potential for conflicts of interest to develop, the Board
of Trustees of Money Market and the Board of the Trust have adopted certain
procedures under which i) management of the master fund and the feeder fund
will, on a yearly basis, report to each board, including the independent members
of each board, on the operation of the master/feeder fund structure; ii) the
independent members of each board will have ongoing responsibility for reviewing
all proposals at the master fund level to determine whether any proposal
presents a potential for a conflict of interest and to the extent any other
potential conflicts arise before the normal annual review, they will act
promptly to review the potential conflict; iii) if the independent members of
each board determine that a situation or proposal presents a potential conflict,
they will request a written analysis from the master fund management describing
whether the apparent potential conflict of interest will impede the operation of
the constituent feeder fund and the interests of the feeder fund's shareholders;
and iv) upon receipt of the analysis, the independent members of each board
shall review the analysis and present their conclusion to the full boards.

DESCRIPTION OF RATINGS

SHORT-TERM DEBT & COMMERCIAL PAPER RATINGS

MOODY'S

Moody's employs the following designations, judged to be investment grade, used
for both short-term debt and commercial paper to indicate the relative repayment
ability of rated issuers:

P-1 (PRIME-1): Superior capacity for repayment.

P-2 (PRIME-2): Strong capacity for repayment.

S&P

A-1: This designation indicates the degree of safety regarding timely payment is
very strong. A "plus" (+) designation indicates an even stronger likelihood of
timely payment.

A-2: Capacity for timely payment on issues with this designation is strong. The
relative degree of safety, however, is not as overwhelming as for issues
designated A-1.

FITCH

F-1+: Exceptionally strong credit quality. Regarded as having the strongest
degree of assurance for timely payment.

F-1: Very strong credit quality. Reflect an assurance of timely payment only
slightly less in degree than issues rated F-1+.

F-2: Good credit quality. A satisfactory degree of assurance for timely payment,
but the margin of safety is not as great as for issues assigned F-1+ and F-1
ratings.

LOC: The symbol LOC indicates that the rating is based on a letter of credit
issued by a commercial bank.

MUNICIPAL NOTE RATINGS

MOODY'S

MIG 2: Notes are of high quality, with margins of protection ample, although not
so large as in the preceding group.

MIG 4: Notes are of adequate quality, carrying specific risk but having
protection and not distinctly or predominantly speculative.

S&P

SP-2: Issues carrying this designation have a satisfactory capacity to pay
principal and interest.

COMMERCIAL PAPER RATINGS

MOODY'S

Moody's commercial paper ratings, which are also applicable to municipal paper
investments permitted to be made by the fund, are opinions of the ability of
issuers to repay punctually their promissory obligations not having an original
maturity in excess of nine months. Moody's employs the following designations,
all judged to be investment grade, to indicate the relative repayment capacity
of rated issuers:

P-1 (PRIME-1): Superior capacity for repayment.

P-2 (PRIME-2): Strong capacity for repayment.

S&P

S&P's ratings are a current assessment of the likelihood of timely payment of
debt having an original maturity of no more than 365 days. Ratings are graded
into four categories, ranging from "A" for the highest quality obligations to
"D" for the lowest. Issues within the "A" category are delineated with the
numbers 1, 2 and 3 to indicate the relative degree of safety, as follows:

A-1: This designation indicates the degree of safety regarding timely payment is
very strong. A "plus" (+) designation indicates an even stronger likelihood of
timely payment.

A-2: Capacity for timely payment on issues with this designation is strong. The
relative degree of safety,however, is not as overwhelming as for issues
designated A-1.

FITCH

F-1+: Exceptionally strong credit quality. Regarded as having the strongest
degree of assurance for timely payment.

F-1: Very strong credit quality. Reflect an assurance of timely payment only
slightly less in degree than issues rated F-1+.

F-2: Good credit quality. A satisfactory degree of assurance for timely payment,
but the margin of safety is not as great as for issues assigned F-1+ and F-1
ratings.

F-5: Weak credit quality. Have characteristics suggesting a minimal degree of
assurance for timely payment and are vulnerable to near-term adverse changes in
financial and economic conditions.

LOC: The symbol LOC indicates that the rating is based on a letter of credit
issued by a commercial bank.