INSTITUTIONAL FIDUCIARY TRUST, 485BPOS, 2000-10-27

INSTITUTIONAL FIDUCIARY TRUST
485BPOS, 2000-10-27

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As filed with the Securities and Exchange Commission on October 27, 2000.

File Nos.
2-96634
811-4267

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

Pre-Effective Amendment No.

Post-Effective Amendment No. 30 (X)
----

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940

Amendment No. 31 (X)
----

INSTITUTIONAL FIDUCIARY TRUST
-----------------------------
(Exact Name of Registrant as Specified in Charter)

777 MARINERS ISLAND BLVD., SAN MATEO, CA 94404
----------------------------------------------
(Address of Principal Executive Offices) (Zip Code)

Registrant's Telephone Number, Including Area Code (650) 312-2000
--------------

MURRAY L. SIMPSON, 777 MARINERS ISLAND BLVD., SAN MATEO, CA 94404
---------------------------------------------------------------
(Name and Address of Agent for Service of Process)

Approximate Date of Proposed Public offering:

It is proposed that this filing will become effective (check appropriate box)

[ ] immediately upon filing pursuant to paragraph (b)
[X] on November 1, 2000 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of rule 485

If appropriate, check the following box:

[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment

The Money Market Portfolios (the Master Fund) has executed this registration
statement.

Prospectus

INSTITUTIONAL FIDUCIARY TRUST

INVESTMENT STRATEGY
INCOME

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

NOVEMBER 1, 2000

[Insert Franklin Templeton Ben Head]

The SEC has not approved or disapproved these securities or passed upon the
adequacy of this prospectus. Any representation to the contrary is a criminal
offense.

CONTENTS

THE FUNDS

[Begin callout]
INFORMATION ABOUT EACH FUND YOU SHOULD KNOW BEFORE INVESTING
[End callout]

2 Money Market Portfolio

9 Franklin U.S. Government Securities Money Market Portfolio

15 Distributions and Taxes

YOUR ACCOUNT

[Begin callout]
INFORMATION ABOUT ACCOUNT TRANSACTIONS AND SERVICES
[End callout]

16 Buying Shares

19 Investor Services

22 Selling Shares

25 Account Policies

28 Questions

FOR MORE INFORMATION

[Begin callout]
WHERE TO LEARN MORE ABOUT EACH FUND
[End callout]

Back Cover

MONEY MARKET PORTFOLIO (MONEY FUND)

[Insert graphic of bullseye and arrows] GOAL AND STRATEGIES

GOAL The Fund's investment goal is to provide investors with as high a level of
current income as is consistent with the preservation of shareholders' capital
and liquidity. The Fund also tries to maintain a stable $1 share price.

MAIN INVESTMENT STRATEGIES The Fund seeks to achieve its investment goal by
investing all of its assets in shares of The Money Market Portfolio (Portfolio).
The Portfolio has the same investment goal and substantially similar investment
policies as the Fund; it invests in high-quality, short-term U.S. dollar
denominated money market securities of domestic and foreign issuers, including:

BANK OBLIGATIONS and instruments secured by bank obligations, which include
fixed, floating or variable rate certificates of deposit, letters of credit,
time deposits, bank notes and bankers' acceptances. From time to time, the Fund
may concentrate its investments in bank obligations (such as certificates of
deposits) issued by domestic banks. Investments in obligations of U.S. branches
of foreign banks are considered domestic banks if such branches have a federal
or state charter to do business in the U.S. and are subject to U.S. regulatory
authorities.

o CERTIFICATES OF DEPOSITS, which are bank obligations that are issued against
money deposited in a banking institution for a specified period of time at a
specified interest rate.

COMMERCIAL PAPER, which is a short-term obligation of a bank, corporation or
other borrower with a maturity of up to 270 days. Commercial paper may also be
asset-backed (that is, backed by a pool of assets representing the obligations
of a number of different parties). At any time, the Fund may have a significant
portion of its investments in asset-backed commercial paper.

REPURCHASE AGREEMENTS, which are agreements to buy a security and then to sell
the security back after a short period of time (generally, less than seven days)
at a higher price.

U.S. GOVERNMENT SECURITIES, which include marketable fixed, floating and
variable rate securities issued or guaranteed by the U.S. government or its
agencies, or by various instrumentalities that have been established or
sponsored by the U.S. government.

PORTFOLIO MATURITY AND QUALITY The Fund maintains a dollar-weighted average
portfolio maturity of 90 days or less and only buys securities:

o with remaining maturities of 397 days or less, and
o that the manager determines present minimal credit risks and are rated
in the top two short-term ratings by U.S. nationally recognized rating
services (or comparable unrated securities).

[Insert graphic of chart with line going up and down] MAIN RISKS

FINANCIAL SERVICES COMPANIES Financial services companies such as banks are
highly dependent on the supply of short-term financing. The value of securities
issued by financial services companies can be sensitive to changes in government
regulation and interest rates and to economic downturns in the U.S. and
overseas.

INCOME Since the Fund can only distribute what it earns, the Fund's
distributions to shareholders may decline when interest rates fall. Because the
Fund limits its investments to high-quality, short-term securities, its
portfolio generally will earn lower yields than a portfolio with lower-quality,
longer-term securities subject to more risk.

INTEREST RATE Changes in interest rates can be sudden and unpredictable. Rate
changes occur in response to general economic conditions and also as a result of
actions by the Federal Reserve Board. A reduction in short-term interest rates
will normally result in reduced interest income to the Fund and thus a reduction
in dividends payable to shareholders. An increase in short-term interest rates
will normally have the effect of increasing dividends to shareholders.

More detailed information about the Fund, its policies and risks can be found in
the Fund's Statement of Additional Information (SAI).

[Begin callout]
Mutual fund shares are not deposits or obligations of, or guaranteed or endorsed
by, any bank, and are not insured by the Federal Deposit Insurance Corporation,
the Federal Reserve Board, or any other agency of the U.S. government. Although
the Fund tries to maintain a $1 share price, it is possible to lose money by
investing in the Fund.
[End callout]

[Insert graphic of a bull and a bear] PERFORMANCE

This bar chart and table show the volatility of the Fund's returns, which is one
indicator of the risks of investing in the Fund. The bar chart shows changes in
the Fund's returns from year to year over the past 10 calendar years. The table
shows the Fund's average annual total returns. Of course, past performance
cannot predict or guarantee future results.

ANNUAL TOTAL RETURNS/1

[Insert bar graph]

8.24% 5.91% 3.74% 3.14% 4.19 5.98% 5.38% 5.49% 5.44% 4.92%
90 91 92 93 94 95 96 97 98 99
YEAR

[Begin callout]
BEST QUARTER:

Q2 '90 2.03%

WORST QUARTER:

Q1 '93 0.75%
[End callout]

AVERAGE ANNUAL TOTAL RETURNS
For the periods ended December 31, 1999

1 YEAR 5 YEARS 10 YEARS
----------------------------------------------------------------------------
Money Market Portfolio 4.92% 5.45% 5.24%

1. As of September 30, 2000, the Fund's year-to-date return was 4.51%.
All Fund performance assumes reinvestment of dividends.

To obtain the Fund's current yield information, please call 1-800/321-8563.

[Insert graphic of percentage sign] FEES AND EXPENSES

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.

SHAREHOLDER FEES (fees paid directly from your investment)

Maximum sales charge (load) on purchases None

ANNUAL FUND OPERATING EXPENSES (expenses deducted from Fund assets)/1

Management fees/2 0.35%
Other expenses 0.05%
--------
Total annual Fund operating expenses/2 0.40%
========

1. The annual Fund operating expenses shown and included in the example below
reflect the expenses of both the Fund and The Money Market Portfolio.

2. For the fiscal year ended June 30, 2000, the manager had agreed in advance to
limit its fees. With this reduction, management fees were 0.30% and total annual
Fund operating expenses were 0.35%. The manager may end this arrangement at any
time upon notice to the Fund's Board of Trustees.

EXAMPLE

This example can help you compare the cost of investing in the Fund with the
cost of investing in other mutual funds. It assumes:

o You invest $10,000 for the periods shown;
o Your investment has a 5% return each year;
o The Fund's operating expenses remain the same; and
o You sell your shares at the end of the periods shown.

Although your actual costs may be higher or lower, based on these assumptions
your costs would be:

1 YEAR 3 YEARS 5 YEARS 10 YEARS
-----------------------------------------------------------
$41 $128 $224 $505

[Insert graphic of briefcase] MANAGEMENT

Franklin Advisers, Inc. (Advisers), 777 Mariners Island Blvd., San Mateo, CA
94404, is The Money Market Portfolio's investment manager and the Fund's
administrator. Together, Advisers and its affiliates manage over $236 billion
in assets.

The Portfolio pays Advisers a fee for managing the Portfolio's assets. For the
fiscal year ended June 30, 2000, the Fund's share of the Portfolio's management
fees, before any advance waiver, was 0.15% of the Fund's average daily net
assets. Under an agreement by the manager to limit its fees, the Fund's share
was 0.14% of its average daily net assets. The manager may end this arrangement
at any time upon notice to the Fund's Board of Trustees.

[Insert graphic of a dollar bill] FINANCIAL HIGHLIGHTS

This table presents the Fund's financial performance for the past five years.
This information has been audited by PricewaterhouseCoopers LLP.

YEAR ENDED JUNE 30,
--------------------------------------------------------------------------------
2000 1999 1998 1997 1996
--------------------------------------------------------------------------------
PER SHARE DATA ($)

Net asset value, beginning of year 1.00 1.00 1.00 1.00 1.00
---------------------------------------------
Net investment income .054 .049 .054 .053 .055
Distributions from net investment
income (.054) (.049) (.054) (.053) (.055)
---------------------------------------------
Net asset value, end of year 1.00 1.00 1.00 1.00 1.00
=============================================
Total return (%) 5.54 5.02 5.58 5.42 5.61

RATIOS/SUPPLEMENTAL DATA

Net assets, end of year ($ x 1,000) 1,010,170 1,289,010 175,881 185,088 341,295
Ratios to average net assets: (%)
Expenses/1 .35 .31 .20 .20 .19
Expenses excluding waiver and
payments by affiliate/1 .40 .33 .24 .24 .24
Net investment income 5.48 4.82 5.44 5.27 5.45

1. The expense ratio includes the Fund's share of the Portfolio's allocated
expenses.

FRANKLIN U.S. GOVERNMENT SECURITIES MONEY MARKET PORTFOLIO (U.S. SECURITIES
FUND)

[Insert graphic of bullseye and arrows] GOAL AND STRATEGIES

MAIN INVESTMENT STRATEGIES The Fund seeks to achieve its investment goal by
investing all of its assets in shares of The U.S. Government Securities Money
Market Portfolio (Portfolio). The Portfolio has the same investment goal and
substantially similar investment policies as the Fund; it invests only in
marketable obligations that are issued or guaranteed by the U.S. government or
that carry a guarantee that is supported by the full faith and credit of the
U.S. government, repurchase agreements collateralized only by these securities,
and stripped securities (which are separate income and principal components of a
debt security). It is the Fund's present policy to limit its investments to U.S.
Treasury bills, notes and bonds (including stripped securities), and repurchase
agreements collateralized only by these securities. A repurchase agreement is an
agreement to buy a security and then to sell the security back after a short
period of time (generally, less than seven days) at a higher price.

PORTFOLIO MATURITY AND QUALITY The Fund maintains a dollar-weighted average
portfolio maturity of 90 days or less and only buys securities:

o with remaining maturities of 397 days or less, and

o that the manager determines present minimal credit risks and are rated
in the top two short-term ratings by U.S. nationally recognized rating
services (or comparable unrated securities).

[Insert graphic of chart with line going up and down] MAIN RISKS

More detailed information about the Fund, its policies and risks can be found in
the Fund's Statement of Additional Information (SAI).

[Insert graphic of a bull and a bear] PERFORMANCE

ANNUAL TOTAL RETURNS/1

[Insert bar graph]

8.14% 5.71% 3.57% 3.06% 4.11% 5.83% 5.27% 5.41% 5.30% 4.68%
90 91 92 93 94 95 96 97 98 99
YEAR

[Begin callout]
BEST QUARTER:

Q3 '90 2.00%

WORST QUARTER:

Q1 '93 0.73%
[End callout]

AVERAGE ANNUAL TOTAL RETURNS
For the periods ended December 31, 1999

1 YEAR 5 YEARS 10 YEARS
----------------------------------------------------------------------------
Franklin U.S. Government Securities 4.68% 5.30% 5.10
Money Market Portfolio

1. As of September 30, 2000, the Fund's year-to-date return was 4.34%.
All Fund performance assumes reinvestment of dividends.

To obtain the Fund's current yield information, please call 1-800/321-8563.

[Insert graphic of percentage sign] FEES AND EXPENSES

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.

SHAREHOLDER FEES (fees paid directly from your investment)

Maximum sales charge (load) on purchases None

ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)/1

Management fees/2 0.35%
Other expenses 0.08%
-------
Total annual Fund operating expenses/2 0.43%
=======

1. The annual Fund operating expenses shown and included in the example below
reflect the expenses of both the Fund and The U.S. Government Securities Money
Market Portfolio.

2. For the fiscal year ended June 30, 2000, the manager had agreed in advance to
limit its fees. With this reduction, management fees were 0.28% and total annual
Fund operating expenses were 0.35%. The manager may end this arrangement at any
time upon notice to the Fund's Board of Trustees.

EXAMPLE

This example can help you compare the cost of investing in the Fund with the
cost of investing in other mutual funds. It assumes:

o You invest $10,000 for the periods shown;
o Your investment has a 5% return each year;
o The Fund's operating expenses remain the same; and
o You sell your shares at the end of the periods shown.

Although your actual costs may be higher or lower, based on these assumptions
your costs would be:

1 YEAR 3 YEARS 5 YEARS 10 YEARS
------------------------------------------------------------------
$44 $138 $241 $542

[Insert graphic of briefcase] MANAGEMENT

Franklin Advisers, Inc. (Advisers), 777 Mariners Island Blvd., San Mateo, CA
94404, is The U.S. Government Securities Money Market Portfolio's investment
manager and the Fund's administrator. Together, Advisers and its affiliates
manage over $236 billion in assets.

[Insert graphic of a dollar bill] FINANCIAL HIGHLIGHTS

This table presents the Fund's financial performance for the past five years.
This information has been audited by PricewaterhouseCoopers LLP.

Net asset value, beginning of year 1.00 1.00 1.00 1.00 1.00
---------------------------------------------
Net investment income .051 .047 .054 .052 .054
Distributions from net
investment income (.051) (.047) (.054) (.052) (.054)
---------------------------------------------
Net asset value, end of year 1.00 1.00 1.00 1.00 1.00
=============================================
Total return (%) 5.27 4.82 5.51 5.29 5.50

RATIOS/SUPPLEMENTAL DATA

Net assets, end of year ($ x 1,000) 56,436 111,566 131,151 136,705 152,173
Ratios to average net assets: (%)
Expenses/1 .35 .30 .20 .20 .19
Expenses excluding waiver and
payments by affiliate/1 .43 .34 .26 .26 .26
Net investment income 5.08 4.69 5.34 5.14 5.44

1. The expense ratio includes the Fund's share of the Portfolio's allocated
expenses.

[Insert graphic of dollar signs
and stacks of coins] DISTRIBUTIONS AND TAXES

INCOME DISTRIBUTIONS Each Fund typically pays income dividends each day that its
net asset value is calculated. Your account may begin to receive dividends on
the day we receive your investment and will continue to receive dividends
through the day before we receive a request to sell your shares or the
settlement of a wire order trade. The amount of these dividends will vary and
there is no guarantee the Funds will pay dividends.

TAX CONSIDERATIONS In general, Fund distributions are taxable to you as ordinary
income. This is true whether you reinvest your distributions in additional Fund
shares or receive them in cash.

[Begin callout]
BACKUP WITHHOLDING

By law, a Fund must withhold 31% of your taxable distributions and redemption
proceeds if you do not provide your correct social security or taxpayer
identification number and certify that you are not subject to backup
withholding, or if the IRS instructs the Fund to do so.
[End callout]

Every January, you will receive a statement that shows the tax status of
distributions you received for the previous year. Distributions declared in
December but paid in January are taxable as if they were paid in December.

For tax purposes, an exchange of your Fund shares for shares of a different
Franklin Templeton fund is the same as a sale. Because the Funds expect to
maintain a stable $1 share price, you should not have any gain or loss if you
sell your Fund shares.

Fund distributions generally will be subject to state and local taxes. The Funds
do not anticipate that any of their distributions will qualify for exemption
from state and local taxes as dividends from interest on U.S. government
securities. Non-U.S. investors may be subject to U.S. withholding and estate
tax. You should consult your tax advisor about the federal, state, local or
foreign tax consequences of your investment in the Fund.

YOUR ACCOUNT

[Insert graphic of paper with lines
and someone writing] BUYING SHARES

Each Fund is available for investment by individuals and institutional
investors, such as corporations, banks, savings and loan associations, trust
companies, and other institutional and government entities, for investment of
their own capital and of monies held in accounts for which they act in a
fiduciary, advisory, agency, custodial, or other similar capacity. The U.S.
Securities Fund is also designed for government authorities and agencies. Fund
shares are offered without a sales charge.

MINIMUM INVESTMENTS
--------------------------------------------------------------------------------
INITIAL ADDITIONAL
--------------------------------------------------------------------------------
Regular accounts $100,000 no minimum
--------------------------------------------------------------------------------
States, counties, cities and their instrumentalities,
departments, agencies and authorities $1,000 no minimum
--------------------------------------------------------------------------------

PLEASE NOTE THAT YOU MAY ONLY BUY SHARES OF A FUND ELIGIBLE
FOR SALE IN YOUR STATE OR JURISDICTION.

[Begin callout]
FRANKLIN TEMPLETON funds include all of the U.S. registered mutual funds of
Franklin Templeton Investments, except Franklin Templeton Variable Insurance
Products Trust and Templeton Capital Accumulator Fund, Inc.
[End callout]

Certain Franklin Templeton funds offer multiple share classes not offered by
these Funds. Please note that for selling or exchanging your shares, or for
other purposes, the Funds' shares are considered Class A shares.

Many of the Funds' investments, through The Money Market Portfolio and The U.S.
Government Securities Money Market Portfolio, must be paid for in federal funds,
which are monies held by the Funds' custodian on deposit at the Federal Reserve
Bank of San Francisco and elsewhere. A Fund generally cannot invest money it
receives from you until it is available to the Fund in federal funds, which may
take up to two days. Until then, your purchase may not be considered in proper
form. If the Fund is able to make investments within one business day, it may
accept your order with payment in other than federal funds.

DISTRIBUTION AND SERVICE (12B-1) FEES Each Fund has a distribution plan,
sometimes known as a Rule 12b-1 plan, that allows the Fund to pay distribution
and other fees of up to 0.15% per year for the sale of shares and for services
provided to shareholders. No payments have been made for 12b-1 expenses since
inception and the Funds have no intention to use the Rule 12b-1 plan.

ACCOUNT APPLICATION If you are opening a new account, please complete and sign
an institutional account application. Institutional applications can be obtained
by calling Institutional Services at 1-800/321-8563.

[Insert graphic of Contact your investment Contact your investment
hands shaking] representative representative

THROUGH YOUR INVESTMENT
REPRESENTATIVE
--------------------------------------------------------------------------------

[Insert graphic of Make your check, Federal Make your check payable
envelope] Reserve Draft or to the Fund. Include your
negotiable bank draft account number on the
BY MAIL payable to the Fund. check.
Instruments drawn on other
mutual funds may not be Fill out the deposit slip
accepted. from your account
statement. If you do not
Mail the check or draft have a slip, include a
and your signed note with your name, the
application to Fund name, and your
Institutional Services. account number.

Mail the check and deposit
slip or note to
Institutional Services.
--------------------------------------------------------------------------------

[Insert graphic of three Call by 11:15 a.m. Pacific Call by 11:15 a.m.
lightning bolts] time for the Money Fund Pacific time for the
and by 1:30 p.m. Pacific Money Fund and by 1:30
BY WIRE time for the U.S. p.m. Pacific time for the
Securities Fund to receive U.S. Securities Fund to
See "Holiday that day's credit and be receive that day's credit
Schedule" under eligible to receive that and be eligible to
"Account Policies" day's dividend. The Fund receive that day's
will supply a wire control dividend. The Fund will
1-800/321-8563 number and wire supply a wire control
(or 1-650/312-3600) instructions. number and wire
instructions.
Wire the funds and mail
your signed application to Wire the funds to
Institutional Services. Institutional Services.
For investments over For investments over
$50,000, you also need to $50,000, you also need to
complete the Institutional complete the
Telephone Privileges Institutional Telephone
section of the Privileges section of the
application. Please application.
include the wire control
number on the application. To make a same day wire
investment, please make
To make a same day wire sure we receive your wire
investment, please make payment by 3:00 p.m.
sure we receive your wire Pacific time.
payment by 3:00 p.m.
Pacific time.
--------------------------------------------------------------------------------

[Insert graphic of two Call Institutional Call Institutional
arrows Services at the number Services at the number
pointing in opposite below, or send signed below, or send signed
directions] written instructions. written instructions.

BY EXCHANGE For requests over $50,000, For requests over
you must complete the $50,000, you must
1-800/321-8563 or Institutional Telephone complete the
1-650/312-3600 Privileges section of the Institutional Telephone
application. Privileges section of the
application.
(Please see page 20 for
information on exchanges.) (Please see page 20 for
information on exchanges.)
--------------------------------------------------------------------------------

INSTITUTIONAL SERVICES, 777 MARINERS ISLAND BLVD, P.O. BOX 7777,
SAN MATEO, CA 94403-7777
CALL TOLL-FREE: 1-800/321-8563
(MONDAY THROUGH FRIDAY 6:00 A.M. TO 5:00 P.M., PACIFIC TIME)

[Insert graphic of person with headset] INVESTOR SERVICES

DISTRIBUTION OPTIONS You may reinvest distributions you receive from the Fund,
you can have your distributions mailed by check, or you can have your
distributions wired to you.

Please indicate on your application the distribution option you have chosen,
otherwise we will reinvest your distributions in the Fund. If you choose not to
reinvest your distributions, the Fund will distribute distributions paid during
the month as directed on the last business day of each month.

TELEFACTS(R) Our TeleFACTS system offers around-the-clock access to information
about your account or any Franklin Templeton fund. This service is available
from touch-tone phones at 1-800/247-1753. For a free TeleFACTS brochure, call
1-800/DIAL BEN.

TELEPHONE PRIVILEGES You will automatically receive telephone privileges when
you open your account, allowing you and your investment representative to sell
or exchange your shares and make certain other changes to your account by phone.

For accounts with more than one registered owner, telephone privileges also
allow the Funds to accept written instructions signed by only one owner for
transactions and account changes that could otherwise be made by phone. For all
other transactions and changes, all registered owners must sign the
instructions. In addition, our telephone exchange privilege allows you to
exchange shares by phone from a fund account requiring two or more signatures
into an identically registered money fund account requiring only one signature
for all transactions. This type of telephone exchange is available as long as
you have telephone exchange privileges on your account.

As long as we take certain measures to verify telephone requests, we will not be
responsible for any losses that may occur from unauthorized requests. Of course,
you can decline telephone exchange or redemption privileges on your account
application.

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

EXCHANGE PRIVILEGE You can exchange shares between most Franklin Templeton funds
within the same class*. If you exchange shares from a Fund to another Franklin
Templeton fund, a sales charge may apply unless you acquired your Fund shares by
exchange or through the reinvestment of dividends, or you otherwise qualify to
buy shares without an initial sales charge.

FROM THE FUND INTO ANY OTHER SERIES OF THE TRUST. If you exchange shares 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 A SHARES OF OTHER FRANKLIN TEMPLETON FUNDS. The
exchange will be effected at the respective net asset value or offering price of
the funds involved next computed on the day on which the request is received in
proper form prior to the above deadlines. Requests received after the deadlines
will be effective at the next day's price.

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 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.

*Class Z shareholders of Franklin Mutual Series Fund Inc. may exchange into the
Funds. Advisor Class shareholders of other Franklin Templeton Funds also may
exchange into the Funds. Advisor Class shareholders who exchange their shares
for shares of a Fund and later decide they would like to exchange into another
fund that offers Advisor Class may do so.

[Begin callout]
An EXCHANGE is really two transactions: a sale of one fund and the purchase of
another. In general, the same policies that apply to purchases and sales apply
to exchanges, including minimum investment amounts. Exchanges also have the same
tax consequences as ordinary sales and purchases.
[End callout]

Generally exchanges may only be made between identically registered accounts,
unless you send written instructions with a signature guarantee.

Because excessive trading can hurt fund performance, operations and
shareholders, the Funds reserve the right to revise or terminate the exchange
privilege, limit the amount or number of exchanges, reject any exchange, or
restrict or refuse purchases if (i) the Fund or its manager believes 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 (please
see "Market Timers" on page 26).

[Insert graphic of a certificate] SELLING SHARES

SELLING SHARES IN WRITING Generally, requests to sell $100,000 or less can be
made over the phone or in writing. With an Institutional Telephone Privileges
Agreement form on file you may redeem amounts of over $100,000. Sometimes,
however, to protect you and the Fund we will need written instructions signed by
all registered owners, with a signature guarantee for each owner, if:

[Begin callout]
A SIGNATURE GUARANTEE helps protect your account against fraud. You can obtain a
signature guarantee at most banks and securities dealers.

A notary public CANNOT provide a signature guarantee.
[End callout]

o you are selling more than $100,000 worth of shares and do not have an
Institutional Telephone Privileges Agreement form on file
o you want your proceeds paid to someone who is not a registered owner
o you want to send your proceeds somewhere other than the address of record,
or preauthorized bank or brokerage firm account

We also may require a signature guarantee on instructions we receive from an
agent, not the registered owners, or when we believe it would protect the Fund
against potential claims based on the instructions received.

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

REDEMPTION PROCEEDS Your redemption check will be sent within seven days after
we receive your request in proper form. We are not able to receive or pay out
cash in the form of currency. Redemption proceeds may be delayed if we have not
yet received your signed account application.

CONTINGENT DEFERRED SALES CHARGE (CDSC) Most Franklin Templeton funds impose a
1% CDSC on certain investments of Class A shares sold within 12 months of
purchase. While the Funds generally do not have a CDSC, they will impose one if
you sell shares exchanged into a Fund from another Franklin Templeton fund and
those shares would have been assessed a CDSC in the other fund. Please keep in
mind that the time the shares are held in the Fund does not count towards the
CDSC holding period.

The CDSC is based on the current value of the shares being sold or their net
asset value when purchased, whichever is less. To keep your CDSC as low as
possible, each time you place a request to sell shares we will first sell any
shares in your account that are not subject to a CDSC. If there are not enough
of these to meet your request, we will sell the shares in the order they were
purchased.

SELLING SHARES
--------------------------------------------------------------------------------
TO SELL SOME OR ALL OF YOUR SHARES
--------------------------------------------------------------------------------

[Insert graphic of hands Contact your investment representative
shaking]

THROUGH YOUR INVESTMENT
REPRESENTATIVE
--------------------------------------------------------------------------------

[Insert graphic of envelope] Send written instructions to Institutional
Services. Corporate, partnership or trust
BY MAIL accounts may need to send additional documents.

Specify the Fund, the account number and the
dollar value or number of shares you wish to
sell. Be sure to include all necessary
signatures and any additional documents, as well
as signature guarantees if required.

A check will be mailed to the name(s) and
address on the account, or otherwise according
to your written instructions.
--------------------------------------------------------------------------------

[Insert graphic of three o As long as your transaction is for
lightning bolts] $100,000 or less,
o or you have completed the Institutional
BY WIRE Telephone Privileges section of the
application,
1-800/321-8563 o and you have not changed your address by
phone within the last 15 days,
See "Holiday Schedule"
Under "Account Policies" You can call or write to have redemption
proceeds wired to you. If requested, redemption
proceeds may also be wired directly to a
commercial bank previously designated by you on
an application, or in a signature-guaranteed
letter of instruction. A 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.

Before requesting a bank wire, please make sure
we have your bank account information on file.
If we do not have this information, you will
need to send written instructions with your
bank's name and address, your bank account
number, the ABA routing number, and a signature
guarantee.

Amounts of under $100 will be sent out by check.
--------------------------------------------------------------------------------

[Insert graphic of two arrows Obtain a current prospectus for the fund you
pointing are considering.
in opposite directions]
Call Institutional Services at the number below
BY EXCHANGE or send signed written instructions. See the
policies above for selling shares by mail or
TeleFACTS(R) phone.
1-800/247-1753
(around-the-clock access)
--------------------------------------------------------------------------------

INSTITUTIONAL SERVICES, 777 MARINERS ISLAND BLVD, P.O. BOX 7777,
SAN MATEO, CA 94403-7777
CALL TOLL-FREE: 1-800/321-8563
(MONDAY THROUGH FRIDAY 6:00 A.M. TO 5:00 P.M., PACIFIC TIME)

[Insert graphic of paper and pen] ACCOUNT POLICIES

CALCULATING SHARE PRICE When you buy shares, you pay the net asset value (NAV)
per share. When you sell shares, you receive the NAV minus any applicable
contingent deferred sales charge (CDSC).

The Money Fund calculates its NAV per share at 12:30 p.m. Pacific time and the
U.S. Securities Fund calculates its NAV per share at 3:00 p.m. Pacific time,
each day the New York Stock Exchange and the Federal Reserve Bank of San
Francisco are open, by dividing their net assets by the number of shares
outstanding. A Fund's assets are generally valued at their amortized cost.

Requests to buy and sell shares are processed at the NAV next calculated after
we receive your request in proper form.

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

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

ACCOUNTS WITH LOW BALANCES If the value of your account falls below $20,000
($500 for states, counties, cities and their instrumentalities, departments,
agencies and authorities) because you sell some of your shares, we may mail you
a notice asking you to bring the account back up to its applicable minimum
investment amount. If you choose not to do so within 30 days, we may close your
account and mail the proceeds to the address of record.

STATEMENTS AND REPORTS You will receive statements that show your account
transactions. You also will receive the Funds' financial reports every six
months. To reduce Fund expenses, we try to identify related shareholders in a
household and send only one copy of the financial reports. If you need
additional copies, please call 1-800/321-8563.

If there is a dealer or other investment representative of record on your
account, he or she also will receive copies of all notifications and statements
and other information about your account directly from the Fund.

STREET OR NOMINEE ACCOUNTS You may transfer your shares from the street or
nominee name account of one dealer to another, as long as both dealers have an
agreement with Franklin Templeton Distributors, Inc. We will process the
transfer after we receive authorization in proper form from your delivering
securities dealer.

JOINT ACCOUNTS Unless you specify a different registration, accounts with two or
more owners are registered as "joint tenants with rights of survivorship" (shown
as "Jt Ten" on your account statement). To make any ownership changes to a joint
account, all owners must agree in writing, regardless of the law in your state.

MARKET TIMERS The Funds may restrict or refuse purchases or exchanges by market
timers. You may be considered a Market Timer if you have (i) requested an
exchange out of any of the Franklin Templeton funds within two weeks of an
earlier exchange request out of any fund, or (ii) exchanged shares out of any of
the Franklin Templeton funds more than twice within a rolling 90 day period, or
(iii) otherwise seem to follow a market timing pattern that may adversely affect
the fund. Accounts under common ownership or control with an account that is
covered by (i), (ii), or (iii) are also subject to these limits.

Anyone, including the shareholder or the shareholder's agent, who is considered
to be a Market Timer by the Fund, its manager or shareholder services agent,
will be issued a written notice of their status and the Fund's policies.
Identified Market Timers will be required to register with the market timing
desk of Franklin Templeton Investor Services, Inc., and to place all purchase
and exchange trade requests through the desk. Some funds do not allow
investments by Market Timers.

ADDITIONAL POLICIES Please note that the Funds maintain additional policies and
reserve certain rights, including:

o The Funds may restrict or refuse any order to buy shares, including any
purchase under the exchange privilege.

o At any time, the Funds may change their investment minimums or waive or
lower their minimums for certain purchases.

o If you buy shares with a check or draft that is returned to a Fund unpaid,
the Fund may impose a $10 charge against your account for each returned
item.

o When you buy shares, it does not create a checking or other bank account
relationship with the Fund or any bank.

o The Funds may modify or discontinue the exchange privilege on 60 days'
notice.

o In unusual circumstances, we may temporarily suspend redemptions, or
postpone the payment of proceeds, as allowed by federal securities laws.

o For redemptions over a certain amount, the Funds reserve the right, in the
case of an emergency, to make payments in securities or other assets of the
Fund if the payment of cash proceeds by check, wire or electronic funds
transfer would be harmful to existing shareholders.

o To permit investors to obtain the current price, dealers are responsible
for transmitting all orders to the Funds promptly.

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

[Insert graphic of question mark] QUESTIONS

If you have any questions about the Funds or your account, you can write to
us at 777 Mariners Island Blvd., P.O. Box 7777, San Mateo, CA 94403-7777. You
can also call us at 1-800/321-8563 Monday through Friday, from 6:00 a.m. to
5:00 p.m. Pacific time.

FOR MORE INFORMATION

You can learn more about each Fund in the following documents:

ANNUAL/SEMIANNUAL REPORT TO SHAREHOLDERS

Includes a discussion of recent market conditions and Fund strategies, financial
statements, detailed performance information, portfolio holdings and the
auditor's report.

STATEMENT OF ADDITIONAL INFORMATION (SAI)

Contains more information about each Fund, its investments and policies. It is
incorporated by reference (is legally a part of this prospectus).

For a free copy of the current annual/semiannual report or the SAI, please
contact your investment representative or call us at the number below.

FRANKLIN(R)TEMPLETON(R)
1-800/321-8563
franklintempleton.com

You can also obtain information about each Fund by visiting the SEC's Public
Reference Room in Washington, D.C. (phone 1-202/942-8090) or the EDGAR Database
on the SEC's Internet site at http://www.sec.gov. You can obtain copies of this
information, after paying a duplicating fee, by writing to the SEC's Public
Reference Section, Washington, D.C. 20549-0102 or by electronic request at the
following E-mail address: [email protected].

Investment Company Act file #811-4267 IFT-1 P 11/00

Prospectus

FRANKLIN CASH RESERVES FUND

INSTITUTIONAL FIDUCIARY TRUST

INVESTMENT STRATEGY
INCOME

NOVEMBER 1, 2000

[Insert Franklin Templeton Ben Head]

The SEC has not approved or disapproved these securities or passed upon the
adequacy of this prospectus. Any representation to the contrary is a criminal
offense.

CONTENTS

THE FUND

[Begin callout]
INFORMATION ABOUT THE FUND YOU SHOULD KNOW BEFORE INVESTING
[End callout]

2 Goal and Strategies

4 Main Risks

5 Performance

6 Fees and Expenses

7 Management

8 Distributions and Taxes

9 Financial Highlights

YOUR ACCOUNT

[Begin callout]
INFORMATION ABOUT ACCOUNT TRANSACTIONS AND SERVICES
[End callout]

10 Buying Shares

14 Investor Services

16 Selling Shares

19 Account Policies

21 Questions

FOR MORE INFORMATION

[Begin callout]
WHERE TO LEARN MORE ABOUT THE FUND
[End callout]

Back Cover

THE FUND

[Insert graphic of bullseye and arrows] GOAL AND STRATEGIES

MAIN INVESTMENT STRATEGIES

The Fund seeks to achieve its investment goal by investing all of its assets in
shares of The Money Market Portfolio (Portfolio). The Portfolio has the same
investment goal and substantially similar investment policies as the Fund; it
invests in high-quality, short-term U.S. dollar denominated money market
securities of domestic and foreign issuers, including:

o CERTIFICATES OF DEPOSITS, which are bank obligations that are issued
against money deposited in a banking institution for a specified period of
time at a specified interest rate.

REPURCHASE AGREEMENTS, which are agreements to buy a security and then to sell
the security back after a short period of time (generally, less than seven days)
at a higher price.

PORTFOLIO MATURITY AND QUALITY The Fund maintains a dollar-weighted average
portfolio maturity of 90 days or less and only buys securities:

[Insert graphic of chart with line going up and down] MAIN RISKS

More detailed information about the Fund, its policies and risks can be found in
the Fund's Statement of Additional Information (SAI).

[Insert graphic of a bull and a bear] PERFORMANCE

This bar chart and table show the volatility of the Fund's returns, which is one
indicator of the risks of investing in the Fund. The bar chart shows changes in
the Fund's returns from year to year over the past 5 calendar years. The table
shows the Fund's average annual total returns. Of course, past performance
cannot predict or guarantee future results.

ANNUAL TOTAL RETURNS/1

[Insert bar graph]

5.73% 5.08% 5.19% 5.03% 4.46%
95 96 97 98 99
Year

[Begin callout]
BEST QUARTER:

Q2 '95 1.45%

WORST QUARTER:

Q2 '99 1.00%
[End callout]

AVERAGE ANNUAL TOTAL RETURNS
For the periods ended December 31, 1999

Since
Inception
1 Year 5 Year (7/1/94)
-------------------------------------------------------------------------
Franklin Cash Reserves Fund 4.46% 5.10% 5.08%

1. As of September 30, 2000, the Fund's year-to-date return was 4.16%.
All Fund performance assumes reinvestment of dividends.

To obtain the Fund's current yield information, please call 1-800/321-8563.

[Insert graphic of percentage sign] FEES AND EXPENSES

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.

SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)

Maximum sales charge (load) on purchases None

ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)/1

Management fees/2 0.40%
Distribution and service
(12b-1) fees 0.25%
Other expenses 0.17%
-------------
Total annual Fund operating expenses/2 0.82%
-------------

1. The annual Fund operating expenses shown and included in the example below
reflect the expenses of both the Fund and The Money Market Portfolio.
2. For the fiscal year ended June 30, 2000, the manager had agreed in advance to
limit its fees. With this reduction, management fees were 0.39% and total annual
Fund operating expenses were 0.81%. The manager may end this arrangement at any
time upon notice to the Fund's Board of Trustees.

EXAMPLE

This example can help you compare the cost of investing in the Fund with the
cost of investing in other mutual funds. It assumes:

o You invest $10,000 for the periods shown;
o Your investment has a 5% return each year;
o The Fund's operating expenses remain the same; and
o You sell your shares at the end of the periods shown.

Although your actual costs may be higher or lower, based on these assumptions
your costs would be:

1 Year 3 Years 5 Years 10 Years
------------------------------------------------------------
$84 $262 $455 $1,014

[Insert graphic of briefcase] MANAGEMENT

[Insert graphic of dollar
signs and stacks of coins] DISTRIBUTIONS AND TAXES

INCOME DISTRIBUTIONS The Fund typically declares income dividends each day that
its net asset value is calculated and pays these dividends monthly. Your account
may begin to be credited with dividends on the day after we receive your
investment and will continue to be credited with dividends through the day we
receive a request to sell your shares. The amount of these dividends will
vary and there is no guarantee the Fund will pay dividends.

TAX CONSIDERATIONS In general, Fund distributions are taxable to you as ordinary
income. This is true whether you reinvest your distributions in additional Fund
shares or receive them in cash.

[Begin callout]
Backup Withholding

By law, the Fund must withhold 31% of your taxable distributions and redemption
proceeds if you do not provide your correct social security or taxpayer
identification number and certify that you are not subject to backup
withholding, or if the IRS instructs the Fund to do so.
[End callout]

For tax purposes, an exchange of your Fund shares for shares of a different
Franklin Templeton fund is the same as a sale. Because the Fund expects to
maintain a stable $1 share price, you should not have any gain or loss if you
sell your Fund shares.

Fund distributions generally will be subject to state and local taxes. The Fund
does not anticipate that any of its distributions will qualify for exemption
from state and local taxes as dividends from interest on U.S. government
securities. Non-U.S. investors may be subject to U.S. withholding and estate
tax. You should consult your tax advisor about the federal, state, local or
foreign tax consequences of your investment in the Fund.

[Insert graphic of a dollar bill] FINANCIAL HIGHLIGHTS

This table presents the Fund's financial performance for the past five years.
This information has been audited by PricewaterhouseCoopers LLP.

YEAR ENDED JUNE 30,
-------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
-------------------------------------------------------------------------------------------------------------------
PER SHARE DATA ($)

<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year 1.00 1.00 1.00 1.00 1.00
-----------------------------------------------------------------------------
Net investment income .049 .044 .051 .050 .052
Distributions from net
investment income (.049) (.044) (.051) (.050) (.052)
-----------------------------------------------------------------------------
Net asset value, end of year 1.00 1.00 1.00 1.00 1.00
=============================================================================
Total return (%) 5.07 4.49 5.28 5.11 5.35

RATIOS/SUPPLEMENTAL DATA

Net assets, end of year ($ x 1,000) 117,081 135,390 119,585 76,510 30,381
Ratios to average net assets: (%)
Expenses/1 .81 .82 .50 .50 .49
Expenses excluding waiver and
payments by affiliate/1 .82 .82 .77 .69 .73
Net investment income 4.91 4.38 5.14 5.00 5.10
</TABLE>

1. The expense ratio includes the Fund's share of the Portfolio's allocated
expenses.

YOUR ACCOUNT

[Insert graphic of a paper with lines
and someone writing] BUYING SHARES

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

PLEASE NOTE THAT YOU MAY ONLY BUY SHARES OF A FUND ELIGIBLE FOR
SALE IN YOUR STATE OR JURISDICTION.

Certain Franklin Templeton funds offer multiple share classes not offered by
this Fund. Please note that for selling or exchanging your shares, or for other
purposes, the Fund's shares are considered Class A shares.

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

DISTRIBUTION AND SERVICE (12B-1) FEES The Fund has a distribution plan,
sometimes known as a Rule 12b-1 plan, that allows the Fund to pay distribution
and other fees of up to 0.25% per year for the sale of shares and for services
provided to shareholders.

Because these fees are paid out of the assets of the Fund on an on-going basis,
over time these fees will increase the cost of your investment and may cost you
more than paying other types of sales charges.

BUYING SHARES
--------------------------------------------------------------------------------
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
--------------------------------------------------------------------------------
[Insert graphic of hands Contact your investment Contact your investment
shaking] representative representative

THROUGH YOUR INVESTMENT
REPRESENTATIVE
--------------------------------------------------------------------------------
[Insert graphic of Make your check, Federal Make your check payable
envelope] Reserve Draft or negotiable to Franklin Cash
bank draft payable to Reserves Fund. Include
BY MAIL Franklin Cash Reserves your account number on
Fund. Instruments drawn on the check.
other mutual funds may not
be accepted. Mail the check to
Institutional Services.
Mail the check or draft your signed application
and to Institutional
Services.
--------------------------------------------------------------------------------
[Insert graphic of three Call to receive a wire Call to receive a wire
lightning bolts] control number and wire control number and wire
instructions. instructions.
BY WIRE

Wire the funds and mail Wire the funds to
See "Holiday Schedule" your signed application to Institutional Services.
under Institutional Services. For For investments over
"Account Policies" investments over $50,000, $50,000, you also need
you also need to complete to complete the
1-800/321-8563 the Institutional Telephone Institutional Telephone
(or 1-650/312-3600) Privileges section of the Privileges section of
application. Please include the application.
the wire control number on
the application. To make a same day wire
investment, please make
To make a same day wire sure we receive your
investment, please make order by 3:00 p.m.
sure we receive your order Pacific time.
by 3:00 p.m. Pacific time.
--------------------------------------------------------------------------------
[Insert graphic of two Call Institutional Services Call Institutional
arrows at the number below, or Services at the number
pointing in opposite send signed written below, or send signed
directions] instructions. written instructions.

BY EXCHANGE For requests over $100,000, For requests over
you must complete the $100,000, you must
1-800/321-8563 Institutional Telephone complete the
or 1-650/312-3600 Privileges section of the Institutional Telephone
application. Privileges section of
the application.
(Please see page 13 for
information on exchanges.) (Please see page 13 for
information on
exchanges.)
--------------------------------------------------------------------------------

INSTITUTIONAL SERVICES, 777 MARINERS ISLAND BLVD, P.O. BOX 7777,
SAN MATEO, CA 94403-7777

CALL TOLL-FREE: 1-800/321-8563
(MONDAY THROUGH FRIDAY 6:00 A.M. TO 5:00 P.M., PACIFIC TIME)

[Insert graphic of person with a headset] INVESTOR SERVICES

DISTRIBUTION OPTIONS You may reinvest distributions you receive from the Fund,
you can have your distributions mailed by check, or you can have your
distributions wired to you.

For accounts with more than one registered owner, telephone privileges also
allow the Fund to accept written instructions signed by only one owner for
transactions and account changes that could otherwise be made by phone. For all
other transactions and changes, all registered owners must sign the
instructions. In addition, our telephone exchange privilege allows you to
exchange shares by phone from a fund account requiring two or more signatures
into an identically registered money fund account requiring only one signature
for all transactions. This type of telephone exchange is available as long as
you have telephone exchange privileges on your account.

EXCHANGE PRIVILEGE You can exchange shares between most Franklin Templeton funds
within the same class*. If you exchange shares from the Fund to another Franklin
Templeton fund, a sales charge may apply unless you acquired your Fund shares by
exchange or through the reinvestment of dividends, or you otherwise qualify to
buy shares without an initial sales charge.

Generally exchanges may only be made between identically registered accounts,
unless you send written instructions with a signature guarantee.

Because excessive trading can hurt fund performance, operations and
shareholders, the Fund reserves the right to revise or terminate the exchange
privilege, limit the amount or number of exchanges, reject any exchange, or
restrict or refuse purchases if (i) the Fund or its manager believes 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 (please
see "Market Timers" on page 19).

*Class Z shareholders of Franklin Mutual Series Fund Inc. may exchange into the
Fund. Advisor Class shareholders of other Franklin Templeton funds also may
exchange into the Fund. Advisor Class shareholders who exchange their shares for
shares of the Fund and later decide they would like to exchange into another
fund that offers Advisor Class may do so.

[Insert graphic of a certificate] SELLING SHARES

You can sell your shares at any time.

SELLING SHARES IN WRITING Generally, requests to sell $100,000 or less can be
made over the phone or with a simple letter if you have completed a separate
agreement. Call Institutional Services to receive a copy. Sometimes, however, to
protect you and the Fund we will need written instructions signed by all
registered owners, with a signature guarantee for each owner, if:

[Begin callout]
A SIGNATURE GUARANTEE helps protect your account against fraud. You can obtain a
signature guarantee at most banks and securities dealers.

A notary public CANNOT provide a signature guarantee.
[End callout]

o you are selling more than $100,000 worth of shares
o you want your proceeds paid to someone who is not a registered owner
o you want to send your proceeds somewhere other than the address of
record, or preauthorized bank or brokerage firm account

CONTINGENT DEFERRED SALES CHARGE (CDSC) Most Franklin Templeton funds impose a
1% CDSC on certain investments of Class A shares sold within 12 months of
purchase. While the Fund generally does not have a CDSC, it will impose one if
you sell shares exchanged into the Fund from another Franklin Templeton fund and
those shares would have been assessed a CDSC in the other fund. Please keep in
mind that the time the shares are held in the Fund does not count towards the
CDSC holding period.

[Insert graphic of hands Contact your investment representative
shaking]

THROUGH YOUR INVESTMENT
REPRESENTATIVE
--------------------------------------------------------------------------------

[Insert graphic of envelope] Send written instructions to Institutional
Services. Corporate, partnership or trust
BY MAIL accounts may need to send additional documents.

A check will be mailed to the name(s) and
address on the account, or otherwise according
to your written instructions.
--------------------------------------------------------------------------------

[Insert graphic of phone] As long as your transaction is for $100,000 or
less, you have completed the Institutional
BY PHONE Telephone Privileges section of the
application, and you have not changed your
1-800/321-8563 address by phone within the last 15 days, you
can sell your shares by phone.
See "Holiday Schedule"
under
"Account Policies" A check will be mailed to the name(s)
and address on the account. Written
instructions, with a signature guarantee, are
required to send the check to another address
or to make it payable to another person.
--------------------------------------------------------------------------------

[Insert graphic of three You can call or write to have redemption
lightning bolts] proceeds wired to you. If requested,
redemption proceeds may also be wired directly
BY WIRE to a commercial bank previously designated by
you on an application, or in a
1-800/321-8563 signature-guaranteed letter of instruction.
For non-retirement plan participants, payment
See "Holiday Schedule" under may be transmitted by wire the same business
"Account Policies" 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.

Requests received in proper form by 3:00 p.m.
Pacific time will be wired the next business
day.
--------------------------------------------------------------------------------

[Insert graphic of two Obtain a current prospectus for the fund you
arrows pointing are considering.
in opposite
directions] Call Institutional Services at the number
below or send signed written
BY EXCHANGE instructions. See the policies above
for selling shares by mail or phone.
--------------------------------------------------------------------------------

INSTITUTIONAL SERVICES, 777 MARINERS ISLAND BLVD, P.O. BOX 7777,
SAN MATEO, CA 94403-7777

CALL TOLL-FREE: 1-800/321-8563
(MONDAY THROUGH FRIDAY 6:00 A.M. TO 5:00 P.M., PACIFIC TIME)

[Insert graphic of paper and pen] ACCOUNT POLICIES

CALCULATING SHARE PRICE When you buy shares, you pay the net asset value (NAV)
per share. When you sell shares, you receive the NAV minus any applicable
contingent deferred sales charge (CDSC).

The Fund calculates its NAV per share at 3:00 p.m. Pacific time, each day the
New York Stock Exchange and the Federal Reserve Bank of San Francisco are open,
by dividing its net assets by the number of shares outstanding. The Fund's
assets are generally valued at their amortized cost.

Requests to buy and sell shares are processed at the NAV next calculated after
we receive your request in proper form.

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

ACCOUNTS WITH LOW BALANCES If the value of your account falls below $20,000 (or
one-half the minimum required investment, whichever is less) because you sell
some of your shares, we may mail you a notice asking you to bring the account
back up to its applicable minimum investment amount. If you choose not to do so
within 30 days, we may close your account and mail the proceeds to the address
of record.

STATEMENTS AND REPORTS You will receive statements that show your account
transactions. You also will receive the Fund's financial reports every six
months. If you need additional copies, please call 1-800/321-8563.

MARKET TIMERS The Fund may restrict or refuse purchases or exchanges by Market
Timers. You may be considered a Market Timer if you have (i) requested an
exchange out of any of the Franklin Templeton funds within two weeks of an
earlier exchange request out of any fund, or (ii) exchanged shares out of any of
the Franklin Templeton funds more than twice within a rolling 90 day period, or
(iii) otherwise seem to follow a market timing pattern that may adversely affect
the fund. Accounts under common ownership or control with an account that is
covered by (i), (ii), or (iii) are also subject to these limits.

ADDITIONAL POLICIES Please note that the Fund maintains additional policies and
reserves certain rights, including:

o The Fund may restrict or refuse any order to buy shares, including any
purchase under the exchange privilege.

o At any time, the Fund may change its investment minimums or waive or lower
its minimums for certain purchases.

o If you buy shares with a check or draft that is returned to the Fund
unpaid, the Fund may impose a $10 charge against your account for each
returned item.

o When you buy shares, it does not create a checking or other bank account
relationship with the Fund or any bank.

o The Fund may modify or discontinue the exchange privilege on 60 days'
notice.

o In unusual circumstances, we may temporarily suspend redemptions, or
postpone the payment of proceeds, as allowed by federal securities laws.

o For redemptions over a certain amount, the Fund reserves the right, in the
case of an emergency, to make payments in securities or other assets of the
Fund, if the payment of cash proceeds by check, wire or electronic funds
transfer would be harmful to existing shareholders.

o To permit investors to obtain the current price, dealers are responsible
for transmitting all orders to the Fund promptly.

[Insert graphic of question mark] QUESTIONS

If you have any questions about the Fund or your account, you can write to us
at 777 Mariners Island Blvd., P.O. Box 7777, San Mateo, CA 94403-7777. You
can also call us at 1-800/321-8563 Monday through Friday, from 6:00 a.m. to
5:00 p.m. Pacific time.

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

For your protection and to help ensure we provide you with quality service, all
calls may be monitored or recorded.

FOR MORE INFORMATION

You can learn more about the Fund in the following documents:

ANNUAL/SEMIANNUAL REPORT TO SHAREHOLDERS

Includes a discussion of recent market conditions and Fund strategies, financial
statements, detailed performance information, portfolio holdings and the
auditor's report.

STATEMENT OF ADDITIONAL INFORMATION (SAI)

Contains more information about the Fund, its investments and policies. It is
incorporated by reference (is legally a part of this prospectus).

For a free copy of the current annual/semiannual report or the SAI, please
contact your investment representative or call us at the number below.

FRANKLIN(R)TEMPLETON(R)
1-800/321-8563
franklintempleton.com

You also can obtain information about the Fund by visiting the SEC's Public
Reference Room in Washington, D.C. (phone 1-202/942-8090) or the EDGAR Database
on the SEC's Internet site at http://www.sec.gov. You can obtain copies of this
information, after paying a duplicating fee, by writing to the SEC's Public
Reference Section, Washington, D.C. 20549-0102 or by electronic request at the
following E-mail address: [email protected].

Investment Company Act file #811-4267 149 P 11/00

INSTITUTIONAL FIDUCIARY TRUST

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

STATEMENT OF ADDITIONAL INFORMATION

NOVEMBER 1, 2000

[Insert Franklin Templeton Ben Head]

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

This Statement of Additional Information (SAI) is not a prospectus. It contains
information in addition to the information in the Funds' prospectus. The Funds'
prospectus, dated November 1, 2000, which we may amend from time to time,
contains the basic information you should know before investing in a Fund. You
should read this SAI together with the Funds' prospectus.

The audited financial statements and auditor's report in the Funds' Annual
Report to Shareholders, for the fiscal year ended June 30, 2000, are
incorporated by reference (are legally a part of this SAI).

For a free copy of the current prospectus or annual report, contact
Institutional Services at 1-800/321-8563.

CONTENTS

Goals, Strategies and Risks................................2
Officers and Trustees......................................7
Management and Other Services..............................9
Portfolio Transactions....................................11
Distributions and Taxes...................................11
Organization, Voting Rights
and Principal Holders.....................................12
Buying and Selling Shares.................................13
Pricing Shares............................................15
The Underwriter...........................................15
Performance...............................................16
Miscellaneous Information.................................17
Description of Ratings....................................18
Appendices................................................20
California Government Code Section 53601 ...............20
California Government Code Section 53635 ...............23

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MUTUAL FUNDS, ANNUITIES, AND OTHER INVESTMENT PRODUCTS:

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

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

O ARE SUBJECT TO INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL.
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GOALS, STRATEGIES AND RISKS
------------------------------------------------------------------------------

Money Market Portfolio (Money Fund) seeks to achieve its investment goal by
investing all of its assets in shares of The Money Market Portfolio (Money
Portfolio). Franklin U.S. Government Securities Money Market Portfolio (U.S.
Securities Fund) seeks to achieve its investment goal by investing all of its
assets in shares of The U.S. Government Securities Money Market Portfolio (U.S.
Securities Portfolio). The Money Portfolio and the U.S. Securities Portfolio are
series of The Money Market Portfolios (Money Market). References to the
"Portfolio," unless the context indicates that an individual portfolio is being
referenced, are to both the Money Portfolio and the U.S. Securities Portfolio.
The Portfolio has the same investment goal and substantially similar investment
policies as the Funds, except, in all cases, the Funds may pursue their policies
by investing in a mutual fund with the same investment goal and substantially
similar policies and restrictions as the Funds. The investment goal of the
Portfolio also is fundamental and may not be changed without shareholder
approval.

Generally, the policies and restrictions discussed in this SAI and in the
prospectus apply when a Fund makes an investment. In most cases, a Fund is not
required to sell a security because circumstances change and the security no
longer meets one or more of the Fund's policies or restrictions. If a percentage
restriction or limitation is met at the time of investment, a later increase or
decrease in the percentage due to a change in the value or liquidity of
portfolio securities will not be considered a violation of the restriction or
limitation.

Each Fund has adopted certain restrictions as fundamental policies. This means
they may only be changed if the change is approved by (i) more than 50% of a
Fund's outstanding shares or (ii) 67% or more of a Fund's shares present at a
shareholder meeting if more than 50% of a Fund's outstanding shares are
represented at the meeting in person or by proxy, whichever is less.

A non-fundamental policy may be changed by the board of trustees without the
approval of shareholders.

FUNDAMENTAL INVESTMENT POLICIES

Each Fund's investment goal is to provide investors with as high a level of
current income as is consistent with the preservation of shareholders' capital
and liquidity. Each Fund also tries to maintain a stable $1 share price.

Each Fund directly or through its investment in the respective Portfolio may
not:

1. Borrow money or mortgage or pledge any of its assets, except that borrowings
(and a pledge of assets therefor) for temporary or emergency purposes may be
made from banks in any amount up to 5% of the Money Fund's total asset value and
up to 10% of the U.S. Securities Fund's total asset value.

2. Make loans, except (a) through the purchase of debt securities in accordance
with the investment objective and policies of the Fund, (b) to the extent the
entry into a repurchase agreement is deemed to be a loan, or (c) by the loan of
its portfolio securities in accordance with the policies described below.

3. Acquire, lease or hold real estate, provided that this limitation shall not
prohibit the purchase of municipal and other debt securities secured by real
estate or interests therein.

4. Buy any securities "on margin" or sell any securities "short," except that it
may use such short-term credits as are necessary for the clearance of
transactions.

5. Invest in commodities and commodity contracts, puts, calls, straddles,
spreads or any combination thereof, or interests in oil, gas or other mineral
exploration or development programs, except that it may purchase, hold and
dispose of "obligations with puts attached" or write covered call options in
accordance with its stated investment policies.

6. Purchase securities, in private placements or in other transactions, for
which there are legal or contractual restrictions on resale and are not readily
marketable, or enter into a repurchase agreement with more than seven days to
maturity if, as a result, more than 10% of the total assets of the Fund would be
invested in such securities or repurchase agreement, 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
objective and policies as the Fund.

7. Act as underwriter of securities issued by other persons, except insofar as
the Trust may technically be deemed an underwriter under the federal securities
laws in connection with the disposition of portfolio securities; except that all
or substantially all of the assets of the Fund may be invested in another
registered investment company having the same investment objectives and policies
as the Fund.

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

9. Invest in any issuer for purposes of exercising control or management, except
that, to the extent this restriction is applicable, all or substantially all of
the assets of the Fund may be invested in another registered investment company
having the same investment objective and policies as the Fund.

10. Purchase securities from or sell to the Trust's officers and trustees, or
any firm of which any officer or trustee is a member, as principal, or retain
securities of any issuer if, to the knowledge of the Trust, one or more of the
Trust's officers, trustees or the manager own beneficially more than 1/2 of 1%
of the securities of such issuer and all such officers and trustees together own
beneficially more than 5% of such securities.

11. Invest more than 25% of its assets in securities of any industry, although,
for purposes of this limitation, U.S. government obligations are not considered
to be part of any industry. This prohibition does not apply where the policies
of a Fund, as described in the prospectus, state otherwise, and further does not
apply to the extent that a Fund invests all of its assets in another registered
investment company having the same investment objective and policy.

The Funds have the following additional fundamental policies:

1. U.S. Securities Fund may invest only in marketable securities issued or
guaranteed by the U.S. government, by various agencies of the U.S. government
and by various instrumentalities that have been established or sponsored by
the U.S. government, including U.S. Treasury bills, notes, bonds and
securities of the Government National Mortgage Association (GNMA) and the
Federal Housing Administration, which are issued or guaranteed by the U.S.
government or which carry a guarantee supported by the full faith and credit
of the U.S. government; or in another open-end investment company (such as
the U.S. Securities Fund) that has a fundamental policy to invest in these
types of securities.

2. 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.

3. 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.

4. 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 of trustees of the Fund and to comply with requirements under Rule
2a-7 under the Investment Company Act of 1940 (1940 Act), 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.

5. 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, 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.

6. U.S. Securities Fund may not buy a security if, with respect to 75% of its
total assets, more than 5% would be invested in the securities of any one
issuer, and may not invest in a security if the Fund would own more than 10%
of the outstanding voting securities of any one issuer (these limitation do
not apply to obligations issued or guaranteed by the U.S. government or its
instrumentalities.

NON-FUNDAMENTAL INVESTMENT POLICIES

The following non-fundamental policies apply to investments made by a Fund
through the respective Portfolio.

1. Each Fund may not invest in real estate limited partnerships (investments in
marketable securities issued by real estate investment trusts are not subject to
this restriction) or in interests (other than publicly traded equity securities)
in oil, gas, or other mineral leases, exploration or development program.

2. The U.S. Securities Fund may invest only in U.S. Treasury bills, notes,
and bonds (including stripped securities) and repurchase agreements
collateralized only by such securities.

3. The Money Fund only intends to buy stripped securities that are issued or
guaranteed by the U.S. Treasury or by an agency or instrumentality of the
U.S. government.

4. The Money Fund will invest in obligations or instruments issued by banks and
savings institutions with assets of at least $1 billion.

5. The Money Fund may not invest more than 10% of its assets in time deposits
with more than seven days to maturity.

6. The Money Fund may invest in an obligation issued by a branch of a bank only
if the parent bank has assets of at least $5 billion, and may invest only up to
25% of its assets in obligations of foreign branches of U.S. or foreign banks.
The Money Fund may invest more than 25% of its assets in certain domestic bank
obligations, including U.S. branches of foreign banks.

7. The Money Fund may not make any new investments while any outstanding
loans exceed 5% of its total assets.

8. The Money Fund may invest up to 10% of its assets in taxable municipal
securities.

9. The Money Fund may not invest more than 10% of its net assets in illiquid
securities. Notwithstanding this limitation, the Money Fund may invest in
securities that cannot be offered to the public for sale without first being
registered under the Securities Act of 1933, as amended (1933 Act) (restricted
securities), where such investment is consistent with the Money Fund's
investment goal and the manager determines that there is a liquid institutional
or other market for such securities. For example, restricted securities that may
be freely transferred among qualified institutional buyers pursuant to Rule 144A
under the 1933 Act and for which a liquid institutional market has developed
will be considered liquid even though such securities have not been registered
pursuant to the 1933 Act.

10. The Money Fund may not invest more than 5% of its total assets in securities
of companies, including predecessors, that have been in continuous operation for
less than three years.

11. The U. S. Securities Fund only intends to buy stripped securities that
are issued or guaranteed by the U.S. Treasury.

INVESTMENTS, TECHNIQUES, STRATEGIES AND THEIR RISKS

In trying to achieve its investment goals, each Fund through its respective
Portfolio may invest in the following types of securities or engage in the
following types of transactions, and can be subject to the following types of
risks:

ASSET-BACKED SECURITIES in which the Money Fund may invest are typically
commercial paper backed by the loans or accounts receivable of an entity, such
as a bank or credit card company. The issuer intends to repay using the assets
backing the securities (once collected). Therefore, repayment depends largely on
the cash-flows generated by the assets backing the securities. Sometimes the
credit support for these securities is limited to the underlying assets. In
other cases it may be provided by a third party through a letter of credit or
insurance guarantee.

Repayment of these securities is intended to be obtained from an identified pool
of diversified assets, typically receivables related to a particular industry,
such as asset-backed securities related to credit card receivables, automobile
receivables, trade receivables or diversified financial assets. The credit
quality of most asset-backed commercial paper depends primarily on the credit
quality for the assets underlying the securities, how well the entity issuing
the securities is insulated from the credit risk of the originator (or any other
affiliated entities) and the amount and quality of any credit support provided
to the securities.

Asset-backed commercial paper is often backed by a pool of assets representing
the obligations of a number of different parties. To lessen the effect of
failures by obligors on these underlying assets to make payment, the securities
may contain elements of credit support. The credit support falls into two
categories: liquidity protection and protection against ultimate default on the
underlying assets. Liquidity protection refers to the provision of advances,
generally by the entity administering the pool of assets, to ensure that
scheduled payments on the underlying pool are made in a timely fashion.
Protection against ultimate default ensures payment on at least a portion of the
assets in the pool. This protection may be provided through guarantees,
insurance policies or letters of credit obtained from third parties, through
various means of structuring the transaction or through a combination of these
approaches. The degree of credit support provided on each issue is based
generally on historical information respecting the level of credit risk
associated with the payments. Delinquency or loss that exceeds the anticipated
amount could adversely impact the return on an investment in an asset-backed
security.

BANK OBLIGATIONS The Money Fund may invest in obligations of U.S. banks,
foreign branches of U.S. or foreign banks, and U.S. branches of foreign
banks. These obligations may include deposits that are fully insured by the
U.S. government, its agencies or instrumentalities, such as 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.

COMMERCIAL PAPER The Money Fund may invest in commercial paper of domestic or
foreign issuers.

CORPORATE OBLIGATIONS in which the Money Fund may invest include fixed, floating
and variable rate bonds, debentures or notes.

CREDIT An issuer of securities may be unable to make interest payments and repay
principal. Changes in an issuer's financial strength or in a security's credit
rating may affect a security's value. Some of the Money Fund's portfolio
securities may be supported by credit enhancements, which may be provided by
either U.S. or foreign banks and insurance companies. These securities have the
credit risk of the entity providing the credit support. Credit support provided
by a foreign bank or insurance company may be less certain because of the
possibility of adverse foreign economic, political or legal developments that
may affect the ability of that entity to meet its obligations.

FOREIGN SECURITIES The value of foreign (and U.S.) securities that the Money
Fund may hold is affected by general economic conditions and individual company
and industry earnings prospects. While foreign securities may offer significant
opportunities for gain, they also involve additional risks that can increase the
potential for losses in the Money Fund.

The political, economic and social structures of some countries the Money Fund
invests in may be less stable and more volatile than those in the U.S. The risks
of investing in these countries include the possibility of the imposition of
exchange controls, expropriation, restrictions on removal of currency or other
assets, nationalization of assets and punitive taxes.

There may be less publicly available information about a foreign company or
government than about a U.S. company or public entity. Certain countries'
financial markets and services are less developed than those in the U.S. or
other major economies. As a result, they may not have uniform accounting,
auditing and financial reporting standards and may have less government
supervision of financial markets. Foreign securities markets may have
substantially lower trading volumes than U.S. markets, resulting in less
liquidity and more volatility than experienced in the U.S. Transaction costs on
foreign securities markets are generally higher than in the U.S. The settlement
practices may be cumbersome and result in delays that may affect portfolio
liquidity. The Fund may have greater difficulty exercising rights, pursuing
legal remedies, and obtaining judgments with respect to foreign investments in
foreign courts than with respect to domestic issuers in U.S. courts.

ILLIQUID INVESTMENTS Illiquid securities are generally securities that cannot be
sold within seven days in the normal course of business at approximately the
amount at which the Money Fund has valued them. The Money Fund's board of
trustees will review the determination by the manager to treat a restricted
security as a liquid security on an ongoing basis, including, among others, the
following factors: (i) the frequency of trades and quotes for the security; (ii)
the number of dealers willing to buy or sell the security and the number of
other potential buyers; (iii) dealer undertakings to make a market in the
security; and (iv) the nature of the security and market place trades (e.g.,
the time needed to dispose of the security, the method of soliciting offers, and
the mechanics of transfer). To the extent the Money Fund invests in restricted
securities that are deemed liquid, the general level of illiquidity in the Money
Fund may be increased if qualified institutional buyers become uninterested in
buying these securities or the market for these securities contracts. The Money
Fund's board of trustees will consider appropriate actions, consistent with the
Money Fund's goals and policies, if a security becomes illiquid after purchase.

INTEREST RATE As a general rule, when interest rates rise, debt securities can
lose market value. Similarly, when interest rates fall, debt securities can gain
value. However, because the length of time to maturity of the money market
instruments in a Fund's portfolio is very short, it is unlikely to be affected
by interest rate changes in this way except in the case of unexpectedly large
interest rate changes over a very short period of time.

LOANS OF PORTFOLIO SECURITIES To generate additional income, each Fund may lend
certain of its portfolio securities to qualified banks and broker-dealers. These
loans may not exceed 25% of the value of the Money Fund's total assets and 10%
of the value of the U.S. Securities Fund's total assets, measured at the time of
the most recent loan. For each loan, the borrower must maintain with the Money
Fund's custodian collateral (consisting of cash) and with the U.S. Securities
Fund's custodian collateral (consisting of any combination of cash, securities
issued by the U.S. government and its agencies and instrumentalities, or
irrevocable letters of credit) with a value at least equal to 100% of the
current market value of the loaned securities. Each Fund retains all or a
portion of the interest received on investment of the cash collateral or
receives a fee from the borrower. Each Fund also continues to receive any
distributions paid on the loaned securities. Each Fund may terminate a loan at
any time and obtain the return of the securities loaned within the normal
settlement period for the security involved.

As with other extensions of credit, there are risks of delay in recovery or even
loss of rights in collateral in the event of default or insolvency of the
borrower. Each Fund will loan its securities only to parties who meet
creditworthiness standards approved by the Fund's board of trustees, i.e., banks
or broker-dealers that the manager has determined present no serious risk of
becoming involved in bankruptcy proceedings within the time frame contemplated
by the loan.

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

If a Fund, as a shareholder of a 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 a Portfolio sell their shares, the Fund's expenses may
increase. Additionally, any economies of scale the corresponding Fund has
achieved as a result of the structure may be diminished. Institutional investors
in a Portfolio that have a greater pro rata ownership interest in the Portfolio
than the corresponding Fund could also have effective voting control.

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

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

REPURCHASE AGREEMENTS Under a repurchase agreement, each Fund agrees to buy
securities guaranteed as to payment of principal and interest by the U.S.
government or its agencies from a qualified bank or broker-dealer and then to
sell the securities back to the bank or broker-dealer after a short period of
time (generally, less than seven days) at a higher price. The bank or
broker-dealer must transfer to the Fund's custodian securities with an initial
market value of at least 102% of the dollar amount invested by a Fund in each
repurchase agreement. The manager will monitor the value of such securities
daily to determine that the value equals or exceeds the repurchase price.

Repurchase agreements may involve risks in the event of default or insolvency of
the bank or broker-dealer, including possible delays or restrictions upon a
Fund's ability to sell the underlying securities. Each Fund will enter into
repurchase agreements only with parties who meet certain creditworthiness
standards, i.e., banks or broker-dealers that the manager has determined present
no serious risk of becoming involved in bankruptcy proceedings within the time
frame contemplated by the repurchase transaction.

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

These risks also include, among others, the risk that the price movements in the
underlying securities correlate with price movements in the relevant portion of
a Fund's portfolio. A Fund either bears the risk in the same amount as the
instrument it has purchased, or there may be a negative correlation that would
result in a loss on both the underlying security and the stripped security.

TIME DEPOSITS, which the Money Fund may make from time to time, are
non-negotiable deposits that are held in a banking institution for a specified
time at a stated interest rate.

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

VARIABLE MASTER DEMAND NOTES are a type of commercial paper in which the Money
Fund may invest. They are direct arrangements between a lender and a borrower
that allow daily changes to the amount borrowed and to the interest rate. The
Money Fund, as lender, may increase or decrease the amount provided by the note
agreement, and the borrower may repay up to the full amount of the note without
penalty. Typically, the borrower may also set the interest rate daily, usually
at a rate that is the same or similar to the interest rate on other commercial
paper issued by the borrower. The Money Fund does not have any limit on the
amount of its assets that may be invested in variable master demand notes and
may invest only in variable master demand notes of U.S. issuers.

Because variable master demand notes are direct lending arrangements between the
lender and the borrower, they generally are not traded and do not have a
secondary market. They are, however, redeemable at face value plus accrued
interest at any time, although the Money Fund's ability to redeem a note is
dependent on the ability of the borrower to pay the principal and interest on
demand. When determining whether to invest in a variable master demand note, the
manager considers, among other things, the earnings power, cash flow and other
liquidity ratios of the issuer.

WHEN-ISSUED OR DELAYED-DELIVERY TRANSACTIONS are those where payment and
delivery for the security take place at a future date. Since the market price of
the security may fluctuate during the time before payment and delivery, the Fund
assumes the risk that the value of the security at delivery may be more or less
than the purchase prices. When a Fund is the buyer in the transaction, it will
maintain cash or liquid securities, with an aggregate value equal to the amount
of its purchase commitments, in a segregated account with its custodian bank
until payment is made. A Fund will not engage in when-issued and
delayed-delivery transactions for investment leverage purposes.

OFFICERS AND TRUSTEES
------------------------------------------------------------------------------

The Trust has a board of trustees. The board is responsible for the overall
management of the Trust, including general supervision and review of each Fund's
investment activities. The board, in turn, elects the officers of the Trust who
are responsible for administering the Trust's day-to-day operations.

The name, age and address of the officers and board members, as well as their
affiliations, positions held with the Trust, and principal occupations during
the past five years are shown below.

Frank H. Abbott, III (79)
1045 Sansome Street, San Francisco, CA 94111
TRUSTEE

President and Director, Abbott Corporation (an investment company); director or
trustee, as the case may be, of 29 of the investment companies in Franklin
Templeton Investments; and FORMERLY, Director, MotherLode Gold Mines
Consolidated (gold mining) (until 1996) and Vacu-Dry Co. (food processing)
(until 1996).

Harris J. Ashton (68)
191 Clapboard Ridge Road, Greenwich, CT 06830
TRUSTEE

Director, RBC Holdings, Inc. (bank holding company) and Bar-S Foods (meat
packing company); director or trustee, as the case may be, of 48 of the
investment companies in Franklin Templeton Investments; and FORMERLY, President,
Chief Executive Officer and Chairman of the Board, General Host Corporation
(nursery and craft centers) (until 1998).

Robert F. Carlson (72)
2120 Lambeth Way, Carmichael, CA 95608
TRUSTEE

Vice President and past President, Board of Administration, California Public
Employees Retirement Systems (CALPERS); director or trustee, as the case may be,
of 11 of the investment companies in Franklin Templeton Investments; and
FORMERLY, member and Chairman of the Board, Sutter Community Hospitals, member,
Corporate Board, Blue Shield of California, and Chief Counsel, California
Department of Transportation.

S. Joseph Fortunato (68)
Park Avenue at Morris County, P.O. Box 1945
Morristown, NJ 07962-1945
TRUSTEE

Member of the law firm of Pitney, Hardin, Kipp & Szuch; and director or trustee,
as the case may be, of 50 of the investment companies in Franklin Templeton
Investments.

*Charles B. Johnson (67)
777 Mariners Island Blvd., San Mateo, CA 94404
CHAIRMAN OF THE BOARD AND TRUSTEE

Chairman of the Board, Chief Executive Officer, Member - Office of the
Chairman and Director, Franklin Resources, Inc.; Chairman of the Board and
Director, Franklin Investment Advisory Services, Inc.; Vice President,
Franklin Templeton Distributors, Inc.; Director, Franklin/Templeton Investor
Services, Inc. and Franklin Templeton Services, Inc.; officer and/or director
or trustee, as the case may be, of most of the other subsidiaries of Franklin
Resources, Inc. and of 49 of the investment companies in Franklin Templeton
Investments.

*Charles E. Johnson (44)
777 Mariners Island Blvd., San Mateo, CA 94404
PRESIDENT AND TRUSTEE

President, Member - Office of the President and Director, Franklin Resources,
Inc.; Senior Vice President, Franklin Templeton Distributors, Inc.; President
and Director, Templeton Worldwide, Inc. and Franklin Advisers, Inc.;
Director, Templeton Investment Counsel, Inc.; President, Franklin Investment
Advisory Services, Inc.; officer and/or director of some of the other
subsidiaries of Franklin Resources, Inc.; and officer and/or director or
trustee, as the case may be, of 33 of the investment companies in Franklin
Templeton Investments.

*Rupert H. Johnson, Jr. (60)
777 Mariners Island Blvd., San Mateo, CA 94404
VICE PRESIDENT AND TRUSTEE

Vice Chairman, Member - Office of the Chairman and Director, Franklin
Resources, Inc.; Executive Vice President and Director, Franklin Templeton
Distributors, Inc.; Director, Franklin Advisers, Inc., Franklin Investment
Advisory Services, Inc. and Franklin/Templeton Investor Services, Inc.;
Senior Vice President, Franklin Advisory Services, LLC; and officer and/or
director or trustee, as the case may be, of most of the other subsidiaries of
Franklin Resources, Inc. and of 52 of the investment companies in Franklin
Templeton Investments.

Frank W.T. LaHaye (71)
20833 Stevens Creek Blvd., Suite 102, Cupertino, CA 95014
TRUSTEE

Chairman, Peregrine Venture Management Company (venture capital); Director, The
California Center for Land Recycling (redevelopment); director or trustee, as
the case may be, of 29 of the investment companies in Franklin Templeton
Investments; and FORMERLY, General Partner, Miller & LaHaye and Peregrine
Associates, the general partners of Peregrine Venture funds.

Gordon S. Macklin (72)
8212 Burning Tree Road, Bethesda, MD 20817
TRUSTEE

Director, Martek Biosciences Corporation, WorldCom, Inc. (communications
services), MedImmune, Inc. (biotechnology), Overstock.com (internet
services), White Mountains Insurance Group, Ltd. (holding company) and
Spacehab, Inc. (aerospace services); director or trustee, as the case may be,
of 48 of the investment companies in Franklin Templeton Investments; and
FORMERLY, Chairman, White River Corporation (financial services) (until 1998)
and Hambrecht & Quist Group (investment banking) (until 1992), and President,
National Association of Securities Dealers, Inc. (until 1987).

Harmon E. Burns (55)
777 Mariners Island Blvd., San Mateo, CA 94404
VICE PRESIDENT

Vice Chairman, Member - Office of the Chairman and Director, Franklin
Resources, Inc.; Executive Vice President and Director, Franklin Templeton
Distributors, Inc.; Executive Vice President, Franklin Advisers, Inc.;
Director, Franklin Investment Advisory Services, Inc., Franklin/Templeton
Investor Services, Inc. and Franklin Templeton Services, Inc.; and officer
and/or director or trustee, as the case may be, of most of the other
subsidiaries of Franklin Resources, Inc. and of 52 of the investment
companies in Franklin Templeton Investments.

Martin L. Flanagan (40)
777 Mariners Island Blvd., San Mateo, CA 94404
VICE PRESIDENT AND CHIEF FINANCIAL OFFICER

President, Member - Office of the President, Chief Financial Officer and
Chief Operating Officer, Franklin Resources, Inc.; Executive Vice President
and Director, Franklin/Templeton Investor Services, Inc.; President and Chief
Financial Officer, Franklin Mutual Advisers, LLC; Executive Vice President,
Chief Financial Officer and Director, Templeton Worldwide, Inc.; Executive
Vice President, Chief Operating Officer and Director, Templeton Investment
Counsel, Inc.; Executive Vice President, Franklin Advisers, Inc. and Franklin
Investment Advisory Services, Inc.; Chief Financial Officer, Franklin
Advisory Services, LLC; Chairman and Director, Franklin Templeton Services,
Inc.; officer and/or director of some of the other subsidiaries of Franklin
Resources, Inc.; and officer and/or director or trustee, as the case may be,
of 52 of the investment companies in Franklin Templeton Investments.

David P. Goss (53)
777 Mariners Island Blvd., San Mateo, CA 94404
VICE PRESIDENT

Associate General Counsel, Franklin Templeton Investments; President, Chief
Executive Officer and Director, Franklin Select Realty Trust, Property
Resources, Inc., Property Resources Equity Trust, Franklin Real Estate
Management, Inc. and Franklin Properties, Inc.; officer and director of some
of the other subsidiaries of Franklin Resources, Inc.; officer of 53 of the
investment companies in Franklin Templeton Investments; and FORMERLY,
President, Chief Executive Officer and Director, Franklin Real Estate Income
Fund and Franklin Advantage Real Estate Income Fund (until 1996).

Barbara J. Green (53)
777 Mariners Island Blvd., San Mateo, CA 94404
VICE PRESIDENT

Vice President and Deputy General Counsel, Franklin Resources, Inc.; Senior Vice
President, Templeton Worldwide, Inc.; officer of 53 of the investment companies
in Franklin Templeton Ivestments; and FORMERLY, Deputy Director, Division of
Investment Management, Executive Assistant and Senior Advisor to the Chairman,
Counselor to the Chairman, Special Counsel and Attorney Fellow, U.S. Securities
and Exchange Commission (1986-1995), Attorney, Rogers & Wells (until 1986), and
Judicial Clerk, U.S. District Court (District of Massachusetts)(until 1979).

Kimberley Monasterio (36)
777 Mariners Island Blvd., San Mateo, CA 94404
TREASURER AND PRINCIPAL ACCOUNTING OFFICER

Senior Vice President, Franklin Templeton Services, Inc.; and officer of 34 of
the investment companies in Franklin Templeton Investments.

Thomas J. Runkel (42)
777 Mariners Island Blvd., San Mateo, CA 94404
VICE PRESIDENT

Senior Vice President and Portfolio Manager, Franklin Advisers, Inc.; and
officer of four of the investment companies in Franklin Templeton Investments.

Murray L. Simpson (63)
777 Mariners Island Blvd., San Mateo, CA 94404
VICE PRESIDENT AND SECRETARY

Executive Vice President and General Counsel, Franklin Resources, Inc.;
officer and/or director of some of the subsidiaries of Franklin Resources,
Inc.; officer of 53 of the investment companies in Franklin Templeton
Investments; and FORMERLY, Chief Executive Officer and Managing Director,
Templeton Franklin Investment Services (Asia) Limited (until January 2000)
and Director, Templeton Asset Management Ltd. (until 1999).

*This board member is considered an "interested person" under federal securities
laws.

Note: Charles B. Johnson and Rupert H. Johnson, Jr. are brothers and the
father and uncle, respectively, of Charles E. Johnson.

The Trust pays noninterested board members $310 per month plus $225 per meeting
attended. Board members who serve on the audit committee of the Trust and other
funds in Franklin Templeton Investments receive a flat fee of $2,000 per
committee meeting attended, a portion of which is allocated to the Trust.
Members of a committee are not compensated for any committee meeting held on the
day of a board meeting. Noninterested board members also may serve as directors
or trustees of other funds in Franklin Templeton Investments and may receive
fees from these funds for their services. The fees payable to noninterested
board members by the Trust are subject to reductions resulting from fee caps
limiting the amount of fees payable to board members who serve on other boards
within Franklin Templeton Investments. The following table provides the total
fees paid to noninterested board members by the Trust and by Franklin Templeton
Investments.

NUMBER OF BOARDS IN
TOTAL FEES TOTAL FEES RECEIVED THE FRANKLIN
RECEIVED FROM THE FRANKLIN TEMPLETON
FROM THE TRUST/1 TEMPLETON INVESTMENTS ON
NAME ($) INVESTMENTS/2 ($) WHICH EACH SERVES/3
--------------------------------------------------------------------------------
Frank H. Abbott, III 4,749 156,060 29
Harris J. Ashton 4,932 363,165 48
Robert F. Carlson 6,195 89,690 11
S. Joseph Fortunato 4,595 363,238 50
Frank W.T. LaHaye 4,749 156,060 29
Gordon S. Macklin 4,932 363,165 48

1. For the fiscal year ended June 30, 2000.
2. For the calendar year ended December 31, 1999.
3. We base the number of boards on the number of registered investment companies
in Franklin Templeton Investments. This number does not include the total number
of series or funds within each investment company for which the board members
are responsible. Franklin Templeton Investments currently includes 52 registered
investment companies, with approximately 156 U.S. based funds or series.

Noninterested board members are reimbursed for expenses incurred in connection
with attending board meetings, paid pro rata by each fund in Franklin Templeton
Investments for which they serve as director or trustee. No officer or board
member received any other compensation, including pension or retirement
benefits, directly or indirectly from the Fund or other funds in Franklin
Templeton Investments. Certain officers or board members who are shareholders of
Franklin Resources, Inc. may be deemed to receive indirect remuneration by
virtue of their participation, if any, in the fees paid to its subsidiaries.

Board members historically have followed a policy of having substantial
investments in one or more of the funds in Franklin Templeton Investments, as is
consistent with their individual financial goals. In February 1998, this policy
was formalized through adoption of a requirement that each board member invest
one-third of fees received for serving as a director or trustee of a Templeton
fund in shares of one or more Templeton funds and one-third of fees received for
serving as a director or trustee of a Franklin fund in shares of one or more
Franklin funds until the value of such investments equals or exceeds five times
the annual fees paid such board member. Investments in the name of family
members or entities controlled by a board member constitute fund holdings of
such board member for purposes of this policy, and a three year phase-in period
applies to such investment requirements for newly elected board members. In
implementing such policy, a board member's fund holdings existing on February
27, 1998, are valued as of such date with subsequent investments valued at cost.

The board, with approval of all noninterested and interested board members, has
adopted written procedures designed to deal with potential conflicts of interest
that may arise from the Funds and the Portfolios having substantially the same
boards. These procedures call for an annual review of each fund's relationship
with its Portfolio. If a conflict exists, the boards may take action, which may
include the establishment of a new board. The board has determined that there
are no conflicts of interest at the present time.

MANAGEMENT AND OTHER SERVICES
------------------------------------------------------------------------------

MANAGER AND SERVICES PROVIDED The Portfolios' manager is Franklin Advisers,
Inc. The manager is a wholly owned subsidiary of Franklin Resources, Inc.
(Resources), a publicly owned company engaged in the financial services
industry through its subsidiaries. Charles B. Johnson and Rupert H. Johnson,
Jr. are the principal shareholders of Resources.

The manager provides investment research and portfolio management services, and
selects the securities for the Portfolios to buy, hold or sell. The manager also
selects the brokers who execute the Portfolio's portfolio transactions. The
manager provides periodic reports to the board, which reviews and supervises the
manager's investment activities. To protect the Portfolio, the manager and its
officers, directors and employees are covered by fidelity insurance.

The manager and its affiliates manage numerous other investment companies and
accounts. The manager may give and take action with respect to any of the other
funds it manages, or for its own account, that may differ from action taken by
the manager on behalf of the Portfolios. Similarly, with respect to the
Portfolios, the manager is not obligated to recommend, buy or sell, or to
refrain from recommending, buying or selling any security that the manager and
access persons, as defined by applicable federal securities laws, may buy or
sell for its or their own account or for the accounts of any other fund. The
manager is not obligated to refrain from investing in securities held by the
Portfolios or other funds it manages.

The Funds, the Portfolios, their manager and the Funds' principal underwriter
have each adopted a code of ethics, as required by federal securities laws.
Under the code of ethics, employees who are designated as access persons may
engage in personal securities transactions, including transactions involving
securities that are being considered for a Portfolio or that are currently held
by a Portfolio, subject to certain general restrictions and procedures. The
personal securities transactions of access persons of the Funds, the Portfolios,
their manager and the Funds' principal underwriter will be governed by the code
of ethics. The code of ethics is on file with, and available from, the U.S.
Securities and Exchange Commission (SEC).

MANAGEMENT FEES Each Portfolio pays the manager a fee equal to an annual rate of
0.15 of 1% of the value of its average daily net assets.

The fee is computed at the close of business each day according to the terms of
the management agreement.

For the last three fiscal years ended June 30, the Portfolios paid the following
management fees:

MANAGEMENT FEES PAID/1 ($)
--------------------------------------------------------
2000 1999 1998
--------------------------------------------------------------------------------
Money Portfolio 5,179,045 3,900,807 2,830,858
U.S. Securities Portfolio 351,386 430,179 367,433

1. For the fiscal years ended June 30, 2000, 1999 and 1998, management fees,
before any advance waiver, totaled $5,343,198, $3,996,761 and $2,963,304 for the
Money Portfolio and $376,050, $437,891 and $394,321 for the U.S. Securities
Portfolio. Under an agreement by the manager to limit its fees, the Portfolio
paid the management fees shown.

ADMINISTRATOR AND SERVICES PROVIDED Franklin Advisers, Inc. (Advisers) has an
agreement with each Fund to provide various administrative, statistical and
other services to the Fund.

ADMINISTRATION FEES Each Fund pays Advisers a fee equal to an annual rate of
0.20 of 1% of the value of the Fund's average daily net assets.

During the last three fiscal years ended June 30, the Funds paid Advisers the
following administration fees:

ADMINISTRATION FEES PAID/1 ($)
--------------------------------------------------------
2000 1999 1998
--------------------------------------------------------------------------------
Money Fund 1,128,567 491,517 39,173
U.S. Securities Fund 105,532 147,808 0

1. For the fiscal years ended June 30, 2000, 1999 and 1998, administration fees,
before any advance waiver, totaled $1,400,074, $555,980 and $104,796 for the
Money Fund and $156,306, $203,308 and $66,469 for the U.S. Securities Fund.
Under an agreement by the administrator to limit its fees, the Funds paid the
administration fees shown.

SHAREHOLDER SERVICING AND TRANSFER AGENT Franklin/Templeton Investor Services,
Inc. (Investor Services) is each Fund's shareholder servicing agent and acts as
the Fund's transfer agent and dividend-paying agent. Investor Services is
located at 777 Mariners Island Blvd., San Mateo, CA 94404. Please send all
correspondence to Institutional Services, 777 Mariners Island Blvd., P.O. Box
7777, San Mateo, CA 94403-7777.

For its services, Investor Services receives a fixed fee per account. Each Fund
also will reimburse Investor Services for certain out-of-pocket expenses, which
may include payments by Investor Services to entities, including affiliated
entities, that provide sub-shareholder services, recordkeeping and/or transfer
agency services to beneficial owners of the Fund. The amount of reimbursements
for these services per benefit plan participant Fund account per year will not
exceed the per account fee payable by the Fund to Investor Services in
connection with maintaining shareholder accounts.

CUSTODIAN Investor Services, as the transfer agent for the Portfolios,
effectively acts as each Fund's custodian and holds the Fund's shares of the
Portfolio on its books. Bank of New York, Mutual Funds Division, 90 Washington
Street, New York, NY 10286, acts as custodian of each Fund's cash, pending
investment in Portfolio shares. Bank of New York also acts as custodian of the
securities and other assets of the Portfolios.

AUDITOR PricewaterhouseCoopers LLP, 333 Market Street, San Francisco, CA 94105,
is the Funds' independent auditor. The auditor gives an opinion on the financial
statements included in the Funds' Annual Report to Shareholders and reviews the
Trust's registration statement filed with the SEC.

PORTFOLIO TRANSACTIONS
------------------------------------------------------------------------------

The Funds will not incur any brokerage or other costs in connection with buying
or selling shares of the Portfolio.

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

It is not possible to place a dollar value on the special executions or on the
research services the manager receives from dealers effecting transactions in
portfolio securities. The allocation of transactions to obtain additional
research services allows the manager to supplement its own research and analysis
activities and to receive the views and information of individuals and research
staffs of other securities firms. As long as it is lawful and appropriate to do
so, the manager and its affiliates may use this research and data in their
investment advisory capacities with other clients. If the Portfolios' officers
are satisfied that the best execution is obtained, the sale of Fund shares, as
well as shares of other funds in Franklin Templeton Investments, also may be
considered a factor in the selection of broker-dealers to execute the
Portfolios' portfolio transactions.

If purchases or sales of securities of the Portfolio and one or more other
investment companies or clients supervised by the manager are considered at or
about the same time, transactions in these securities will be allocated among
the several investment companies and clients in a manner deemed equitable to all
by the manager, taking into account the respective sizes of the funds and the
amount of securities to be purchased or sold. In some cases this procedure could
have a detrimental effect on the price or volume of the security so far as the
Portfolios are concerned. In other cases it is possible that the ability to
participate in volume transactions may improve execution and reduce transaction
costs to the Portfolios.

During the fiscal years ended June 30, 2000, 1999 and 1998, the Portfolios did
not pay any brokerage commissions.

As of June 30, 2000, the Money Portfolio owned the following securities issued
by its regular broker-dealers:

AGGREGATE VALUE
OF PORTFOLIO
TRANSACTIONS ($)
-----------------------------------------------------------------------
Morgan Stanley Dean Witter 153,622,000
Morgan (J.P.) Securities Inc. 24,665,000
UBS Warburg 24,991,000
Merrill Lynch Government Securities Inc. 74,302,000
Barclays Investment Inc. 24,931,000
Banc of America Securities LLC 155,000,000
Salomon Smith Barney 164,514,000
Dresdner Kleinwort Benson, North America LLC 75,001,000

Except as noted, neither the Funds nor the Portfolios owned any securities
issued by their regular broker-dealers as of the end of the fiscal year.

DISTRIBUTIONS AND TAXES
------------------------------------------------------------------------------

The Funds do not pay "interest" or guarantee any fixed rate of return on an
investment in their shares.

DISTRIBUTIONS OF NET INVESTMENT INCOME The Funds typically pay dividends from
their daily net income each day that their net asset values are calculated. The
Funds daily net income includes dividends they receive from their investment in
the Portfolio, less the estimated expenses of the Funds. Any distributions by
the Funds from such income will be taxable to you as ordinary income, whether
you receive them in cash or in additional shares.

The Portfolio's daily net income includes accrued interest and any original
issue or acquisition discount, plus or minus any gain or loss on the sale of
portfolio securities and changes in unrealized appreciation or depreciation in
portfolio securities (to the extent required to maintain a stable $1 share
price), less the estimated expenses of the Portfolio.

DISTRIBUTIONS OF CAPITAL GAINS Each Fund may derive capital gains and losses in
connection with its investment in its shares of the Portfolio. Distributions
from net short-term capital gains will be taxable to you as ordinary income.
Because the Funds invests in money funds, they do not anticipate realizing any
long-term capital gains.

MAINTAINING A $1 SHARE PRICE Gains and losses on the Funds' investment in shares
of the Portfolio and unrealized appreciation or depreciation in the value of
these shares may require the Funds to adjust distributions to maintain their $1
share price. These procedures may result in under- or over-distributions by a
Fund of its net investment income.

EFFECT OF FOREIGN INVESTMENTS ON DISTRIBUTIONS Most foreign exchange gains
realized on the sale of debt securities are treated as ordinary income by the
Money Portfolio. Similarly, foreign exchange losses realized on the sale of debt
securities generally are treated as ordinary losses. These gains when
distributed will be taxable to the Money Fund as ordinary income, and any losses
will reduce the Money Portfolio's ordinary income otherwise available for
distribution to the Money Fund. This treatment could increase or decrease the
Money Portfolio's ordinary income distributions to the Money Fund and, in turn,
to you.

The Money Portfolio may be subject to foreign withholding taxes on income from
certain foreign securities. This could reduce ordinary income distributions to
the Money Fund and, in turn, to you.

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

If you have not held Fund shares for a full year, a Fund may designate and
distribute to you, as ordinary income, a percentage of income that is not equal
to the actual amount of such income earned during the period of your investment
in the Fund.

ELECTION TO BE TAXED AS A REGULATED INVESTMENT COMPANY Each Fund has elected to
be treated as a regulated investment company under Subchapter M of the Internal
Revenue Code (Code). Each Fund has qualified as a regulated investment company
for its most recent fiscal year, and intends to continue to qualify during the
current fiscal year. As regulated investment companies, the Funds generally pay
no federal income tax on the income and gains they distribute to you. The board
reserves the right not to maintain the qualification of a Fund as a regulated
investment company if it determines such course of action to be beneficial to
shareholders. In such case, a Fund will be subject to federal, and possibly
state, corporate taxes on its taxable income and gains, and distributions to you
will be taxed as ordinary dividend income to the extent of the Fund's earnings
and profits.

EXCISE TAX DISTRIBUTION REQUIREMENTS To avoid federal excise taxes, the Code
requires a Fund to distribute to you by December 31 of each year, at a minimum,
the following amounts: 98% of its taxable ordinary income earned during the
calendar year; 98% of its capital gain net income earned during the twelve month
period ending October 31; and 100% of any undistributed amounts from the prior
year. Each Fund intends to declare and pay these distributions in December (or
to pay them in January, in which case you must treat them as received in
December) but can give no assurances that its distributions will be sufficient
to eliminate all taxes.

REDEMPTION OF FUND SHARES Redemptions (including redemptions in kind) and
exchanges of Fund shares are taxable transactions for federal and state income
tax purposes. Because the Funds try to maintain a stable $1 share price,
however, you should not expect to realize any capital gain or loss on the sale
or exchange of your shares.

U.S. GOVERNMENT SECURITIES States grant tax-free status to dividends paid
from interest earned on certain U.S. government securities. The Funds
anticipate, however, that none of their distributions will qualify for this
exemption because they invest only indirectly (through the Portfolio) in any
qualifying U.S. government securities.

DIVIDENDS-RECEIVED DEDUCTION FOR CORPORATIONS Because the Portfolio's income is
derived primarily from interest rather than dividends, generally none of the
Funds' distributions will be eligible for the corporate dividends-received
deduction.

INVESTMENT IN COMPLEX SECURITIES The Portfolio may invest in complex securities,
including stripped securities. These investments may be subject to numerous
special and complex tax rules. These rules may affect the amount, timing or
character of the income distributed to the Funds by the Portfolio and, in turn,
by the Funds to you.

ORGANIZATION, VOTING RIGHTS AND PRINCIPAL HOLDERS
------------------------------------------------------------------------------

Each Fund is a diversified series of the Institutional Fiduciary Trust(the
Trust), an open-end management investment company, commonly called a mutual
fund. The Trust was organized as a Massachusetts business trust on January 15,
1985, and is registered with the SEC.

As a shareholder of a Massachusetts business trust, you could, under certain
circumstances, be held personally liable as a partner for its obligations. The
Agreement and Declaration of Trust, however, contains an express disclaimer of
shareholder liability for acts or obligations of the Funds. 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 each 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.

Certain Franklin Templeton funds offer multiple classes of shares. The different
classes have proportionate interests in the same portfolio of investment
securities. They differ, however, primarily in their sales charge structures and
Rule 12b-1 plans. Please note that for selling or exchanging your shares, or for
other purposes, the Funds' shares are considered Class A shares.

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

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

As of October 2, 2000, the principal shareholders of the Funds, beneficial or of
record, were:

NAME AND ADDRESS PERCENTAGE (%)
--------------------------------------------------------------------------------

MONEY FUND

Franklin California Growth Fund 14
c/o Fund Accounting Dept.
3310 Quality Dr.
Rancho Cordova, CA 95670

Franklin Floating Rate Trust 27
c/o Fund Accounting Dept.
3310 Quality Dr.
Rancho Cordova, CA 95670

Franklin Strategic Biotechnology Discovery Fund 12
c/o Fund Accounting Dept.
3310 Quality Dr.
Rancho Cordova, CA 95670

Franklin Templeton Variable Insurance Products Trust 8
Franklin Small Cap Fund
c/o Fund Accounting Dept.
3310 Quality Dr.
Rancho Cordova, CA 95670

Franklin Growth and Income Fund 6
c/o Fund Accounting Dept.
3310 Quality DR.
Rancho Cordova, CA 95670

U.S. SECURITIES FUND

Redevelopment Agency 5
City of Richmond/Potrero
Attn. Finance Dept.
2600 Barrett Ave.
P.O. Box 4086
Richmond, CA 94804-0046

Greer Margolis Mitchell Burns & Associates 16
c/o Annemarie Hannon
1010 Wisconsin Ave. NW Suite 800
Washington D.C. 20007-3674

Visa International Special Account 5 22
900 Metro Center
Foster City, CA 94404-2172

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

As of October 2, 2000, the officers and board members, as a group, owned of
record and beneficially less than 1% of the outstanding shares of the each Fund.
The board members may own shares in other funds in Franklin Templeton
Investments.

BUYING AND SELLING SHARES
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Each Fund continuously offers its shares through securities dealers who have an
agreement with Franklin Templeton Distributors, Inc. (Distributors). A
securities dealer includes any financial institution that, either directly or
through affiliates, has an agreement with Distributors to handle customer orders
and accounts with the Fund. This reference is for convenience only and does not
indicate a legal conclusion of capacity. Banks and financial institutions that
sell shares of the Fund may be required by state law to register as securities
dealers.

For investors outside the U.S., the offering of Fund shares may be limited in
many jurisdictions. An investor who wishes to buy shares of the Fund should
determine, or have a broker-dealer determine, the applicable laws and
regulations of the relevant jurisdiction. Investors are responsible for
compliance with tax, currency exchange or other regulations applicable to
redemption and purchase transactions in any jurisdiction to which they may be
subject. Investors should consult appropriate tax and legal advisors to obtain
information on the rules applicable to these transactions.

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

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

DEALER COMPENSATION Distributors and/or its affiliates may provide financial
support to securities dealers that sell shares of Franklin Templeton
Investments. This support is based primarily on the amount of sales of fund
shares and/or total assets with Franklin Templeton Investments. 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 Franklin
Templeton Investments; 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 Franklin Templeton Investments. Financial support
to securities dealers may be made by payments from Distributors' resources, from
Distributors' retention of underwriting concessions and, in the case of funds
that have Rule 12b-1 plans, from payments to Distributors under such plans. In
addition, certain securities dealers may receive brokerage commissions generated
by fund portfolio transactions in accordance with the rules of the National
Association of Securities Dealers, Inc.

Distributors routinely sponsors due diligence meetings for registered
representatives during which they receive updates on various Franklin Templeton
funds and are afforded the opportunity to speak with portfolio managers.
Invitation to these meetings is not conditioned on selling a specific number of
shares. Those who have shown an interest in Franklin Templeton funds, however,
are more likely to be considered. To the extent permitted by their firm's
policies and procedures, registered representatives' expenses in attending these
meetings may be covered by Distributors.

EXCHANGE PRIVILEGE If a substantial number of shareholders should, within a
short period, sell their Fund shares under the exchange privilege, a 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 generally are 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.

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 U.S. Securities and Exchange
Commission (SEC). In the case of redemption requests in excess of these amounts,
the board reserves the right to make payments in whole or in part in securities
or other assets of the Fund, in case of an emergency, or if the payment of such
a redemption in cash would be detrimental to the existing shareholders of the
Fund. In these circumstances, the securities distributed would be valued at the
price used to compute the Fund's net assets and you may incur brokerage fees in
converting the securities to cash.

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

All purchases of Fund shares will be credited to you, in full and fractional
Fund shares (rounded to the nearest 1/100 of a share), in an account maintained
for you by the Fund's transfer agent.

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

Distribution or redemption checks sent to you do not earn interest or any other
income during the time the checks remain uncashed. Neither the 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.

Sending redemption proceeds by wire or electronic funds transfer (ACH) is a
special service that we make available whenever possible. By offering this
service to you, the Fund is not bound to meet any redemption request in less
than the seven day period prescribed by law. Neither the Fund nor its agents
shall be liable to you or any other person if, for any reason, a redemption
request by wire or ACH is not processed as described in the prospectus.

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

There are special procedures for banks and other institutions that wish 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 when the master account is
opened by listing them on the application, or by providing instructions to the
Fund at a later date. These sub-accounts may be registered either by name or
number. The Fund's investment minimums apply to each sub-account. The Fund will
send confirmation and account statements for the sub-accounts to the
institution.

If you buy or sell shares through your securities dealer, we use the net asset
value next calculated after your securities dealer receives your request, which
is promptly transmitted to the Fund.

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

PRICING SHARES
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When you buy shares, you pay the net asset value (NAV) per share. When you sell
shares, you receive the NAV minus any applicable contingent deferred sales
charge (CDSC).

The value of a mutual fund is determined by deducting the fund's liabilities
from the total assets of the portfolio. The net asset value per share is
determined by dividing the net asset value of the fund by the number of shares
outstanding.

The valuation of each Portfolio's portfolio securities, including any securities
set aside on the Portfolio's books for when-issued securities, is based on the
amortized cost of the securities, which does not take into account unrealized
capital gains or losses. This method involves valuing an instrument at its cost
and thereafter assuming a constant amortization to maturity of any discount or
premium, regardless of the impact of fluctuating interest rates on the market
value of the instrument. While this method provides certainty in calculation, it
may result in periods during which value, as determined by amortized cost, is
higher or lower than the price the Portfolio would receive if it sold the
instrument. During periods of declining interest rates, the daily yield on
shares of the Portfolio computed as described above may tend to be higher than a
like computation made by a fund with identical investments but using a method of
valuation based upon market prices and estimates of market prices for all of its
portfolio instruments. Thus, if the use of amortized cost by the Portfolio
resulted in a lower aggregate portfolio value on a particular day, a prospective
investor in the Portfolio would be able to obtain a somewhat higher yield than
would result from an investment in a fund using only market values, and existing
investors in the Portfolio would receive less investment income. The opposite
would be true in a period of rising interest rates. The Portfolio's use of
amortized cost, which helps the Portfolio maintain a $1 share price, is
permitted by a rule adopted by the SEC.

The board has established procedures designed to stabilize, to the extent
reasonably possible, each Portfolio's price per share at $1, as computed for the
purpose of sales and redemptions. These procedures include a review of the
Portfolio's holdings by the board, at such intervals as it may deem appropriate,
to determine if the Portfolio's net asset value calculated by using available
market quotations deviates from $1 per share based on amortized cost. The extent
of any deviation will be examined by the board. If a deviation exceeds 1/2 of
1%, the board will promptly consider what action, if any, will be initiated. If
the board determines that a deviation exists that may result in material
dilution or other unfair results to investors or existing shareholders, it will
take corrective action that it regards as necessary and appropriate, which may
include selling portfolio instruments before maturity to realize capital gains
or losses or to shorten average portfolio maturity, withholding dividends,
redeeming shares in kind, or establishing a net asset value per share by using
available market quotations.

THE UNDERWRITER
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Franklin Templeton Distributors, Inc. (Distributors) acts as the principal
underwriter in the continuous public offering of each Fund's shares.
Distributors is located at 777 Mariners Island Blvd., San Mateo, CA 94404.

Distributors pays the expenses of the distribution of Fund shares, including
advertising expenses and the costs of printing sales material and prospectuses
used to offer shares to the public. The Funds pay the expenses of preparing and
printing amendments to their 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 payments from the Funds under the Rule 12b-1
plans, as discussed below. Distributors received no compensation from the Funds
for acting as underwriter.

DISTRIBUTION AND SERVICE (12B-1) FEES The board has adopted a separate plan
pursuant to Rule 12b-1 for each Fund's shares. The plans are designed to benefit
the Funds and their shareholders. The plans are expected to, among other things,
increase advertising of the Funds, encourage sales of the Funds and service to
their shareholders, and increase or maintain assets of the Funds so that certain
fixed expenses may be spread over a broader asset base, resulting in lower per
share expense ratios. In addition, a positive cash flow into the Funds is useful
in managing the Funds because the manager has more flexibility in taking
advantage of new investment opportunities and handling shareholder redemptions.

Under the plans, the Funds pay Distributors or others for the expenses of
activities that are primarily intended to sell shares of the Fund. These
expenses also may include service fees paid to securities dealers or others who
have executed a servicing agreement with the Funds, Distributors or its
affiliates and who provide service or account maintenance to shareholders
(service fees); the expenses of printing prospectuses and reports used for sales
purposes, and of preparing and distributing sales literature and advertisements;
and a prorated portion of Distributors' overhead expenses related to these
activities. Together, these expenses, including the service fees, are "eligible
expenses."

Each Fund may pay up to 0.15% per year of the Fund's average daily net assets.

The plans are reimbursement plans. They allow the Funds to reimburse
Distributors for eligible expenses that Distributors has shown it has incurred.
The Funds will not reimburse more than the maximum amount allowed under the
plan. Any unreimbursed expenses from one year may not be carried over to or
reimbursed in later years.

For the fiscal year ended June 30, 2000, the Funds did not incur any expenses
pursuant to the plans.

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

To the extent fees are for distribution or marketing functions, as distinguished
from administrative servicing or agency transactions, certain banks may not
participate in the plans because of applicable federal law prohibiting certain
banks from engaging in the distribution of mutual fund shares. These banks,
however, are allowed to receive fees under the plans for administrative
servicing or for agency transactions.

Distributors must provide written reports to the board at least quarterly on the
amounts and purpose of any payment made under the plans and any related
agreements, and furnish the board with such other information as the board may
reasonably request to enable it to make an informed determination of whether the
plans should be continued.

Each plan has been approved according to the provisions of Rule 12b-1. The terms
and provisions of each plan also are consistent with Rule 12b-1.

PERFORMANCE
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Performance quotations are subject to SEC rules. These rules require the use of
standardized performance quotations or, alternatively, that every
non-standardized performance quotation furnished by the Fund be accompanied by
certain standardized performance information computed as required by the SEC.
Average annual total return, current yield and effective yield quotations used
by the Fund are based on the standardized methods of computing performance
mandated by the SEC. An explanation of these and other methods used by the Funds
to compute or express performance follows. Regardless of the method used, past
performance does not guarantee future results, and is an indication of the
return to shareholders only for the limited historical period used.

AVERAGE ANNUAL TOTAL RETURN Average annual total return is determined by finding
the average annual rates of return over the periods indicated below that would
equate an initial hypothetical $1,000 investment to its ending redeemable value.
The calculation assumes income dividends are reinvested at net asset value. The
quotation assumes the account was completely redeemed at the end of each period
and the deduction of all applicable charges and fees.

The average annual total returns for the indicated periods ended June 30, 2000,
were:

1 YEAR (%) 5 YEARS (%) 10 YEARS (%)
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Money Fund 5.54 5.42 5.12
U.S. Securities Fund 5.27 5.27 4.98

The following SEC formula was used to calculate these figures:

n
P(1+T) = ERV

where:

P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment made at
the beginning of each period at the end of each period

CURRENT YIELD Current yield shows the income per share earned by the Funds. It
is calculated by determining the net change, excluding capital changes, in the
value of a hypothetical pre-existing account with a balance of one share at the
beginning of the period, subtracting a hypothetical charge reflecting deductions
from shareholder accounts, and dividing the difference by the value of the
account at the beginning of the base period to obtain the base period return.
The result is then annualized by multiplying the base period return by 365/7.
The current yield for the seven day period ended June 30, 2000, was 6.32% for
the Money Fund and 6.10% for the U.S. Securities Fund.

EFFECTIVE YIELD The Funds' effective yield is calculated in the same manner as
their current yield, except the annualization of the return for the seven day
period reflects the results of compounding. The effective yield for the seven
day period ended June 30, 2000, was 6.52% for the Money Fund and 6.29% for the
U.S. Securities Fund.

The following SEC formula was used to calculate this figure:

365/7
Effective yield = [(Base period return + 1) ] - 1

OTHER PERFORMANCE QUOTATIONS Each Fund may include in its advertising or sales
material information relating to investment goals and performance results of
funds belonging to Franklin Templeton Investments. Franklin Resources, Inc. is
the parent company of the advisors and underwriter of Franklin Templeton funds.

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

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

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

o BANK RATE MONITOR - a weekly publication that reports various bank
investments such as CD rates, average savings account rates and average
loan rates.

o SALOMON SMITH BARNEY BOND MARKET ROUNDUP - a weekly publication that
reviews yield spread changes in the major sectors of the money, government
agency, futures, options, mortgage, corporate, Yankee, Eurodollar,
municipal, and preferred stock markets and summarizes changes in banking
statistics and reserve aggregates.

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

o STOCKS, BONDS, BILLS, AND INFLATION, published by Ibbotson Associates - a
historical measure of yield, price, and total return for common and small
company stock, long term government bonds, Treasury bills and inflation.

o Financial publications: The WALL STREET JOURNAL, and BUSINESS WEEK,
CHANGING TIMES, FINANCIAL WORLD, FORBES, FORTUNE, and MONEY MAGAZINES -
provide performance statistics over specified time periods.

From time to time, advertisements or information for each Fund may include a
discussion of certain attributes or benefits to be derived from an investment in
the Fund. The advertisements or information may include symbols, headlines, or
other material that highlights or summarizes the information discussed in more
detail in the communication.

Advertisements or information also may compare each Fund's performance to the
return on certificates of deposit (CDs) or other investments. You should be
aware, however, that an investment in the Fund involves the risk of fluctuation
of principal value, a risk generally not present in an investment in a CD issued
by a bank. CDs are frequently insured by an agency of the U.S. government. An
investment in 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 each 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 a Fund to calculate its figures. In addition,
there can be no assurance that a Fund will continue its performance as compared
to these other averages.

MISCELLANEOUS INFORMATION
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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 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 Funds are members of Franklin Templeton Investments, one of the largest
mutual fund organizations in the U.S., and may be considered in a program for
diversification of assets. Founded in 1947, Franklin is one of the oldest mutual
fund organizations and now services approximately 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, Franklin Templeton Investments has over
$236 billion in assets under management for more than 5 million U.S. based
mutual fund shareholder and other accounts. Franklin Templeton Investments
offers 107 U.S. based open-end investment companies to the public. Each Fund may
identify itself by its Nasdaq symbol or CUSIP number.

Currently, there are more mutual funds than there are stocks listed on the New
York Stock Exchange. While many of them have similar investment goals, no two
are exactly alike. Shares of the Fund are generally sold through securities
dealers, whose investment representatives are experienced professionals who can
offer advice on the type of investments suitable to your unique goals and needs,
as well as the risks associated with such investments.

DESCRIPTION OF RATINGS
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CORPORATE BOND RATINGS

MOODY'S INVESTORS SERVICE, INC. (MOODY'S)

INVESTMENT GRADE

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.

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

STANDARD & POOR'S RATINGS GROUP (S&P(R))

INVESTMENT GRADE

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 "CCC" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.

MUNICIPAL BOND RATINGS

MOODY'S

INVESTMENT GRADE

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.

Note: Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
classification from Aa through Caa in its municipal 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

INVESTMENT GRADE

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 "CCC" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.

FITCH INVESTORS SERVICE, INC. (FITCH)

INVESTMENT GRADE

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, DDD, DD or D categories.

MUNICIPAL NOTE RATINGS

MOODY'S

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

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

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

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

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

S&P

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

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

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

SHORT-TERM DEBT & COMMERCIAL PAPER RATINGS

MOODY'S

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

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

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

S&P

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

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

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

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

FITCH

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

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

F-1: Very strong credit quality. Reflects 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.

APPENDICES
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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 subdivisions (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.

FRANKLIN CASH RESERVES FUND

INSTITUTIONAL FIDUCIARY TRUST

STATEMENT OF ADDITIONAL INFORMATION

NOVEMBER 1, 2000

[Insert Franklin Templeton Ben Head]

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

This Statement of Additional Information (SAI) is not a prospectus. It contains
information in addition to the information in the Fund's prospectus. The Fund's
prospectus, dated November 1, 2000, which we may amend from time to time,
contains the basic information you should know before investing in the Fund. You
should read this SAI together with the Fund's prospectus.

The audited financial statements and auditor's report in the Fund's Annual
Report to Shareholders, for the fiscal year ended June 30, 2000, are
incorporated by reference (are legally a part of this SAI).

For a free copy of the current prospectus or annual report, contact
Institutional Services at 1-800/321-8563.

CONTENTS

Goal, Strategies and Risks.................................2
Officers and Trustees......................................6
Management and Other Services..............................9
Portfolio Transactions....................................10
Distributions and Taxes...................................10
Organization, Voting Rights and
Principal Holders........................................11
Buying and Selling Shares.................................12
Pricing Shares............................................14
The Underwriter...........................................14
Performance...............................................15
Miscellaneous Information.................................16
Description of Ratings....................................17

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MUTUAL FUNDS, ANNUITIES, AND OTHER INVESTMENT PRODUCTS:

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

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

O ARE SUBJECT TO INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL.
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GOAL, STRATEGIES AND RISKS
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The Fund seeks to achieve its investment goal by investing all of its assets in
shares of The Money Market Portfolio (Portfolio). The Portfolio has the same
investment goal and substantially similar investment policies as the Fund,
except, in all cases, the Fund may pursue its policies by investing in a mutual
fund with the same investment goal and substantially similar policies and
restrictions as the Fund. The Portfolio's investment restrictions are the same
as the Fund's, except as necessary to reflect the Fund's policy to invest all of
its assets in shares of the Portfolio.

Generally, the policies and restrictions discussed in this SAI and in the
prospectus apply when the Fund makes an investment. In most cases, the Fund is
not required to sell a security because circumstances change and the security no
longer meets one or more of the Fund's policies or restrictions. If a percentage
restriction or limitation is met at the time of investment, a later increase or
decrease in the percentage due to a change in the value or liquidity of
portfolio securities will not be considered a violation of the restriction or
limitation.

The Fund has adopted certain restrictions as fundamental policies. This means
they may only be changed if the change is approved by (i) more than 50% of the
Fund's outstanding shares or (ii) 67% or more of the Fund's shares present at a
shareholder meeting if more than 50% of the Fund's outstanding shares are
represented at the meeting in person or by proxy, whichever is less.

A non-fundamental policy may be changed by the board of trustees without the
approval of shareholders.

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

FUNDAMENTAL INVESTMENT POLICIES

The Fund's investment goal is to provide investors with as high a level of
current income as is consistent with the preservation of shareholders' capital
and liquidity. The Fund also tries to maintain a stable $1 share price.

The Fund directly or through its investment in the Portfolio may not:

3. Acquire, lease or hold real estate, provided that this limitation shall not
prohibit the purchase of municipal and other debt securities secured by real
estate or interests therein.

4. Buy any securities "on margin" or sell any securities "short," except that it
may use such short-term credits as are necessary for the clearance of
transactions.

5. Invest in commodities and commodity contracts, puts, calls, straddles,
spreads, or any combination thereof, or interests in oil, gas, or other mineral
exploration or development programs, except that it may purchase, hold, and
dispose of "obligations with puts attached" in accordance with its stated
investment policies.

6. Purchase securities, in private placements or in other transactions, for
which there are legal or contractual restrictions on resale and that are not
readily marketable, or enter into a repurchase agreement with more than seven
days to maturity if, as a result, more than 10% of the total assets of the Fund
would be invested in such securities or repurchase agreement, except that, to
the extent this restriction is applicable, the Fund may purchase, in private
placements, shares of another registered investment company having the same
investment objectives and policies as the Fund.

7. Act as underwriter of securities issued by other persons, except insofar as
the Fund may technically be deemed an underwriter under the federal securities
laws in connection with the disposition of portfolio securities; except that all
or substantially all of the assets of the Fund may be invested in another
registered investment company having the same investment objectives and policies
as the Fund.

10. Purchase securities from or sell to the Trust's officers and trustees, or
any firm of which any officer or trustee is a member, as principal, or retain
securities of any issuer if, to the knowledge of the Trust, one or more of the
Trust's officers, trustees, or the manager own beneficially more than 1/2 of 1%
of the securities of such issuer and all such officers and trustees together own
beneficially more than 5% of such securities.

11. Invest more than 25% of its assets in securities of any industry, except
that this policy is inapplicable where the Fund's policies, as described in its
current prospectus, state otherwise, and further does not apply to the extent
that the Fund invests all or substantially all of its assets in another
registered investment company having the same investment objective and policies.
For purposes of this limitation, U.S. government obligations are not considered
to be part of any industry.

NON-FUNDAMENTAL INVESTMENT POLICIES

The following non-fundamental policies apply to investments made by the Fund
through the Portfolio.

1. The Fund will invest in obligations or instruments issued by banks and
savings institutions with assets of at least $1 billion.

2. The Fund may not invest more than 10% of its assets in time deposits with
more than seven days to maturity.

3. The Fund may invest in an obligation issued by a branch of a bank only if the
parent bank has assets of at least $5 billion, and may invest only up to 25% of
its assets in obligations of foreign branches of U.S. or foreign banks. The Fund
may invest more than 25% of its assets in certain domestic bank obligations,
including U.S. branches of foreign banks.

4. The Fund may not make any new investments while any outstanding loans
exceed 5% of its total assets.

5. The Fund may invest up to 10% of its assets in taxable municipal
securities.

6. The Fund only intends to buy stripped securities that are issued or
guaranteed by the U.S. Treasury or by an agency or instrumentality of the
U.S. government.

7. The Fund may not invest more than 10% of its net assets in illiquid
securities. Notwithstanding this limitation, the Fund may invest in securities
that cannot be offered to the public for sale without first being registered
under the Securities Act of 1933, as amended (the "1933 Act") (restricted
securities), where such investment is consistent with the Fund's investment goal
and the manager determines that there is a liquid institutional or other market
for such securities. For example, restricted securities that may be freely
transferred among qualified institutional buyers pursuant to Rule 144A under the
1933 Act and for which a liquid institutional market has developed will be
considered liquid even though such securities have not been registered pursuant
to the 1933 Act.

8. The Fund may not invest more than 5% of its total assets in securities of
companies, including predecessors, that have been in continuous operation for
less than three years.

INVESTMENTS, TECHNIQUES, STRATEGIES AND THEIR RISKS

In trying to achieve its investment goals, the Fund through the Portfolio may
invest in the following types of securities or engage in the following types of
transactions, and can be subject to the following types of risks:

ASSET-BACKED SECURITIES in which the Fund may invest are typically commercial
paper backed by the loans or accounts receivable of an entity, such as a bank or
credit card company. The issuer intends to repay using the assets backing the
securities (once collected). Therefore, repayment depends largely on the
cash-flows generated by the assets backing the securities. Sometimes the credit
support for these securities is limited to the underlying assets. In other cases
it may be provided by a third party through a letter of credit or insurance
guarantee.

BANK OBLIGATIONS The Fund may invest in obligations of U.S. banks, foreign
branches of U.S. or foreign banks, and U.S. branches of foreign banks. These
obligations may include deposits that are fully insured by the U.S.
government, its agencies or instrumentalities, such as deposits in banking
and savings institutions up to the current limit of the insurance on
principal provided by the Federal Deposit Insurance Corporation. Deposits are
frequently combined in larger units by an intermediate bank or other
institution.

COMMERCIAL PAPER The Fund may invest in commercial paper of domestic or foreign
issuers.

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

CREDIT An issuer of securities may be unable to make interest payments and repay
principal. Changes in an issuer's financial strength or in a security's credit
rating may affect a security's value. Some of the Fund's portfolio securities
may be supported by credit enhancements, which may be provided by either U.S. or
foreign banks and insurance companies. These securities have the credit risk of
the entity providing the credit support. Credit support provided by a foreign
bank or insurance company may be less certain because of the possibility of
adverse foreign economic, political or legal developments that may affect the
ability of that entity to meet its obligations.

FOREIGN SECURITIES The value of foreign (and U.S.) securities is affected by
general economic conditions and individual company and industry earnings
prospects. While foreign securities may offer significant opportunities for
gain, they also involve additional risks that can increase the potential for
losses in the Fund.

The political, economic and social structures of some countries the Fund invests
in may be less stable and more volatile than those in the U.S. The risks of
investing in these countries include the possibility of the imposition of
exchange controls, expropriation, restrictions on removal of currency or other
assets, nationalization of assets and punitive taxes.

ILLIQUID INVESTMENTS Illiquid securities are generally securities that cannot be
sold within seven days in the normal course of business at approximately the
amount at which the Fund has valued them. The Fund's board of trustees will
review the determination by the manager to treat a restricted security as a
liquid security on an ongoing basis, including, among others, the following
factors: (i) the frequency of trades and quotes for the security; (ii) the
number of dealers willing to buy or sell the security and the number of other
potential buyers; (iii) dealer undertakings to make a market in the security;
and (iv) the nature of the security and market place trades (e.g., the time
needed to dispose of the security, the method of soliciting offers, and the
mechanics of transfer). To the extent the Fund invests in restricted securities
that are deemed liquid, the general level of illiquidity in the Fund may be
increased if qualified institutional buyers become uninterested in buying these
securities or the market for these securities contracts. The Fund's board of
trustees will consider appropriate actions, consistent with the Fund's goals and
policies, if a security becomes illiquid after purchase.

INTEREST RATE As a general rule, when interest rates rise, debt securities can
lose market value. Similarly, when interest rates fall, debt securities can gain
value. However, because the length of time to maturity of the money market
instruments in the Fund's portfolio is very short, it is unlikely to be affected
by interest rate changes in this way except in the case of unexpectedly large
interest rate changes over a very short period of time.

LOANS OF PORTFOLIO SECURITIES To generate additional income, the Fund may lend
certain of its portfolio securities to qualified banks and broker-dealers. These
loans may not exceed 33 1/3% of the value of the Fund's total assets, measured
at the time of the most recent loan. For each loan, the borrower must maintain
with the Fund's custodian collateral (consisting of any combination of cash,
securities issued by the U.S. government and its agencies and instrumentalities,
or irrevocable letters of credit) with a value at least equal to 102% of the
current market value of the loaned securities. The Fund retains all or a portion
of the interest received on investment of the cash collateral or receives a fee
from the borrower. The Fund also continues to receive any distributions paid on
the loaned securities. The Fund may terminate a loan at any time and obtain the
return of the securities loaned within the normal settlement period for the
security involved.

As with other extensions of credit, there are risks of delay in recovery or even
loss of rights in collateral in the event of default or insolvency of the
borrower. The Fund will loan its securities only to parties who meet
creditworthiness standards approved by the Fund's board of trustees, i.e., banks
or broker-dealers that the manager has determined present no serious risk of
becoming involved in bankruptcy proceedings within the time frame contemplated
by the loan.

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

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

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

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

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.

REPURCHASE AGREEMENTS Under a repurchase agreement, the Fund agrees to buy
securities guaranteed as to payment of principal and interest by the U.S.
government or its agencies from a qualified bank or broker-dealer and then to
sell the securities back to the bank or broker-dealer after a short period of
time (generally, less than seven days) at a higher price. The bank or
broker-dealer must transfer to the Fund's custodian securities with an initial
market value of at least 102% of the dollar amount invested by the Fund in each
repurchase agreement. The manager will monitor the value of such securities
daily to determine that the value equals or exceeds the repurchase price.

Repurchase agreements may involve risks in the event of default or insolvency of
the bank or broker-dealer, including possible delays or restrictions upon the
Fund's ability to sell the underlying securities. The Fund will enter into
repurchase agreements only with parties who meet certain creditworthiness
standards, i.e., banks or broker-dealers that the manager has determined present
no serious risk of becoming involved in bankruptcy proceedings within the time
frame contemplated by the repurchase transaction.

These risks also include, among others, the risk that the price movements in the
underlying securities correlate with price movements in the relevant portion of
the Fund's portfolio. The Fund either bears the risk in the same amount as the
instrument it has purchased, or there may be a negative correlation that would
result in a loss on both the underlying security and the stripped security.

TIME DEPOSITS are non-negotiable deposits that are held in a banking institution
for a specified time at a stated interest rate.

VARIABLE MASTER DEMAND NOTES are a type of commercial paper. They are direct
arrangements between a lender and a borrower that allow daily changes to the
amount borrowed and to the interest rate. The Fund, as lender, may increase or
decrease the amount provided by the note agreement, and the borrower may repay
up to the full amount of the note without penalty. Typically, the borrower may
also set the interest rate daily, usually at a rate that is the same or similar
to the interest rate on other commercial paper issued by the borrower. The Fund
does not have any limit on the amount of its assets that may be invested in
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 Fund's ability to redeem a note is dependent
on the ability of the borrower to pay the principal and interest on demand. When
determining whether to invest in a variable master demand note, the manager
considers, among other things, the earnings power, cash flow and other liquidity
ratios of the issuer.

WHEN-ISSUED OR DELAYED-DELIVERY TRANSACTIONS are those where payment and
delivery for the security take place at a future date. Since the market price of
the security may fluctuate during the time before payment and delivery, the Fund
assumes the risk that the value of the security at delivery may be more or less
than the purchase prices. When the Fund is the buyer in the transaction, it will
maintain cash or liquid securities, with an aggregate value equal to the amount
of its purchase commitments, in a segregated account with its custodian bank
until payment is made. The Fund will not engage in when-issued and
delayed-delivery transactions for investment leverage purposes.

OFFICERS AND TRUSTEES
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The Trust has a board of trustees. The board is responsible for the overall
management of the Trust, including general supervision and review of the Fund's
investment activities. The board, in turn, elects the officers of the Trust who
are responsible for administering the Trust's day-to-day operations.