UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-04267
----------
INSTITUTIONAL FIDUCIARY TRUST
-----------------------------
(Exact name of registrant as specified in charter)
ONE FRANKLIN PARKWAY, SAN MATEO, CA 94403-1906
-----------------------------------------------
(Address of principal executive offices) (Zip code)
CRAIG S. TYLE, ONE FRANKLIN PARKWAY, SAN MATEO, CA 94403-1906
-------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: 650 312-2000
-------------
Date of fiscal year end: 6/30
----
Date of reporting period: 6/30/09
-------
ITEM 1. REPORTS TO STOCKHOLDERS.
JUNE 30, 2009
ANNUAL REPORT
FRANKLIN CASH
RESERVES FUND
(FRANKLIN TEMPLETON INVESTMENTS(R) LOGO)
FRANKLIN - Templeton - Mutual Series
Contents
ANNUAL REPORT
Franklin Cash Reserves Fund ............................................... 1
Performance Summary ....................................................... 3
Your Fund's Expenses ...................................................... 4
Financial Highlights and Statement of Investments ......................... 6
Financial Statements ...................................................... 8
Notes to Financial Statements ............................................. 11
Report of Independent Registered Public Accounting Firm ................... 16
Tax Designation ........................................................... 17
Board Members and Officers ................................................ 18
The Money Market Portfolios ............................................... 22
Shareholder Information ................................................... 39
Annual Report
Franklin Cash Reserves Fund
YOUR FUND'S GOAL AND MAIN INVESTMENTS: Franklin Cash Reserves Fund seeks to
provide as high a level of current income as is consistent with preservation of
shareholders' capital and liquidity. The Fund invests all of its assets in the
shares of The Money Market Portfolio (the Portfolio), which has the same
investment goal and policies. The Portfolio, in turn, invests mainly in
high-quality, short-term U.S. dollar denominated money market securities of
domestic and foreign issuers. The Fund attempts to maintain a stable $1.00 share
price.
This annual report for Franklin Cash Reserves Fund covers the fiscal year ended
June 30, 2009.
PERFORMANCE DATA REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE
RESULTS. INVESTMENT RETURN VALUE WILL FLUCTUATE. CURRENT PERFORMANCE MAY DIFFER
FROM FIGURES SHOWN. PLEASE VISIT franklintempleton.com OR CALL (800) 342-5236
FOR MOST RECENT MONTH-END PERFORMANCE.
AN INVESTMENT IN THE FUND IS NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY OR INSTITUTION. ALTHOUGH
THE FUND SEEKS TO PRESERVE THE VALUE OF YOUR INVESTMENT AT $1.00 PER SHARE, IT
IS POSSIBLE TO LOSE MONEY BY INVESTING IN THE FUND.
PERFORMANCE OVERVIEW
Declining short-term interest rates during the period under review resulted in a
decrease in the Fund's yield. In this environment, the Fund's seven-day
annualized yield fell from 1.69% on June 30, 2008, to 0.00% on June 30, 2009.
ECONOMIC AND MARKET OVERVIEW
During the 12-month period ended June 30, 2009, economic conditions
deteriorated. In February, The Conference Board's Consumer Confidence Index fell
to an all-time low since it began in 1967 as the U.S. economy faltered and as
THE DOLLAR VALUE, NUMBER OF SHARES OR PRINCIPAL AMOUNT, AND NAMES OF ALL
PORTFOLIO HOLDINGS ARE LISTED IN THE FUND'S STATEMENT OF INVESTMENTS (SOI). THE
SOI BEGINS ON PAGE 7.
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE
Annual Report | 1
stock markets declined. Despite far-reaching government interventions, the
nation's economic troubles worsened as manufacturing activity weakened at its
fastest pace in nearly 30 years and as home prices fell at an accelerated rate.
Jobless claims mounted and the unemployment rate rose to 9.5% by period-end.(1)
Economic growth, as measured by gross domestic product (GDP), fell throughout
the period. In 2008's third quarter, GDP was an annualized -2.7%, followed by
annualized rates of -5.4%, -6.4% and an estimated -1.0% in 2008's fourth quarter
and 2009's first and second quarters, respectively. These declines in GDP
reflected broad-based slowdowns in consumer spending, corporate profits and
export growth.
PORTFOLIO BREAKDOWN
6/30/09
% OF TOTAL
INVESTMENTS
-----------
Repurchase Agreements 32.2%
Commercial Paper 26.7%
Certificates of Deposit 21.7%
U.S. Government & 17.1%
Agency Securities
Bank Notes 2.3%
Oil prices were volatile, rising from $140 per barrel at the beginning of the
period to a period-high $145 in July. As economic conditions deteriorated in
mid-2008, oil prices declined significantly, hitting a period-low $31 in
December 2008 before rebounding to end the period at $70. Many other commodity
prices followed similar trends; therefore, as prices fell in late 2008,
inflation remained muted, and June's inflation rate was an annualized -1.4%.(1)
Core inflation, which excludes food and energy costs, rose at a 1.7% annualized
rate, which was within the Federal Reserve Board's (Fed's) informal target range
of 1.5%-2.0%.(1) The core personal consumption expenditures price index reported
a 12-month increase of 1.5%.(2)
A slowing economy and decelerating inflation prompted policymakers to lower
interest rates and enact stimulus plans. During the period under review, the Fed
lowered the federal funds target rate from 1.5% to a range of 0% to 0.25%. The
government implemented the American Recovery and Reinvestment Act, which
included tax breaks, money for ailing state governments, aid to the poor and
unemployed, and spending on infrastructure, renewable energy, health care and
education. The Fed and U.S. Treasury Department also continued programs designed
to shore up beleaguered banks' capital, enable freer lending to businesses and
consumers, and help struggling home buyers avoid foreclosure.
Most Treasury prices declined during the period, and fixed income spreads were
generally wide relative to Treasury yields due to heightened market turbulence
and risk aversion. The spread between two-year and 10-year Treasury yields rose
to 242 basis points (100 basis points equal one percentage point) at the end of
June from 136 basis points at the beginning of the reporting period. The
two-year Treasury bill yield fell from 2.63% to 1.11% over the 12-month period,
while the 10-year Treasury note yield fell slightly from 3.99% to 3.53%.
(1.) Source: Bureau of Labor Statistics.
(2.) Source: Bureau of Economic Analysis.
2 | Annual Report
INVESTMENT STRATEGY
Consistent with our strategy, we invest, through the Portfolio, mainly in
high-quality, short-term U.S. dollar denominated money market securities of
domestic and foreign issuers, including bank obligations, commercial paper,
repurchase agreements and U.S. government securities. We maintain a
dollar-weighted average portfolio maturity of 90 days or less. We seek to
provide shareholders with a high-quality, conservative investment vehicle; thus,
we do not invest the Fund's cash in derivatives or other relatively volatile
securities that we believe involve undue risk.
MANAGER'S DISCUSSION
The 12 months ended June 30, 2009, was the most volatile and challenging period
in the history of the money market. Liquidity and credit issues dominated the
headlines. The one-month London InterBank Offered Rate, which rose from 2.46% at
the beginning of the period to a high of 4.59% in October, dropped to 0.31% at
period-end.(3)
Despite these trying times, we continued to invest in high-quality money market
securities. For example, 100% of the securities purchased for the Portfolio
throughout the year carried short-term credit ratings of A-1 or P-1, or higher,
by independent credit rating agency Standard & Poor's or Moody's Investors
Service.(4)
We appreciate your support, welcome new shareholders and look forward to serving
your investment needs in the years ahead.
PERFORMANCE SUMMARY
SYMBOL: INRXX
6/30/09
Seven-day annualized yield 0.00%
Total annual operating expenses(1)
Without waiver 0.92%
With waiver 0.86%
The administrator has contractually agreed, as of 11/1/08, to limit its fees and
to assume as its own expense certain expenses otherwise payable by the Fund so
that common expenses (i.e., a combination of investment management fees, fund
administration fees, and other expenses, but excluding Rule 12b-1 fees) do not
exceed 0.60% (other than certain non-routine expenses or costs, including those
relating to litigation, indemnification, reorganizations, liquidations and
Treasury Guarantee Program fees) until 10/31/09. To avoid a negative yield, the
investment manager, fund administrator and fund distributor have voluntarily
agreed to waive or limit their respective fees, assume as their own expense
certain expenses otherwise payable by the Fund, and if necessary, make a capital
infusion into the Fund. These waivers, expense reimbursements and capital
infusions, which are not reflected in the table above, are voluntary and may be
modified or discontinued by the investment manager, fund administrator or
distributor at any time. There is no guarantee the Fund will be able to avoid a
negative yield.
(1.) Figures are as stated in the Fund's prospectus current as of the date of
this report. In periods of market volatility, assets may decline
significantly, causing total annual Fund operating expenses to become
higher than the figure shown.
Annualized yield is for the seven-day period ended 6/30/09. The Fund's
average weighted maturity was 49 days. Yield reflects Fund expenses and
fluctuations in interest rates on Portfolio investments.
PERFORMANCE DATA REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE
RESULTS. INVESTMENT RETURN WILL FLUCTUATE. CURRENT PERFORMANCE MAY DIFFER FROM
FIGURES SHOWN. PLEASE CALL (800) 342-5236 FOR MOST RECENT
THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS
AS OF JUNE 30, 2009, THE END OF THE REPORTING PERIOD. THE WAY WE IMPLEMENT OUR
MAIN INVESTMENT STRATEGIES AND THE RESULTING PORTFOLIO HOLDINGS MAY CHANGE
DEPENDING ON FACTORS SUCH AS MARKET AND ECONOMIC CONDITIONS. THESE OPINIONS MAY
NOT BE RELIED UPON AS INVESTMENT ADVICE OR AN OFFER FOR A PARTICULAR SECURITY.
THE INFORMATION IS NOT A COMPLETE ANALYSIS OF EVERY ASPECT OF ANY MARKET,
COUNTRY, INDUSTRY, SECURITY OR THE FUND. STATEMENTS OF FACT ARE FROM SOURCES
CONSIDERED RELIABLE, BUT THE INVESTMENT MANAGER MAKES NO REPRESENTATION OR
WARRANTY AS TO THEIR COMPLETENESS OR ACCURACY. ALTHOUGH HISTORICAL PERFORMANCE
IS NO GUARANTEE OF FUTURE RESULTS, THESE INSIGHTS MAY HELP YOU UNDERSTAND OUR
INVESTMENT MANAGEMENT PHILOSOPHY.
(3.) Source: British Bankers Association.
(4.) These do not indicate ratings of the Fund.
Annual Report | 3
Your Fund's Expenses
As a Fund shareholder, you can incur two types of costs:
- - Transaction costs, including sales charges (loads) on Fund purchases; and
- - Ongoing Fund costs, including management fees, distribution and service
(12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs,
sometimes referred to as operating expenses.
The following table shows ongoing costs of investing in the Fund and can help
you understand these costs and compare them with those of other mutual funds.
The table assumes a $1,000 investment held for the six months indicated.
ACTUAL FUND EXPENSES
The first line (Actual) of the table provides actual account values and
expenses. The "Ending Account Value" is derived from the Fund's actual return,
which includes the effect of Fund expenses.
You can estimate the expenses you paid during the period by following these
steps. OF COURSE, YOUR ACCOUNT VALUE AND EXPENSES WILL DIFFER FROM THOSE IN THIS
ILLUSTRATION:
1. Divide your account value by $1,000.
IF AN ACCOUNT HAD AN $8,600 VALUE, THEN $8,600 / $1,000 = 8.6.
2. Multiply the result by the number under the heading "Expenses Paid During
Period."
IF EXPENSES PAID DURING PERIOD WERE $7.50, THEN 8.6 X $7.50 = $64.50.
In this illustration, the estimated expenses paid this period are $64.50.
HYPOTHETICAL EXAMPLE FOR COMPARISON WITH OTHER FUNDS
Information in the second line (Hypothetical) of the table can help you compare
ongoing costs of investing in the Fund with those of other mutual funds. This
information may not be used to estimate the actual ending account balance or
expenses you paid during the period. The hypothetical "Ending Account Value" is
based on the Fund's actual expense ratio and an assumed 5% annual rate of return
before expenses, which does not represent the Fund's actual return. The figure
under the heading "Expenses Paid During Period" shows the hypothetical expenses
your account would have incurred under this scenario. You can compare this
figure with the 5% hypothetical examples that appear in shareholder reports of
other funds.
4 | Annual Report
Your Fund's Expenses (CONTINUED)
PLEASE NOTE THAT EXPENSES SHOWN IN THE TABLE ARE MEANT TO HIGHLIGHT ONGOING
COSTS AND DO NOT REFLECT ANY TRANSACTION COSTS, SUCH AS SALES CHARGES.
Therefore, the second line of the table is useful in comparing ongoing costs
only, and will not help you compare total costs of owning different funds. In
addition, if transaction costs were included, your total costs would have been
higher. Please refer to the Fund prospectus for additional information on
operating expenses.
BEGINNING ACCOUNT ENDING ACCOUNT EXPENSES PAID DURING
VALUE 1/1/09 VALUE 6/30/09 PERIOD* 1/1/09-6/30/09
----------------- -------------- ----------------------
Actual $1,000 $1,000.10 $2.73
Hypothetical (5% return before expenses) $1,000 $1,022.07 $2.76
* Expenses are calculated using the most recent six-month annualized expense
ratio, net of voluntary and contractual expense waivers, of 0.55%, which
includes the expenses incurred by the Portfolio, multiplied by the average
account value over the period, multiplied by 181/365 to reflect the
one-half year period.
Annual Report | 5
Institutional Fiduciary Trust
FINANCIAL HIGHLIGHTS
FRANKLIN CASH RESERVES FUND
YEAR ENDED JUNE 30,
----------------------------------------------------
2009 2008 2007 2006 2005
-------- -------- -------- -------- --------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year .................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
Income from investment operations - net investment
income ............................................. 0.006 0.034 0.045 0.034 0.013
Less distributions from net investment income ......... (0.006) (0.034) (0.045) (0.034) (0.013)
-------- -------- -------- -------- --------
Net asset value, end of year .......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total return .......................................... 0.61% 3.45% 4.56% 3.49% 1.36%
RATIOS TO AVERAGE NET ASSETS
Expenses before waiver and payments by affiliates(a) .. 0.94% 0.87% 0.87% 0.84% 0.98%
Expenses net of waiver and payments by affiliates(a) .. 0.69% 0.81% 0.85% 0.81% 0.85%
Net investment income ................................. 0.59% 3.36% 4.48% 3.35% 1.34%
SUPPLEMENTAL DATA
Net assets, end of year (000's) ....................... $147,751 $150,390 $141,685 $142,192 $190,179
(a) The expense ratio includes the Fund's share of the Portfolio's allocated
expenses.
The accompanying notes are an integral part of these financial statements.
6 | Annual Report
Institutional Fiduciary Trust
STATEMENT OF INVESTMENTS, JUNE 30, 2009
FRANKLIN CASH RESERVES FUND SHARES VALUE
- --------------------------- ----------- ------------
MUTUAL FUNDS (COST $147,869,092) 100.1%
(a) The Money Market Portfolio, 0.15% ........ 147,869,092 $147,869,092
OTHER ASSETS, LESS LIABILITIES (0.1)% .... (117,659)
------------
NET ASSETS 100.0% ........................ $147,751,433
============
(a) The rate shown is the annualized seven-day yield at period end.
The accompanying notes are an integral part of these financial statements.
Annual Report | 7
Institutional Fiduciary Trust
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2009
FRANKLIN
CASH RESERVES
FUND
-------------
Assets:
Investment in Portfolio, at value and cost ..... $147,869,092
Cash ........................................... 75,021
Receivables from capital shares sold ........... 129,494
------------
Total assets ............................. 148,073,607
============
Liabilities:
Payables:
Capital shares redeemed ..................... 154,617
Affiliates .................................. 6,135
Professional fees ........................... 29,785
Unaffiliated transfer agent fees ............ 118,503
Accrued expenses and other liabilities ......... 13,134
------------
Total liabilities ........................ 322,174
============
Net assets, at value .................. $147,751,433
============
Net assets consist of paid-in capital ............. $147,751,433
============
Shares outstanding ................................ 147,751,433
============
Net asset value per share ......................... $ 1.00
============
The accompanying notes are an integral part of these financial statements.
8 | Annual Report
Institutional Fiduciary Trust
FINANCIAL STATEMENTS (CONTINUED)
STATEMENT OF OPERATIONS
for the year ended June 30, 2009
FRANKLIN
CASH RESERVES
FUND
-------------
Investment income:
Dividends from Portfolio ......................................... $ 1,776,827
-----------
Expenses:
Administrative fees (Note 3a) .................................... 392,496
Distribution fees (Note 3b) ...................................... 367,825
Transfer agent fees (Note 3c) .................................... 356,171
Reports to shareholders .......................................... 13,690
Registration and filing fees ..................................... 25,293
Professional fees ................................................ 47,275
Trustees' fees and expenses ...................................... 3,233
Temporary Guarantee Program fee (Note 5) ......................... 38,284
Other ............................................................ 8,182
-----------
Total expenses ................................................ 1,252,449
Expenses waived/paid by affiliates (Note 3d) .................. (398,657)
-----------
Net expenses ............................................... 853,792
-----------
Net investment income ................................... 923,035
-----------
Net increase (decrease) in net assets resulting from operations ..... $ 923,035
===========
The accompanying notes are an integral part of these financial statements.
Annual Report | 9
Institutional Fiduciary Trust
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS
FRANKLIN CASH RESERVES FUND
---------------------------
YEAR ENDED JUNE 30,
---------------------------
2009 2008
------------ ------------
Increase (decrease) in net assets:
Net investment income from operations ......... $ 923,035 $ 4,911,764
Distributions to shareholders from net
investment income .......................... (923,035) (4,911,764)
Capital share transactions (Note 2) ........... (2,638,434) 8,705,308
------------ ------------
Net increase (decrease) in net assets ...... (2,638,434) 8,705,308
Net assets (there is no undistributed net
investment income at beginning or end of year):
Beginning of year ............................. 150,389,867 141,684,559
------------ ------------
End of year ................................... $147,751,433 $150,389,867
============ ============
The accompanying notes are an integral part of these financial statements.
10 | Annual Report
Institutional Fiduciary Trust
NOTES TO FINANCIAL STATEMENTS
FRANKLIN CASH RESERVES FUND
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Institutional Fiduciary Trust (Trust) is registered under the Investment Company
Act of 1940, as amended, (1940 Act) as an open-end investment company,
consisting of two separate funds. The Franklin Cash Reserves Fund (Fund) is
included in this report. The financial statements of the remaining fund in the
Trust are presented separately.
The Fund invests substantially all of its assets in The Money Market Portfolio
(Portfolio), which is registered under the 1940 Act as an open-end investment
company. The accounting policies of the Portfolio, including the Portfolio's
security valuation policies, will directly affect the recorded value of the
Fund's investment in the Portfolio. The financial statements of the Portfolio,
including the Statement of Investments, are included elsewhere in this report
and should be read in conjunction with the Fund's financial statements.
The following summarizes the Fund's significant accounting policies.
A. SECURITY VALUATION
The Fund holds Portfolio shares that are valued at its proportionate interest in
the closing net asset value of the Portfolio. At June 30, 2009, the Fund owned
1.74% of the Portfolio.
B. INCOME TAXES
No provision has been made for U.S. income taxes because it is the Fund's policy
to qualify as a regulated investment company under the Internal Revenue Code and
to distribute to shareholders substantially all of its taxable income and net
realized gains.
The Fund has reviewed the tax positions, taken on federal income tax returns,
for each of the three open tax years and as of June 30, 2009, and has determined
that no provision for income tax is required in the Fund's financial statements.
C. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Income and estimated expenses are accrued daily. Dividends from net investment
income received from the Portfolio are normally declared daily; these dividends
are reinvested and paid monthly to shareholders. Distributions to shareholders
are determined according to income tax regulations (tax basis). Distributable
earnings determined on a tax basis may differ from earnings recorded in
accordance with accounting principles generally accepted in the United States of
America. These differences may be permanent or temporary. Permanent differences
are reclassified among capital accounts to reflect their tax character. These
reclassifications have no impact on net assets or the results of operations.
Temporary differences are not reclassified, as they may reverse in subsequent
periods.
Annual Report | 11
Institutional Fiduciary Trust
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FRANKLIN CASH RESERVES FUND
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
C. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
(CONTINUED)
Common expenses incurred by the Trust are allocated among the funds based on the
ratio of net assets of each fund to the combined net assets of the Trust. Fund
specific expenses are charged directly to the fund that incurred the expense.
D. ACCOUNTING ESTIMATES
The preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the amounts of income
and expenses during the reporting period. Actual results could differ from those
estimates.
E. GUARANTEES AND INDEMNIFICATIONS
Under the Trust's organizational documents, its officers and trustees are
indemnified by the Trust against certain liabilities arising out of the
performance of their duties to the Trust. Additionally, in the normal course of
business, the Trust, on behalf of the Fund, enters into contracts with service
providers that contain general indemnification clauses. The Trust's maximum
exposure under these arrangements is unknown as this would involve future claims
that may be made against the Trust that have not yet occurred. Currently, the
Trust expects the risk of loss to be remote.
2. SHARES OF BENEFICIAL INTEREST
At June 30, 2009, there were an unlimited number of shares authorized (without
par value). Transactions in the Fund's shares at $1.00 per share were as
follows:
YEAR ENDED JUNE 30,
---------------------------
2009 2008
------------ ------------
Shares sold ..................................... $ 86,567,797 $ 94,248,471
Shares issued in reinvestment of distributions .. 935,405 4,898,965
Shares redeemed ................................. (90,141,636) (90,442,128)
------------ ------------
Net increase (decrease) ......................... $ (2,638,434) $ 8,705,308
============ ============
12 | Annual Report
Institutional Fiduciary Trust
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FRANKLIN CASH RESERVES FUND
3. TRANSACTIONS WITH AFFILIATES
Franklin Resources, Inc. is the holding company for various subsidiaries that
together are referred to as Franklin Templeton Investments. Certain officers and
trustees of the Trust are also officers, directors, and/or trustees of the
Portfolio and of the following subsidiaries:
SUBSIDIARY AFFILIATION
- ---------- ----------------------
Franklin Advisers, Inc. (Advisers) Administrative manager
Franklin Templeton Distributors, Inc. (Distributors) Principal underwriter
Franklin Templeton Investor Services, LLC (Investor Transfer agent
Services)
A. ADMINISTRATIVE FEES
The Fund pays an administrative fee to Advisers of 0.25% per year of the average
daily net assets of the Fund.
B. DISTRIBUTION FEES
The Fund's Board of Trustees has adopted a reimbursement distribution plan
pursuant to Rule 12b-1 under the 1940 Act, under which the Fund reimburses
Distributors for costs incurred in connection with the servicing, sale and
distribution of the Fund's shares up to 0.25% per year of its average daily net
assets. Costs exceeding the maximum for the current plan year cannot be
reimbursed in subsequent periods.
C. TRANSFER AGENT FEES
For the year ended June 30, 2009, the Fund paid transfer agent fees of $356,171,
of which $98,595 was retained by Investor Services.
D. WAIVER AND EXPENSE REIMBURSEMENTS
Advisers has agreed in advance to waive all or a portion of its fees and to
assume payment of other expenses through October 31, 2009 so that its common
expense ratio, including its share of the Portfolio's allocated expenses, does
not exceed 0.60% on an annualized basis. After October 31, 2009, Advisers may
discontinue this waiver at any time upon notice to the Fund's Board of Trustees.
In addition, Advisers and Distributors have agreed in advance to limit their
expenses such that the Fund does not return a negative yield to its
shareholders. This resulted in an additional waiver of $220,490 for the year
ended June 30, 2009. Total expenses waived or paid are not subject to
reimbursement by the Fund subsequent to the Fund's fiscal year end.
Annual Report | 13
Institutional Fiduciary Trust
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FRANKLIN CASH RESERVES FUND
4. INCOME TAXES
The tax character of distributions paid during the years ended June 30, 2009 and
2008, was as follows:
2009 2008
-------- ----------
Distributions paid from ordinary
income ...................... $923,035 $4,911,764
-------- ----------
At June 30, 2009, the cost of investments and undistributed ordinary income for
income tax purposes were as follows:
Cost of investments ..................................... $147,869,092
------------
Distributable earnings - undistributed ordinary income .. $ 5,640
============
5. TEMPORARY GUARANTEE PROGRAM FOR MONEY MARKET FUNDS
On October 6, 2008, the Fund's Board of Trustees approved the participation in
the U.S. Department of the Treasury's Temporary Guarantee Program for Money
Market Funds ("Program") through December 18, 2008, which was subsequently
extended through April 30, 2009. Under the Program, shares held by the Fund as
of the close of business on September 19, 2008 ("Program Date") were insured
against loss in the event the Fund liquidated its holdings during the term of
the Program and the per share value at the time of liquidation dropped below
$0.995. For participation in the initial three months of the Program, the Fund
paid 0.01% of its net assets as of the Program Date, and paid an additional
0.015% of its net assets as of the Program Date to participate in the extension.
This expense was borne by the Fund without regard to any expense limitation
currently in effect for the Fund. The fees were amortized over the term of the
Program. Although the U.S. Department of the Treasury extended the Program with
a third and final installment, through September 18, 2009, the Fund elected not
to participate in this extension. Thus, the Fund's participation in the Program
ended on April 30, 2009.
6. UPCOMING LIQUIDATION
On April 14, 2009, the Board of Trustees approved a proposal to liquidate the
Fund. The Fund is scheduled to liquidate on October 16, 2009.
14 | Annual Report
Institutional Fiduciary Trust
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FRANKLIN CASH RESERVES FUND
7. FAIR VALUE MEASUREMENTS
The Fund adopted Financial Accounting Standards Board (FASB) Statement No. 157,
"Fair Value Measurement" (SFAS 157), on July 1, 2008. SFAS 157 defines fair
value, establishes a framework for measuring fair value, and expands disclosures
about fair value measurements. The Fund has determined that the implementation
of SFAS 157 did not have a material impact on the Fund's financial statements.
SFAS 157 establishes a fair value hierarchy that distinguishes between market
data obtained from independent sources (observable inputs) and the Trust's own
market assumptions (unobservable inputs). These inputs are used in determining
the value of the Fund's investments and are summarized in the following fair
value hierarchy:
- Level 1 - quoted prices in active markets for identical securities
- Level 2 - other significant observable inputs (including quoted prices
for similar securities, interest rates, prepayment speed, credit risk,
etc.)
- Level 3 - significant unobservable inputs (including the Fund's own
assumptions in determining the fair value of investments)
The inputs or methodology used for valuing securities are not an indication of
the risk associated with investing in those securities.
At June 30, 2009, all of the Fund's investments in securities carried at fair
value were in Level 1 inputs.
8. SUBSEQUENT EVENTS
Management has evaluated subsequent events through August 14, 2009 and
determined that no events have occurred that require disclosure.
Annual Report | 15
Institutional Fiduciary Trust
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF FRANKLIN CASH RESERVES FUND
In our opinion, the accompanying statement of assets and liabilities, including
the statement of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Franklin Cash Reserves Fund (the
"Fund") at June 30, 2009, the results of its operations for the year then ended,
the changes in its net assets for each of the two years in the period then ended
and the financial highlights for each of the five years in the period then
ended, in conformity with accounting principles generally accepted in the United
States of America. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of investments with the
Portfolio's transfer agent at June 30, 2009, provide a reasonable basis for our
opinion.
PricewaterhouseCoopers LLP
San Francisco, California
August 14, 2009
16 | Annual Report
Institutional Fiduciary Trust
TAX DESIGNATION (UNAUDITED)
FRANKLIN CASH RESERVES FUND
Under Section 871(k)(1)(C) of the Internal Revenue Code (Code), the Fund
designates the maximum amount allowable but no less than $902,562 as interest
related dividends for purposes of the tax imposed under Section 871(a)(1)(A) of
the Code for the fiscal year ended June 30, 2009.
Annual Report | 17
Institutional Fiduciary Trust
BOARD MEMBERS AND OFFICERS
The name, year of birth and address of the officers and board members, as well
as their affiliations, positions held with the Trust, principal occupations
during the past five years and number of portfolios overseen in the Franklin
Templeton Investments fund complex are shown below. Generally, each board member
serves until that person's successor is elected and qualified.
INDEPENDENT BOARD MEMBERS
NUMBER OF
PORTFOLIOS IN
FUND COMPLEX
NAME, YEAR OF BIRTH LENGTH OF OVERSEEN BY
AND ADDRESS POSITION TIME SERVED BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------- --------------- ------------------ -------------- --------------------------------------
HARRIS J. ASHTON (1932) Trustee Since 1985 135 Bar-S Foods (meat packing company).
One Franklin Parkways
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director of various companies; and FORMERLY, Director, RBC Holdings, Inc. (bank holding company) (until 2002); and President,
Chief Executive Officer and Chairman of the Board, General Host Corporation (nursery and craft centers) (until 1998).
ROBERT F. CARLSON (1928) Trustee Since 1998 112 None
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Retired; and FORMERLY, Vice President, senior member and President, Board of Administration, California Public Employees
Retirement Systems (CALPERS) (1971-2008); member and Chairman of the Board, Sutter Community Hospitals; member, Corporate
Board, Blue Shield of California; and Chief Counsel, California Department of Transportation.
SAM GINN (1937) Trustee Since 2007 112 Chevron Corporation (global energy
One Franklin Parkway company) and ICO Global
San Mateo, CA 94403-1906 Communications (Holdings) Limited
(satellite company).
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Private investor; and FORMERLY, Chairman of the Board, Vodafone AirTouch, PLC (wireless company); Chairman of the Board and
Chief Executive Officer, AirTouch Communications (cellular communications) (1993-1998) and Pacific Telesis Groups (telephone
holding company) (1988-1994).
EDITH E. HOLIDAY (1952) Trustee Since 2005 135 Hess Corporation (exploration and
One Franklin Parkway refining of oil and gas), H.J. Heinz
San Mateo, CA 94403-1906 Company (processed foods and allied
products), RTI International Metals,
Inc. (manufacture and distribution
of titanium), Canadian National
Railway (railroad) and White
Mountains Insurance Group, Ltd.
(holding company).
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director or Trustee of various companies and trusts; and FORMERLY, Assistant to the President of the United States and
Secretary of the Cabinet (1990-1993); General Counsel to the United States Treasury Department (1989-1990); and Counselor to
the Secretary and Assistant Secretary for Public Affairs and Public Liaison - United States Treasury Department (1988-1989).
18 | Annual Report
NUMBER OF
PORTFOLIOS IN
FUND COMPLEX
NAME, YEAR OF BIRTH LENGTH OF OVERSEEN BY
AND ADDRESS POSITION TIME SERVED BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------- --------------- ------------------ -------------- --------------------------------------
FRANK W.T. LAHAYE (1929) Trustee Since 1985 112 Center for Creative Land Recycling
One Franklin Parkway (brownfield redevelopment).
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
General Partner, Las Olas L.P. (Asset Management); and FORMERLY, Chairman, Peregrine Venture Management Company (venture
capital).
FRANK A. OLSON (1932) Trustee Since 2005 135 Hess Corporation (exploration and
One Franklin Parkway refining of oil and gas) and Sentient
San Mateo, CA 94403-1906 Jet (private jet service).
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Chairman Emeritus, The Hertz Corporation (car rental) (since 2000) (Chairman of the Board (1980-2000) and Chief Executive
Officer (1977-1999)); and FORMERLY, Chairman of the Board, President and Chief Executive Officer, UAL Corporation (airlines).
LARRY D. THOMPSON (1945) Trustee Since 2007 143 None
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Vice President - Government Affairs, General Counsel and Secretary, PepsiCo, Inc. (consumer products); and FORMERLY,
Director, Delta Airlines (aviation) (2003-2005) and Providian Financial Corp. (credit card provider) (1997-2001); Senior
Fellow of The Brookings Institution (2003-2004); Visiting Professor, University of Georgia School of Law (2004); and Deputy
Attorney General, U.S. Department of Justice (2001-2003).
JOHN B. WILSON (1959) Lead Trustee since 112 None
One Franklin Parkway Independent 2007 and Lead
San Mateo, CA 94403-1906 Trustee Independent
Trustee since
2008
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
President and Founder, Hyannis Port Capital, Inc. (real estate and private equity investing); serves on private and non-profit
boards; and FORMERLY, Chief Operating Officer and Executive Vice President, Gap, Inc. (retail) (1996-2000); Chief Financial
Officer and Executive Vice President - Finance and Strategy, Staples, Inc. (office supplies) (1992-1996); Senior Vice
President - Corporate Planning, Northwest Airlines, Inc. (airlines) (1990-1992); and Vice President and Partner, Bain &
Company (consulting firm) (1986-1990).
INTERESTED BOARD MEMBERS AND OFFICERS
NUMBER OF
PORTFOLIOS IN
FUND COMPLEX
NAME, YEAR OF BIRTH LENGTH OF OVERSEEN BY
AND ADDRESS POSITION TIME SERVED BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------- --------------- ------------------ -------------- --------------------------------------
**CHARLES B. JOHNSON (1933) Trustee and Trustee since 135 None
One Franklin Parkway Chairman of 1985 and
San Mateo, CA 94403-1906 the Board Chairman of the
Board since 1993
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Chairman of the Board, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Director, Templeton Worldwide,
Inc.; and officer and/or director or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources,
Inc. and of 41 of the investment companies in Franklin Templeton Investments.
Annual Report | 19
NUMBER OF
PORTFOLIOS IN
FUND COMPLEX
NAME, YEAR OF BIRTH LENGTH OF OVERSEEN BY
AND ADDRESS POSITION TIME SERVED BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------- --------------- ------------------ -------------- --------------------------------------
**GREGORY E. JOHNSON (1961) Trustee Since 2007 91 None
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director, President and Chief Executive Officer, Franklin Resources, Inc.; President, Templeton Worldwide, Inc.; Director,
Templeton Asset Management Ltd.; and officer and/or director or trustee, as the case may be, of some of the other subsidiaries
of Franklin Resources, Inc. and of 32 of the investment companies in Franklin Templeton Investments.
JAMES M. DAVIS (1952) Chief Chief Compliance Not Applicable Not Applicable
One Franklin Parkway Compliance Officer since 2004
San Mateo, CA 94403-1906 Officer and and Vice President
Vice President - AML Compliance
- AML since 2006
Compliance
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director, Global Compliance, Franklin Resources, Inc.; officer of some of the other subsidiaries of Franklin Resources, Inc.
and of 45 of the investment companies in Franklin Templeton Investments; and FORMERLY, Director of Compliance, Franklin
Resources, Inc. (1994-2001).
LAURA F. FERGERSON (1962) Chief Executive Since March 2009 Not Applicable Not Applicable
One Franklin Parkway Officer -
San Mateo, CA 94403-1906 Finance and
Administration
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice President, Franklin Templeton Services, LLC; officer of 45 of the investment companies in Franklin Templeton Investments;
and FORMERLY, Director and member of Audit and Valuation Committees, Runkel Funds, Inc. (2003-2004); Assistant Treasurer of
most of the investment companies in Franklin Templeton Investments (1997-2003); and Vice President, Franklin Templeton
Services, LLC (1997-2003).
GASTON GARDEY (1967) Treasurer, Since March 2009 Not Applicable Not Applicable
One Franklin Parkway Chief Financial
San Mateo, CA 94403-1906 Officer and
Chief
Accounting
Officer
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director, Fund Accounting, Franklin Templeton Investments; and officer of 27 of the investment companies in Franklin Templeton
Investments.
ALIYA S. GORDON (1973) Vice President Since March 2009 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Associate General Counsel, Franklin Templeton Investments; officer of 45 of the investment companies in Franklin Templeton
Investments; and FORMERLY, Litigation Associate, Steefel, Levitt & Weiss, LLP (2000-2004).
DAVID P. GOSS (1947) Vice President Since 2000 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Associate General Counsel, Franklin Templeton Investments; officer and/or director, as the case maybe, of some of the
other subsidiaries of Franklin Resources, Inc. and of 45 of the investment companies in Franklin Templeton Investments.
20 | Annual Report
NUMBER OF
PORTFOLIOS IN
FUND COMPLEX
NAME, YEAR OF BIRTH LENGTH OF OVERSEEN BY
AND ADDRESS POSITION TIME SERVED BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------- --------------- ------------------ -------------- --------------------------------------
RUPERT H. JOHNSON, JR. (1940) President and Since 2002 Not Applicable Not Applicable
One Franklin Parkway Chief
San Mateo, CA 94403-1906 Executive
Officer -
Investment
Management
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice Chairman, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Director, Franklin Advisers, Inc. and
Templeton Worldwide, Inc.; Senior Vice President, Franklin Advisory Services, LLC; and officer and/or director or trustee, as
the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 43 of the investment companies in
Franklin Templeton Investments.
KAREN L. SKIDMORE (1952) Vice President Since 2006 Not Applicable Not Applicable
One Franklin Parkway and Secretary
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Associate General Counsel, Franklin Templeton Investments; and officer of 29 of the investment companies in Franklin
Templeton Investments.
CRAIG S. TYLE (1960) Vice President Since 2005 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
General Counsel and Executive Vice President, Franklin Resources, Inc.; officer of some of the other subsidiaries of Franklin
Resources, Inc. and of 45 of the investment companies in Franklin Templeton Investments; and FORMERLY, Partner, Shearman &
Sterling, LLP (2004-2005); and General Counsel, Investment Company Institute (ICI) (1997-2004).
* We base the number of portfolios on each separate series of the U.S.
registered investment companies within the Franklin Templeton Investments
fund complex. These portfolios have a common investment manager or
affiliated investment managers.
** Charles B. Johnson is considered to be an interested person of the Trust
under the federal securities laws due to his position as officer and
director and major shareholder of Franklin Resources, Inc. (Resources),
which is the parent company of the Fund's administrator and distributor.
Gregory E. Johnson is considered to be an interested person of the Trust
under the federal securities laws due to his position as an officer and
director of Resources.
Note 1: Charles B. Johnson and Rupert H. Johnson, Jr. are brothers and the
father and uncle, respectively, of Gregory E. Johnson.
Note 2: Officer information is current as of the date of this report. It is
possible that after this date, information about officers may change.
THE SARBANES-OXLEY ACT OF 2002 AND RULES ADOPTED BY THE SECURITIES AND EXCHANGE
COMMISSION REQUIRE THE FUND TO DISCLOSE WHETHER THE FUND'S AUDIT COMMITTEE
INCLUDES AT LEAST ONE MEMBER WHO IS AN AUDIT COMMITTEE FINANCIAL EXPERT WITHIN
THE MEANING OF SUCH ACT AND RULES. THE FUND'S BOARD HAS DETERMINED THAT THERE IS
AT LEAST ONE SUCH FINANCIAL EXPERT ON THE AUDIT COMMITTEE AND HAS DESIGNATED
JOHN B. WILSON AS ITS AUDIT COMMITTEE FINANCIAL EXPERT. THE BOARD BELIEVES THAT
MR. WILSON QUALIFIES AS SUCH AN EXPERT IN VIEW OF HIS EXTENSIVE BUSINESS
BACKGROUND AND EXPERIENCE, INCLUDING SERVICE AS CHIEF FINANCIAL OFFICER OF
STAPLES, INC. FROM 1992 TO 1996. MR. WILSON HAS BEEN A MEMBER AND CHAIRMAN OF
THE FUND'S AUDIT COMMITTEE SINCE 2007. AS A RESULT OF SUCH BACKGROUND AND
EXPERIENCE, THE BOARD BELIEVES THAT MR. WILSON HAS ACQUIRED AN UNDERSTANDING OF
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AND FINANCIAL STATEMENTS, THE GENERAL
APPLICATION OF SUCH PRINCIPLES IN CONNECTION WITH THE ACCOUNTING ESTIMATES,
ACCRUALS AND RESERVES, AND ANALYZING AND EVALUATING FINANCIAL STATEMENTS THAT
PRESENT A BREADTH AND LEVEL OF COMPLEXITY OF ACCOUNTING ISSUES GENERALLY
COMPARABLE TO THOSE OF THE FUND, AS WELL AS AN UNDERSTANDING OF INTERNAL
CONTROLS AND PROCEDURES FOR FINANCIAL REPORTING AND AN UNDERSTANDING OF AUDIT
COMMITTEE FUNCTIONS. MR. WILSON IS AN INDEPENDENT BOARD MEMBER AS THAT TERM IS
DEFINED UNDER THE RELEVANT SECURITIES AND EXCHANGE COMMISSION RULES AND
RELEASES.
THE STATEMENT OF ADDITIONAL INFORMATION (SAI) INCLUDES ADDITIONAL INFORMATION
ABOUT THE BOARD MEMBERS AND IS AVAILABLE, WITHOUT CHARGE, UPON REQUEST.
SHAREHOLDERS MAY CALL (800) DIAL BEN/(800) 342-5236 TO REQUEST THE SAI.
Annual Report | 21
The Money Market Portfolios
FINANCIAL HIGHLIGHTS
THE MONEY MARKET PORTFOLIO
YEAR ENDED JUNE 30,
------------------------------------------------------------------
2009 2008 2007 2006 2005
---------- ---------- ---------- ---------- ----------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year .............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income ........................ 0.011 0.040 0.052 0.041 0.020
Net realized and unrealized gains (losses) ... (--)(a) -- (--)(a) -- --
---------- ---------- ---------- ---------- ----------
Less distributions from net investment income ... (0.011) (0.040) (0.052) (0.041) (0.020)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year .................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========== ========== ==========
Total return .................................... 1.14% 4.10% 5.28% 4.15% 2.06%
RATIOS TO AVERAGE NET ASSETS
Expenses(b) ..................................... 0.15% 0.16% 0.15% 0.16% 0.16%
Net investment income ........................... 1.12% 4.02% 5.17% 4.09% 2.04%
SUPPLEMENTAL DATA
Net assets, end of year (000's) ................. $8,520,392 $7,028,194 $6,580,101 $4,993,739 $5,676,479
(a) Amount rounds to less than $0.001 per share.
(b) Benefit of expense reduction rounds to less than 0.01%.
The accompanying notes are an integral part of these financial statements.
22 | Annual Report
The Money Market Portfolios
STATEMENT OF INVESTMENTS, JUNE 30, 2009
PRINCIPAL
THE MONEY MARKET PORTFOLIO AMOUNT (a) VALUE
- -------------------------- ------------ --------------
INVESTMENTS 100.6%
BANK NOTES (COST $200,000,000) 2.3%
Wells Fargo Bank NA, 0.20%, 7/07/09 ............................................... $200,000,000 $ 200,000,000
--------------
CERTIFICATES OF DEPOSIT 21.8%
Australia and New Zealand Banking Group Ltd., New York Branch, 0.26%, 7/08/09 ..... 50,000,000 50,000,097
Australia and New Zealand Banking Group Ltd., New York Branch, 0.33%, 8/17/09 ..... 100,000,000 100,001,305
Bank of Montreal, Chicago Branch, 0.26%, 7/13/09 .................................. 100,000,000 100,000,333
Bank of Montreal, Chicago Branch, 0.31%, 10/01/09 ................................. 50,000,000 50,000,000
Bank of Nova Scotia, Houston Branch, 0.27%, 8/11/09 ............................... 100,000,000 100,000,000
Bank of Nova Scotia, Houston Branch, 0.31% - 0.58%, 7/08/09 - 9/21/09 ............. 100,000,000 100,000,000
Banque Nationale De Paris, San Francisco Branch, 1.01%, 7/23/09 ................... 100,000,000 100,000,000
Banque Nationale De Paris, San Francisco Branch, 1.32%, 8/20/09 ................... 100,000,000 100,000,000
Calyon NY, New York Branch, 0.26% - 1.05%, 7/10/09 - 8/18/09 ...................... 200,000,000 200,000,277
Lloyds TSB Bank PLC, New York Branch, 0.27%, 7/06/09 (United Kingdom) ............. 100,000,000 100,000,000
Lloyds TSB Bank PLC, New York Branch, 0.27%, 7/13/09 (United Kingdom) ............. 100,000,000 100,000,000
National Australia Bank, New York Branch, 0.55%, 7/01/09 .......................... 100,000,000 100,000,000
National Australia Bank, New York Branch, 0.41% - 0.57%, 7/09/09 - 8/06/09 ........ 55,500,000 55,505,508
Royal Bank of Canada, New York Branch, 0.265%, 8/12/09 ............................ 200,000,000 200,001,166
Societe Generale, New York Branch, 0.28%, 7/09/09 ................................. 200,000,000 200,000,000
The Toronto-Dominion Bank, New York Branch, 0.22%, 7/09/09 ........................ 150,000,000 150,000,000
The Toronto-Dominion Bank, New York Branch, 0.95%, 9/28/09 ........................ 50,000,000 50,000,000
--------------
TOTAL CERTIFICATES OF DEPOSIT (COST $1,855,508,686) ............................... 1,855,508,686
--------------
(b) COMMERCIAL PAPER 26.9%
Australia and New Zealand Banking Group Ltd., 7/27/09 ............................. 50,000,000 49,975,444
Bank of Montreal, 9/16/09 ......................................................... 50,000,000 49,965,778
Chevron Funding Corp., 8/03/09 .................................................... 40,000,000 39,992,667
Chevrontexaco Funding Corp., 7/16/09 .............................................. 75,000,000 74,992,500
Commonwealth Bank of Australia, 7/20/09 - 8/31/09 ................................. 220,000,000 219,890,939
Government of Canada, 11/03/09 (Canada) ........................................... 100,000,000 99,722,222
Government of Canada, 7/14/09 - 2/09/10 (Canada) .................................. 95,000,000 94,893,612
Internationale Nederlanden U.S. Funding Corp., 7/07/09 ............................ 50,000,000 49,998,083
Internationale Nederlanden U.S. Funding Corp., 7/09/09 ............................ 100,000,000 99,994,667
Johnson & Johnson, 10/26/09 - 12/17/09 ............................................ 128,135,000 127,990,941
JPMorgan Chase & Co., 7/02/09 ..................................................... 100,000,000 99,999,306
JPMorgan Chase & Co., 7/15/09 ..................................................... 100,000,000 99,990,278
National Australia Funding, 7/07/09 ............................................... 50,000,000 49,995,333
Province of British Columbia, 7/13/09 - 3/19/10 (Canada) .......................... 267,000,000 266,755,142
Province of Ontario, 9/16/09 - 9/17/09 (Canada) ................................... 75,000,000 74,959,549
Rabobank USA Finance Corp., 7/23/09 ............................................... 50,000,000 49,977,389
Rabobank USA Finance Corp., 9/14/09 ............................................... 91,000,000 90,941,229
Societe Generale North America, 7/01/09 ........................................... 100,000,000 100,000,000
Total Fina ELF Capital, 7/01/09 ................................................... 150,000,000 150,000,000
Total Fina ELF Capital, 9/09/09 ................................................... 100,000,000 99,953,333
Total Fina ELF Capital, 9/22/09 ................................................... 100,000,000 99,942,361
Westpac Banking Corp., 7/17/09 - 9/09/09 .......................................... 100,000,000 99,950,277
Westpac Banking Corp., 9/23/09 .................................................... 100,000,000 99,923,000
--------------
TOTAL COMMERCIAL PAPER (COST $2,289,804,050) ...................................... 2,289,804,050
--------------
Annual Report | 23
The Money Market Portfolios
STATEMENT OF INVESTMENTS, JUNE 30, 2009 (CONTINUED)
PRINCIPAL
THE MONEY MARKET PORTFOLIO AMOUNT (a) VALUE
- -------------------------- ------------ --------------
INVESTMENTS (CONTINUED)
U.S. GOVERNMENT AND AGENCY SECURITIES 17.2%
(b) FHLB, 7/01/09 ..................................................................... $126,420,000 $ 126,420,000
FHLB, 0.56%, 6/22/10 .............................................................. 50,000,000 49,986,576
FHLMC, 1.25%, 3/18/10 ............................................................. 25,000,000 25,045,647
FHLMC, 1.25%, 3/23/10 ............................................................. 122,080,000 122,249,029
(b) FNMA, 7/22/09 ..................................................................... 50,000,000 49,985,708
(b) International Bank for Reconstruction & Development, 7/01/09 - 12/23/09
(Supranational (c)) ............................................................ 95,000,000 94,944,583
(b) U.S. Treasury Bill, 7/02/09 ....................................................... 150,000,000 149,995,396
(b) U.S. Treasury Bill, 7/30/09 - 8/06/09 ............................................. 100,000,000 99,967,091
(b) U.S. Treasury Bill, 9/15/09 ....................................................... 200,000,000 199,818,445
(b) U.S. Treasury Bill, 1/14/10 ....................................................... 100,000,000 99,751,698
(b) U.S. Treasury Bill, 4/01/10 ....................................................... 200,000,000 199,363,901
(b) U.S. Treasury Bill, 6/03/10 ....................................................... 250,000,000 248,838,286
--------------
TOTAL U.S. GOVERNMENT AND AGENCY SECURITIES (COST $1,466,366,360) ................. 1,466,366,360
--------------
TOTAL INVESTMENTS BEFORE REPURCHASE AGREEMENTS (COST $5,811,679,096) .............. 5,811,679,096
--------------
(d) REPURCHASE AGREEMENTS 32.4%
Banc of America Securities LLC, 0.01%, 7/01/09 (Maturity Value $86,735,024)
Collateralized by U.S. Treasury Notes, 0.875%, 4/15/10 - 1/31/11 ............... 86,735,000 86,735,000
Banc of America Securities LLC, 0.05%, 7/01/09 (Maturity Value $ 840,001,167)
Collateralized by U.S. Government Agency Securities, 0.00% - 6.21%,
8/03/09 - 6/05/36 .............................................................. 840,000,000 840,000,000
Barclays Capital Inc., 0.01%, 7/01/09 (Maturity Value $405,000,112)
Collateralized by U.S. Treasury Notes, 1.50%, 12/31/13 ......................... 405,000,000 405,000,000
Deutsche Bank Securities Inc., 0.01%, 7/01/09 (Maturity Value $ 586,105,163)
Collateralized by U.S. Treasury Notes, 0.875% - 3.125%, 4/30/10 - 9/30/13; and
(b) U.S. Treasury Bills, 9/17/09 ................................................... 586,105,000 586,105,000
HSBC Securities (USA) Inc., 0.04%, 7/01/09 (Maturity Value $790,000,878)
Collateralized by U.S. Government Agency Securities, 1.45% - 10.35%,
9/10/10 - 10/08/27 ............................................................. 790,000,000 790,000,000
UBS Securities LLC, 0.07%, 7/01/09 (Maturity Value $50,000,097)
Collateralized by U.S. Government Agency Securities, 0.85%, 12/03/10 ........... 50,000,000 50,000,000
--------------
TOTAL REPURCHASE AGREEMENTS (COST $2,757,840,000) ................................. 2,757,840,000
--------------
TOTAL INVESTMENTS (COST $8,569,519,096) 100.6% .................................... 8,569,519,096
OTHER ASSETS, LESS LIABILITIES (0.6)% ............................................. (49,126,719)
--------------
NET ASSETS 100.0% ................................................................. $8,520,392,377
==============
See Abbreviations on page 32.
(a) The principal amount is stated in U.S. dollars unless otherwise indicated.
(b) The security is traded on a discount basis with no stated coupon rate.
(c) A supranational organization is an entity formed by two or more central
governments through international treaties.
(d) See Note 1(b) regarding repurchase agreements.
The accompanying notes are an integral part of these financial statements.
24 | Annual Report
The Money Market Portfolios
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2009
THE
MONEY MARKET
PORTFOLIO
--------------
Assets:
Investments in securities, at amortized cost ............... $5,811,679,096
Repurchase agreements, at value and cost ................... 2,757,840,000
--------------
Total investments .................................... $8,569,519,096
Receivables:
Capital shares sold ..................................... 456,390
Interest receivable ..................................... 2,094,221
--------------
Total assets ......................................... 8,572,069,707
--------------
Liabilities:
Payables:
Investment securities purchased ......................... 50,000,000
Affiliates .............................................. 1,069,924
Funds advanced by custodian ................................ 454,490
Accrued expenses and other liabilities ..................... 152,916
--------------
Total liabilities .................................... 51,677,330
--------------
Net assets, at value .............................. $8,520,392,377
--------------
Net assets consist of:
Paid-in capital ............................................ $8,523,624,394
Accumulated net realized gain (loss) ....................... (3,232,017)
--------------
Net assets, at value .............................. $8,520,392,377
==============
Shares outstanding ............................................ 8,523,624,394
==============
Net asset value per share ..................................... $ 1.00
==============
The accompanying notes are an integral part of these financial statements.
Annual Report | 25
The Money Market Portfolios
FINANCIAL STATEMENTS (CONTINUED)
STATEMENT OF OPERATIONS for the
year ended June 30, 2009
THE
MONEY MARKET
PORTFOLIO
------------
Investment income:
Interest ................................................... $109,770,988
------------
Expenses:
Management fees (Note 3a) .................................. 12,958,059
Custodian fees (Note 4) .................................... 157,952
Reports to shareholders .................................... 7,672
Professional fees .......................................... 127,620
Other ...................................................... 132,248
------------
Total expenses .......................................... 13,383,551
Expense reductions (Note 4) ............................. (13,198)
------------
Net expenses ......................................... 13,370,353
------------
Net investment income ............................. 96,400,635
------------
Net realized gain (loss) from investments ..................... (3,212,548)
------------
Net increase (decrease) in net assets resulting from
operations ................................................. $ 93,188,087
============
The accompanying notes are an integral part of these financial statements.
26 | Annual Report
The Money Market Portfolios
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS
THE MONEY MARKET PORTFOLIO
-------------------------------
YEAR ENDED JUNE 30,
-------------------------------
2009 2008
-------------- --------------
Increase (decrease) in net assets:
Operations:
Net investment income ................................................... $ 96,400,635 $ 271,686,303
Net realized gain (loss) from investments ............................... (3,212,548) --
-------------- --------------
Net increase (decrease) in net assets resulting from operations ...... 93,188,087 271,686,303
-------------- --------------
Distributions to shareholders from net investment income ................... (96,400,635) (271,686,303)
Capital share transactions (Note 2) ........................................ 1,495,410,735 448,092,878
-------------- --------------
Net increase (decrease) in net assets ................................ 1,492,198,187 448,092,878
Net assets (there is no undistributed net investment income at beginning or end
of year):
Beginning of year .......................................................... 7,028,194,190 6,580,101,312
-------------- --------------
End of year ................................................................ $8,520,392,377 $7,028,194,190
============== ==============
The accompanying notes are an integral part of these financial statements.
Annual Report | 27
The Money Market Portfolios
NOTES TO FINANCIAL STATEMENTS
THE MONEY MARKET PORTFOLIO
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Money Market Portfolios (Trust) is registered under the Investment Company
Act of 1940, as amended, (1940 Act) as an open-end investment company,
consisting of one portfolio, The Money Market Portfolio (Portfolio). The shares
of the Portfolio are issued in private placements and are exempt from
registration under the Securities Act of 1933.
The following summarizes the Portfolio's significant accounting policies.
A. SECURITY VALUATION
Securities are valued at amortized cost which approximates market value. This
method involves valuing an instrument at its cost and thereafter assuming a
constant amortization to maturity of any discount or premium. All security
valuation procedures are approved by the Trust's Board of Trustees.
B. REPURCHASE AGREEMENTS
The Portfolio may enter into repurchase agreements, which are accounted for as a
loan by the Portfolio to the seller, collateralized by securities which are
delivered to the Portfolio's custodian. The market value, including accrued
interest, of the initial collateralization is required to be at least 102% of
the dollar amount invested by the Portfolio, with the value of the underlying
securities marked to market daily to maintain coverage of at least 100%. All
repurchase agreements held by the Portfolio at year end had been entered into on
June 30, 2009. Repurchase agreements are valued at cost.
C. INCOME TAXES
No provision has been made for U.S. income taxes because it is the Portfolio's
policy to qualify as a regulated investment company under the Internal Revenue
Code and to distribute to shareholders substantially all of its taxable income
and net realized gains.
The Portfolio has reviewed the tax positions, taken on federal income tax
returns, for each of the three open tax years and as of June 30, 2009, and has
determined that no provision for income tax is required in the Portfolio's
financial statements.
D. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Interest income and estimated expenses are accrued daily. Amortization of
premium and accretion of discount on debt securities are included in interest
income. Dividends from net investment income are normally declared daily; these
dividends are reinvested and paid monthly. Distributions to shareholders are
determined according to income tax regulations (tax basis). Distributable
earnings determined on a tax basis may differ from earnings recorded in
accordance with accounting principles generally accepted
28 | Annual Report
The Money Market Portfolios
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
THE MONEY MARKET PORTFOLIO
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
D. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
(CONTINUED)
in the United States of America. These differences may be permanent or
temporary. Permanent differences are reclassified among capital accounts to
reflect their tax character. These reclassifications have no impact on net
assets or the results of operations. Temporary differences are not reclassified,
as they may reverse in subsequent periods.
E. ACCOUNTING ESTIMATES
The preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the amounts of income
and expenses during the reporting period. Actual results could differ from those
estimates.
F. GUARANTEES AND INDEMNIFICATIONS
Under the Trust's organizational documents, its officers and trustees are
indemnified by the Trust against certain liabilities arising out of the
performance of their duties to the Trust. Additionally, in the normal course of
business, the Trust, on behalf of the Portfolio, enters into contracts with
service providers that contain general indemnification clauses. The Trust's
maximum exposure under these arrangements is unknown as this would involve
future claims that may be made against the Trust that have not yet occurred.
Currently, the Trust expects the risk of loss to be remote.
2. SHARES OF BENEFICIAL INTEREST
At June 30, 2009, there were an unlimited number of shares authorized (without
par value). Transactions in the Portfolio's shares at $1.00 per share were as
follows:
YEAR ENDED JUNE 30,
----------------------------------
2009 2008
---------------- ---------------
Shares sold ..................................... $ 14,699,668,141 $ 8,390,404,437
Shares issued in reinvestment of distributions .. 96,416,354 271,685,448
Shares redeemed ................................. (13,300,673,760) (8,213,997,007)
---------------- ---------------
Net increase (decrease) ......................... $ 1,495,410,735 $ 448,092,878
================ ===============
Annual Report | 29
The Money Market Portfolios
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
THE MONEY MARKET PORTFOLIO
3. TRANSACTIONS WITH AFFILIATES
Franklin Resources, Inc. is the holding company for various subsidiaries that
together are referred to as Franklin Templeton Investments. Certain officers and
trustees of the Trust are also officers, directors, and/or trustees of the
Franklin Money Fund, the Franklin Templeton Money Fund Trust, the Institutional
Fiduciary Trust, and of the following subsidiaries:
SUBSIDIARY AFFILIATION
- ---------- -------------------
Franklin Advisers, Inc. (Advisers) Investment manager
Franklin Templeton Investor Services, LLC (Investor
Services) Transfer agent
A. MANAGEMENT FEES
The Portfolio pays an investment management fee to Advisers of 0.15% per year of
the average daily net assets of the Portfolio.
B. TRANSFER AGENT FEES
Investor Services, under terms of an agreement, performs shareholder servicing
for the Portfolio and is not paid by the Portfolio for the services.
C. OTHER AFFILIATED TRANSACTIONS
At June 30, 2009, the shares of the Portfolio were owned by the following
entities:
PERCENTAGE OF
SHARES OUTSTANDING SHARES
------------- ------------------
Institutional Fiduciary Trust - Money Market Portfolio.. 5,354,079,725 62.81%
Franklin Money Fund..................................... 2,558,928,082 30.02%
Franklin Templeton Money Fund Trust -
Franklin Templeton Money Fund........................ 462,747,495 5.43%
Institutional Fiduciary Trust - Franklin Cash
Reserves Fund........................................ 147,869,092 1.74%
4. EXPENSE OFFSET ARRANGEMENT
The Portfolio has entered into an arrangement with its custodian whereby credits
realized as a result of uninvested cash balances are used to reduce a portion of
the Portfolio's custodian expenses. During the year ended June 30, 2009, the
custodian fees were reduced as noted in the Statement of Operations.
30| Annual Report
The Money Market Portfolios
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
THE MONEY MARKET PORTFOLIO
5. INCOME TAXES
For tax purposes, capital losses may be carried over to offset future capital
gains, if any. At June 30, 2009, the capital loss carryforwards were as follows:
Capital loss carryforwards expiring in:
2016.... $ 19,469
2017.... 3,212,548
----------
$3,232,017
==========
The tax character of distributions paid during the years ended June 30, 2009 and
2008, was as follows:
2009 2008
----------- ------------
Distributions paid from ordinary income.. $96,400,635 $271,686,303
=========== ============
At June 30, 2009, the cost of investments and undistributed ordinary income for
book and income tax purposes were the same.
6. FAIR VALUE MEASUREMENTS
The Portfolio adopted Financial Accounting Standards Board (FASB) Statement No.
157, "Fair Value Measurement" (SFAS 157), on July 1, 2008. SFAS 157 defines fair
value, establishes a framework for measuring fair value, and expands disclosures
about fair value measurements. The Portfolio has determined that the
implementation of SFAS 157 did not have a material impact on the Portfolio's
financial statements.
SFAS 157 establishes a fair value hierarchy that distinguishes between market
data obtained from independent sources (observable inputs) and the Trust's own
market assumptions (unobservable inputs). These inputs are used in determining
the value of the Portfolio's investments and are summarized in the following
fair value hierarchy:
- Level 1 - quoted prices in active markets for identical securities
- Level 2 - other significant observable inputs (including quoted prices
for similar securities, interest rates, prepayment speed, credit risk,
etc.)
- Level 3 - significant unobservable inputs (including the Portfolio's
own assumptions in determining the fair value of investments)
The inputs or methodology used for valuing securities are not an indication of
the risk associated with investing in those securities. Money market securities
may be valued using amortized cost, in accordance with the 1940 Act. Generally,
amortized cost reflects the current fair value
Annual Report | 31
The Money Market Portfolios
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
THE MONEY MARKET PORTFOLIO
6. FAIR VALUE MEASUREMENTS (CONTINUED)
of a security, but since the value is not obtained from a quoted price in an
active market, such securities are reflected as a Level 2.
At June 30, 2009, all the Portfolio's investments in securities carried at fair
value were in Level 2 inputs. For detailed industry descriptions, see the
accompanying Statement of Investments.
7. SUBSEQUENT EVENTS
Management has evaluated subsequent events through August 14, 2009 and
determined that no events have occurred that require disclosure.
ABBREVIATIONS
SELECTED PORTFOLIO
FHLB - Federal Home Loan Bank
FHLMC - Federal Home Loan Mortgage Corp.
FNMA - Federal National Mortgage Association
32| Annual Report
The Money Market Portfolios
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF THE MONEY MARKET PORTFOLIO
In our opinion, the accompanying statement of assets and liabilities, including
the statement of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of The Money Market Portfolio (the
"Fund") at June 30, 2009, the results of its operations for the year then ended,
the changes in its net assets for each of the two years in the period then ended
and the financial highlights for each of the five years in the period then
ended, in conformity with accounting principles generally accepted in the United
States of America. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at June
30, 2009 by correspondence with the custodian and brokers, provide a reasonable
basis for our opinion.
PricewaterhouseCoopers LLP
San Francisco, California
August 14, 2009
Annual Report | 33
The Money Market Portfolios
TAX DESIGNATION (UNAUDITED)
Under Section 871(k)(1)(C) of the Internal Revenue Code (Code), the Portfolio
designates the maximum amount allowable but no less than $93,335,422 as interest
related dividends for purposes of the tax imposed under Section 871(a)(1)(A) of
the Code for the fiscal year ended June 30, 2009.
34 | Annual Report
The Money Market Portfolios
BOARD MEMBERS AND OFFICERS
The name, year of birth and address of the officers and board members, as well
as their affiliations, positions held with the Trust, principal occupations
during the past five years and number of portfolios overseen in the Franklin
Templeton Investments fund complex are shown below. Generally, each board member
serves until that person's successor is elected and qualified.
INDEPENDENT BOARD MEMBERS
NUMBER OF
PORTFOLIOS IN
FUND COMPLEX
NAME, YEAR OF BIRTH LENGTH OF OVERSEEN BY
AND ADDRESS POSITION TIME SERVED BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------- --------------- ------------------ -------------- --------------------------------------------
HARRIS J. ASHTON (1932) Trustee Since 1992 135 Bar-S Foods (meat packing company)
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director of various companies; and FORMERLY, Director, RBC Holdings, Inc. (bank holding company) (until 2002); and President, Chief
Executive Officer and Chairman of the Board, General Host Corporation (nursery and craft centers) (until 1998).
ROBERT F. CARLSON (1928) Trustee Since 1998 112 None
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Retired; and FORMERLY, Vice President, senior member and President, Board of Administration, California Public Employees Retirement
Systems (CALPERS) (1971-2008); member and Chairman of the Board, Sutter Community Hospitals; member, Corporate Board, Blue Shield of
California; and Chief Counsel, California Department of Transportation.
SAM GINN (1937) Trustee Since 2007 112 Chevron Corporation (global energy company)
One Franklin Parkway and ICO Global Communications (Holdings)
San Mateo, CA 94403-1906 Limited (satellite company).
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Private investor; and FORMERLY, Chairman of the Board, Vodafone AirTouch, PLC (wireless company); Chairman of the Board and Chief
Executive Officer, AirTouch Communications (cellular communications) (1993-1998) and Pacific Telesis Groups (telephone holding
company) (1988-1994).
EDITH E. HOLIDAY (1952) Trustee Since 2005 135 Hess Corporation (exploration and refining
One Franklin Parkway of oil and gas), H.J. Heinz Company
San Mateo, CA 94403-1906 (processed foods and allied products), RTI
International Metals, Inc. (manufacture and
distribution of titanium), Canadian National
Railway (railroad) and White Mountains
Insurance Group, Ltd. (holding company).
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director or Trustee of various companies and trusts; and FORMERLY, Assistant to the President of the United States and Secretary of
the Cabinet (1990-1993); General Counsel to the United States Treasury Department (1989-1990); and Counselor to the Secretary and
Assistant Secretary for Public Affairs and Public Liaison - United States Treasury Department (1988-1989).
Annual Report | 35
NUMBER OF
PORTFOLIOS IN
FUND COMPLEX
NAME, YEAR OF BIRTH LENGTH OF OVERSEEN BY
AND ADDRESS POSITION TIME SERVED BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------- --------------- ------------------ -------------- --------------------------------------------
FRANK W.T. LAHAYE (1929) Trustee Since 1992 112 Center for Creative Land Recycling
One Franklin Parkway (brownfield redevelopment).
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
General Partner, Las Olas L.P. (Asset Management); and FORMERLY, Chairman, Peregrine Venture Management Company (venture capital).
FRANK A. OLSON (1932) Trustee Since 2007 135 Hess Corporation (exploration and refining
One Franklin Parkway of oil and gas) and Sentient Jet (private
San Mateo, CA 94403-1906 jet service).
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Chairman Emeritus, The Hertz Corporation (car rental) (since 2000) (Chairman of the Board (1980-2000) and Chief Executive Officer
(1977-1999)); and FORMERLY, Chairman of the Board, President and Chief Executive Officer, UAL Corporation (airlines).
LARRY D. THOMPSON (1945) Trustee Since 2007 143 None
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Vice President - Government Affairs, General Counsel and Secretary, PepsiCo, Inc. (consumer products); and FORMERLY,
Director, Delta Airlines (aviation) (2003-2005) and Providian Financial Corp. (credit card provider) (1997-2001); Senior Fellow of
The Brookings Institution (2003-2004); Visiting Professor, University of Georgia School of Law (2004); and Deputy Attorney General,
U.S. Department of Justice (2001-2003).
JOHN B. WILSON (1959) Lead Trustee since 112 None
One Franklin Parkway Independent 2007 and Lead
San Mateo, CA 94403-1906 Trustee Independent
Trustee since
2008
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
President and Founder, Hyannis Port Capital, Inc. (real estate and private equity investing); serves on private and non-profit
boards; and FORMERLY, Chief Operating Officer and Executive Vice President, Gap, Inc. (retail) (1996-2000); Chief Financial Officer
and Executive Vice President - Finance and Strategy, Staples, Inc. (office supplies) (1992-1996); Senior Vice President - Corporate
Planning, Northwest Airlines, Inc. (airlines) (1990-1992); and Vice President and Partner, Bain & Company (consulting firm)
(1986-1990).
INTERESTED BOARD MEMBERS AND OFFICERS
NUMBER OF
PORTFOLIOS IN
FUND COMPLEX
NAME, YEAR OF BIRTH LENGTH OF OVERSEEN BY
AND ADDRESS POSITION TIME SERVED BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------- --------------- ------------------ -------------- --------------------------------------------
**CHARLES B. JOHNSON (1933) Trustee and Trustee since 135 None
One Franklin Parkway Chairman of 1992 and
San Mateo, CA 94403-1906 the Board Chairman of the
Board since 1993
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Chairman of the Board, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Director, Templeton Worldwide, Inc.;
and officer and/or director or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 41
of the investment companies in Franklin Templeton Investments.
36 | Annual Report
NUMBER OF
PORTFOLIOS IN
FUND COMPLEX
NAME, YEAR OF BIRTH LENGTH OF OVERSEEN BY
AND ADDRESS POSITION TIME SERVED BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------- --------------- ------------------ -------------- --------------------------------------------
**GREGORY E. JOHNSON (1961) Trustee Since 2007 91 None
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director, President and Chief Executive Officer, Franklin Resources, Inc.; President, Templeton Worldwide, Inc.; Director, Templeton
Asset Management Ltd.; and officer and/or director or trustee, as the case may be, of some of the other subsidiaries of Franklin
Resources, Inc. and of 32 of the investment companies in Franklin Templeton Investments.
JAMES M. DAVIS (1952) Chief Chief Compliance Not Applicable Not Applicable
One Franklin Parkway Compliance Officer since 2004
San Mateo, CA 94403-1906 Officer and and Vice President
Vice President - AML Compliance
- AML since 2006
Compliance
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director, Global Compliance, Franklin Resources, Inc.; officer of some of the other subsidiaries of Franklin Resources, Inc. and of
45 of the investment companies in Franklin Templeton Investments; and FORMERLY, Director of Compliance, Franklin Resources, Inc.
(1994-2001).
LAURA F. FERGERSON (1962) Chief Since March 2009 Not Applicable Not Applicable
One Franklin Parkway Executive
San Mateo, CA 94403-1906 Officer -
Finance and
Administration
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice President, Franklin Templeton Services, LLC; officer of 45 of the investment companies in Franklin Templeton Investments; and
FORMERLY, Director and member of Audit and Valuation Committees, Runkel Funds, Inc. (2003-2004); Assistant Treasurer of most of the
investment companies in Franklin Templeton Investments (1997-2003); and Vice President, Franklin Templeton Services, LLC
(1997-2003).
GASTON GARDEY (1967) Treasurer, Since March 2009 Not Applicable Not Applicable
One Franklin Parkway Chief Financial
San Mateo, CA 94403-1906 Officer and
Chief
Accounting
Officer
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director, Fund Accounting, Franklin Templeton Investments; and officer of 27 of the investment companies in Franklin Templeton
Investments.
ALIYA S. GORDON (1973) Vice President Since March 2009 Not Applicable Not Applicable
One Franklin Parkway
San Mateo,
CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Associate General Counsel, Franklin Templeton Investments; officer of 45 of the investment companies in Franklin Templeton
Investments; and FORMERLY, Litigation Associate, Steefel, Levitt & Weiss, LLP (2000-2004).
DAVID P. GOSS (1947) Vice President Since 2000 Not Applicable Not Applicable
One Franklin Parkway
San Mateo,
CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Associate General Counsel, Franklin Templeton Investments; officer and/or director, as the case maybe, of some of the other
subsidiaries of Franklin Resources, Inc. and of 45 of the investment companies in Franklin Templeton Investments.
Annual Report | 37
NUMBER OF
PORTFOLIOS IN
FUND COMPLEX
NAME, YEAR OF BIRTH LENGTH OF OVERSEEN BY
AND ADDRESS POSITION TIME SERVED BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------- --------------- ------------------ -------------- --------------------------------------------
RUPERT H. JOHNSON, JR. (1940) President and Since 2002 Not Applicable Not Applicable
One Franklin Parkway Chief
San Mateo, CA 94403-1906 Executive
Officer -
Investment
Management
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice Chairman, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Director, Franklin Advisers, Inc. and
Templeton Worldwide, Inc.; Senior Vice President, Franklin Advisory Services, LLC; and officer and/or director or trustee, as the
case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 43 of the investment companies in Franklin
Templeton Investments.
KAREN L. SKIDMORE (1952) Vice President Since 2006 Not Applicable Not Applicable
One Franklin Parkway and Secretary
San Mateo,
CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Associate General Counsel, Franklin Templeton Investments; and officer of 29 of the investment companies in Franklin
Templeton Investments.
CRAIG S. TYLE (1960) Vice President Since 2005 Not Applicable Not Applicable
One Franklin Parkway
San Mateo,
CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
General Counsel and Executive Vice President, Franklin Resources, Inc.; officer of some of the other subsidiaries of Franklin
Resources, Inc. and of 45 of the investment companies in Franklin Templeton Investments; and FORMERLY, Partner, Shearman & Sterling,
LLP (2004-2005); and General Counsel, Investment Company Institute (ICI) (1997-2004).
* We base the number of portfolios on each separate series of the U.S.
registered investment companies within the Franklin Templeton Investments
fund complex. These portfolios have a common investment manager or
affiliated investment managers.
** Charles B. Johnson is considered to be an interested person of the Fund
under the federal securities laws due to his position as officer and
director and major shareholder of Franklin Resources, Inc. (Resources),
which is the parent company of the Fund's administrator and distributor.
Gregory E. Johnson is considered to be an interested person of the Fund
under the federal securities laws due to his position as an officer and
director of Resources.
Note 1: Charles B. Johnson and Rupert H. Johnson, Jr. are brothers and the
father and uncle, respectively, of Gregory E. Johnson.
Note 2: Officer information is current as of the date of this report. It is
possible that after this date, information about officers may change.
THE SARBANES-OXLEY ACT OF 2002 AND RULES ADOPTED BY THE SECURITIES AND EXCHANGE
COMMISSION REQUIRE THE FUND TO DISCLOSE WHETHER THE FUND'S AUDIT COMMITTEE
INCLUDES AT LEAST ONE MEMBER WHO IS AN AUDIT COMMITTEE FINANCIAL EXPERT WITHIN
THE MEANING OF SUCH ACT AND RULES. THE FUND'S BOARD OF TRUSTEES HAS DETERMINED
THAT THERE IS AT LEAST ONE SUCH FINANCIAL EXPERT ON THE AUDIT COMMITTEE AND HAS
DESIGNATED JOHN B. WILSON AS ITS AUDIT COMMITTEE FINANCIAL EXPERT. THE BOARD
BELIEVES THAT MR. WILSON QUALIFIES AS SUCH AN EXPERT IN VIEW OF HIS EXTENSIVE
BUSINESS BACKGROUND AND EXPERIENCE, INCLUDING SERVICE AS CHIEF FINANCIAL OFFICER
OF STAPLES, INC. FROM 1992 TO 1996. MR. WILSON HAS BEEN A MEMBER AND CHAIRMAN OF
THE FUND'S AUDIT COMMITTEE SINCE 2006. AS A RESULT OF SUCH BACKGROUND AND
EXPERIENCE, THE BOARD OF TRUSTEES BELIEVES THAT MR. WILSON HAS ACQUIRED AN
UNDERSTANDING OF GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AND FINANCIAL
STATEMENTS, THE GENERAL APPLICATION OF SUCH PRINCIPLES IN CONNECTION WITH THE
ACCOUNTING ESTIMATES, ACCRUALS AND RESERVES, AND ANALYZING AND EVALUATING
FINANCIAL STATEMENTS THAT PRESENT A BREADTH AND LEVEL OF COMPLEXITY OF
ACCOUNTING ISSUES GENERALLY COMPARABLE TO THOSE OF THE FUND, AS WELL AS AN
UNDERSTANDING OF INTERNAL CONTROLS AND PROCEDURES FOR FINANCIAL REPORTING AND AN
UNDERSTANDING OF AUDIT COMMITTEE FUNCTIONS. MR. WILSON IS AN INDEPENDENT TRUSTEE
AS THAT TERM IS DEFINED UNDER THE RELEVANT SECURITIES AND EXCHANGE COMMISSION
RULES AND RELEASES.
THE STATEMENT OF ADDITIONAL INFORMATION (SAI) INCLUDES ADDITIONAL INFORMATION
ABOUT THE BOARD MEMBERS AND IS AVAILABLE, WITHOUT CHARGE, UPON REQUEST.
SHAREHOLDERS MAY CALL (800) DIAL BEN/(800) 342-5236 TO REQUEST THE SAI.
38 | Annual Report
Institutional Fiduciary Trust
SHAREHOLDER INFORMATION
FRANKLIN CASH RESERVES FUND
BOARD REVIEW OF INVESTMENT MANAGEMENT AGREEMENT
At a meeting held April 14, 2009, the Board of Trustees (Board), including a
majority of non-interested or independent Trustees, approved renewal of the
investment management agreement for Franklin Cash Reserves Fund, one of the two
separate funds within the Trust (Fund(s)). In reaching this decision, the Board
took into account information furnished throughout the year at regular Board
meetings, as well as information prepared specifically in connection with the
annual renewal review process. Information furnished and discussed throughout
the year included investment performance reports and related financial
information for each Fund, as well as periodic reports on shareholder services,
legal, compliance, pricing, brokerage commissions and execution and other
services provided by the Investment Manager (Manager) and its affiliates.
Information furnished specifically in connection with the renewal process
included a report for each Fund prepared by Lipper, Inc. (Lipper), an
independent organization, as well as additional material, including a Fund
profitability analysis report prepared by management. The Lipper reports
compared each Fund's investment performance and expenses with those of other
mutual funds deemed comparable to the Fund as selected by Lipper. The Fund
profitability analysis report discussed the profitability to Franklin Templeton
Investments from its overall U.S. fund operations, as well as on an individual
fund-by-fund basis. Included with such profitability analysis report was
information on a fund-by-fund basis listing portfolio managers and other
accounts they manage, as well as information on management fees charged by the
Manager and its affiliates including management's explanation of differences
where relevant and a three-year expense analysis with an explanation for any
increase in expense ratios. Additional material accompanying such report was a
memorandum prepared by management describing project initiatives and capital
investments relating to the services provided to the Funds by the Franklin
Templeton Investments organization, as well as a memorandum relating to
economies of scale and a comparative analysis concerning transfer agent fees
charged each Fund. Such material also discussed some of the actions taken by
management in coping with problems arising out of the past year's financial
upheaval.
In considering such materials, the independent Trustees received assistance and
advice from and met separately with independent counsel. While the investment
management agreements for all Funds were considered at the same Board meeting,
the Board dealt with each Fund separately. In approving continuance of the
investment management agreement for each Fund, the Board, including a majority
of independent Trustees, determined that the existing management fee structure
was fair and reasonable and that continuance of the investment management
agreement was in the best interests of each Fund and its shareholders. While
attention was given to all information furnished, the following discusses some
primary factors relevant to the Board's decision.
NATURE, EXTENT AND QUALITY OF SERVICE. The Board was satisfied with the nature
and quality of the overall services provided by the Manager and its affiliates
to the Fund and its shareholders. In addition to investment performance and
expenses discussed later, the Board's opinion was based, in part, upon periodic
reports furnished it showing that the investment policies
Annual Report | 39
Institutional Fiduciary Trust
SHAREHOLDER INFORMATION (CONTINUED)
FRANKLIN CASH RESERVES FUND
BOARD REVIEW OF INVESTMENT MANAGEMENT AGREEMENT (CONTINUED)
and restrictions for the Fund were consistently complied with as well as other
reports periodically furnished the Board covering matters such as the compliance
of portfolio managers and other management personnel with the code of ethics
adopted throughout the Franklin Templeton fund complex, the adherence to fair
value pricing procedures established by the Board, and the accuracy of net asset
value calculations. The Board also noted the extent of benefits provided Fund
shareholders from being part of the Franklin Templeton family of funds,
including the right to exchange investments between the same class of funds
without a sales charge, the ability to reinvest Fund dividends into other funds
and the right to combine holdings in other funds to obtain a reduced sales
charge. Favorable consideration was given to management's continuous efforts and
expenditures in establishing back-up systems and recovery procedures to function
in the event of a natural disaster, it being noted that such systems and
procedures had functioned smoothly during the Florida hurricanes and blackouts
experienced in recent years. Among other factors taken into account by the Board
were the Manager's best execution trading policies, including a favorable report
by an independent portfolio trading analytical firm. Consideration was also
given to the experience of the Fund's portfolio management team, the number of
accounts managed and general method of compensation. In this latter respect, the
Board noted that a primary factor in management's determination of a portfolio
manager's bonus compensation was the relative investment performance of the
funds he or she managed and that a portion of such bonus was required to be
invested in a predesignated list of funds within such person's fund management
area so as to be aligned with the interests of Fund shareholders. The Board also
took into account the quality of transfer agent and shareholder services
provided Fund shareholders by an affiliate of the Manager, noting continuing
expenditures by management to increase and improve the scope of such services,
periodic favorable reports on such service conducted by third parties, and the
continuous enhancements to and high industry ranking given the Franklin
Templeton website. Particular attention was given to the overall performance and
actions taken by the Manager and its affiliates in response to problems arising
out of the market turmoil and financial crisis experienced during the past year.
In this respect, the Board noted that management's independent credit analysis
and diligent risk management procedures had minimized exposure of funds within
the Franklin Templeton complex to subprime mortgages and that its continuous
monitoring of counterparty credit risk had limited fund exposure to firms
experiencing financial difficulties like Bear Stearns and AIG. The same type of
conservative approach and attention to risk had also prevented any structured
investment products or other volatile instruments from being held in the
portfolios of the Fund or any of the other money market funds within the
Franklin Templeton complex. The Board also took into account, among other
things, management's efforts in establishing a $725 million global credit
facility for the benefit of the funds and other accounts managed by Franklin
Templeton Investments to provide a source of cash for temporary and emergency
purposes or to meet unusual redemption requests as well as the strong financial
position of the Manager's parent company and its commitment to the mutual fund
business. The Board also noted that during the past year Franklin Templeton
Investments, like many other fund managers, had announced a hiring freeze and
implemented employee reductions, and the Board discussed with
40 | Annual Report
Institutional Fiduciary Trust
SHAREHOLDER INFORMATION (CONTINUED)
FRANKLIN CASH RESERVES FUND
BOARD REVIEW OF INVESTMENT MANAGEMENT AGREEMENT (CONTINUED)
management the nature of such reductions and steps being taken to minimize any
negative impact on the nature and quality of services being provided the Fund.
INVESTMENT PERFORMANCE. The Board placed significant emphasis on the investment
performance of the Fund in view of its importance to shareholders. While
consideration was given to performance reports and discussions with portfolio
managers at Board meetings throughout the year, particular attention in
assessing performance was given to the Lipper reports furnished for the
agreement renewal. The Lipper reports prepared for the Fund showed its
investment performance in comparison to a performance universe selected by
Lipper for the one-year period ended January 31, 2009, and for additional yearly
periods ended that date depending on when the Fund commenced operations. The
following summarizes the performance results for the Fund and the Board's view
of such performance.
The performance universe for the Fund consisted of the Fund and all
institutional money market funds as selected by Lipper. The Lipper report
comparison showed the Fund's total return to be in the lowest quintile of its
performance universe for the one-year period as well as for each of the previous
three-, five- and 10-year periods on an annualized basis. In discussing such
performance, management pointed out that the Fund followed a very conservative
approach with investments made only in those securities having the highest
short-term ratings from rating agencies that rate such securities and constant
monitoring that avoided ownership of any downgraded securities to Tier 2 status.
Management further noted such policy was believed appropriate in view of the
fact that Fund shareholders largely consisted of 401(k) or other defined
contribution plans. The Board believed the Fund's performance to be acceptable
in view of management's explanation.
COMPARATIVE EXPENSES. Consideration was given to a comparative analysis of the
management fees and total expense ratios of the Fund compared with those of a
group of other funds selected by Lipper as its appropriate Lipper expense group.
Lipper expense data is based upon historical information taken from each fund's
most recent annual report and, as a result of the severe decline in mutual fund
industry assets during the last quarter of 2008, is based on asset levels that
are higher than the level currently existing for most funds. While recognizing
the limitations inherent in Lipper's methodology and recognizing that current
expense ratios may increase as assets decline, the Board believed that the
independent analysis conducted by Lipper remained an appropriate measure of
comparative expenses. In reviewing comparative costs, Lipper provides
information on the Fund's contractual investment management fee in comparison
with the contractual investment management fee that would have been charged by
other funds within its Lipper expense group assuming they were similar in size
to the master money fund through which the Fund invests, as well as the actual
total expenses of the Fund in comparison with those of its Lipper expense group.
The Lipper contractual investment management fee analysis includes
administrative charges as being part of a management fee. The results of these
comparisons showed, in the case of Franklin Cash Reserves
Annual Report | 41
Institutional Fiduciary Trust
SHAREHOLDER INFORMATION (CONTINUED)
FRANKLIN CASH RESERVES FUND
BOARD REVIEW OF INVESTMENT MANAGEMENT AGREEMENT (CONTINUED)
Fund, that its contractual investment management fee rate and total expenses
were both in the second most expensive quintile of its Lipper expense group. In
discussing these expenses, management pointed out that while the Fund's expense
group consisted of institutional funds, the nature of its shareholders and their
servicing needs were believed to be more retail in nature, justifying higher
expenses. The Board found the expenses of the Fund to be acceptable, noting they
were subsidized by fee waivers or management reimbursements.
MANAGEMENT PROFITABILITY. The Board also considered the level of profits
realized by the Manager and its affiliates in connection with the operation of
the Fund. In this respect, the Board reviewed the Fund profitability analysis
that addresses the overall profitability of Franklin Templeton's U.S. fund
business, as well as its profits in providing management and other services to
the Fund during the 12-month period ended September 30, 2008, being the most
recent fiscal year end for Franklin Resources, Inc., the Manager's parent.
During such period, the assets of the Franklin Templeton U.S. fund business were
significantly higher than currently existing, and to such extent the
profitability analysis does not reflect current fund operations. While taking
this into account in assessing the significance of the Fund profitability
analysis, the Board recognized such analysis was made at a given point in time
and that the decline in assets and effect on profitability would be reflected in
the profitability analysis covering Franklin Resources' 2009 fiscal year period.
In reviewing the analysis, attention was given to the methodology followed in
allocating costs to the Fund, it being recognized that allocation methodologies
are inherently subjective and various allocation methodologies may each be
reasonable while producing different results. In this respect, the Board noted
that, while being continuously refined and reflecting changes in the Manager's
own cost accounting, the allocation methodology was consistent with that
followed in profitability report presentations for the Fund made in prior years
and that the Fund's independent registered public accounting firm had been
engaged by the Manager to perform certain procedures on a biennial basis,
specified and approved by the Manager and the Fund's Board solely for their
purposes and use in reference to the profitability analysis. In reviewing and
discussing such analysis, management discussed with the Board its belief that
costs incurred in establishing the infrastructure necessary for the type of
mutual fund operations conducted by the Manager and its affiliates may not be
fully reflected in the expenses allocated to the Fund in determining its
profitability, as well as the fact that the level of profits, to a certain
extent, reflected operational cost savings and efficiencies initiated by
management. The Board also took into account management's expenditures in
improving shareholder services provided the Fund, as well as the need to meet
additional regulatory and compliance requirements resulting from the
Sarbanes-Oxley Act and recent SEC and other regulatory requirements. In
addition, the Board considered a third-party study comparing the profitability
of the Manager's parent on an overall basis as compared to other publicly held
managers broken down to show profitability from management operations exclusive
of distribution expenses, as well as profitability including distribution
expenses. The Board also considered the extent to which the Manager and its
affiliates might derive ancillary benefits from fund operations, including
potential benefits
42 | Annual Report
Institutional Fiduciary Trust
SHAREHOLDER INFORMATION (CONTINUED)
FRANKLIN CASH RESERVES FUND
BOARD REVIEW OF INVESTMENT MANAGEMENT AGREEMENT (CONTINUED)
resulting from allocation of fund brokerage and the use of commission dollars to
pay for research. Based upon its consideration of all these factors, the Board
determined that the level of profits realized by the Manager and its affiliates
from providing services to the Fund was not excessive in view of the nature,
quality and extent of services provided.
ECONOMIES OF SCALE. The Board also considered whether economies of scale are
realized by the Manager as the Fund grows larger and the extent to which this is
reflected in the level of management fees charged. While recognizing that any
precise determination is inherently subjective, the Board noted that based upon
the Fund profitability analysis, it appears that as some funds get larger, at
some point economies of scale do result in the Manager realizing a larger profit
margin on management services provided such a fund. The Fund is part of a master
feeder relationship and the advisory fee at the master fund level for the Fund
is a flat rate of 0.15% at all asset levels. In addition, a separate fee for
administrative services amounting to 0.25% at all asset levels is charged to the
Fund. While intending to continuously review the issue, the Board believed it
problematic for reasons, including the size of the Fund and the nature of its
shareholder accounts that the Manager and its affiliates realized any meaningful
economies of scale in furnishing advisory and administrative services to the
Fund.
PROXY VOTING POLICIES AND PROCEDURES
The Trust's investment manager has established Proxy Voting Policies and
Procedures (Policies) that the Trust uses to determine how to vote proxies
relating to portfolio securities. Shareholders may view the Trust's complete
Policies online at franklintempleton.com. Alternatively, shareholders may
request copies of the Policies free of charge by calling the Proxy Group collect
at (954) 527-7678 or by sending a written request to: Franklin Templeton
Companies, LLC, 500 East Broward Boulevard, Suite 1500, Fort Lauderdale, FL
33394, Attention: Proxy Group. Copies of the Trust's proxy voting records are
also made available online at franklintempleton.com and posted on the U.S.
Securities and Exchange Commission's website at sec.gov and reflect the most
recent 12-month period ended June 30.
QUARTERLY STATEMENT OF INVESTMENTS
The Trust files a complete statement of investments with the U.S. Securities and
Exchange Commission for the first and third quarters for each fiscal year on
Form N-Q. Shareholders may view the filed Form N-Q by visiting the Commission's
website at sec.gov. The filed form may also be viewed and copied at the
Commission's Public Reference Room in Washington, DC. Information regarding the
operations of the Public Reference Room may be obtained by calling (800)
SEC-0330.
Annual Report | 43
This page intentionally left blank.
(FRANKLIN TEMLETON(R) INVESTMENTS LOGO) One Franklin Parkway
San Mateo, CA 94403-1906
ANNUAL REPORT
FRANKLIN CASH RESERVES FUND
INVESTMENT MANAGER
Franklin Advisers, Inc.
DISTRIBUTOR
Franklin Templeton Distributors, Inc.
One Franklin Parkway
San Mateo, CA 94403-1906
SHAREHOLDER SERVICES
(800) 342-5236
ftinstitutional.com
Authorized for distribution only when accompanied or preceded by a prospectus.
Investors should carefully consider a fund's investment goals, risks, charges
and expenses before investing. The prospectus contains this and other
information; please read it carefully before investing.
To ensure the highest quality of service, telephone calls to or from our service
departments may be monitored, recorded and accessed. These calls can be
identified by the presence of a regular beeping tone.
149 A2009 08/09
JUNE 30, 2009
Money Market Portfolio
ANNUAL REPORT
INSTITUTIONAL FIDUCIARY TRUST
FRANKLIN TEMPLETON INSTITUTIONAL(R) (LOGO)
Contents
ANNUAL REPORT
IFT Money Market Portfolio ............................................... 1
Performance Summary ...................................................... 3
Your Fund's Expenses ..................................................... 4
Financial Highlights and Statement of Investments ........................ 6
Financial Statements ..................................................... 8
Notes to Financial Statements ............................................ 11
Report of Independent Registered Public Accounting Firm .................. 15
Tax Designation .......................................................... 16
Board Members and Officers ............................................... 17
The Money Market Portfolios .............................................. 21
Shareholder Information .................................................. 38
Annual Report
IFT Money Market Portfolio
YOUR FUND'S GOAL AND MAIN INVESTMENTS: The IFT Money Market Portfolio seeks to
provide as high a level of current income as is consistent with preservation of
shareholders' capital and liquidity. The Fund invests all of its assets in the
shares of The Money Market Portfolio (the Portfolio), which has the same
investment goal. The Portfolio, in turn, invests mainly in high-quality,
short-term U.S. dollar denominated money market securities of domestic and
foreign issuers. The Fund attempts to maintain a stable $1.00 share price.
PERFORMANCE DATA REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE
RESULTS. INVESTMENT RETURN WILL FLUCTUATE. CURRENT PERFORMANCE MAY DIFFER FROM
FIGURES SHOWN. PLEASE CALL A FRANKLIN TEMPLETON INSTITUTIONAL SERVICES
REPRESENTATIVE AT (800) 321-8563 FOR MOST RECENT MONTH-END PERFORMANCE.
AN INVESTMENT IN THE FUND IS NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY OR INSTITUTION. ALTHOUGH
THE FUND SEEKS TO PRESERVE THE VALUE OF YOUR INVESTMENT AT $1.00 PER SHARE, IT
IS POSSIBLE TO LOSE MONEY BY INVESTING IN THE FUND.
This annual report for IFT Money Market Portfolio covers the fiscal year ended
June 30, 2009.
PERFORMANCE OVERVIEW
Declining short-term interest rates during the period under review resulted in a
decrease in the Fund's yield. In this environment, the Fund's seven-day
annualized yield fell from 2.17% on June 30, 2008, to 0.00% on June 30, 2009.
ECONOMIC AND MARKET OVERVIEW
During the 12-month period ended June 30, 2009, economic conditions
deteriorated. In February, The Conference Board's Consumer Confidence Index fell
to an all-time low since it began in 1967 as the U.S. economy faltered and as
THE DOLLAR VALUE, NUMBER OF SHARES OR PRINCIPAL AMOUNT, AND NAMES OF ALL
PORTFOLIO HOLDINGS ARE LISTED IN THE FUND'S STATEMENT OF INVESTMENTS (SOI). THE
SOI BEGINS ON PAGE 7.
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE
Annual Report | 1
PORTFOLIO BREAKDOWN
6/30/09
% OF TOTAL
INVESTMENTS
-----------
Repurchase Agreements 32.2%
Commercial Paper 26.7%
Certificates of Deposit 21.7%
U.S. Government & Agency Securities 17.1%
Bank Notes 2.3%
stock markets declined. Despite far-reaching government interventions, the
nation's economic troubles worsened as manufacturing activity weakened at its
fastest pace in nearly 30 years and as home prices fell at an accelerated rate.
Jobless claims mounted and the unemployment rate rose to 9.5% by period-end.(1)
Economic growth, as measured by gross domestic product (GDP), fell throughout
the period. In 2008's third quarter, GDP was an annualized -2.7%, followed by
annualized rates of -5.4%, -6.4% and an estimated -1.0% in 2008's fourth quarter
and 2009's first and second quarters, respectively. These declines in GDP
reflected broad-based slowdowns in consumer spending, corporate profits and
export growth.
Oil prices were volatile, rising from $140 per barrel at the beginning of the
period to a period-high $145 in July. As economic conditions deteriorated in
mid-2008, oil prices declined significantly, hitting a period-low $31 in
December 2008 before rebounding to end the period at $70. Many other commodity
prices followed similar trends; therefore, as prices fell in late 2008,
inflation remained muted, and June's inflation rate was an annualized -1.4%.(1)
Core inflation, which excludes food and energy costs, rose at a 1.7% annualized
rate, which was within the Federal Reserve Board's (Fed's) informal target range
of 1.5%-2.0%.(1) The core personal consumption expenditures price index reported
a 12-month increase of 1.5%.(2)
A slowing economy and decelerating inflation prompted policymakers to lower
interest rates and enact stimulus plans. During the period under review, the Fed
lowered the federal funds target rate from 1.5% to a range of 0% to 0.25%. The
government implemented the American Recovery and Reinvestment Act, which
included tax breaks, money for ailing state governments, aid to the poor and
unemployed, and spending on infrastructure, renewable energy, health care and
education. The Fed and U.S. Treasury Department also continued programs designed
to shore up beleaguered banks' capital, enable freer lending to businesses and
consumers, and help struggling home buyers avoid foreclosure.
Most Treasury prices declined during the period, and fixed income spreads were
generally wide relative to Treasury yields due to heightened market turbulence
and risk aversion. The spread between two-year and 10-year Treasury yields rose
to 242 basis points (100 basis points equal one percentage point) at the end of
June from 136 basis points at the beginning of the reporting period. The
two-year Treasury bill yield fell from 2.63% to 1.11% over the 12-month period,
while the 10-year Treasury note yield fell slightly from 3.99% to 3.53%.
(1.) Source: Bureau of Labor Statistics.
(2.) Source: Bureau of Economic Analysis.
2 | Annual Report
INVESTMENT STRATEGY
Consistent with our strategy, we invest, through the Portfolio, mainly in
high-quality, short-term U.S. dollar denominated money market securities of
domestic and foreign issuers, including bank obligations, commercial paper,
repurchase agreements and U.S. government securities. We maintain a
dollar-weighted average portfolio maturity of 90 days or less. We seek to
provide shareholders with a high-quality, conservative investment vehicle; thus,
we do not invest the Fund's cash in derivatives or other relatively volatile
securities that we believe involve undue risk.
MANAGER'S DISCUSSION
The 12 months ended June 30, 2009, was the most volatile and challenging period
in the history of the money market. Liquidity and credit issues dominated the
headlines. The one-month London InterBank Offered Rate, which rose from 2.46% at
the beginning of the period to a high of 4.59% in October, dropped to 0.31% at
period-end.(3)
Despite these trying times, we continued to invest in high-quality money market
securities. For example, 100% of the securities purchased for the Portfolio
throughout the year carried short-term credit ratings of A-1 or P-1, or higher,
by independent credit rating agency Standard & Poor's or Moody's Investors
Service.(4)
We appreciate your support, welcome new shareholders and look forward to serving
your investment needs in the years ahead.
PERFORMANCE SUMMARY
SYMBOL: INFXX
6/30/09
Seven-day annualized yield 0.00%
Total annual operating expenses* 0.39%
* Figures are as stated in the Fund's prospectus current as of the date of
this report. In periods of market volatility, assets may decline
significantly, causing total annual Fund operating expenses to become
higher than the figure shown. To avoid a negative yield, the investment
manager, fund administrator and fund distributor have voluntarily agreed to
waive or limit their respective fees, assume as their own expense certain
expenses otherwise payable by the Fund, and if necessary, make a capital
infusion into the Fund. These waivers, expense reimbursements and capital
infusions, which are not reflected in the table above, are voluntary and
may be modified or discontinued by the investment manager, fund
administrator or distributor at any time. There is no guarantee the Fund
will be able to avoid a negative yield. Annualized yield is for the
seven-day period ended 6/30/09. The Fund's average weighted maturity was 49
days. Yield reflects Fund expenses and fluctuations in interest rates on
Portfolio investments.
PERFORMANCE DATA REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE
RESULTS. INVESTMENT RETURN WILL FLUCTUATE. CURRENT PERFORMANCE MAY DIFFER FROM
FIGURES SHOWN. PLEASE CALL A FRANKLIN TEMPLETON INSTITUTIONAL SERVICES
REPRESENTATIVE AT (800) 321-8563 FOR MOST RECENT MONTH-END PERFORMANCE.
THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS
AS OF JUNE 30, 2009, THE END OF THE REPORTING PERIOD. THE WAY WE IMPLEMENT OUR
MAIN INVESTMENT STRATEGIES AND THE RESULTING PORTFOLIO HOLDINGS MAY CHANGE
DEPENDING ON FACTORS SUCH AS MARKET AND ECONOMIC CONDITIONS. THESE OPINIONS MAY
NOT BE RELIED UPON AS INVESTMENT ADVICE OR AN OFFER FOR A PARTICULAR SECURITY.
THE INFORMATION IS NOT A COMPLETE ANALYSIS OF EVERY ASPECT OF ANY MARKET,
COUNTRY, INDUSTRY, SECURITY OR THE FUND. STATEMENTS OF FACT ARE FROM SOURCES
CONSIDERED RELIABLE, BUT THE INVESTMENT MANAGER MAKES NO REPRESENTATION OR
WARRANTY AS TO THEIR COMPLETENESS OR ACCURACY. ALTHOUGH HISTORICAL PERFORMANCE
IS NO GUARANTEE OF FUTURE RESULTS, THESE INSIGHTS MAY HELP YOU UNDERSTAND OUR
INVESTMENT MANAGEMENT PHILOSOPHY.
(3.) Source: British Bankers Association.
(4.) These do not indicate ratings of the Fund.
Annual Report | 3
Your Fund's Expenses
As a Fund shareholder, you can incur two types of costs:
- - Transaction costs, including sales charges (loads) on Fund purchases; and
- - Ongoing Fund costs, including management fees, distribution and service
(12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs,
sometimes referred to as operating expenses.
The following table shows ongoing costs of investing in the Fund and can help
you understand these costs and compare them with those of other mutual funds.
The table assumes a $1,000 investment held for the six months indicated.
ACTUAL FUND EXPENSES
The first line (Actual) of the table provides actual account values and
expenses. The "Ending Account Value" is derived from the Fund's actual return,
which includes the effect of Fund expenses.
You can estimate the expenses you paid during the period by following these
steps. OF COURSE, YOUR ACCOUNT VALUE AND EXPENSES WILL DIFFER FROM THOSE IN THIS
ILLUSTRATION:
1. Divide your account value by $1,000.
IF AN ACCOUNT HAD AN $8,600 VALUE, THEN $8,600 / $1,000 = 8.6.
2. Multiply the result by the number under the heading "Expenses Paid During
Period."
IF EXPENSES PAID DURING PERIOD WERE $7.50, THEN 8.6 X $7.50 = $64.50.
In this illustration, the estimated expenses paid this period are $64.50.
HYPOTHETICAL EXAMPLE FOR COMPARISON WITH OTHER FUNDS
Information in the second line (Hypothetical) of the table can help you compare
ongoing costs of investing in the Fund with those of other mutual funds. This
information may not be used to estimate the actual ending account balance or
expenses you paid during the period. The hypothetical "Ending Account Value" is
based on the Fund's actual expense ratio and an assumed 5% annual rate of return
before expenses, which does not represent the Fund's actual return. The figure
under the heading "Expenses Paid During Period" shows the hypothetical expenses
your account would have incurred under this scenario. You can compare this
figure with the 5% hypothetical examples that appear in shareholder reports of
other funds.
4 | Annual Report
Your Fund's Expenses (CONTINUED)
PLEASE NOTE THAT EXPENSES SHOWN IN THE TABLE ARE MEANT TO HIGHLIGHT ONGOING
COSTS AND DO NOT REFLECT ANY TRANSACTION COSTS, SUCH AS SALES CHARGES.
Therefore, the second line of the table is useful in comparing ongoing costs
only, and will not help you compare total costs of owning different funds. In
addition, if transaction costs were included, your total costs would have been
higher. Please refer to the Fund prospectus for additional information on
operating expenses.
BEGINNING ACCOUNT ENDING ACCOUNT EXPENSES PAID DURING
VALUE 1/1/09 VALUE 6/30/09 PERIOD* 1/1/09-6/30/09
----------------- -------------- ----------------------
Actual $1,000 $1,000.80 $1.93
Hypothetical (5% return before expenses) $1,000 $1,022.86 $1.96
* Expenses are calculated using the most recent six-month annualized expense
ratio, net of voluntary expense waivers, of 0.39%, which includes the
expenses incurred by the Portfolio, multiplied by the average account value
over the period, multiplied by 181/365 to reflect the one-half year period.
Annual Report | 5
Institutional Fiduciary Trust
FINANCIAL HIGHLIGHTS
MONEY MARKET PORTFOLIO
YEAR ENDED JUNE 30,
----------------------------------------------------------------
2009 2008 2007 2006 2005
------------- ---------- ---------- ---------- ----------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year .......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ---------- ---------- ---------- ----------
Income from investment operations -
net investment income ....................... 0.009 0.038 0.050 0.039 0.018
Less distributions from net investment income (0.009) (0.038) (0.050) (0.039) (0.018)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year ................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ---------- ---------- ---------- ----------
Total return ................................ 0.91% 3.89% 5.07% 3.94% 1.85%
RATIOS TO AVERAGE NET ASSETS
Expenses(a) ................................. 0.39%(b) 0.37% 0.36% 0.37% 0.37%
Net investment income ....................... 0.90% 3.86% 4.96% 3.88% 1.83%
SUPPLEMENTAL DATA
Net assets, end of year (000's) ............. $5,353,195 $4,174,060 $4,543,430 $3,005,324 $3,931,546
(a) The expense ratio includes the Fund's share of the Portfolio's allocated
expenses.
(b) Benefit of waiver and payment by affiliates is less than 0.01%.
The accompanying notes are an integral part of these financial statements.
6 | Annual Report
Institutional Fiduciary Trust
STATEMENT OF INVESTMENTS, JUNE 30, 2009
MONEY MARKET PORTFOLIO SHARES VALUE
- ---------------------- ------------- --------------
MUTUAL FUNDS (COST $5,354,079,725) 100.0%
(a) The Money Market Portfolio, 0.15% 5,354,079,725 $5,354,079,725
OTHER ASSETS, LESS LIABILITIES (0.0)%b (885,075)
--------------
NET ASSETS 100.0% $5,353,194,650
--------------
(a) The rate shown is the annualized seven-day yield at period end.
(b) Rounds to less than 0.1% of net assets.
The accompanying notes are an integral part of these financial statements.
Annual Report | 7
Institutional Fiduciary Trust
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2009
MONEY MARKET
PORTFOLIO
--------------
Assets:
Investment in Portfolio, at value and cost .. $5,354,079,725
--------------
Liabilities:
Payables:
Affiliates ............................... 790,783
Accrued expenses and other liabilities ...... 94,292
--------------
Total liabilities ..................... 885,075
--------------
Net assets, at value ............... $5,353,194,650
--------------
Net assets consist of paid-in capital .......... $5,353,194,650
--------------
Shares outstanding ............................. 5,353,194,650
--------------
Net asset value per share ...................... $ 1.00
--------------
The accompanying notes are an integral part of these financial statements.
8 | Annual Report
Institutional Fiduciary Trust
FINANCIAL STATEMENTS (CONTINUED)
STATEMENT OF OPERATIONS
for the year ended June 30, 2009
MONEY MARKET
PORTFOLIO
------------
Investment income:
Dividends from Portfolio ...................................... $ 57,635,301
------------
Expenses:
Administrative fees (Note 3a) ................................. 10,180,549
Transfer agent fees ........................................... 24,242
Reports to shareholders ....................................... 18,559
Registration and filing fees .................................. 38,500
Professional fees ............................................. 101,845
Trustees' fees and expenses ................................... 98,993
Temporary Guarantee Program fee (Note 5) ...................... 1,482,805
Other ......................................................... 149,936
------------
Total expenses ............................................. 12,095,429
Expenses waived/paid by affiliates (Note 3c) ............... (107,024)
------------
Net expenses ............................................ 11,988,405
------------
Net investment income ................................ 45,646,896
------------
Net increase (decrease) in net assets resulting from operations .. $ 45,646,896
------------
The accompanying notes are an integral part of these financial statements.
Annual Report | 9
Institutional Fiduciary Trust
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS
MONEY MARKET PORTFOLIO
YEAR ENDED JUNE 30,
-------------------------------
2009 2008
-------------- --------------
Increase (decrease) in net assets:
Net investment income from operations ................................................ $ 45,646,896 $ 155,381,317
Distributions to shareholders from net investment income ............................. (45,646,896) (155,381,317)
Capital share transactions (Note 2) .................................................. 1,179,134,932 (369,370,048)
-------------- --------------
Net increase (decrease) in net assets ............................................. 1,179,134,932 (369,370,048)
Net assets (there is no undistributed net investment income at beginning or end of year):
Beginning of year .................................................................... 4,174,059,718 4,543,429,766
-------------- --------------
End of year .......................................................................... $5,353,194,650 $4,174,059,718
-------------- --------------
The accompanying notes are an integral part of these financial statements.
10 | Annual Report
Institutional Fiduciary Trust
NOTES TO FINANCIAL STATEMENTS
MONEY MARKET PORTFOLIO
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Institutional Fiduciary Trust (Trust) is registered under the Investment Company
Act of 1940, as amended, (1940 Act) as an open-end investment company,
consisting of two separate funds. The Institutional Fiduciary Trust Money Market
Portfolio (Fund) is included in this report. The financial statements of the
remaining fund in the Trust are presented separately.
The Fund invests substantially all of its assets in the The Money Market
Portfolio (Portfolio), which is registered under the 1940 Act as an open-end
investment company. The accounting policies of the Portfolio, including the
Portfolio's security valuation policies, will directly affect the recorded value
of the Fund's investment in the Portfolio. The financial statements of the
Portfolio, including the Statement of Investments, are included elsewhere in
this report and should be read in conjunction with the Fund's financial
statements.
Shares of the Fund are offered to other investment companies managed by Franklin
Advisers Inc. (Advisers), or its affiliates. At June 30, 2009, investment
companies managed by Advisers or its affiliates owned 5,326,517,190 shares of
the Fund.
The following summarizes the Fund's significant accounting policies.
A. SECURITY VALUATION
The Fund holds Portfolio shares that are valued at its proportionate interest in
the closing net asset value of the Portfolio. At June 30, 2009, the Fund owned
62.81% of the Portfolio.
B. INCOME TAXES
No provision has been made for U.S. income taxes because it is the Fund's policy
to qualify as a regulated investment company under the Internal Revenue Code and
to distribute to shareholders substantially all of its taxable income and net
realized gains.
The Fund has reviewed the tax positions, taken on federal income tax returns,
for each of the three open tax years and as of June 30, 2009, and has determined
that no provision for income tax is required in the Fund's financial statements.
C. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Income and estimated expenses are accrued daily. Dividends from net investment
income received from the Portfolio are normally declared daily; these dividends
are reinvested and paid monthly to shareholders. Distributions to shareholders
are determined according to income tax regulations (tax basis). Distributable
earnings determined on a tax basis may differ from earnings recorded in
accordance with accounting principles generally accepted in the United States of
America. These differences may be permanent
Annual Report | 11
Institutional Fiduciary Trust
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MONEY MARKET PORTFOLIO
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
C. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
(CONTINUED)
or temporary. Permanent differences are reclassified among capital accounts to
reflect their tax character. These reclassifications have no impact on net
assets or the results of operations. Temporary differences are not reclassified,
as they may reverse in subsequent periods.
Common expenses incurred by the Trust are allocated among the funds based on the
ratio of net assets of each fund to the combined net assets of the Trust. Fund
specific expenses are charged directly to the fund that incurred the expense.
D. ACCOUNTING ESTIMATES
The preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the amounts of income
and expenses during the reporting period. Actual results could differ from those
estimates.
E. GUARANTEES AND INDEMNIFICATIONS
Under the Trust's organizational documents, its officers and trustees are
indemnified by the Trust against certain liabilities arising out of the
performance of their duties to the Trust. Additionally, in the normal course of
business, the Trust, on behalf of the Fund, enters into contracts with service
providers that contain general indemnification clauses. The Trust's maximum
exposure under these arrangements is unknown as this would involve future claims
that may be made against the Trust that have not yet occurred. Currently, the
Trust expects the risk of loss to be remote.
2. SHARES OF BENEFICIAL INTEREST
At June 30, 2009, there were an unlimited number of shares authorized (without
par value). Transactions in the Fund's shares at $1.00 per share were as
follows:
YEAR ENDED JUNE 30,
-----------------------------------
2009 2008
---------------- ----------------
Shares sold ..................................... $ 32,568,068,818 $ 24,337,138,875
Shares issued in reinvestment of distributions .. 35,667,005 111,809,838
Shares redeemed ................................. (31,424,600,891) (24,818,318,761)
---------------- ----------------
Net increase (decrease) ......................... $ 1,179,134,932 $ (369,370,048)
---------------- ----------------
12 | Annual Report
Institutional Fiduciary Trust
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MONEY MARKET PORTFOLIO
3. TRANSACTIONS WITH AFFILIATES
Franklin Resources, Inc. is the holding company for various subsidiaries that
together are referred to as Franklin Templeton Investments. Certain officers and
trustees of the Trust are also officers, directors and/or trustees of the
Portfolio and of the following subsidiaries:
SUBSIDIARY AFFILIATION
- ---------- ----------------------
Franklin Advisers, Inc. (Advisers) Administrative manager
Franklin Templeton Investor Services, LLC (Investor Services) Transfer agent
A. ADMINISTRATIVE FEES
The Fund pays an administrative fee to Advisers of 0.20% per year of the average
daily net assets of the Fund.
B. TRANSFER AGENT FEES
Investor Services, under terms of an agreement, performs shareholder servicing
for the Fund and is not paid by the Fund for the services.
C. WAIVER AND EXPENSE REIMBURSEMENTS
Advisers has agreed in advance to limit its expenses such that the Fund does not
return a negative yield to its shareholders. Total expenses waived or paid are
not subject to reimbursement by the Fund subsequent to the Fund's fiscal year
end.
4. INCOME TAXES
The tax character of distributions paid during the years ended June 30, 2009 and
2008, was as follows:
2009 2008
----------- ------------
Distributions paid from ordinary income ....... $45,646,896 $155,381,317
----------- ------------
At June 30, 2009, the cost of investments and undistributed ordinary income for
income tax purposes were as follows:
Cost of investments ........................................ $5,354,079,725
--------------
Distributable earnings - undistributed ordinary income ..... $ 13,191
--------------
5. TEMPORARY GUARANTEE PROGRAM FOR MONEY MARKET FUNDS
On October 6, 2008, the Fund's Board of Trustees approved the participation in
the U.S. Department of the Treasury's Temporary Guarantee Program for Money
Market Funds ("Program") through December 18, 2008, which was subsequently
extended through April 30, 2009. Under
Annual Report | 13
Institutional Fiduciary Trust
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MONEY MARKET PORTFOLIO
5. TEMPORARY GUARANTEE PROGRAM FOR MONEY MARKET FUNDS (CONTINUED)
the Program, shares held by the Fund as of the close of business on September
19, 2008 ("Program Date") were insured against loss in the event the Fund
liquidated its holdings during the term of the Program and the per share value
at the time of liquidation dropped below $0.995. For participation in the
initial three months of the Program, the Fund paid 0.01% of its net assets as of
the Program Date, and paid an additional 0.015% of its net assets as of the
Program Date to participate in the extension. This expense was borne by the
Fund. The fees were amortized over the term of the Program. Although the U.S.
Department of the Treasury extended the Program with a third and final
installment, through September 18, 2009, the Fund elected not to participate in
this extension. Thus, the Fund's participation in the Program ended on April 30,
2009.
6. FAIR VALUE MEASUREMENTS
The Fund adopted Financial Accounting Standards Board (FASB) Statement No. 157,
"Fair Value Measurement" (SFAS 157), on July 1, 2008. SFAS 157 defines fair
value, establishes a framework for measuring fair value, and expands disclosures
about fair value measurements. The Fund has determined that the implementation
of SFAS 157 did not have a material impact on the Fund's financial statements.
SFAS 157 establishes a fair value hierarchy that distinguishes between market
data obtained from independent sources (observable inputs) and the Trust's own
market assumptions (unobservable inputs). These inputs are used in determining
the value of the Fund's investments and are summarized in the following fair
value hierarchy:
- Level 1 - quoted prices in active markets for identical securities
- Level 2 - other significant observable inputs (including quoted prices
for similar securities, interest rates, prepayment speed, credit risk,
etc.)
- Level 3 - significant unobservable inputs (including the Fund's own
assumptions in determining the fair value of investments)
The inputs or methodology used for valuing securities are not an indication of
the risk associated with investing in those securities.
At June 30, 2009, all of the Fund's investments in securities carried at fair
value were in Level 1 inputs.
7. SUBSEQUENT EVENTS
Management has evaluated subsequent events through August 14, 2009 and
determined that no events have occurred that require disclosure.
14 | Annual Report
Institutional Fiduciary Trust
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF MONEY MARKET PORTFOLIO
In our opinion, the accompanying statement of assets and liabilities, including
the statement of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Money Market Portfolio (the "Fund")
at June 30, 2009, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period then ended and
the financial highlights for each of the five years in the period then ended, in
conformity with accounting principles generally accepted in the United States of
America. These financial statements and financial highlights (hereafter referred
to as "financial statements") are the responsibility of the Fund's management.
Our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of investments with the Portfolio's transfer
agent at June 30, 2009, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
San Francisco, California
August 14, 2009
Annual Report | 15
Institutional Fiduciary Trust
TAX DESIGNATION (UNAUDITED)
MONEY MARKET PORTFOLIO
Under Section 871(k)(1)(C) of the Internal Revenue Code (Code), the Fund
designates the maximum amount allowable but no less than $44,554,056 as interest
related dividends for purposes of the tax imposed under Section 871(a)(1)(A) of
the Code for the fiscal year ended June 30, 2009.
16 | Annual Report
Institutional Fiduciary Trust
BOARD MEMBERS AND OFFICERS
The name, year of birth and address of the officers and board members, as well
as their affiliations, positions held with the Trust, principal occupations
during the past five years and number of portfolios overseen in the Franklin
Templeton Investments fund complex are shown below. Generally, each board member
serves until that person's successor is elected and qualified.
INDEPENDENT BOARD MEMBERS
NUMBER OF PORTFOLIOS IN
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ----------------------------- --------------- ------------------ ----------------------- -----------------------------------
HARRIS J. ASHTON (1932) Trustee Since 1985 135 Bar-S Foods (meat packing company).
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director of various companies; and FORMERLY, Director, RBC Holdings, Inc. (bank
holding company) (until 2002); and President, Chief Executive Officer and
Chairman of the Board, General Host Corporation (nursery and craft centers)
(until 1998).
ROBERT F. CARLSON (1928) Trustee Since 1998 112 None
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Retired; and FORMERLY, Vice President, senior member and President, Board of
Administration, California Public Employees Retirement Systems (CALPERS)
(1971-2008); member and Chairman of the Board, Sutter Community Hospitals;
member, Corporate Board, Blue Shield of California; and Chief Counsel,
California Department of Transportation.
SAM GINN (1937) Trustee Since 2007 112 Chevron Corporation (global energy
One Franklin Parkway company) and ICO Global
San Mateo, CA 94403-1906 Communications (Holdings) Limited
(satellite company).
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Private investor; and FORMERLY, Chairman of the Board, Vodafone AirTouch, PLC
(wireless company); Chairman of the Board and Chief Executive Officer, AirTouch
Communications (cellular communications) (1993-1998) and Pacific Telesis Groups
(telephone holding company) (1988-1994).
EDITH E. HOLIDAY (1952) Trustee Since 2005 135 Hess Corporation (exploration and
One Franklin Parkway refining of oil and gas), H.J.
San Mateo, CA 94403-1906 Heinz Company (processed foods and
allied products), RTI International
Metals, Inc. (manufacture and
distribution of titanium), Canadian
National Railway (railroad) and
White Mountains Insurance Group,
Ltd. (holding company).
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director or Trustee of various companies and trusts; and FORMERLY, Assistant to
the President of the United States and Secretary of the Cabinet (1990-1993);
General Counsel to the United States Treasury Department (1989-1990); and
Counselor to the Secretary and Assistant Secretary for Public Affairs and Public
Liaison - United States Treasury Department (1988-1989).
Annual Report | 17
NUMBER OF PORTFOLIOS IN
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ----------------------------- --------------- ------------------ ----------------------- -----------------------------------
FRANK W.T. LAHAYE (1929) Trustee Since 1985 112 Center for Creative Land Recycling
One Franklin Parkway (brownfield redevelopment).
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
General Partner, Las Olas L.P. (Asset Management); and FORMERLY, Chairman,
Peregrine Venture Management Company (venture capital).
FRANK A. OLSON (1932) Trustee Since 2005 135 Hess Corporation (exploration and
One Franklin Parkway refining of oil and gas) and
San Mateo, CA 94403-1906 Sentient Jet (private jet service).
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Chairman Emeritus, The Hertz Corporation (car rental) (since 2000) (Chairman of
the Board (1980-2000) and Chief Executive Officer (1977-1999)); and FORMERLY,
Chairman of the Board, President and Chief Executive Officer, UAL Corporation
(airlines).
LARRY D. THOMPSON (1945) Trustee Since 2007 143 None
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Vice President - Government Affairs, General Counsel and Secretary,
PepsiCo, Inc. (consumer products); and FORMERLY, Director, Delta Airlines
(aviation) (2003-2005) and Providian Financial Corp. (credit card provider)
(1997-2001); Senior Fellow of The Brookings Institution (2003-2004); Visiting
Professor, University of Georgia School of Law (2004); and Deputy Attorney
General, U.S. Department of Justice (2001-2003).
JOHN B. WILSON (1959) Lead Trustee since 112 None
One Franklin Parkway Independent 2007 and Lead
San Mateo, CA 94403-1906 Trustee Independent
Trustee since
2008
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
President and Founder, Hyannis Port Capital, Inc. (real estate and private
equity investing); serves on private and non-profit boards; and FORMERLY, Chief
Operating Officer and Executive Vice President, Gap, Inc. (retail) (1996-2000);
Chief Financial Officer and Executive Vice President - Finance and Strategy,
Staples, Inc. (office supplies) (1992-1996); Senior Vice President - Corporate
Planning, Northwest Airlines, Inc. (airlines) (1990-1992); and Vice President
and Partner, Bain & Company (consulting firm) (1986-1990).
INTERESTED BOARD MEMBERS AND OFFICERS
NUMBER OF PORTFOLIOS IN
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ----------------------------- --------------- ------------------ ----------------------- -----------------------------------
**CHARLES B. JOHNSON (1933) Trustee and Trustee since 135 None
One Franklin Parkway Chairman of 1985 and
San Mateo, CA 94403-1906 the Board Chairman of the
Board since 1993
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Chairman of the Board, Member - Office of the Chairman and Director, Franklin
Resources, Inc.; Director, Templeton Worldwide, Inc.; and officer and/or
director or trustee, as the case may be, of some of the other subsidiaries of
Franklin Resources, Inc. and of 41 of the investment companies in Franklin
Templeton Investments.
18 | Annual Report
NUMBER OF PORTFOLIOS IN
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ----------------------------- --------------- ------------------ ----------------------- -----------------------------------
**GREGORY E. JOHNSON (1961) Trustee Since 2007 91 None
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director, President and Chief Executive Officer, Franklin Resources, Inc.;
President, Templeton Worldwide, Inc.; Director, Templeton Asset Management Ltd.;
and officer and/or director or trustee, as the case may be, of some of the other
subsidiaries of Franklin Resources, Inc. and of 32 of the investment companies
in Franklin Templeton Investments.
JAMES M. DAVIS (1952) Chief Chief Compliance Not Applicable Not Applicable
One Franklin Parkway Compliance Officer since 2004
San Mateo, CA 94403-1906 Officer and and Vice President
Vice President - AML Compliance
- AML since 2006
Compliance
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director, Global Compliance, Franklin Resources, Inc.; officer of some of the
other subsidiaries of Franklin Resources, Inc. and of 45 of the investment
companies in Franklin Templeton Investments; and FORMERLY, Director of
Compliance, Franklin Resources, Inc. (1994-2001).
LAURA F. FERGERSON (1962) Chief Since March 2009 Not Applicable Not Applicable
One Franklin Parkway Executive
San Mateo, CA 94403-1906 Officer -
Finance and
Administration
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice President, Franklin Templeton Services, LLC; officer of 45 of the
investment companies in Franklin Templeton Investments; and FORMERLY, Director
and member of Audit and Valuation Committees, Runkel Funds, Inc. (2003-2004);
Assistant Treasurer of most of the investment companies in Franklin Templeton
Investments (1997-2003); and Vice President, Franklin Templeton Services, LLC
(1997-2003).
GASTON GARDEY (1967) Treasurer, Since March 2009 Not Applicable Not Applicable
One Franklin Parkway Chief Financial
San Mateo, CA 94403-1906 Officer and
Chief
Accounting
Officer
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director, Fund Accounting, Franklin Templeton Investments; and officer of 27 of
the investment companies in Franklin Templeton Investments.
ALIYA S. GORDON (1973) Vice President Since March 2009 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Associate General Counsel, Franklin Templeton Investments; officer of 45 of the
investment companies in Franklin Templeton Investments; and FORMERLY, Litigation
Associate, Steefel, Levitt & Weiss, LLP (2000-2004).
DAVID P. GOSS (1947) Vice President Since 2000 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Associate General Counsel, Franklin Templeton Investments; officer and/or
director, as the case maybe, of some of the other subsidiaries of Franklin
Resources, Inc. and of 45 of the investment companies in Franklin Templeton
Investments.
Annual Report | 19
NUMBER OF PORTFOLIOS IN
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ----------------------------- --------------- ------------------ ----------------------- -----------------------------------
RUPERT H. JOHNSON, JR. (1940) President and Since 2002 Not Applicable Not Applicable
One Franklin Parkway Chief
San Mateo, CA 94403-1906 Executive
Officer -
Investment
Management
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice Chairman, Member - Office of the Chairman and Director, Franklin Resources,
Inc.; Director, Franklin Advisers, Inc. and Templeton Worldwide, Inc.; Senior
Vice President, Franklin Advisory Services, LLC; and officer and/or director or
trustee, as the case may be, of some of the other subsidiaries of Franklin
Resources, Inc. and of 43 of the investment companies in Franklin Templeton
Investments.
KAREN L. SKIDMORE (1952) Vice President Since 2006 Not Applicable Not Applicable
One Franklin Parkway and Secretary
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Associate General Counsel, Franklin Templeton Investments; and officer of
29 of the investment companies in Franklin Templeton Investments.
CRAIG S. TYLE (1960) Vice President Since 2005 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
General Counsel and Executive Vice President, Franklin Resources, Inc.; officer
of some of the other subsidiaries of Franklin Resources, Inc. and of 45 of the
investment companies in Franklin Templeton Investments; and FORMERLY, Partner,
Shearman & Sterling, LLP (2004-2005); and General Counsel, Investment Company
Institute (ICI) (1997-2004).
* We base the number of portfolios on each separate series of the U.S.
registered investment companies within the Franklin Templeton Investments
fund complex. These portfolios have a common investment manager or
affiliated investment managers.
** Charles B. Johnson is considered to be an interested person of the Trust
under the federal securities laws due to his position as officer and
director and major shareholder of Franklin Resources, Inc. (Resources),
which is the parent company of the Fund's administrator and distributor.
Gregory E. Johnson is considered to be an interested person of the Trust
under the federal securities laws due to his position as an officer and
director of Resources.
Note 1: Charles B. Johnson and Rupert H. Johnson, Jr. are brothers and the
father and uncle, respectively, of Gregory E. Johnson.
Note 2: Officer information is current as of the date of this report. It is
possible that after this date, information about officers may change.
THE SARBANES-OXLEY ACT OF 2002 AND RULES ADOPTED BY THE SECURITIES AND EXCHANGE
COMMISSION REQUIRE THE FUND TO DISCLOSE WHETHER THE FUND'S AUDIT COMMITTEE
INCLUDES AT LEAST ONE MEMBER WHO IS AN AUDIT COMMITTEE FINANCIAL EXPERT WITHIN
THE MEANING OF SUCH ACT AND RULES. THE FUND'S BOARD HAS DETERMINED THAT THERE IS
AT LEAST ONE SUCH FINANCIAL EXPERT ON THE AUDIT COMMITTEE AND HAS DESIGNATED
JOHN B. WILSON AS ITS AUDIT COMMITTEE FINANCIAL EXPERT. THE BOARD BELIEVES THAT
MR. WILSON QUALIFIES AS SUCH AN EXPERT IN VIEW OF HIS EXTENSIVE BUSINESS
BACKGROUND AND EXPERIENCE, INCLUDING SERVICE AS CHIEF FINANCIAL OFFICER OF
STAPLES, INC. FROM 1992 TO 1996. MR. WILSON HAS BEEN A MEMBER AND CHAIRMAN OF
THE FUND'S AUDIT COMMITTEE SINCE 2007. AS A RESULT OF SUCH BACKGROUND AND
EXPERIENCE, THE BOARD BELIEVES THAT MR. WILSON HAS ACQUIRED AN UNDERSTANDING OF
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AND FINANCIAL STATEMENTS, THE GENERAL
APPLICATION OF SUCH PRINCIPLES IN CONNECTION WITH THE ACCOUNTING ESTIMATES,
ACCRUALS AND RESERVES, AND ANALYZING AND EVALUATING FINANCIAL STATEMENTS THAT
PRESENT A BREADTH AND LEVEL OF COMPLEXITY OF ACCOUNTING ISSUES GENERALLY
COMPARABLE TO THOSE OF THE FUND, AS WELL AS AN UNDERSTANDING OF INTERNAL
CONTROLS AND PROCEDURES FOR FINANCIAL REPORTING AND AN UNDERSTANDING OF AUDIT
COMMITTEE FUNCTIONS. MR. WILSON IS AN INDEPENDENT BOARD MEMBER AS THAT TERM IS
DEFINED UNDER THE RELEVANT SECURITIES AND EXCHANGE COMMISSION RULES AND
RELEASES.
THE STATEMENT OF ADDITIONAL INFORMATION (SAI) INCLUDES ADDITIONAL INFORMATION
ABOUT THE BOARD MEMBERS AND IS AVAILABLE, WITHOUT CHARGE, UPON REQUEST.
SHAREHOLDERS MAY CALL (800) 321-8563 TO REQUEST THE SAI.
20 | Annual Report
The Money Market Portfolios
FINANCIAL HIGHLIGHTS
THE MONEY MARKET PORTFOLIO
YEAR ENDED JUNE 30,
--------------------------------------------------------------------
2009 2008 2007 2006 2005
---------- ---------- ---------- ---------- ----------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income ....................... 0.011 0.040 0.052 0.041 0.020
Net realized and unrealized gains (losses) .. (--)(a) -- (--)(a) -- --
---------- ---------- ---------- ---------- ----------
Less distributions from net investment income .. (0.011) (0.040) (0.052) (0.041) (0.020)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year ................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========== ========== ==========
Total return ................................... 1.14% 4.10% 5.28% 4.15% 2.06%
RATIOS TO AVERAGE NET ASSETS
Expenses(b) .................................... 0.15% 0.16% 0.15% 0.16% 0.16%
Net investment income .......................... 1.12% 4.02% 5.17% 4.09% 2.04%
SUPPLEMENTAL DATA
Net assets, end of year (000's) ................ $8,520,392 $7,028,194 $6,580,101 $4,993,739 $5,676,479
(a) Amount rounds to less than $0.001 per share
(b) Benefit of expense reduction rounds to less than 0.01%.
The accompanying notes are an integral part of these financial statements.
Annual Report | 21
The Money Market Portfolios
STATEMENT OF INVESTMENTS, JUNE 30, 2009
PRINCIPAL
THE MONEY MARKET PORTFOLIO AMOUNT(a) VALUE
- -------------------------- -------------- --------------
INVESTMENTS 100.6%
BANK NOTES (COST $200,000,000) 2.3%
Wells Fargo Bank NA, 0.20%, 7/07/09 ............................................. $ 200,000,000 $ 200,000,000
--------------
CERTIFICATES OF DEPOSIT 21.8%
Australia and New Zealand Banking Group Ltd., New York Branch, 0.26%, 7/08/09 ... 50,000,000 50,000,097
Australia and New Zealand Banking Group Ltd., New York Branch, 0.33%, 8/17/09 ... 100,000,000 100,001,305
Bank of Montreal, Chicago Branch, 0.26%, 7/13/09 ................................ 100,000,000 100,000,333
Bank of Montreal, Chicago Branch, 0.31%, 10/01/09 ............................... 50,000,000 50,000,000
Bank of Nova Scotia, Houston Branch, 0.27%, 8/11/09 ............................. 100,000,000 100,000,000
Bank of Nova Scotia, Houston Branch, 0.31% - 0.58%, 7/08/09 - 9/21/09 ........... 100,000,000 100,000,000
Banque Nationale De Paris, San Francisco Branch, 1.01%, 7/23/09 ................. 100,000,000 100,000,000
Banque Nationale De Paris, San Francisco Branch, 1.32%, 8/20/09 ................. 100,000,000 100,000,000
Calyon NY, New York Branch, 0.26% - 1.05%, 7/10/09 - 8/18/09 .................... 200,000,000 200,000,277
Lloyds TSB Bank PLC, New York Branch, 0.27%, 7/06/09 (United Kingdom) ........... 100,000,000 100,000,000
Lloyds TSB Bank PLC, New York Branch, 0.27%, 7/13/09 (United Kingdom) ........... 100,000,000 100,000,000
National Australia Bank, New York Branch, 0.55%, 7/01/09 ........................ 100,000,000 100,000,000
National Australia Bank, New York Branch, 0.41% - 0.57%, 7/09/09 - 8/06/09 ...... 55,500,000 55,505,508
Royal Bank of Canada, New York Branch, 0.265%, 8/12/09 .......................... 200,000,000 200,001,166
Societe Generale, New York Branch, 0.28%, 7/09/09 ............................... 200,000,000 200,000,000
The Toronto-Dominion Bank, New York Branch, 0.22%, 7/09/09 ...................... 150,000,000 150,000,000
The Toronto-Dominion Bank, New York Branch, 0.95%, 9/28/09 ...................... 50,000,000 50,000,000
--------------
TOTAL CERTIFICATES OF DEPOSIT (COST $1,855,508,686) ............................. 1,855,508,686
--------------
(b) COMMERCIAL PAPER 26.9%
Australia and New Zealand Banking Group Ltd., 7/27/09 ........................... 50,000,000 49,975,444
Bank of Montreal, 9/16/09 ....................................................... 50,000,000 49,965,778
Chevron Funding Corp., 8/03/09 .................................................. 40,000,000 39,992,667
Chevrontexaco Funding Corp., 7/16/09 ............................................ 75,000,000 74,992,500
Commonwealth Bank of Australia, 7/20/09 - 8/31/09 ............................... 220,000,000 219,890,939
Government of Canada, 11/03/09 (Canada) ......................................... 100,000,000 99,722,222
Government of Canada, 7/14/09 - 2/09/10 (Canada) ................................ 95,000,000 94,893,612
Internationale Nederlanden U.S. Funding Corp., 7/07/09 .......................... 50,000,000 49,998,083
Internationale Nederlanden U.S. Funding Corp., 7/09/09 .......................... 100,000,000 99,994,667
Johnson & Johnson, 10/26/09 - 12/17/09 .......................................... 128,135,000 127,990,941
JPMorgan Chase & Co., 7/02/09 ................................................... 100,000,000 99,999,306
JPMorgan Chase & Co., 7/15/09 ................................................... 100,000,000 99,990,278
National Australia Funding, 7/07/09 ............................................. 50,000,000 49,995,333
Province of British Columbia, 7/13/09 - 3/19/10 (Canada) ........................ 267,000,000 266,755,142
Province of Ontario, 9/16/09 - 9/17/09 (Canada) ................................. 75,000,000 74,959,549
Rabobank USA Finance Corp., 7/23/09 ............................................. 50,000,000 49,977,389
Rabobank USA Finance Corp., 9/14/09 ............................................. 91,000,000 90,941,229
Societe Generale North America, 7/01/09 ......................................... 100,000,000 100,000,000
Total Fina ELF Capital, 7/01/09 ................................................. 150,000,000 150,000,000
Total Fina ELF Capital, 9/09/09 ................................................. 100,000,000 99,953,333
Total Fina ELF Capital, 9/22/09 ................................................. 100,000,000 99,942,361
Westpac Banking Corp., 7/17/09 - 9/09/09 ........................................ 100,000,000 99,950,277
Westpac Banking Corp., 9/23/09 .................................................. 100,000,000 99,923,000
--------------
TOTAL COMMERCIAL PAPER (COST $2,289,804,050) .................................... 2,289,804,050
--------------
22 | Annual Report
The Money Market Portfolios
STATEMENT OF INVESTMENTS, JUNE 30, 2009 (CONTINUED)
PRINCIPAL
THE MONEY MARKET PORTFOLIO AMOUNT(a) VALUE
- -------------------------- -------------- --------------
INVESTMENTS (CONTINUED)
U.S. GOVERNMENT AND AGENCY SECURITIES 17.2%
(b) FHLB, 7/01/09 ................................................................... $ 126,420,000 $ 126,420,000
FHLB, 0.56%, 6/22/10 ............................................................ 50,000,000 49,986,576
FHLMC, 1.25%, 3/18/10 ........................................................... 25,000,000 25,045,647
FHLMC, 1.25%, 3/23/10 ........................................................... 122,080,000 122,249,029
(b) FNMA, 7/22/09 ................................................................... 50,000,000 49,985,708
(b) International Bank for Reconstruction & Development, 7/01/09 - 12/23/09
(Supranationalc) ................................................................ 95,000,000 94,944,583
(b) U.S. Treasury Bill, 7/02/09 ..................................................... 150,000,000 149,995,396
(b) U.S. Treasury Bill, 7/30/09 - 8/06/09 ........................................... 100,000,000 99,967,091
(b) U.S. Treasury Bill, 9/15/09 ..................................................... 200,000,000 199,818,445
(b) U.S. Treasury Bill, 1/14/10 ..................................................... 100,000,000 99,751,698
(b) U.S. Treasury Bill, 4/01/10 ..................................................... 200,000,000 199,363,901
(b) U.S. Treasury Bill, 6/03/10 ..................................................... 250,000,000 248,838,286
--------------
TOTAL U.S. GOVERNMENT AND AGENCY SECURITIES (COST $1,466,366,360) ............... 1,466,366,360
--------------
TOTAL INVESTMENTS BEFORE REPURCHASE AGREEMENTS (COST $5,811,679,096) ............ 5,811,679,096
--------------
(d) REPURCHASE AGREEMENTS 32.4%
Banc of America Securities LLC, 0.01%, 7/01/09 (Maturity Value $86,735,024)
Collateralized by U.S. Treasury Notes, 0.875%, 4/15/10 - 1/31/11 ............. 86,735,000 86,735,000
Banc of America Securities LLC, 0.05%, 7/01/09 (Maturity Value $840,001,167)
Collateralized by U.S. Government Agency Securities, 0.00% - 6.21%,
8/03/09 - 6/05/36 ............................................................ 840,000,000 840,000,000
Barclays Capital Inc., 0.01%, 7/01/09 (Maturity Value $405,000,112)
Collateralized by U.S. Treasury Notes, 1.50%, 12/31/13 ....................... 405,000,000 405,000,000
Deutsche Bank Securities Inc., 0.01%, 7/01/09 (Maturity Value $586,105,163)
Collateralized by U.S. Treasury Notes, 0.875% - 3.125%, 4/30/10 - 9/30/13; and
(b) U.S. Treasury Bills, 9/17/09 ................................................. 586,105,000 586,105,000
HSBC Securities (USA) Inc., 0.04%, 7/01/09 (Maturity Value $790,000,878)
Collateralized by U.S. Government Agency Securities, 1.45% - 10.35%,
9/10/10 - 10/08/27 ........................................................... 790,000,000 790,000,000
UBS Securities LLC, 0.07%, 7/01/09 (Maturity Value $50,000,097)
Collateralized by U.S. Government Agency Securities, 0.85%, 12/03/10 ......... 50,000,000 50,000,000
--------------
TOTAL REPURCHASE AGREEMENTS (COST $2,757,840,000) ............................... 2,757,840,000
--------------
TOTAL INVESTMENTS (COST $8,569,519,096) 100.6% .................................. 8,569,519,096
OTHER ASSETS, LESS LIABILITIES (0.6)% ........................................... (49,126,719)
--------------
NET ASSETS 100.0% ............................................................... $8,520,392,377
==============
See Abbreviations on page 31.
(a) The principal amount is stated in U.S. dollars unless otherwise indicated.
(b) The security is traded on a discount basis with no stated coupon rate.
(c) A supranational organization is an entity formed by two or more central
governments through international treaties.
(d) See Note 1(b) regarding repurchase agreements.
The accompanying notes are an integral part of these financial statements.
Annual Report | 23
The Money Market Portfolios
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2009
THE
MONEY MARKET
PORTFOLIO
--------------
Assets:
Investments in securities, at amortized cost .. $5,811,679,096
Repurchase agreements, at value and cost ...... 2,757,840,000
--------------
Total investments ....................... $8,569,519,096
Receivables:
Capital shares sold ........................ 456,390
Interest receivable ........................ 2,094,221
--------------
Total assets ............................ 8,572,069,707
--------------
Liabilities:
Payables:
Investment securities purchased ............ 50,000,000
Affiliates ................................. 1,069,924
Funds advanced by custodian ................... 454,490
Accrued expenses and other liabilities ........ 152,916
--------------
Total liabilities ....................... 51,677,330
--------------
Net assets, at value ................. $8,520,392,377
--------------
Net assets consist of:
Paid-in capital ............................... $8,523,624,394
Accumulated net realized gain (loss) .......... (3,232,017)
--------------
Net assets, at value ................. $8,520,392,377
--------------
Shares outstanding ............................... 8,523,624,394
--------------
Net asset value per share ........................ $ 1.00
--------------
The accompanying notes are an integral part of these financial statements.
24 | Annual Report
The Money Market Portfolios
FINANCIAL STATEMENTS (CONTINUED)
STATEMENT OF OPERATIONS
for the year ended June 30, 2009
THE
MONEY MARKET
PORTFOLIO
------------
Investment income:
Interest ...................................................... $109,770,988
------------
Expenses:
Management fees (Note 3a) ..................................... 12,958,059
Custodian fees (Note 4) ....................................... 157,952
Reports to shareholders ....................................... 7,672
Professional fees ............................................. 127,620
Other ......................................................... 132,248
------------
Total expenses ............................................. 13,383,551
Expense reductions (Note 4) ................................ (13,198)
------------
Net expenses ............................................ 13,370,353
------------
Net investment income ................................ 96,400,635
------------
Net realized gain (loss) from investments ........................ (3,212,548)
------------
Net increase (decrease) in net assets resulting from operations .. $ 93,188,087
============
The accompanying notes are an integral part of these financial statements.
Annual Report | 25
The Money Market Portfolios
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS
THE MONEY MARKET PORTFOLIO
YEAR ENDED JUNE 30,
-------------------------------
2009 2008
-------------- --------------
Increase (decrease) in net assets:
Operations:
Net investment income ................................................ $ 96,400,635 $ 271,686,303
Net realized gain (loss) from investments ............................ (3,212,548) --
-------------- --------------
Net increase (decrease) in net assets resulting from operations 93,188,087 271,686,303
-------------- --------------
Distributions to shareholders from net investment income ................ (96,400,635) (271,686,303)
Capital share transactions (Note 2) ..................................... 1,495,410,735 448,092,878
-------------- --------------
Net increase (decrease) in net assets ............................. 1,492,198,187 448,092,878
Net assets (there is no undistributed net investment income at beginning
or end of year):
Beginning of year ....................................................... 7,028,194,190 6,580,101,312
-------------- --------------
End of year ............................................................. $8,520,392,377 $7,028,194,190
============== ==============
The accompanying notes are an integral part of these financial statements.
26 | Annual Report
The Money Market Portfolios
NOTES TO FINANCIAL STATEMENTS
THE MONEY MARKET PORTFOLIO
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Money Market Portfolios (Trust) is registered under the Investment Company
Act of 1940, as amended, (1940 Act) as an open-end investment company,
consisting of one portfolio, The Money Market Portfolio (Portfolio). The shares
of the Portfolio are issued in private placements and are exempt from
registration under the Securities Act of 1933.
The following summarizes the Portfolio's significant accounting policies.
A. SECURITY VALUATION
Securities are valued at amortized cost which approximates market value. This
method involves valuing an instrument at its cost and thereafter assuming a
constant amortization to maturity of any discount or premium. All security
valuation procedures are approved by the Trust's Board of Trustees.
B. REPURCHASE AGREEMENTS
The Portfolio may enter into repurchase agreements, which are accounted for as a
loan by the Portfolio to the seller, collateralized by securities which are
delivered to the Portfolio's custodian. The market value, including accrued
interest, of the initial collateralization is required to be at least 102% of
the dollar amount invested by the Portfolio, with the value of the underlying
securities marked to market daily to maintain coverage of at least 100%. All
repurchase agreements held by the Portfolio at year end had been entered into on
June 30, 2009. Repurchase agreements are valued at cost.
C. INCOME TAXES
No provision has been made for U.S. income taxes because it is the Portfolio's
policy to qualify as a regulated investment company under the Internal Revenue
Code and to distribute to shareholders substantially all of its taxable income
and net realized gains.
The Portfolio has reviewed the tax positions, taken on federal income tax
returns, for each of the three open tax years and as of June 30, 2009, and has
determined that no provision for income tax is required in the Portfolio's
financial statements.
D. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Interest income and estimated expenses are accrued daily. Amortization of
premium and accretion of discount on debt securities are included in interest
income. Dividends from net investment income are normally declared daily; these
dividends are reinvested and paid monthly. Distributions to shareholders are
determined according to income tax regulations (tax basis). Distributable
earnings determined on a tax basis may differ from earnings recorded in
accordance with accounting principles generally accepted
Annual Report | 27
The Money Market Portfolios
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
THE MONEY MARKET PORTFOLIO
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
D. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
(CONTINUED)
in the United States of America. These differences may be permanent or
temporary. Permanent differences are reclassified among capital accounts to
reflect their tax character. These reclassifications have no impact on net
assets or the results of operations. Temporary differences are not reclassified,
as they may reverse in subsequent periods.
E. ACCOUNTING ESTIMATES
The preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the amounts of income
and expenses during the reporting period. Actual results could differ from those
estimates.
F. GUARANTEES AND INDEMNIFICATIONS
Under the Trust's organizational documents, its officers and trustees are
indemnified by the Trust against certain liabilities arising out of the
performance of their duties to the Trust. Additionally, in the normal course of
business, the Trust, on behalf of the Portfolio, enters into contracts with
service providers that contain general indemnification clauses. The Trust's
maximum exposure under these arrangements is unknown as this would involve
future claims that may be made against the Trust that have not yet occurred.
Currently, the Trust expects the risk of loss to be remote.
2. SHARES OF BENEFICIAL INTEREST
At June 30, 2009, there were an unlimited number of shares authorized (without
par value). Transactions in the Portfolio's shares at $1.00 per share were as
follows:
YEAR ENDED JUNE 30,
2009 2008
---------------- ---------------
Shares sold ..................................... $ 14,699,668,141 $ 8,390,404,437
Shares issued in reinvestment of distributions .. 96,416,354 271,685,448
Shares redeemed ................................. (13,300,673,760) (8,213,997,007)
---------------- ---------------
Net increase (decrease) ......................... $ 1,495,410,735 $ 448,092,878
================ ===============
28 | Annual Report
The Money Market Portfolios
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
THE MONEY MARKET PORTFOLIO
3. TRANSACTIONS WITH AFFILIATES
Franklin Resources, Inc. is the holding company for various subsidiaries that
together are referred to as Franklin Templeton Investments. Certain officers and
trustees of the Trust are also officers, directors, and/or trustees of the
Franklin Money Fund, the Franklin Templeton Money Fund Trust, the Institutional
Fiduciary Trust, and of the following subsidiaries:
SUBSIDIARY AFFILIATION
- ------------------------------------------------------------- ----------------
Franklin Advisers, Inc. (Advisers) Investment manager
Franklin Templeton Investor Services, LLC (Investor Services) Transfer agent
A. MANAGEMENT FEES
The Portfolio pays an investment management fee to Advisers of 0.15% per year of
the average daily net assets of the Portfolio.
B. TRANSFER AGENT FEES
Investor Services, under terms of an agreement, performs shareholder servicing
for the Portfolio and is not paid by the Portfolio for the services.
C. OTHER AFFILIATED TRANSACTIONS
At June 30, 2009, the shares of the Portfolio were owned by the following
entities:
PERCENTAGE OF
SHARES OUTSTANDING SHARES
------------- ------------------
Institutional Fiduciary Trust - Money Market Portfolio ....... 5,354,079,725 62.81%
Franklin Money Fund .......................................... 2,558,928,082 30.02%
Franklin Templeton Money Fund Trust -
Franklin Templeton Money Fund ............................. 462,747,495 5.43%
Institutional Fiduciary Trust - Franklin Cash Reserves Fund .. 147,869,092 1.74%
4. EXPENSE OFFSET ARRANGEMENT
The Portfolio has entered into an arrangement with its custodian whereby credits
realized as a result of uninvested cash balances are used to reduce a portion of
the Portfolio's custodian expenses. During the year ended June 30, 2009, the
custodian fees were reduced as noted in the Statement of Operations.
Annual Report | 29
The Money Market Portfolios
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
THE MONEY MARKET PORTFOLIO
5. INCOME TAXES
For tax purposes, capital losses may be carried over to offset future capital
gains, if any. At June 30, 2009, the capital loss carryforwards were as follows:
Capital loss carryforwards expiring in:
2016 ... $ 19,469
2017 ... 3,212,548
----------
$3,232,017
==========
The tax character of distributions paid during the years ended June 30, 2009 and
2008, was as follows:
2009 2008
----------- ------------
Distributions paid from ordinary income ... $96,400,635 $271,686,303
----------- ------------
At June 30, 2009, the cost of investments and undistributed ordinary income for
book and income tax purposes were the same.
6. FAIR VALUE MEASUREMENTS
The Portfolio adopted Financial Accounting Standards Board (FASB) Statement No.
157, "Fair Value Measurement" (SFAS 157), on July 1, 2008. SFAS 157 defines fair
value, establishes a framework for measuring fair value, and expands disclosures
about fair value measurements. The Portfolio has determined that the
implementation of SFAS 157 did not have a material impact on the Portfolio's
financial statements.
SFAS 157 establishes a fair value hierarchy that distinguishes between market
data obtained from independent sources (observable inputs) and the Trust's own
market assumptions (unobservable inputs). These inputs are used in determining
the value of the Portfolio's investments and are summarized in the following
fair value hierarchy:
- Level 1 - quoted prices in active markets for identical securities
- Level 2 - other significant observable inputs (including quoted prices
for similar securities, interest rates, prepayment speed, credit risk,
etc.)
- Level 3 - significant unobservable inputs (including the Portfolio's
own assumptions in determining the fair value of investments)
The inputs or methodology used for valuing securities are not an indication of
the risk associated with investing in those securities. Money market securities
may be valued using amortized cost, in accordance with the 1940 Act. Generally,
amortized cost reflects the current fair value
30 | Annual Report
The Money Market Portfolios
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
THE MONEY MARKET PORTFOLIO
6. FAIR VALUE MEASUREMENTS (CONTINUED)
of a security, but since the value is not obtained from a quoted price in an
active market, such securities are reflected as a Level 2.
At June 30, 2009, all the Portfolio's investments in securities carried at fair
value were in Level 2 inputs. For detailed industry descriptions, see the
accompanying Statement of Investments.
7. SUBSEQUENT EVENTS
Management has evaluated subsequent events through August 14, 2009 and
determined that no events have occurred that require disclosure.
ABBREVIATIONS
SELECTED PORTFOLIO
FHLB - Federal Home Loan Bank
FHLMC - Federal Home Loan Mortgage Corp.
FNMA - Federal National Mortgage Association
Annual Report | 31
The Money Market Portfolios
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF THE MONEY MARKET PORTFOLIO
In our opinion, the accompanying statement of assets and liabilities, including
the statement of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of The Money Market Portfolio (the
"Fund") at June 30, 2009, the results of its operations for the year then ended,
the changes in its net assets for each of the two years in the period then ended
and the financial highlights for each of the five years in the period then
ended, in conformity with accounting principles generally accepted in the United
States of America. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at June
30, 2009 by correspondence with the custodian and brokers, provide a reasonable
basis for our opinion.
PricewaterhouseCoopers LLP
San Francisco, California
August 14, 2009
32 | Annual Report
The Money Market Portfolios
TAX DESIGNATION (UNAUDITED)
Under Section 871(k)(1)(C) of the Internal Revenue Code (Code), the Portfolio
designates the maximum amount allowable but no less than $93,335,422 as interest
related dividends for purposes of the tax imposed under Section 871(a)(1)(A) of
the Code for the fiscal year ended June 30, 2009.
Annual Report | 33
The Money Market Portfolios
BOARD MEMBERS AND OFFICERS
The name, year of birth and address of the officers and board members, as well
as their affiliations, positions held with the Trust, principal occupations
during the past five years and number of portfolios overseen in the Franklin
Templeton Investments fund complex are shown below. Generally, each board member
serves until that person's successor is elected and qualified.
INDEPENDENT BOARD MEMBERS
NUMBER OF PORTFOLIOS IN
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ----------------------------- --------------- ------------------ ----------------------- -----------------------------------
HARRIS J. ASHTON (1932) Trustee Since 1992 135 Bar-S Foods (meat packing company).
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director of various companies; and FORMERLY, Director, RBC Holdings, Inc. (bank
holding company) (until 2002); and President, Chief Executive Officer and
Chairman of the Board, General Host Corporation (nursery and craft centers)
(until 1998).
ROBERT F. CARLSON (1928) Trustee Since 1998 112 None
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Retired; and FORMERLY, Vice President, senior member and President, Board of
Administration, California Public Employees Retirement Systems (CALPERS)
(1971-2008); member and Chairman of the Board, Sutter Community Hospitals;
member, Corporate Board, Blue Shield of California; and Chief Counsel,
California Department of Transportation.
SAM GINN (1937) Trustee Since 2007 112 Chevron Corporation (global energy
One Franklin Parkway company) and ICO Global
San Mateo, CA 94403-1906 Communications (Holdings) Limited
(satellite company).
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Private investor; and FORMERLY, Chairman of the Board, Vodafone AirTouch, PLC
(wireless company); Chairman of the Board and Chief Executive Officer, AirTouch
Communications (cellular communications) (1993-1998) and Pacific Telesis Groups
(telephone holding company) (1988-1994).
EDITH E. HOLIDAY (1952) Trustee Since 2005 135 Hess Corporation (exploration and
One Franklin Parkway refining of oil and gas), H.J.
San Mateo, CA 94403-1906 Heinz Company (processed foods and
allied products), RTI International
Metals, Inc. (manufacture and
distribution of titanium), Canadian
National Railway (railroad) and
White Mountains Insurance Group,
Ltd. (holding company).
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director or Trustee of various companies and trusts; and FORMERLY, Assistant to
the President of the United States and Secretary of the Cabinet (1990-1993);
General Counsel to the United States Treasury Department (1989-1990); and
Counselor to the Secretary and Assistant Secretary for Public Affairs and Public
Liaison - United States Treasury Department (1988-1989).
34 | Annual Report
NUMBER OF PORTFOLIOS IN
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ----------------------------- --------------- ------------------ ----------------------- -----------------------------------
FRANK W.T. LAHAYE (1929) Trustee Since 1992 112 Center for Creative Land Recycling
One Franklin Parkway (brownfield redevelopment).
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
General Partner, Las Olas L.P. (Asset Management); and FORMERLY, Chairman,
Peregrine Venture Management Company (venture capital).
FRANK A. OLSON (1932) Trustee Since 2007 135 Hess Corporation (exploration and
One Franklin Parkway refining of oil and gas) and
San Mateo, CA 94403-1906 Sentient Jet (private jet service).
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Chairman Emeritus, The Hertz Corporation (car rental) (since 2000) (Chairman of
the Board (1980-2000) and Chief Executive Officer (1977-1999)); and FORMERLY,
Chairman of the Board, President and Chief Executive Officer, UAL Corporation
(airlines).
LARRY D. THOMPSON (1945) Trustee Since 2007 143 None
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Vice President - Government Affairs, General Counsel and Secretary,
PepsiCo, Inc. (consumer products); and FORMERLY, Director, Delta Airlines
(aviation) (2003-2005) and Providian Financial Corp. (credit card provider)
(1997-2001); Senior Fellow of The Brookings Institution (2003-2004); Visiting
Professor, University of Georgia School of Law (2004); and Deputy Attorney
General, U.S. Department of Justice (2001-2003).
JOHN B. WILSON (1959) Lead Trustee since 112 None
One Franklin Parkway Independent 2007 and Lead
San Mateo, CA 94403-1906 Trustee Independent
Trustee since
2008
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
President and Founder, Hyannis Port Capital, Inc. (real estate and private
equity investing); serves on private and non-profit boards; and FORMERLY, Chief
Operating Officer and Executive Vice President, Gap, Inc. (retail) (1996-2000);
Chief Financial Officer and Executive Vice President - Finance and Strategy,
Staples, Inc. (office supplies) (1992-1996); Senior Vice President - Corporate
Planning, Northwest Airlines, Inc. (airlines) (1990-1992); and Vice President
and Partner, Bain & Company (consulting firm) (1986-1990).
INTERESTED BOARD MEMBERS AND OFFICERS
NUMBER OF PORTFOLIOS IN
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ----------------------------- --------------- ------------------ ----------------------- -----------------------------------
**CHARLES B. JOHNSON (1933) Trustee and Trustee since 135 None
One Franklin Parkway Chairman of 1992 and
San Mateo, CA 94403-1906 the Board Chairman of the
Board since 1993
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Chairman of the Board, Member - Office of the Chairman and Director, Franklin
Resources, Inc.; Director, Templeton Worldwide, Inc.; and officer and/or
director or trustee, as the case may be, of some of the other subsidiaries of
Franklin Resources, Inc. and of 41 of the investment companies in Franklin
Templeton Investments.
Annual Report | 35
NUMBER OF PORTFOLIOS IN
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ----------------------------- --------------- ------------------ ----------------------- -----------------------------------
**GREGORY E. JOHNSON (1961) Trustee Since 2007 91 None
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director, President and Chief Executive Officer, Franklin Resources, Inc.;
President, Templeton Worldwide, Inc.; Director, Templeton Asset Management Ltd.;
and officer and/or director or trustee, as the case may be, of some of the other
subsidiaries of Franklin Resources, Inc. and of 32 of the investment companies
in Franklin Templeton Investments.
JAMES M. DAVIS (1952) Chief Chief Compliance Not Applicable Not Applicable
One Franklin Parkway Compliance Officer since 2004
San Mateo, CA 94403-1906 Officer and and Vice President
Vice President - AML Compliance
- AML since 2006
Compliance
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director, Global Compliance, Franklin Resources, Inc.; officer of some of the
other subsidiaries of Franklin Resources, Inc. and of 45 of the investment
companies in Franklin Templeton Investments; and FORMERLY, Director of
Compliance, Franklin Resources, Inc. (1994-2001).
LAURA F. FERGERSON (1962) Chief Since March 2009 Not Applicable Not Applicable
One Franklin Parkway Executive
San Mateo, CA 94403-1906 Officer -
Finance and
Administration
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice President, Franklin Templeton Services, LLC; officer of 45 of the
investment companies in Franklin Templeton Investments; and FORMERLY, Director
and member of Audit and Valuation Committees, Runkel Funds, Inc. (2003-2004);
Assistant Treasurer of most of the investment companies in Franklin Templeton
Investments (1997-2003); and Vice President, Franklin Templeton Services, LLC
(1997-2003).
GASTON GARDEY (1967) Treasurer, Since March 2009 Not Applicable Not Applicable
One Franklin Parkway Chief Financial
San Mateo, CA 94403-1906 Officer and
Chief
Accounting
Officer
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director, Fund Accounting, Franklin Templeton Investments; and officer of 27 of
the investment companies in Franklin Templeton Investments.
ALIYA S. GORDON (1973) Vice President Since March 2009 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Associate General Counsel, Franklin Templeton Investments; officer of 45 of the
investment companies in Franklin Templeton Investments; and FORMERLY, Litigation
Associate, Steefel, Levitt & Weiss, LLP (2000-2004).
DAVID P. GOSS (1947) Vice President Since 2000 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Associate General Counsel, Franklin Templeton Investments; officer and/or
director, as the case maybe, of some of the other subsidiaries of Franklin
Resources, Inc. and of 45 of the investment companies in Franklin Templeton
Investments.
36 | Annual Report
NUMBER OF PORTFOLIOS IN
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ----------------------------- --------------- ------------------ ----------------------- -----------------------------------
RUPERT H. JOHNSON, JR. (1940) President and Since 2002 Not Applicable Not Applicable
One Franklin Parkway Chief
San Mateo, CA 94403-1906 Executive
Officer -
Investment
Management
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice Chairman, Member - Office of the Chairman and Director, Franklin Resources,
Inc.; Director, Franklin Advisers, Inc. and Templeton Worldwide, Inc.; Senior
Vice President, Franklin Advisory Services, LLC; and officer and/or director or
trustee, as the case may be, of some of the other subsidiaries of Franklin
Resources, Inc. and of 43 of the investment companies in Franklin Templeton
Investments.
KAREN L. SKIDMORE (1952) Vice President Since 2006 Not Applicable Not Applicable
One Franklin Parkway and Secretary
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Associate General Counsel, Franklin Templeton Investments; and officer of
29 of the investment companies in Franklin Templeton Investments.
CRAIG S. TYLE (1960) Vice President Since 2005 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
General Counsel and Executive Vice President, Franklin Resources, Inc.; officer
of some of the other subsidiaries of Franklin Resources, Inc. and of 45 of the
investment companies in Franklin Templeton Investments; and FORMERLY, Partner,
Shearman & Sterling, LLP (2004-2005); and General Counsel, Investment Company
Institute (ICI) (1997-2004).
* We base the number of portfolios on each separate series of the U.S.
registered investment companies within the Franklin Templeton Investments
fund complex. These portfolios have a common investment manager or
affiliated investment managers.
** Charles B. Johnson is considered to be an interested person of the Fund
under the federal securities laws due to his position as officer and
director and major shareholder of Franklin Resources, Inc. (Resources),
which is the parent company of the Fund's administrator and distributor.
Gregory E. Johnson is considered to be an interested person of the Fund
under the federal securities laws due to his position as an officer and
director of Resources.
Note 1: Charles B. Johnson and Rupert H. Johnson, Jr. are brothers and the
father and uncle, respectively, of Gregory E. Johnson.
Note 2: Officer information is current as of the date of this report. It is
possible that after this date, information about officers may change.
THE SARBANES-OXLEY ACT OF 2002 AND RULES ADOPTED BY THE SECURITIES AND EXCHANGE
COMMISSION REQUIRE THE FUND TO DISCLOSE WHETHER THE FUND'S AUDIT COMMITTEE
INCLUDES AT LEAST ONE MEMBER WHO IS AN AUDIT COMMITTEE FINANCIAL EXPERT WITHIN
THE MEANING OF SUCH ACT AND RULES. THE FUND'S BOARD OF TRUSTEES HAS DETERMINED
THAT THERE IS AT LEAST ONE SUCH FINANCIAL EXPERT ON THE AUDIT COMMITTEE AND HAS
DESIGNATED JOHN B. WILSON AS ITS AUDIT COMMITTEE FINANCIAL EXPERT. THE BOARD
BELIEVES THAT MR. WILSON QUALIFIES AS SUCH AN EXPERT IN VIEW OF HIS EXTENSIVE
BUSINESS BACKGROUND AND EXPERIENCE, INCLUDING SERVICE AS CHIEF FINANCIAL OFFICER
OF STAPLES, INC. FROM 1992 TO 1996. MR. WILSON HAS BEEN A MEMBER AND CHAIRMAN OF
THE FUND'S AUDIT COMMITTEE SINCE 2006. AS A RESULT OF SUCH BACKGROUND AND
EXPERIENCE, THE BOARD OF TRUSTEES BELIEVES THAT MR. WILSON HAS ACQUIRED AN
UNDERSTANDING OF GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AND FINANCIAL
STATEMENTS, THE GENERAL APPLICATION OF SUCH PRINCIPLES IN CONNECTION WITH THE
ACCOUNTING ESTIMATES, ACCRUALS AND RESERVES, AND ANALYZING AND EVALUATING
FINANCIAL STATEMENTS THAT PRESENT A BREADTH AND LEVEL OF COMPLEXITY OF
ACCOUNTING ISSUES GENERALLY COMPARABLE TO THOSE OF THE FUND, AS WELL AS AN
UNDERSTANDING OF INTERNAL CONTROLS AND PROCEDURES FOR FINANCIAL REPORTING AND AN
UNDERSTANDING OF AUDIT COMMITTEE FUNCTIONS. MR. WILSON IS AN INDEPENDENT TRUSTEE
AS THAT TERM IS DEFINED UNDER THE RELEVANT SECURITIES AND EXCHANGE COMMISSION
RULES AND RELEASES.
THE STATEMENT OF ADDITIONAL INFORMATION (SAI) INCLUDES ADDITIONAL INFORMATION
ABOUT THE BOARD MEMBERS AND IS AVAILABLE, WITHOUT CHARGE, UPON REQUEST.
SHAREHOLDERS MAY CALL (800) DIAL BEN/(800) 342-5236 TO REQUEST THE SAI.
Annual Report | 37
Institutional Fiduciary Trust
SHAREHOLDER INFORMATION
IFT MONEY MARKET PORTFOLIO
BOARD REVIEW OF INVESTMENT MANAGEMENT AGREEMENT
At a meeting held April 14, 2009, the Board of Trustees (Board), including a
majority of non-interested or independent Trustees, approved renewal of the
investment management agreement for Money Market Portfolio, one of the two
separate funds within the Trust (Fund(s)). In reaching this decision, the Board
took into account information furnished throughout the year at regular Board
meetings, as well as information prepared specifically in connection with the
annual renewal review process. Information furnished and discussed throughout
the year included investment performance reports and related financial
information for each Fund, as well as periodic reports on shareholder services,
legal, compliance, pricing, brokerage commissions and execution and other
services provided by the Investment Manager (Manager) and its affiliates.
Information furnished specifically in connection with the renewal process
included a report for each Fund prepared by Lipper, Inc. (Lipper), an
independent organization, as well as additional material, including a Fund
profitability analysis report prepared by management. The Lipper reports
compared each Fund's investment performance and expenses with those of other
mutual funds deemed comparable to the Fund as selected by Lipper. The Fund
profitability analysis report discussed the profitability to Franklin Templeton
Investments from its overall U.S. fund operations, as well as on an individual
fund-by-fund basis. Included with such profitability analysis report was
information on a fund-by-fund basis listing portfolio managers and other
accounts they manage, as well as information on management fees charged by the
Manager and its affiliates including management's explanation of differences
where relevant and a three-year expense analysis with an explanation for any
increase in expense ratios. Additional material accompanying such report was a
memorandum prepared by management describing project initiatives and capital
investments relating to the services provided to the Funds by the Franklin
Templeton Investments organization, as well as a memorandum relating to
economies of scale and a comparative analysis concerning transfer agent fees
charged each Fund. Such material also discussed some of the actions taken by
management in coping with problems arising out of the past year's financial
upheaval.
In considering such materials, the independent Trustees received assistance and
advice from and met separately with independent counsel. While the investment
management agreements for all Funds were considered at the same Board meeting,
the Board dealt with each Fund separately. In approving continuance of the
investment management agreement for each Fund, the Board, including a majority
of independent Trustees, determined that the existing management fee structure
was fair and reasonable and that continuance of the investment management
agreement was in the best interests of each Fund and its shareholders. While
attention was given to all information furnished, the following discusses some
primary factors relevant to the Board's decision.
NATURE, EXTENT AND QUALITY OF SERVICE. The Board was satisfied with the nature
and quality of the overall services provided by the Manager and its affiliates
to the Fund and its shareholders. In addition to investment performance and
expenses discussed later, the Board's
38 | Annual Report
Institutional Fiduciary Trust
SHAREHOLDER INFORMATION (CONTINUED)
IFT MONEY MARKET PORTFOLIO
BOARD REVIEW OF INVESTMENT MANAGEMENT AGREEMENT (CONTINUED)
opinion was based, in part, upon periodic reports furnished it showing that the
investment policies and restrictions for the Fund were consistently complied
with as well as other reports periodically furnished the Board covering matters
such as the compliance of portfolio managers and other management personnel with
the code of ethics adopted throughout the Franklin Templeton fund complex, the
adherence to fair value pricing procedures established by the Board, and the
accuracy of net asset value calculations. The Board also noted the extent of
benefits provided Fund shareholders from being part of the Franklin Templeton
family of funds, including the right to exchange investments between the same
class of funds without a sales charge, the ability to reinvest Fund dividends
into other funds and the right to combine holdings in other funds to obtain a
reduced sales charge. Favorable consideration was given to management's
continuous efforts and expenditures in establishing back-up systems and recovery
procedures to function in the event of a natural disaster, it being noted that
such systems and procedures had functioned smoothly during the Florida
hurricanes and blackouts experienced in recent years. Among other factors taken
into account by the Board were the Manager's best execution trading policies,
including a favorable report by an independent portfolio trading analytical
firm. Consideration was also given to the experience of the Fund's portfolio
management team, the number of accounts managed and general method of
compensation. In this latter respect, the Board noted that a primary factor in
management's determination of a portfolio manager's bonus compensation was the
relative investment performance of the funds he or she managed and that a
portion of such bonus was required to be invested in a pre-designated list of
funds within such person's fund management area so as to be aligned with the
interests of Fund shareholders. The Board also took into account the quality of
transfer agent and shareholder services provided Fund shareholders by an
affiliate of the Manager, noting continuing expenditures by management to
increase and improve the scope of such services, periodic favorable reports on
such service conducted by third parties, and the continuous enhancements to and
high industry ranking given the Franklin Templeton website. Particular attention
was given to the overall performance and actions taken by the Manager and its
affiliates in response to problems arising out of the market turmoil and
financial crisis experienced during the past year. In this respect, the Board
noted that management's independent credit analysis and diligent risk management
procedures had minimized exposure of funds within the Franklin Templeton complex
to subprime mortgages and that its continuous monitoring of counterparty credit
risk had limited fund exposure to firms experiencing financial difficulties like
Bear Stearns and AIG. The same type of conservative approach and attention to
risk had also prevented any structured investment products or other volatile
instruments from being held in the portfolios of the Fund or any of the other
money market funds within the Franklin Templeton complex. The Board also took
into account, among other things, management's efforts in establishing a $725
million global credit facility for the benefit of the funds and other accounts
managed by Franklin Templeton Investments to provide a source of cash for
Annual Report | 39
Institutional Fiduciary Trust
SHAREHOLDER INFORMATION (CONTINUED)
IFT MONEY MARKET PORTFOLIO
BOARD REVIEW OF INVESTMENT MANAGEMENT AGREEMENT (CONTINUED)
temporary and emergency purposes or to meet unusual redemption requests as well
as the strong financial position of the Manager's parent company and its
commitment to the mutual fund business. The Board also noted that during the
past year Franklin Templeton Investments, like many other fund managers, had
announced a hiring freeze and implemented employee reductions, and the Board
discussed with management the nature of such reductions and steps being taken to
minimize any negative impact on the nature and quality of services being
provided the Fund.
INVESTMENT PERFORMANCE. The Board placed significant emphasis on the investment
performance of the Fund in view of its importance to shareholders. While
consideration was given to performance reports and discussions with portfolio
managers at Board meetings throughout the year, particular attention in
assessing performance was given to the Lipper reports furnished for the
agreement renewal. The Lipper reports prepared for each individual Fund showed
its investment performance in comparison to a performance universe selected by
Lipper for the one-year period ended January 31, 2009, and for additional yearly
periods ended that date depending on when the Fund commenced operations. The
following summarizes the performance results for the Fund and the Board's view
of such performance.
The performance universe for the Fund consisted of the Fund and all
institutional money market funds as selected by Lipper. The Lipper report
comparison showed the Fund's total return to be in the second-lowest quintile of
such universe for the one-year period, and on an annualized basis to be in the
second-lowest quintile of such universe for each of the previous three- and
five-year periods, and the middle quintile of such universe for the previous
10-year period. This Fund is managed with a conservative approach with
investments made only in those securities having the highest short-term ratings
from rating agencies that rate such securities and constant monitoring that
avoided ownership of any downgraded securities to Tier 2 status. The Board found
such performance to be acceptable, noting that the Fund's one-year return was
within 40 basis points of the performance universe median and for each of such
annualized periods was within 16 basis points of the performance universe
median.
COMPARATIVE EXPENSES. Consideration was given to a comparative analysis of the
management fees and total expense ratios of the Fund compared with those of a
group of other funds selected by Lipper as its appropriate Lipper expense group.
Lipper expense data is based upon historical information taken from each fund's
most recent annual report and, as a result of the severe decline in mutual fund
industry assets during the last quarter of 2008, is based on asset levels that
are higher than the level currently existing for most funds. While recognizing
the limitations inherent in Lipper's methodology and recognizing that current
expense ratios may increase
40 | Annual Report
Institutional Fiduciary Trust
SHAREHOLDER INFORMATION (CONTINUED)
IFT MONEY MARKET PORTFOLIO
BOARD REVIEW OF INVESTMENT MANAGEMENT AGREEMENT (CONTINUED)
as assets decline, the Board believed that the independent analysis conducted by
Lipper remained an appropriate measure of comparative expenses. In reviewing
comparative costs, Lipper provides information on the Fund's contractual
investment management fee in comparison with the contractual investment
management fee that would have been charged by other funds within its Lipper
expense group assuming they were similar in size to the master money fund
through which the Fund invests, as well as the actual total expenses of the Fund
in comparison with those of its Lipper expense group. The Lipper contractual
investment management fee analysis includes administrative charges as being part
of a management fee. In the case of Money Market Portfolio, its Lipper report
showed its contractual investment management fee rate and actual total expenses
to be in the most expensive quintile of its Lipper expense group. In discussing
these expenses, management pointed out to the Board that this Fund is not
actively marketed and largely serves as an alternative and frequent temporary
investment vehicle for institutional investors and other funds within the
Franklin/Templeton/Mutual Series families and provides same day wiring and
exchange privileges for its shareholders. Management also pointed out that the
Fund's actual total expenses were within 19 basis points of its expense group
median. Based upon management's discussions and points raised, the Board found
the comparative expenses of this Fund to be acceptable.
MANAGEMENT PROFITABILITY. The Board also considered the level of profits
realized by the Manager and its affiliates in connection with the operation of
the Fund. In this respect, the Board reviewed the Fund profitability analysis
that addresses the overall profitability of Franklin Templeton's U.S. fund
business, as well as its profits in providing management and other services to
the Fund during the 12-month period ended September 30, 2008, being the most
recent fiscal year end for Franklin Resources, Inc., the Manager's parent.
During such period, the assets of the Franklin Templeton U.S. fund business were
significantly higher than currently existing, and to such extent the
profitability analysis does not reflect current fund operations. While taking
this into account in assessing the significance of the Fund profitability
analysis, the Board recognized such analysis was made at a given point in time
and that the decline in assets and effect on profitability would be reflected in
the profitability analysis covering Franklin Resources' 2009 fiscal year period.
In reviewing the analysis, attention was given to the methodology followed in
allocating costs to the Fund, it being recognized that allocation methodologies
are inherently subjective and various allocation methodologies may each be
reasonable while producing different results. In this respect, the Board noted
that, while being continuously refined and reflecting changes in the Manager's
own cost accounting, the allocation methodology was consistent with that
followed in profitability report presentations for the Fund made in prior years
and that the Fund's independent registered public accounting firm had been
engaged by the Manager to perform certain procedures on a biennial basis,
specified and approved by the Manager and the Fund's Board solely for their
Annual Report | 41
Institutional Fiduciary Trust
SHAREHOLDER INFORMATION (CONTINUED)
IFT MONEY MARKET PORTFOLIO
BOARD REVIEW OF INVESTMENT MANAGEMENT AGREEMENT (CONTINUED)
purposes and use in reference to the profitability analysis. In reviewing and
discussing such analysis, management discussed with the Board its belief that
costs incurred in establishing the infrastructure necessary for the type of
mutual fund operations conducted by the Manager and its affiliates may not be
fully reflected in the expenses allocated to the Fund in determining its
profitability, as well as the fact that the level of profits, to a certain
extent, reflected operational cost savings and efficiencies initiated by
management. The Board also took into account management's expenditures in
improving shareholder services provided the Fund, as well as the need to meet
additional regulatory and compliance requirements resulting from the
Sarbanes-Oxley Act and recent SEC and other regulatory requirements. In
addition, the Board considered a third-party study comparing the profitability
of the Manager's parent on an overall basis as compared to other publicly held
managers broken down to show profitability from management operations exclusive
of distribution expenses, as well as profitability including distribution
expenses. The Board also considered the extent to which the Manager and its
affiliates might derive ancillary benefits from fund operations, including
potential benefits resulting from allocation of fund brokerage and the use of
commission dollars to pay for research. Based upon its consideration of all
these factors, the Board determined that the level of profits realized by the
Manager and its affiliates from providing services to the Fund was not excessive
in view of the nature, quality and extent of services provided.
ECONOMIES OF SCALE. The Board also considered whether economies of scale are
realized by the Manager as the Fund grows larger and the extent to which this is
reflected in the level of management fees charged. While recognizing that any
precise determination is inherently subjective, the Board noted that based upon
the Fund profitability analysis, it appears that as some funds get larger, at
some point economies of scale do result in the Manager realizing a larger profit
margin on management services provided such a fund. The Fund is part of a
master-feeder relationship and the advisory fee at the master fund level for the
Fund is a flat rate of 0.15% at all asset levels. In addition, a separate fee
for administrative services amounting to 0.20% at all asset levels is charged to
the Fund. Management pointed out that a significant portion of the Fund's assets
at any given time consisted of investments by other funds within the Franklin
Templeton complex pursuant to cash sweep arrangements aimed at efficient
management of their excess cash. It was further noted that shareholders of funds
participating in such arrangements benefited from the fact that their fund's
normally higher advisory and administrative fees were reduced to the levels
charged the Fund on assets invested under such cash sweep arrangements. While
intending to monitor this issue, the Board believed it problematic in view of
the nature and role served by this Fund, the way it is managed, and the services
it provides that the Manager and its affiliates benefited from any meaningful
economies of scale that were not reflected in the level of advisory and
administrative fees charged the Fund and its shareholders.
42 | Annual Report
Institutional Fiduciary Trust
SHAREHOLDER INFORMATION (CONTINUED)
IFT MONEY MARKET PORTFOLIO
PROXY VOTING POLICIES AND PROCEDURES
The Trust's investment manager has established Proxy Voting Policies and
Procedures (Policies) that the Trust uses to determine how to vote proxies
relating to portfolio securities. Shareholders may view the Trust's complete
Policies online at franklintempleton.com. Alternatively, shareholders may
request copies of the Policies free of charge by calling the Proxy Group collect
at (954) 527-7678 or by sending a written request to: Franklin Templeton
Companies, LLC, 500 East Broward Boulevard, Suite 1500, Fort Lauderdale, FL
33394, Attention: Proxy Group. Copies of the Trust's proxy voting records are
also made available online at franklintempleton.com and posted on the U.S.
Securities and Exchange Commission's website at sec.gov and reflect the most
recent 12-month period ended June 30.
QUARTERLY STATEMENT OF INVESTMENTS
The Trust files a complete statement of investments with the U.S. Securities and
Exchange Commission for the first and third quarters for each fiscal year on
Form N-Q. Shareholders may view the filed Form N-Q by visiting the Commission's
website at sec.gov. The filed form may also be viewed and copied at the
Commission's Public Reference Room in Washington, DC. Information regarding the
operations of the Public Reference Room may be obtained by calling (800)
SEC-0330.
Annual Report | 43
This page intentionally left blank.
(FRANKLIN TEMPLETON INSTITUTIONAL(R) LOGO) 600 Fifth Avenue
New York, NY 10020
ANNUAL REPORT
INSTITUTIONAL FIDUCIARY TRUST
Money Market Portfolio
INVESTMENT MANAGER
Franklin Advisers, Inc.
DISTRIBUTOR
Franklin Templeton Distributors, Inc.
One Franklin Parkway
San Mateo, CA 94403-1906
FRANKLIN TEMPLETON INSTITUTIONAL SERVICES
(800) 321-8563
ftinstitutional.com
Authorized for distribution only when accompanied or preceded by a prospectus.
Investors should carefully consider a fund's investment goals, risks, charges
and expenses before investing. The prospectus contains this and other
information; please read it carefully before investing.
To ensure the highest quality of service, telephone calls to or from our service
departments may be monitored, recorded and accessed. These calls can be
identified by the presence of a regular beeping tone.
140 A2009 08/09
ITEM 2. CODE OF ETHICS.
(a) The Registrant has adopted a code of ethics that applies to its principal
executive officers and principal financial and accounting officer.
(c) N/A
(d) N/A
(f) Pursuant to Item 12(a)(1), the Registrant is attaching as an exhibit a copy
of its code of ethics that applies to its principal executive officers and
principal financial and accounting officer.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
(a)(1) The Registrant has an audit committee financial expert serving on its
audit committee.
(2) The audit committee financial expert is John B. Wilson and he is
"independent" as defined under the relevant Securities and Exchange Commission
Rules and Releases.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees
The aggregate fees paid to the principal accountant for professional services
rendered by the principal accountant for the audit of the registrant's annual
financial statements or for services that are normally provided by the principal
accountant in connection with statutory and regulatory filings or engagements
were $64,484 for the fiscal year ended June 30, 2009 and $58,558 for the fiscal
year ended June 30, 2008.
(b) Audit-Related Fees
There were no fees paid to the principal accountant for assurance and related
services rendered by the principal accountant to the registrant that are
reasonably related to the performance of the audit of the registrant's financial
statements and are not reported under paragraph (a) of Item 4.
There were no fees paid to the principal accountant for assurance and related
services rendered by the principal accountant to the registrant's investment
adviser and any entity controlling, controlled by or under common control with
the investment adviser that provides ongoing services to the registrant that are
reasonably related to the performance of the audit of their financial
statements.
(c) Tax Fees
There were no fees paid to the principal accountant for professional services
rendered by the principal accountant to the registrant for tax compliance, tax
advice and tax planning.
The aggregate fees paid to the principal accountant for professional services
rendered by the principal accountant to the registrant's investment adviser and
any entity controlling, controlled by or under common control with the
investment adviser that provides ongoing services to the registrant for tax
compliance, tax advice and tax planning were $6,000 for the fiscal year ended
June 30, 2009 and $0 for the fiscal year ended June 30, 2008. The services for
which these fees were paid included tax compliance and advice.
(d) All Other Fees
The aggregate fees paid to the principal accountant for products and services
rendered by the principal accountant to the registrant not reported in
paragraphs (a)-(c) of Item 4 were $0 for the fiscal year ended June 30, 2009 and
$3,074 for the fiscal year ended June 30, 2008. The services for which these
fees were paid include review of materials provided to the fund Board in
connection with the investment management contract renewal process.
The aggregate fees paid to the principal accountant for products and services
rendered by the principal accountant to the registrant's investment adviser and
any entity controlling, controlled by or under common control with the
investment adviser that provides ongoing services to the registrant other than
services reported in paragraphs (a)-(c) of Item 4 were $0 for the fiscal year
ended June 30, 2009 and $281,003 for the fiscal year ended June 30, 2008. The
services for which these fees were paid include review of materials provided to
the fund Board in connection with the investment management contract renewal
process.
(e) (1) The registrant's audit committee is directly responsible for approving
the services to be provided by the auditors, including:
(i) pre-approval of all audit and audit related services;
(ii) pre-approval of all non-audit related services to be provided to
the Fund by the auditors;
(iii) pre-approval of all non-audit related services to be provided to
the registrant by the auditors to the registrant's investment adviser or to any
entity that controls, is controlled by or is under common control with the
registrant's investment adviser and that provides ongoing services to the
registrant where the non-audit services relate directly to the operations or
financial reporting of the registrant; and
(iv) establishment by the audit committee, if deemed necessary or
appropriate, as an alternative to committee pre-approval of services to be
provided by the auditors, as required by paragraphs (ii) and (iii) above, of
policies and procedures to permit such services to be pre-approved by other
means, such as through establishment of guidelines or by action of a designated
member or members of the committee; provided the policies and procedures are
detailed as to the particular service and the committee is informed of each
service and such policies and procedures do not include delegation of audit
committee responsibilities, as contemplated under the Securities Exchange Act of
1934, to management; subject, in the case of (ii) through (iv), to any waivers,
exceptions or exemptions that may be available under applicable law or rules.
(e) (2) None of the services provided to the registrant described in paragraphs
(b)-(d) of Item 4 were approved by the audit committee pursuant to paragraph
(c)(7)(i)(C) of Rule 2-01 of regulation S-X.
(f) No disclosures are required by this Item 4(f).
(g) The aggregate non-audit fees paid to the principal accountant for services
rendered by the principal accountant to the registrant and the registrant's
investment adviser and any entity controlling, controlled by or under common
control with the investment adviser that provides ongoing services to the
registrant were $6,000 for the fiscal year ended June 30, 2009 and $284,077 for
the fiscal year ended June 30, 2008.
(h) The registrant's audit committee of the board has considered whether the
provision of non-audit services that were rendered to the registrant's
investment adviser (not including any sub-adviser whose role is primarily
portfolio management and is subcontracted with or overseen by another investment
adviser), and any entity controlling, controlled by, or under common control
with the investment adviser that provides ongoing services to the registrant
that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of
Regulation S-X is compatible with maintaining the principal accountant's
independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. N/A
ITEM 6. SCHEDULE OF INVESTMENTS. N/A
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES. N/A
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. N/A
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS. N/A
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no changes to the procedures by which shareholders may recommend
nominees to the Registrant's Board of Trustees that would require disclosure
herein.
ITEM 11. CONTROLS AND PROCEDURES.
(a) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. The Registrant maintains
disclosure controls and procedures that are designed to ensure that information
required to be disclosed in the Registrant's filings under the Securities
Exchange Act of 1934 and the Investment Company Act of 1940 is recorded,
processed, summarized and reported within the periods specified in the rules and
forms of the Securities and Exchange Commission. Such information is accumulated
and communicated to the Registrant's management, including its principal
executive officer and principal financial officer, as appropriate, to allow
timely decisions regarding required disclosure. The Registrant's management,
including the principal executive officer and the principal financial officer,
recognizes that any set of controls and procedures, no matter how well designed
and operated, can provide only reasonable assurance of achieving the desired
control objectives.
Within 90 days prior to the filing date of this Shareholder Report on Form
N-CSR, the Registrant had carried out an evaluation, under the supervision and
with the participation of the Registrant's management, including the
Registrant's principal executive officer and the Registrant's principal
financial officer, of the effectiveness of the design and operation of the
Registrant's disclosure controls and procedures. Based on such evaluation, the
Registrant's principal executive officer and principal financial officer
concluded that the Registrant's disclosure controls and procedures are
effective.
(b) CHANGES IN INTERNAL CONTROLS. There have been no significant changes in the
Registrant's internal controls or in other factors that could significantly
affect the internal controls subsequent to the date of their evaluation in
connection with the preparation of this Shareholder Report on Form N-CSR.
ITEM 12. EXHIBITS.
(a)(1) Code of Ethics
(a)(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
of Laura F. Fergerson, Chief Executive Officer - Finance and Administration, and
Gaston Gardey, Chief Financial Officer and Chief Accounting Officer
(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of
Laura F. Fergerson, Chief Executive Officer - Finance and Administration, and
Gaston Gardey, Chief Financial Officer and Chief Accounting Officer
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
INSTITUTIONAL FIDUCIARY TRUST
By /S/Laura F. Fergerson
-------------------------
Laura F. Fergerson
Chief Executive Officer - Finance and Administration
Date August 27, 2009
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By /S/Laura F. Fergerson
-------------------------
Laura F. Fergerson
Chief Executive Officer - Finance and Administration
Date August 27, 2009
By /S/Gaston Gardey
---------------------
Gaston Gardey
Chief Financial Officer and Chief Accounting Officer
Date August 27, 2009