August 15, 1995
Dear Shareholder:
We are pleased to bring you the 15th annual report of the Franklin Federal Money
Fund for the fiscal year ended June 30, 1995.
As you know, the Franklin Federal Money Fund is a short-term money market fund,
intended to provide preservation of capital and easy access to your money.
During the fiscal year, the fund's yield followed overall interest rate trends
closely, as should be expected given its investment objective. In addition, the
fund maintained its $1.00 per share value, as it has since its inception 15
years ago.1
As a Franklin Federal Money Fund shareholder, you continue to benefit from
convenience, easy access to your money, and a high degree of credit safety. You
also enjoy a wide range of services including free checks, unlimited
checkwriting for amounts of $100 or more, free wiring privileges and a 24-hour
automated customer service line.
Furthermore, the Franklin Templeton Group of Funds offers over 115 different
mutual funds, each with its own investment objective. If your objectives change,
chances are that we offer a fund to match your new objective.
We thank you for your continued support of the Franklin Federal Money Fund and
look forward to serving your needs in the years to come.
Sincerely,
Charles B. Johnson
Chairman
Franklin Federal Money Fund
1. Please remember that an investment in the fund is neither insured nor
guaranteed by the U.S. government, and that there can be no assurance that the
fund will be able to maintain a stable net asset value of $1.00 per share.
Your Fund's Objective
The Franklin Federal Money Fund seeks to provide a high level of current income,
consistent with liquidity and preservation of capital. The fund invests all of
its assets in the shares of The U.S. Government Securities Money Market
Portfolio (the Portfolio), which has the same investment objective. At present,
it is the Portfolio's policy to limit its investments to U.S. Treasury bills,
notes and bonds, and to repurchase agreements collateralized by such
securities.1 The fund seeks to maintain a $1.00 per share net asset value.2
Fiscal year '94-'95 was one of contrasts. The first half of the fiscal period
was marked by a steadily growing economy and sharply higher interest rates. In
response to this rapid growth and the accompanying threat of inflation, the
Federal Reserve Board (the Fed) raised the federal funds rate by 1.25 percentage
points in the final six months of 1994.
Economic growth slowed in the first six months of 1995 as the effects of the
Fed's tightening actions began to be felt.
A variety of economic indicators, including retail, home, and auto sales,
declined during the first two quarters of 1995. Despite these signs that the
economy was slowing, robust labor markets, higher corporate earnings and
continued tight conditions in the manufacturing sector still warranted
inflationary concerns. With this in mind, the Fed raised short-term interest
rates once more in February of this year.
Since this final rate hike, the economy has slowed considerably, and to head off
further contraction, the Fed lowered the federal funds rate by 25 basis points
on July 6 to 5.75% from 6.00%. This cut in short-term rates was the first in
nearly three years and reverses a trend that began in February 1994, during
which the Federal Reserve raised rates on seven occasions by a total of three
percentage points.
Short-term market rates reflected the trends in economic growth over the year.
During the first half of the fiscal year when growth was especially
strong, one-year Treasury bill yields rose nearly two full percentage points to
7.20% on Decem-ber 31, 1994, from 5.22% on June 30, 1994. By the end of the
reporting period, by which time growth had begun to slow, one-year T-bills had
dropped to 5.33%3.
We kept the fund's average maturity fairly short during the fiscal year,
enabling us to reinvest the fund's assets more quickly in new securities
offering higher yields. As interest rates began to fall during the latter half
of the fiscal year, we began lengthening the average maturity to lock in higher
rates. By June 30, 1995, the fund's weighted average maturity stood at 31 days,
still relatively short, though a considerable rise from just 12 days on June 30,
1994. As a result, the fund's seven-day effective yield rose to 5.06% on June
30, 1995, from 3.32% on June 30, 1994.
Looking forward, although many economic indicators have been mixed, slower
manufacturing activity and a decline in the number of jobs in the economy have
led some to expect that the Federal Reserve would further ease monetary policy.
At this point, it's unclear whether the July reduction will be a one-time action
or whether additional cuts will be forthcoming. Clearly, this will depend on how
the economy responds in the months ahead. If reports suggest the economy is
weakening, additional rate cuts will be likely. If the economy picks up,
however, it may be some time before another rate cut occurs.
We continue to invest the fund's assets in securities that are among the highest
quality available to money market portfolios. Since the fund's objective is to
provide shareholders with a high-quality, conservative investment, we do not
invest in leveraged derivatives or other potentially volatile securities.
1. U.S. government securities owned by the Portfolio or held under repurchase
agreement, but not shares of the fund, are guaranteed by the U.S. government,
its agencies or instrumentalities as to the timely payment of principal and
interest.
2. Please remember, an investment in the fund is neither insured nor guaranteed
by the U.S. government, and there can be no assurance that the fund will be able
to maintain a stable net asset value of $1.00 per share.
Performance Summary
Franklin Federal Money Fund
June 30, 1995
Seven-day annualized yield ............... 4.93%
Seven-day effective yield4................ 5.06%
4. The seven-day effective yield assumes the compounding of daily dividends, and
reflects fluctuations in interest rates on portfolio investments, as well as
fund expenses. Yield should be viewed in terms of the current, low rate of
inflation -- just as high inflation usually results in higher yields, low
inflation often results in lower yields. Past performance is not indicative of
future results.
Franklin Advisers, Inc., the fund's administrator and the
manager of the fund's underlying portfolio, is voluntarily waiving a portion of
its fees, which reduces expenses and increases yield to shareholders. Without
these reductions, the fund's yield would have been lower. The fee waiver may be
discontinued at any time upon notice to the fund's Board of Directors.
3. Source: Micropal
FRANKLIN FEDERAL MONEY FUND
Statement of Investments in Securities and Net Assets, June 30, 1995
<TABLE>
<CAPTION>
Value
Shares (Note 1)
Mutual Funds 100.4%............................................................
<S> <C>
139,823,974 The U.S. Government Securities Money Market Portfolio (Note 1) ................. $139,823,974
---------------
Total Investments (Cost $139,823,974) 100.4% ........................ 139,823,974
Liabilities in Excess of Other Assets, Net (.4%) .................... (537,914)
---------------
Net Assets 100.0% ................................................... $139,286,060
===============
</TABLE>
At June 30, 1995, there was no unrealized appreciation or depreciation for
financial statement or income tax purposes.
The accompanying notes are an integral part of these financial statements.
FRANKLIN FEDERAL MONEY FUND
Financial Statements
Statement of Assets and Liabilities
June 30, 1995
Assets:
Investments in securities,
at value and cost $139,823,974
Cash 5,000
Receivables:
Capital shares sold 367,691
--------------
Total assets 140,196,665
--------------
Liabilities:
Payables:
Capital shares repurchased 799,483
Administration fees 47,484
Distributions to shareholders 16,138
Shareholder servicing costs 15,200
Accrued expenses and other liabilities 32,300
--------------
Total liabilities 910,605
--------------
Net assets (equivalent to $1.00 per share
based on 139,286,060 shares of capital
stock outstanding) $139,286,060
==============
Statement of Operations
for the seven months ended June 30, 1995
Investment income:
Dividends $4,730,257
Expenses:
Administration fees (Note 4) $347,517
Shareholder servicing costs
(Note 4) 107,358
Reports to shareholders 71,445
Registration fees 44,930
Professional fees 18,713
Directors' fees and expenses 6,468
Other 5,004
--------------
Total expenses 601,435
--------------
Net investment income $4,128,822
--------------
Statements of Changes in Net Assets for the seven months ended June 30, 1995 and
the year ended November 30, 1994
June 30, 1995 November 30, 1994
--------------- ----------------
Increase (decrease)
in net assets:
Operations:
Net investment
income $ 4,128,822 $ 5,260,573
Net realized gain
from security
transactions -- 140
--------------- ----------------
Net increase
in net assets
resulting from
operations 4,128,822 5,260,713
Distributions to
shareholders from
undistributed net
investment income: (4,128,822) (5,260,713)
Increase (decrease) in
net assets from
capital share
transactions
(Note 2) (29,243,795) 47,597,119
--------------- ----------------
Net increase
(decrease) in
net assets (29,243,795) 47,597,119
Net assets (there is
no undistributed net
investment income
at beginning or end
of period)
Beginning of
period 168,529,855 120,932,736
--------------- ----------------
End of period $139,286,060 $168,529,855
============== ==============
+Distributions were increased by net realized gain from security transactions of
$140.
The accompanying notes are an integral part of these financial statements.
FRANKLIN FEDERAL MONEY FUND
Notes to Financial Statements
1. SIGNIFICANT ACCOUNTING POLICIES
Franklin Federal Money Fund (the Fund) is a no-load, open-end, diversified
management investment company (mutual fund), registered under the Investment
Company Act of 1940 as amended.
The Fund invests substantially all of its assets in The U.S. Government
Securities Money Market Portfolio (the Portfolio), which is a no-load, open-end,
diversified management investment company having the same investment objective
as the Fund. 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.
On December 13, 1994, the Board of Directors authorized a change in the fiscal
year end of the Fund from November 30 of each year to June 30.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles for
investment companies.
a. Securities Valuations:
The Portfolio's shares held by the Fund are valued at their proportionate
interest in net asset value of the Portfolio. As of June 30, 1995, the Fund owns
29.46% of the Portfolio.
b. Income Tax:
The Fund intends to continue to qualify for the tax treatment applicable to
regulated investment companies under the Internal Revenue Code and to make the
requisite distributions to its shareholders which will be sufficient to relieve
it from income and excise taxes. Therefore, no income tax provision is required.
c. Security Transactions:
Security transactions are accounted for on the date the securities are purchased
or sold (trade date). Realized gains and losses on security transactions (if
any) are determined on the basis of specific identification for both financial
statement and income tax purposes.
d. Investment Income, Expenses and Distributions:
Net investment income includes income, calculated on an accrual basis,
amortization of original issue and market discount or premium (if any), and
estimated expenses which are accrued daily. The total available for
distributions is computed daily and includes the net investment income, plus or
minus any gains or losses on security transactions and changes in unrealized
portfolio appreciation or depreciation, (if any).
Distributions are normally declared for each day the New York Stock Exchange is
open for business, equal to the total available for distributions (as defined
above), and are payable to shareholders of record as of the close of business
the preceding day. Such distributions are automatically reinvested daily in
additional shares of the Fund at net asset value.
2. CAPITAL STOCK
At June 30, 1995, there was 5,000,000,000 shares of no par value capital stock
authorized and capital paid-in aggregated $139,286,060. Transactions in capital
stock at $1.00 per share were as follows:
<TABLE>
<CAPTION>
Seven Months
Ended Year Ended
June 30, 1995 November 30, 1994
<S> <C> <C>
Shares sold................................................................... $ 82,049,245 $132,210,246
--------------- ---------------
Shares issued in reinvestment of distributions................................ 4,114,636 5,292,309
Shares redeemed............................................................... (121,831,762) (177,458,519)
Changes from exercise of exchange privilege:
Shares sold.................................................................. 134,273,108 537,081,791
Shares redeemed.............................................................. (127,849,022) (449,528,708)
--------------- ---------------
Net increase (decrease)....................................................... $ (29,243,795) $ 47,597,119
=============== ===============
</TABLE>
3. PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities aggregated $98,437,172 and $134,940,390,
respectively, for the seven months ended June 30, 1995.
4. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
Franklin Advisers, Inc., under the terms of an administration agreement,
provides various administrative, statistical, and other services, and receives
fees calculated at the annual rate of 91/200 of 1% for the first $100 million of
the Fund's average daily net assets; 33/100 of 1% of its net assets over $100
million up to $250 million; and 7/25 of 1% of its net assets in excess of $250
million. The terms of the agreements provide that aggregate annual expenses of
the Fund be limited to the extent necessary to comply with the limitations set
forth in the laws, regulations and administrative interpretations of the states
in which the Fund's shares are registered. For the seven months ended June 30,
1995, the Fund's expenses did not exceed these limitations.
Pursuant to a shareholder service agreement with Franklin/Templeton Investor
Services, Inc., the Fund pays costs on a per shareholder account basis. Such
costs incurred for the seven months ended June 30, 1995 aggregated $107,358, of
which $106,784 was paid to Franklin/Templeton Investor Services, Inc.
Certain officers and directors of the Fund are also officers and/or directors of
Franklin Advisers, Inc. and/or Franklin/Templeton Investor Services, Inc., both
wholly-owned subsidiaries of Franklin Resources, Inc.
5. FINANCIAL HIGHLIGHTS
Selected data for a share of capital stock outstanding throughout the periods
are as follows:
<TABLE>
<CAPTION>
Seven Months
Ended Year Ended November 30,
-------------------------------
June 30, 1995 1994 1993 1992 1991
---------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net asset value at beginning of period................ $1.00 $1.00 $1.00 $1.00 $1.00
---------- ------- ------- ------- -------
Net investment income................................. .029 .031 .022 .029 .053
Distributions from net investment income.............. (.029) (.031) (.022) (.029) (.053)
---------- ------- ------- ------- -------
Net asset value at end of period...................... $1.00 $1.00 $1.00 $1.00 $1.00
========== ======= ======= ======= =======
Total return**........................................ 2.92% 3.15% 2.22% 2.97% 5.42%
Ratios/Supplemental Data
Net assets at end of period (in 000's)................ $139,286 $168,530 $120,933 $134,931 $211,249
Ratio of expenses to average net assets++............. .87%*+ .98%+ .90% .85% .79%
Ratio of net investment income to average
net assets........................................... 4.93%* 3.15% 2.20% 2.95% 5.26%
</TABLE>
*Annualized
**Total return measures the change in value of an investment over the periods
indicated. It assumes reinvestment of dividends at net asset value and is not
annualized.
++Effective with fiscal year 1994, the expense ratio includes the
Fund's share of Portfolio's allocated expenses.
+During the periods indicated Franklin Advisers, Inc., the investment manager of
the Portfolio agreed in advance to waive a portion of its management fees. Had
such action not been taken, the Fund's ratio of expenses to average net assets
would have been as follows:
<TABLE>
<CAPTION>
Ratio of
Expenses
to Average
Net Assets++
<S> <C>
1994............................................ .99%
1995............................................ .88
</TABLE>
FRANKLIN FEDERAL MONEY FUND
Report of Independent Auditors
To the Shareholders and Board of Directors
of Franklin Federal Money Fund:
We have audited the accompanying statement of assets and liabilities of Franklin
Federal Money Fund, including the statement of investments in securities and net
assets, as of June 30, 1995, and the related statement of operations for the
seven months then ended, the statements of changes in net assets for the periods
indicated thereon, and the financial highlights for the periods indicated in
Note 5. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1995 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Franklin Federal Money Fund as of June 30, 1995, the results of its operations
for the seven months then ended, the changes in its net assets for the periods
indicated thereon, and the financial highlights for each of the periods
indicated in Note 5, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
San Francisco, California
August 4, 1995
THE MONEY MARKET PORTFOLIOS
Statement of Investments in Securities and Net Assets, June 30, 1995
<TABLE>
<CAPTION>
Face Value
Amount The Money Market Portfolio (Note 1)
a Short Term Investments 99.9%
Bank Notes 6.1%
<S> <C> <C>
$ 40,000,000 Abbey National Treasury Services, 6.063%, 11/24/95 .......................... $ 40,000,000
10,000,000 NBD Bank, 6.20%, 10/16/95.................................................... 9,999,372
20,000,000 Wachovia Bank, North Carolina Branch, 5.80%, 08/30/95........................ 20,000,000
10,000,000 Westdeutsche Landesbank, New York Branch, 6.14%, 09/01/95.................... 10,000,169
-------------
Total Bank Notes (Cost $79,999,541) ......................................... 79,999,541
-------------
Certificates of Deposit 15.3%
10,000,000 Banque Nationale de Paris, New York Branch, 6.11%, 08/03/95 ................. 10,000,053
35,000,000 Commerzbank AG, New York Branch, 5.78% - 6.19%, 09/06/95 - 09/26/95 ......... 34,999,371
10,000,000 Lloyds Bank Plc, New York Branch, 5.94%, 09/18/95 ........................... 10,001,452
60,000,000 National Westminster Bank, New York Branch, 6.09% - 6.22%, 09/22/95 - 11/08/95 60,004,040
10,000,000 Rabobank Nederland NV, New York Branch, 6.28%, 10/10/95 ..................... 10,002,228
55,000,000 Societe Generale, New York Branch, 5.94% - 6.03%, 08/01/95 - 09/05/95 ....... 55,000,369
20,000,000 Swiss Bank Corp, 5.80%, 08/07/95 ............................................ 19,997,926
-------------
Total Certificates of Deposit (Cost $200,005,439)............................ 200,005,439
-------------
Commercial Paper 60.7%
20,000,000 ANZ (DE), Inc., 5.86%, 09/13/95 ............................................. 19,759,089
40,000,000 American Express Credit Corp., 5.85% - 5.93%, 08/15/95 - 08/28/95 ........... 39,663,250
25,000,000 Ameritech Corp., 5.70%, 02/26/95 ............................................ 24,050,000
55,000,000 Associates Corp. of North America, 5.96% - 6.07%, 07/26/95 - 08/10/95 ....... 54,671,511
60,000,000 AT&T Corp., 5.77% - 6.20%, 07/11/95 - 09/25/95 .............................. 59,497,800
20,000,000 Bank of Nova Scotia., 5.78%, 09/27/95 ....................................... 19,717,422
20,000,000 Campbell Soup Co., 5.92%, 02/02/96 .......................................... 19,289,600
20,000,000 Canadian Imperial Holdings, Inc., 5.96%, 07/20/95 ........................... 19,937,089
15,000,000 Cargill, Inc., 5.86%, 09/11/95 .............................................. 14,824,200
20,000,000 Cheltenham & Gloucester Building Society, 5.80%, 09/29/95 ................... 19,710,000
13,200,000 CIESCO L.P., 5.77%, 10/06/95 ................................................ 12,994,780
20,000,000 Commerzbank U.S. Finance Inc., 5.77%, 10/02/95 .............................. 19,701,883
55,000,000 Den Danske Corp. Inc., 5.78% - 6.06%, 08/14/95 - 09/28/95 ................... 54,435,661
60,000,000 General Electric Capital Corp., 5.70% - 6.21%, 07/07/95 - 08/31/95 .......... 59,753,389
25,000,000 Halifax Building Society, 5.85%, 09/15/95 ................................... 24,691,250
40,000,000 Kingdom of Sweden, 6.02% - 6.26%, 08/04/95 - 09/18/95 ....................... 39,617,544
20,000,000 MetLife Funding, Inc., 5.90%, 08/24/95 ...................................... 19,823,000
45,000,000 National Rural Utilities Cooperative Finance Corp., 5.69% - 5.94%,
08/16/95 - 10/26/95 ....................................................... 44,419,140
20,000,000 Pepsico Inc., 5.93%, 07/28/95 ............................................... 19,911,050
15,000,000 Province of Alberta, 6.29%, 08/02/95 ........................................ 14,916,134
40,000,000 Prudential Funding Corp., 6.06% - 6.21%, 07/12/95 - 10/16/95 ................ 39,601,817
20,000,000 Smithkline Beecham Corp., 5.75%, 02/02/96 ................................... 19,310,000
Commercial Paper (cont.)
$ 58,000,000 Svenska Handelsbanken, Inc., 5.71% - 6.30%, 07/27/95 - 09/14/95 ............. $ 57,552,377
20,000,000 Treasury Corp. of New South Wales, 5.95%, 07/21/95 .......................... 19,933,889
55,000,000 Westpac Capital Corp., 5.60% - 6.30%, 07/06/95 - 10/05/95 .................. 54,649,472
-------------
Total Commercial Paper (Cost $792,431,347)................................... 792,431,347
-------------
Medium Term Notes 1.6%
20,000,000 Merrill Lynch & Co., Inc., variable rate note, 6.28%, 10/11/95 (Cost $20,000,000) 20,000,000
-------------
Total Investments before Repurchase Agreements
(Cost $1,092,436,327)........................................................ 1,092,436,327
-------------
b Receivables from Repurchase Agreements 16.2%
89,980,000 Chase Securities, Inc., 6.125%, 07/03/95 (Maturity Value $90,045,938)
Collateral: U.S. Treasury Notes, 7.50%, 12/31/96 ............................ 90,000,000
6,391 c J.P. Morgan Securities, Inc., 6.61%, 07/03/95 (Maturity Value $6,394)........ 6,391
121,570,000 J.P. Morgan Securities, Inc., 5.80%, 07/03/95 (Maturity Value $121,628,759)
Collateral: U.S. Treasury Bills, 07/06/95 - 05/30/96
U.S. Treasury Notes, 5.63%, 06/30/97 ............................. 121,570,000
-------------
Total Receivables from Repurchase Agreements (Cost $211,576,391 ) ............ 211,576,391
-------------
Total Investments (Cost $1,304,012,718)99.9% ........................... 1,304,012,718
Others Assets and Liabilities, Net.1%............................ ...... 1,561,695
-------------
Net Assets 100.0% ............................................................ $1,305,574,413
=============
At June 30, 1995, there was no unrealized appreciation or depreciation for
financial statement or income tax purposes.
a Certain short-term securities are traded on a discount basis; the rates shown
are the discount rates at the time of purchase by the Fund. Other securities
bear interest at the rates shown, payable at fixed dates or upon maturity.
b Face amount for repurchase agreements is for the underlying collateral.
c See Note 1(f) regarding sweep repurchase agreement.
The accompanying notes are an integral part of these financial statements.
THE MONEY MARKET PORTFOLIOS
Statement of Investments in Securities and Net Assets, June 30, 1995
Face Value
Amount The U.S. Government Securities Money Market Portfolio (Note 1)
a Short Term Government Securities100%...........................................
Government Securities24.0%
$116,000,000 U.S. Treasury Bills, 5.26% - 6.16%, 07/27/95 - 12/21/95 (Cost $ 113,909,415) .. $113,909,415
--------------
b Receivables from Repurchase Agreements76.1%
19,563,000 Barclays de Zoete Wedd Securities, Inc., New York, 5.90%, 07/03/95
(Maturity Value $20,009,833) Collateral: U.S. Treasury Notes, 7.875%, 02/15/96 ................ 20,000,000
99,370,000 Chase Securities, Inc., 6.125%, 07/03/95 (Maturity Value $100,051,042)
Collateral: U.S. Treasury Notes, 6.625%, 03/31/97.............................................. 100,000,000
19,760,000 Citicorp Securities, Inc., 6.125%, 07/03/95 (Maturity Value $20,010,208)
Collateral: U.S. Treasury Notes, 6.875%, 03/31/97.............................................. 20,000,000
19,880,000 Fuji Securities, Inc., 6.10%, 07/03/95 (Maturity Value $20,010,167)
Collateral: U.S. Treasury Notes, 7.625%, 04/30/96 ............................................. 20,000,000
18,990,000 Lehman Government Securities, Inc., 6.21%, 07/03/95 (Maturity Value $20,010,350)
Collateral: U.S. Treasury Notes, 8.875%, 11/15/97.............................................. 20,000,000
101,200,000 J.P. Morgan Securities, Inc., 5.80%, 07/03/95 (Maturity Value $101,248,913)
Collateral: U.S. Treasury Notes, 6.125%, 05/31/97.............................................. 101,200,000
8,121 c J.P. Morgan Securities, Inc., 5.36%, 07/03/95 (Maturity Value $8,124)........................... 8,121
20,195,000 Morgan Stanley & Co., Inc., 6.00%, 07/03/95 (Maturity Value $20,010,000)
Collateral: U.S. Treasury Notes, 6.00%, 10/15/99............................................... 20,000,000
19,690,000 Nomura Securities International, Inc., 6.125%, 07/03/95 (Maturity Value $20,010,208)
Collateral: U.S. Treasury Notes, 6.75%, 02/28/97............................................... 20,000,000
21,202,000 Sanwa Securities (USA) Co., L.P., 5.95%, 07/03/95 (Maturity Value $20,009,917)
Collateral: U.S. Treasury Notes, 03/07/96...................................................... 20,000,000
20,000,000 UBS Securities, Inc., 6.10%, 07/03/95 (Maturity Value $20,010,167)
Collateral: U.S. Treasury Notes, 6.50%, 04/30/97............................................... 20,000,000
Total Receivables from Repurchase Agreements (Cost $361,208,121)............................... 361,208,121
-------------
Total Investments (Cost $475,117,536)100.1%..................................................... 475,117,536
Liabilities in Excess of Other Assets, Net(.1)%................................................. (463,150)
-------------
Net Assets 100.0%............................................................................... $474,654,386
=============
</TABLE>
At June 30, 1995, there was no unrealized appreciation or depreciation for
financial statement or income tax purposes.
a Certain short-term securities are traded on a discount basis; the rates shown
are the discount rates at the time of purchase by the Fund. Other securities
bear interest at the rates shown, payable at fixed dates or upon maturity.
b Face amount for repurchase agreements is for the underlying collateral.
c See Note 1(f) regarding sweep repurchase agreement.
The accompanying notes are an integral part of these financial statements.
THE MONEY MARKET PORTFOLIOS
Financial Statements
Statements of Assets and Liabilities
June 30, 1995
The The U.S.
Money Government
Market Securities Money
Portfolio Market Portfolio
----------- -----------
Assets:
Investments in
securities, at value
and cost $1,092,436,327 $113,909,415
Receivables from
repurchase agree-
ments, at value and
cost 211,576,391 361,208,121
Receivables:
Interest 2,434,443 60,545
From affiliates 7,934 9,645
----------- -----------
Total assets 1,306,455,095 475,187,726
----------- -----------
Liabilities:
Payables:
Capital shares
repurchased 554,979 461,622
Management fees 308,405 64,872
Distributions to
shareholders 9,133 410
Accrued expenses and
other liabilities 8,165 6,436
----------- -----------
Total liabilities 880,682 533,340
----------- -----------
Net assets, at value $1,305,574,413 $474,654,386
=========== ===========
Shares outstanding 1,305,574,413 474,654,386
=========== ===========
Net asset value
per share $1.00 $1.00
=========== ===========
Statements of Operations
for the year ended June 30, 1995
The The U.S.
Money Government
Market Securities Money
Portfolio Market Portfolio
--------- -----------
Investment income:
Interest $67,765,165 $22,867,808
--------- -----------
Expenses:
Management fees, net
(Note 5) 1,730,028 581,495
Reports to shareholders 33,892 12,653
Custodian fees 32,238 25,590
Professional fees 11,920 6,084
Trustees' fees and
expenses 7,224 2,953
Other 8,786 4,419
--------- -----------
Total expenses 1,824,088 633,194
--------- -----------
Net investment
income 65,941,077 22,234,614
--------- -----------
Net realized gain
on investments 1,356 392
--------- -----------
Net increase in net assets
resulting from operations $65,942,433 $22,235,006
========= ===========
The accompanying notes are an integral part of these financial statements.
THE MONEY MARKET PORTFOLIOS
Financial Statements (cont.)
Statements of Changes in Net Assets
for the years ended June 30, 1995 and 1994
<TABLE>
<CAPTION>
The U.S. Government Securities
The Money Market Portfolio Money Market Portfolio
------------------------ -----------------------
1995 1994 1995 1994
------------ ----------- ----------- -----------
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C>
Net investment income.......................... $ 65,941,077 $ 9,998,562 $ 22,234,614 $ 7,622,616
Net realized gain (loss) from security
transactions................................... 1,356 (5,146) 392 350
------------ ----------- ----------- -----------
Net increase in net assets resulting from
operations..................................... 65,942,433 9,993,416 22,235,006 7,622,966
Distributions to shareholders from undistributed
net investment income.......................... (65,942,433)d (9,993,416)c (22,235,006)b (7,622,966)a
Increase (decrease) in net assets from capital
share transactions (Notes 2 and 5)............. 1,086,385,190 (3,168,832) 256,106,321 (91,771,434)
------------ ----------- ----------- -----------
Net increase (decrease) in net assets........... 1,086,385,190 (3,168,832) 256,106,321 (91,771,434)
Net assets (there is no undistributed net invest-
ment income at beginning or end of the year):
Beginning of year............................... 219,189,223 222,358,055 218,548,065 310,319,499
------------ ----------- ----------- -----------
End of year..................................... $1,305,574,413 $219,189,223 $474,654,386 $218,548,065
============ =========== =========== ===========
aDistributions were increased by net realized gain from security transactions of $350.
bDistributions were increased by net realized gain from security transactions of $392.
cDistributions were decreased by net realized loss from security transactions of $5,146.
dDistributions were increased by net realized gain from security transactions of $1,356.
</TABLE>
The accompanying notes are an integral part of these financial statements.
THE MONEY MARKET PORTFOLIOS
Notes to Financial Statements
1. SIGNIFICANT ACCOUNTING POLICIES
The Money Market Portfolios (the Money Market) is a no load, open-end
diversified management investment company (mutual fund), registered under the
Investment Company Act of 1940, as amended. The Money Market has two portfolios
(the Portfolios) consisting of The Money Market Portfolio and The U.S.
Government Securities Money Market Portfolio. Each of the Portfolios issues a
separate series of shares and maintains a totally separate and distinct
investment portfolio. The shares of the Money Market are issued in private
placements and are thus exempt from registration under the Securities Act of
1933.
The following is a summary of significant accounting policies consistently
followed by the Portfolios in the preparation of their financial statements. The
policies are in conformity with generally accepted accounting principles for
investment companies.
a. Security Valuation:
Portfolio securities are valued at amortized cost, which approximates value.
Each of the Portfolios must maintain a dollar weighted average maturity of 90
days or less and only purchase instruments having remaining maturities of 397
days or less. If a Portfolio has a remaining weighted average maturity of
greater than 90 days, the Portfolio will be stated at value based on recorded
closing sales on a national securities exchange or, in the absence of a recorded
sale, within the range of the most recent quoted bid and ask prices. The
trustees have established procedures designed to stabilize, to the extent
reasonably possible, each Portfolio's price per share as computed for the
purpose of sales and redemptions at $1.00.
b. Income Taxes:
The Money Market intends to continue to qualify for the tax treatment applicable
to regulated investment companies under the Internal Revenue Code and to make
the requisite distributions to its shareholders which will be sufficient to
relieve it from income and excise taxes. Therefore, no income tax provision is
required.
Each Portfolio is treated as a separate entity in the determination of
compliance with the Internal Revenue Code.
c. Security Transactions:
Security transactions are accounted for on the date the securities are purchased
or sold (trade date). Realized gains and losses on security transactions are
determined on the basis of specific identification for both financial statement
and income tax purposes.
d. Investment Income, Expenses and Distributions:
Net investment income includes income, calculated on an accrual basis,
amortization of original issue and market discount or premium (if any), and
estimated expenses which are accrued daily. The total available for
distributions is computed daily and includes the net investment income, plus or
minus any gains or losses on security transactions and changes in unrealized
portfolio appreciation or depreciation, (if any).
Distributions are normally declared for each day the New York Stock Exchange is
open for business, equal to the total available for distributions (as defined
above), and are payable to shareholders of record as of the close of business
that day. Such distributions are automatically reinvested monthly in additional
shares of the Portfolio at net asset value.
e. Expense Allocation:
Common expenses incurred by the Money Market are allocated among the Portfolios
based on the ratio of net assets of each Portfolio to the combined net assets.
In all other respects, expenses are charged to each Portfolio as incurred on a
specific identification basis.
1. SIGNIFICANT ACCOUNTING POLICIES (cont.)
f. Repurchase Agreements:
The Portfolios may enter into repurchase agreements with government securities
dealers recognized by the Federal Reserve Board and/or member banks of the
Federal Reserve System. In a repurchase agreement, the Portfolios purchase a
U.S. government security from a dealer or bank subject to an agreement to resell
it at a mutually agreed upon price and date. Such a transaction is accounted for
as a loan by the Portfolio to the seller, collateralized by the underlying
security. The transaction requires the initial collateralization of the seller's
obligation by U.S. government securities with market value, including accrued
interest, of at least 102% of the dollar amount invested by the Portfolio, with
the value of the underlying security marked to market daily to maintain coverage
of at least 100%. The collateral is delivered to the Portfolios' custodian and
held until resold to the dealer or bank. At June 30, 1995, all outstanding
repurchase agreements held by the Portfolios had been entered into on that date.
The Portfolios may enter into a sweep agreement with their custodian bank. In a
sweep, the excess cash in the Portfolios' direct deposit accounts at the end of
the day is invested overnight. The Money Market Portfolio's excess cash is
invested in a AAA rated time deposit of Morgan Guaranty Trust Company's Nassau
branch. The U.S. Government Securities Money Market Portfolio's excess cash is
invested in a U.S. government-backed repurchase agreement with Morgan Guaranty
of New York. Funds are returned to the Portfolios' direct deposit accounts as
the first transaction of the next business day.
2. TRUST SHARES
At June 30, 1995, there was an unlimited number of $.01 par value shares of
beneficial interest authorized, and paid-in capital aggregated as follows:
<TABLE>
<CAPTION>
The U.S. Government
The Money Securities Money
Market Portfolio Market Portfolio
----------- -------------
<S> <C> <C>
Paid-in capital............................................................... $1,305,574,413 $474,654,386
=========== =============
Transactions in the Portfolios' shares at $1.00 per share for the years ended June 30, 1995 and June 30, 1994 were as
follows:
The U.S. Government
The Money Securities Money
Market Portfolio Market Portfolio
------------ -------------
Year ended June 30, 1995
Shares sold................................................................. $ 2,811,245,134 $ 2,270,754,653
Shares issued in reinvestment of distributions.............................. 65,932,187 22,235,271
Shares redeemed............................................................. (2,923,489,920) (2,175,508,395)
Shares issued in connection with assets transfer (Note 5)................... 1,132,697,789 138,624,792
------------ -------------
Net increase................................................................ $ 1,086,385,190 $ 256,106,321
============ =============
Year ended June 30, 1994
Shares sold................................................................. $ 1,699,503,699 $ 2,476,681,838
Shares issued in reinvestment of distributions.............................. 9,993,345 7,620,764
Shares redeemed............................................................. (1,712,665,876) (2,576,074,036)
------------ -------------
Net decrease................................................................ $ (3,168,832) $ (91,771,434)
============ =============
3. CAPITAL LOSS CARRYOVERS
At June 30, 1995, for tax purposes, The Money Market Portfolio had an
accumulated net realized loss of $5,146. For tax purposes, the aggregate cost of
securities are the same for financial statement purposes at June 30, 1995.
4. PURCHASES AND SALES OF SECURITIES
Aggregate purchases and sales/maturities of securities, including repurchase
agreements, for the year ended June 30, 1995 were as follows:
The U.S. Government
The Money Securities Money
Market Portfolio Market Portfolio
------------ -------------
Purchases................................................................... $83,142,429,080 $90,292,725,226
============ =============
Sales....................................................................... $83,111,797,358 $90,036,843,956
============ =============
</TABLE>
5. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
Franklin Advisers, Inc., under the terms of a management agreement, provides
investment advice, administrative services, office space and facilities to the
Portfolios, and receives fees computed monthly on the average daily net assets
of the Portfolios during the month. The Money Market Portfolio and The U.S.
Government Securities Money Market Portfolio pay fees equal to an annualized
rate of 15/100 of 1% of their average daily net assets.
The terms of the agreement provide that annual aggregate expenses of the
Portfolios be limited to the extent necessary to comply with the limitations set
forth in the laws, regulations and administrative interpretations of the states
in which the Portfolios' shares are registered. The Portfolios' expenses did not
exceed these limitations; however, for the year ended June 30, 1995, Franklin
Advisers, Inc. agreed in advance to waive $93,609 and $53,499 of the management
fees for The Money Market Portfolio and The U.S. Government Securities Money
Market Portfolio, respectively.
Certain officers and trustees of the Portfolios are also officers and/or
directors of Franklin Advisers, Inc. and Franklin/Templeton Investor Services,
Inc., all wholly-owned subsidiaries of Franklin Resources, Inc.
6. ASSETS TRANSFER
On August 1, 1994, the Franklin Money Fund and the Franklin Federal Money Fund
transferred substantially all of their net assets, respectively, into The Money
Market Portfolio and The U.S. Government Securities Money Market Portfolio. The
transfers were accompanied by a tax-free exchange of 1,132,697,789 capital
shares of The Money Market Portfolio for net assets valued at $1,132,697,789 of
the Franklin Money Fund and 138,624,792 capital shares of The U.S. Government
Securities Money Market Portfolio for net assets valued at $138,624,792 of the
Franklin Federal Money Fund.
As of June 30, 1995, the shares of The Money Market Portfolio were owned by the
following funds:
<TABLE>
<CAPTION>
Percentage of
Shares Outstanding Shares
---------- ------------
<S> <C> <C>
Franklin Money Fund............................................................. 1,018,691,315 78.03%
Institutional Fiduciary Trust - Money Market Portfolio.......................... 272,146,783 20.84%
Institutional Fiduciary Trust - Franklin Cash Reserves Fund..................... 14,585,078 1.12%
Franklin Templeton Money Fund Trust - Franklin Templeton Money Fund II.......... 151,237 .01%
6. ASSETS TRANSFER (cont.)
As of June 30, 1995, the shares of The U.S. Government Securities Money Market
Portfolio were owned by the following funds:
Percentage of
Shares Outstanding Shares
--------- ------------
Institutional Fiduciary Trust-Franklin U.S. Government Securities Money Market Portfolio 334,830,412 70.54%
Franklin Federal Money Fund.............................................................. 139,823,974 29.46%
7. FINANCIAL HIGHLIGHTS
Selected data for each share of beneficial interest outstanding throughout the
period are as follows:
Per Share Operating Performance Ratios/Supplemental Data
------------------------------------ ---------------------------
Net Asset Distributions Net Assets Ratio of Ratio of
Values at Net From Net Net Asset at End Expenses Net Income
Year Ended Beginning Investment Investment Values at Total of Period to Average to Average
June 30 of Year Income Income End of Year Return++ (in 000's) Net Assets+ Net Assets
The Money Market Portfolio
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1993* $1.00 $0.027 $(0.027) $1.00 2.92%** $ 222,358 0.15%** 3.18%**
1994 1.00 0.033 (0.033) 1.00 3.33 219,189 0.15 3.25
1995 1.00 0.053 (0.053) 1.00 5.46 1,305,574 0.15 5.42
The U.S. Government Securities Money Market Portfolio
1993* 1.00 0.021 (0.021) 1.00 2.27** 310,319 0.15** 3.05**
1994 1.00 0.032 (0.032) 1.00 3.25 218,548 0.15 3.20
1995 1.00 0.052 (0.052) 1.00 5.32 474,654 0.15 5.25
*July 28, 1992 (Effective date of registration) to June 30, 1993.
**Annualized
++Total return measures the change in value of an investment over the periods
indicated. It assumes reinvestment of dividends and capital gains, if any, at
net asset value and is not annualized.
+During the period indicated, the Manager agreed to waive in advance a portion
of its management fees of the Portfolios. Had such action not been taken, the
ratios of expenses to average net assets would have been as follows.
Ratio of Expenses to
Average Net Assets
-----------
The Money Market Portfolio
<S> <C>
1993*...................................... .17%**
1994....................................... .17
1995....................................... .16
The U.S. Government Securities
Money Market Portfolio
1993*...................................... .18%**
1994....................................... .17
1995....................................... .16
</TABLE>
THE MONEY MARKET PORTFOLIOS
Report of Independent Accountants
To the Shareholders and Board of Trustees
The Money Market Portfolios
We have audited the accompanying statements of assets and liabilities of the two
portfolios comprising The Money Market Portfolios, including each Portfolio's
statement of investments in securities and net assets, as of June 30, 1995, and
the related statements of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the three years in the period then ended.
These financial statements and financial highlights are the responsibility of
the Portfolios' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1995 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
two Portfolios comprising The Money Market Portfolios as of June 30, 1995, the
results of their operations for the year then ended, the changes in their net
assets for each of the two years in the period then ended and the financial
highlights for the period then ended in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
San Francisco, California
August 4, 1995
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
determined by the presence of a regular beeping tone.
