CHAIRMAN'S MESSAGE
Your Fund's Objective:
The Franklin 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 Money Market Portfolio (the Portfolio), which
has the same investment objective. The Portfolio, in turn, invests in various
money market instruments such as U.S. government securities and other U.S.
dollar-denominated securities. The fund attempts to maintain a stable net asset
value of $1.00 per share.1
August 15, 1996
Dear Shareholder:
We are pleased to bring you the Franklin Money Fund's annual report for the
period ended June 30, 1996.
Slow economic growth and mild inflation characterized most of the period under
review. Nearing the end of a two-year economic slowdown, the first seven months
of this fiscal year were distinctly different from the last five months. In an
attempt to stimulate economic activity, the Federal Reserve Board (Fed) cut its
federal funds rate (the interest rate banks charge each other for overnight
loans) from 6.00% to 5.75% in July 1995, then to 5.50% in December. Despite
these cuts, gross domestic product (GDP), a measure of the nation's economic
output, grew at an annual rate of only 0.3% in the fourth quarter of 1995.2 The
Fed once again lowered its federal funds rate in late January 1996 to 5.25%.
1. An investment in the fund is neither insured nor guaranteed by the U.S.
government or by any other entity or institution. There is no assurance that the
$1.00 per share price will be maintained.
GDP expanded at an annual rate of 2.0% during the first quarter of 1996,
however, following the release of surprisingly impressive employment reports.
Consumer confidence, industrial production, and employment figures, which are
three key indicators of future economic strength, surged through the end of the
reporting period. GDP increased at an estimated annual rate of 4.2% during the
second quarter of 1996.
Short-term market rates reflected this growth pattern. The 90-day Treasury bill
yield dropped from 5.57% on June 30, 1995, to 5.14% on March 30, 1996. Three
months later, this yield rose to 5.16%.3
Since we maintained a relatively short-weighted average maturity during the
reporting period (54 days on June 30, 1996), the fund's seven-day yield mirrored
movements in Treasury bill rates.The fund's seven-day yield began the period at
5.47%, declined to 4.70% on March 30, 1996, then rose to 4.76% on June 30, 1996.
We continue to invest in the highest quality securities 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 that we believe involve undue risk.
This discussion reflects the strategies we employed for the fund during the 12
months under review and includes our opinions as of the close of the period.
Since economic and market conditions are constantly changing, our strategies,
evaluations, conclusions and decisions regarding portfolio holdings, may change
as new circumstances arise. Although past performance of a specific investment
or sector cannot guarantee future performance, such information can be useful in
analyzing securities we purchase or sell for the fund.
2. Source for all GDP figures: U.S. Commerce Dept.
3. Source: Bloomberg.
Looking forward, lower unemployment rates and stronger business activity should
work to strengthen the economy. If economic growth continues at its current
pace, however, the Fed may raise short-term interest rates as it seeks to
prevent inflation from getting out of control.
As a Franklin Money Fund shareholder, you continue to benefit from convenient,
easy access to your money, and a high degree of credit safety. You can also
enjoy a wide range of services, including draft writing for amounts of $100 or
more, free draft books, and access to TeleFACTS(R), our around-the-clock
automated customer service line.
Thank you for your continued support of the Franklin Money Fund, and we look
forward to serving you in the years to come.
Sincerely,
Charles B. Johnson
Chairman
Franklin Money Fund
Performance Summary
- -----------------------------------------------------
Franklin Money Fund
June 30, 1996
Seven-day annualized yield 4.65%
Seven-day effective yield* 4.76%
- -----------------------------------------------------
*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. Yields 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 predictive of
future results.
Franklin Advisers, Inc., the fund's administrator and the manager of the fund's
underlying portfolio, has agreed in advance to waive 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.
FRANKLIN MONEY FUND
Statement of Investments in Securities and Net Assets, June 30, 1996
<TABLE>
<CAPTION>
Value
Shares (Note 1)
<S> <C> <C>
Mutual Funds 100.1%
$1,173,771,347 The Money Market Portfolio (Note 1) ......................................... $1,173,771,347
-------------
Total Investments (Cost $1,173,771,347) 100.1% ................... 1,173,771,347
Liabilities in Excess of Other Assets (.1)% ...................... (1,132,723)
-------------
Net Assets 100.0% ................................................ $1,172,638,624
=============
</TABLE>
At June 30, 1996, 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 MONEY FUND
Financial Statements
Statement of Assets and Liabilities
June 30, 1996
Assets:
Investment in securities, at value and cost $1,173,771,347
--------------
Total assets 1,173,771,347
--------------
Liabilities:
Payables:
Capital shares repurchased 346,184
Administration fees 292,197
Shareholder servicing costs 174,936
Accrued expenses and other liabilities 319,406
--------------
Total liabilities 1,132,723
--------------
Net assets (equivalent to $1.00 per share
based on 1,172,638,624 shares of capital
stock outstanding) $1,172,638,624
==============
Statement of Operations
for the year ended June 30, 1996
Investment income:
Dividends $60,297,195
Expenses:
Administration fees (Note 5) $3,351,257
Shareholder servicing costs
(Note 5) 2,024,331
Reports to shareholders 934,296
Registration fees 142,065
Directors' fees and expenses 81,425
Professional fees 20,347
Other 24,473
--------------
Total expenses 6,578,194
--------------
Net investment income $53,719,001
==============
Statements of Changes in Net Assets
for the year ended June 30, 1996
and the seven months ended June 30, 1995
Seven Months
Year Ended Ended
June 30, 1996 June 30, 1995
-------------- --------------
Increase (decrease)
in net assets:
Operations:
Net investment income $ 53,719,001 $ 31,252,091
Distributions to
shareholders from
net investment income (53,719,001) (31,252,091)
Increase (decrease)
in net assets from
capital share trans-
actions (Note 2) 153,672,341 (105,256,444)
-------------- --------------
Net increase
(decrease) in
net assets 153,672,341 (105,256,444)
Net assets (there is
no undistributed net
investment income
at beginning or end
of period):
Beginning of
period 1,018,966,283 1,124,222,727
-------------- --------------
End of period $1,172,638,624 $1,018,966,283
============== ==============
The accompanying notes are an integral part of these financial statements.
FRANKLIN MONEY FUND
Notes to Financial Statements
1. SIGNIFICANT ACCOUNTING POLICIES
Franklin 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's investment objectives are high current income
consistent with capital preservation and liquidity.
The Fund invests substantially all of its assets in The Money Market Portfolio
(the Portfolio), which is a no-load, open-end, diversified management investment
company having the same investment objectives as the Fund. The financial
statements of the Portfolio, including the Statement of Investments in
Securities and Net Assets, 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 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. Security Valuation:
The Fund holds Portfolio shares that are valued at its proportionate interest in
the net asset value of the Portfolio. As of June 30, 1996, the Fund owns 75.72%
of the Portfolio.
b. Income Taxes:
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.
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.
d. Investment Income, Expenses and Distributions:
Net investment income includes income, calculated on an accrual basis, and
estimated expenses which are accrued daily. The total available for distribution
is computed daily and includes the net investment income, plus or minus any
gains or losses on security transactions and any changes in unrealized portfolio
appreciation or depreciation.
Distributions are normally declared each day the New York Stock Exchange is open
for business, equal to the total available for distribution (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.
e. Accounting Estimates:
The preparation of financial statements in accordance with generally accepted
accounting principles 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 expense during the reporting
period. Actual results could differ from those estimates.
2. CAPITAL STOCK
At June 30, 1996, there were 5,000,000,000 shares of $.10 par value capital
stock authorized. Transactions in the Fund's shares at $1.00 per share were as
follows:
<TABLE>
<CAPTION>
Seven Months
Year Ended Ended
June 30, 1996 June 30, 1995
------------ ------------
<S> <C> <C>
Shares sold..................................... $ 2,415,077,056 $ 1,532,810,434
Shares issued in reinvestment of distributions.. 53,666,653 31,240,837
Shares redeemed................................. (2,315,071,368) (1,669,307,715)
------------ ------------
Net increase (decrease)......................... $ 153,672,341 $ (105,256,444)
============ ============
</TABLE>
3. CAPITAL LOSS CARRYOVERS
At June 30, 1996, for tax purposes, the Fund had capital loss carryovers as
follows:
Capital loss carryovers expiring in: 2001........ $ 763
2002........ 4,038
------
$4,801
======
4. PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities for the year ended June 30, 1996 aggregated
$751,298,456 and $596,218,424, respectively.
5. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
a. Administration Agreement:
Under the terms of an administration agreement, Franklin Advisers, Inc.
(Advisers), provides various administrative, statistical, and other services,
and receives fees computed monthly based on the average daily net assets of the
Fund as follows:
Annualized Fee Rate Average Daily Net Assets
------------------ -------------------------------------------------
0.455% First $100 million
0.330% Over $100 million, up to and including $250 million
0.280% Over $250 million
The terms of the administration agreement 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 year ended June 30,
1996, the Fund's expenses did not exceed these limitations.
b. Shareholder Services Agreement:
Under the terms of a shareholder services agreement with Franklin/Templeton
Investor Services, Inc. (Investor Services), the Fund pays costs on a per
shareholder account basis. Shareholder servicing costs incurred by the Fund for
the year ended June 30, 1996 aggregated $2,024,331, of which $2,012,261 was paid
to Investor Services.
5. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES (cont.)
c. Other Affiliates and Related Party Transactions:
Certain officers and directors of the Fund are also officers and/or directors of
Advisers, Investor Services (all wholly-owned subsidiaries of Franklin
Resources, Inc.), and of the Portfolio.
6. FINANCIAL HIGHLIGHTS
Selected data for a share of capital stock outstanding throughout the period are
as follows:
<TABLE>
<CAPTION>
Year Ended June 30, Year Ended November 30,
----------------- --------------------------
1996 1995+++ 1994 1993 1992
-------- -------- -------- -------- --------
<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 ............................... .049 .030 .032 .023 .031
Distributions from net investment income ............ (.049) (.030) (.032) (.023) (.031)
-------- -------- -------- -------- --------
Net asset value at end of period .................... $1.00 $1.00 $1.00 $1.00 $1.00
======== ======== ======== ======== ========
Total Return* ....................................... 4.99% 3.07% 3.28% 2.36% 3.12%
Ratios/Supplemental Data
Net assets at end of period (in 000's) .............. $1,172,639 $1,018,966 $1,124,223 $1,040,026 $1,101,571
Ratio of expenses to average net assets++ ........... .75%** .80%+** .91** .80% .79%
Ratio of net investment income
to average net assets .............................. 4.86% 5.19%+ 3.23% 2.32% 3.08%
</TABLE>
*Total return measures the change in value of an investment over the periods
indicated. It is not annualized. It assumes reinvestment of dividends and
capital gains at net asset value.
+Annualized
++Effective with fiscal year 1994, the expense ratio includes the Fund's share
of the Portfolio's allocated expenses.
+++For the seven months ended June 30, 1995.
**Advisers agreed in advance to waive a portion of its management fees incurred
by the Portfolio during the periods indicated and a portion of its
administration fees incurred by the Fund for 1994 and 1995. Had such action not
been taken, the Fund's ratio of expenses to average net assets would have been
as follows:
Ratio of
Expenses
to Average
Net Assets++
--------------
1994............................................ .93%
1995+++......................................... .82%+
1996............................................ .76%
FRANKLIN MONEY FUND
Report of Independent Auditors
To the Shareholders and Board of Directors
of Franklin Money Fund
We have audited the accompanying statement of assets and liabilities of Franklin
Money Fund, including the statement of investments in securities and net assets,
as of June 30, 1996, and the related statement 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 periods
presented. 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, 1996. 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 Money Fund as of June 30, 1996, and 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 periods
presented, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
San Francisco, California
August 6, 1996
THE MONEY MARKET PORTFOLIOS
Statement of Investments in Securities and Net Assets, June 30, 1996
<TABLE>
<CAPTION>
Face Value
Amount The Money Market Portfolio (Note 1)
<S> <C> <C>
aShort Term Investments 90.5%
Bank Notes .6%
$ 10,000,000 Bank of America NT & SA, 5.45%, 09/18/96 (Cost $9,999,766) .................... $ 9,999,766
-------------
Certificates of Deposit 22.3%
65,000,000 Bank of Nova Scotia, Portland Branch, 5.035% - 5.58%, 07/05/96 - 01/24/97 ..... 64,999,984
35,000,000 Bayerische Landesbank, New York Branch, 5.06% - 5.36%, 07/08/96 - 07/10/96 .... 35,000,141
25,000,000 Commerzbank, AG, New York Branch, 5.37%, 09/06/96 ............................. 25,000,459
25,000,000 Credit Suisse, New York Branch, 5.35%, 09/13/96 ............................... 25,000,506
15,000,000 Dresdner Bank, AG, New York Branch, 4.94%, 01/06/97 ........................... 14,948,167
20,000,000 Lloyds Bank, Plc., New York Branch, 5.70%, 09/11/96 ........................... 20,000,378
25,000,000 National Westminster Bank, New York Branch, 5.50%, 09/12/96 ................... 25,000,000
20,000,000 Rabobank Nederland, NV, New York Branch, 5.37%, 09/09/96 ...................... 20,000,380
20,000,000 Royal Bank of Canada, New York Branch, 5.02%, 08/01/96 ........................ 20,000,313
75,000,000 Societe Generale, New York Branch, 5.36% - 5.51%, 08/15/96 - 10/09/96 ......... 75,000,381
20,000,000 Westpac Banking Corp., New York Branch, 5.36%, 09/05/96 ....................... 20,000,000
-------------
Total Certificates of Deposit (Cost $344,950,709)........................ 344,950,709
-------------
Commercial Paper 67.6%
20,000,000 ABN AMRO North America Finance, Inc., 4.975%, 08/26/96 ........................ 19,845,222
20,000,000 AIG Funding, Inc., 5.39%, 09/23/96 ............................................ 19,748,465
60,000,000 American Express Credit Corp., 4.88% - 5.28%, 07/22/96 - 08/20/96 ............. 59,694,249
20,000,000 ANZ (DE), Inc., 5.27%, 08/29/96 ............................................... 19,827,261
65,000,000 Associates Corp. of North America, 5.27% - 5.28%, 07/01/96 - 09/03/96 ......... 64,621,600
65,000,000 AT&T Corp., 4.91% - 5.30%, 07/19/96 - 09/20/96 ................................ 64,555,765
30,000,000 BBV Finance, Inc., 5.32% - 5.39%, 08/07/96 - 09/16/96 ......................... 29,775,358
60,000,000 Canadian Imperial Holdings, Inc., 5.27% - 5.44%, 07/02/96 - 09/16/96 .......... 59,570,954
35,000,000 Cheltnham & Gloucester Building Society, 5.33% - 5.38%, 09/09/96 - 09/25/96 ... 34,599,939
65,000,000 CIESCO, L.P., 5.27% - 5.29%, 07/25/96 - 08/28/96 .............................. 64,623,425
35,000,000 Den Danske Corp., Inc., 5.27% - 5.275%, 07/22/96 - 08/30/96 ................... 34,749,467
65,000,000 General Electric Capital Corp., 5.27% - 5.31%, 07/31/96 - 08/12/96 ............ 64,651,476
65,000,000 Generale Bank, Inc., 5.07% - 5.31%, 07/11/96 - 08/14/96 ....................... 64,683,717
40,000,000 Halifax Building Society, 4.88% - 5.26%, 08/08/96 - 09/26/96 .................. 39,642,745
40,000,000 Metlife Funding, Inc., 5.28% - 5.40%, 08/26/96 - 10/01/96 ..................... 39,555,755
40,000,000 National Rural Utilities Cooperative Finance Corp., 5.28% - 5.39%,
08/16/96 - 09/18/96 ......................................................... 39,628,506
15,245,000 PepsiCo, Inc., 5.38%, 09/25/96 ................................................ 15,049,068
75,000,000 Prudential Funding Corp., 5.27% - 5.32%, 07/30/96 - 09/10/96 .................. 74,463,990
55,350,000 Schering Corp., 5.31% - 5.38%, 08/27/96 - 10/03/96 ............................ 54,664,248
65,000,000 Svenska Handelsbanken, Inc., 5.29% - 5.40%, 07/15/96 - 09/17/96 ............... 64,522,195
20,000,000 Toronto Dominion Holdings USA, Inc., 5.28%, 08/21/96 .......................... 19,850,400
40,000,000 Toyota Motor Credit Corp., 5.38% - 5.39%, 09/19/96 - 10/01/96 ................. 39,485,466
Commercial Paper (cont.)
$ 20,000,000 Westpac Capital Corp., 5.27%, 07/29/96 ........................................ $ 19,918,021
40,119,000 Wool International, 4.90% - 5.30%, 07/12/96 - 08/23/96 ........................ 39,932,821
-------------
Total Commercial Paper (Cost $1,047,660,113)............................. 1,047,660,113
-------------
Total Investments before Repurchase Agreements
(Cost $1,402,610,588)................................................... 1,402,610,588
-------------
bReceivables from Repurchase Agreements 9.3%
79,993,000 J.P. Morgan Securities, Inc., 5.42%, 07/01/96 (Maturity Value $74,133,469)
Collateral: U.S. Treasury Bills, 06/26/97 .................................... 74,100,000
69,620,000 Morgan Stanley & Co., Inc., 5.35%, 07/01/96 (Maturity Value $70,031,208)
Collateral: U.S. Treasury Notes, 6.875%, 02/28/97 ............................ 70,000,000
-------------
Total Receivables from Repurchase Agreements (Cost $144,100,000)......... 144,100,000
-------------
Total Investments (Cost $1,546,710,588) 99.8%....................... 1,546,710,588
Other Assets and Liabilities, Net .2%............................... 3,374,659
-------------
Net Assets 100.0% .................................................. $1,550,085,247
=============
</TABLE>
At June 30, 1996, there was no unrealized appreciation or depreciation for
financial statement or income tax purposes.
PORTFOLIO ABBREVIATIONS:
L.P. - Limited Partnership
aCertain 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.
bFace amount for repurchase agreements is for the underlying collateral.
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, 1996
<TABLE>
<CAPTION>
Face Value
Amount The U.S. Government Securities Money Market Portfolio (Note 1)
<S> <C> <C>
aShort Term Government Securities100.1%
Government Securities 17.3%
$ 50,000,000 U.S. Treasury Bills, 4.75% - 5.14%, 08/08/96 - 12/12/96 (Cost $49,361,211) ..................... $ 49,361,211
-------------
bReceivables from Repurchase Agreements 82.8%
11,690,000 B.A. Securities, Inc., 5.40%, 07/01/96 (Maturity Value $12,005,400)
Collateral: U.S. Treasury Notes, 8.00%, 01/15/97 .............................................. 12,000,000
12,530,000 B.T. Securities Corp., 5.42%, 07/01/96 (Maturity Value $12,005,420)
Collateral: U.S. Treasury Notes, 5.25%, 01/31/01 .............................................. 12,000,000
11,509,000 Barclays de Zoete Wedd Securities, Inc., New York, 5.35%, 07/01/96
(Maturity Value $12,005,350)
Collateral: U.S. Treasury Notes, 7.875%, 01/15/98 ............................................. 12,000,000
12,185,000 Chase Securities, Inc., 5.40%, 07/01/96 (Maturity Value $12,005,400)
Collateral: U.S. Treasury Notes, 6.125%, 05/31/97 ............................................. 12,000,000
12,120,000 Citicorp Securities, Inc., 5.50%, 07/01/96 (Maturity Value $12,005,500)
Collateral: U.S. Treasury Notes, 5.75%, 09/30/97 .............................................. 12,000,000
12,195,000 Merrill Lynch Government Securities, Inc., 5.20%, 07/01/96
(Maturity Value $12,005,200)
Collateral: U.S. Treasury Notes, 5.875%, 04/30/98 ............................................. 12,000,000
18,201,000 J.P. Morgan Securities, Inc., 5.32%, 07/01/96 (Maturity Value $17,507,758)
Collateral: U.S. Treasury Bills, 11/07/96 ..................................................... 17,500,000
57,501,000 J.P. Morgan Securities, Inc., 5.42%, 07/01/96 (Maturity Value $55,024,842)
Collateral: U.S. Treasury Bills, 12/12/96 ..................................................... 55,000,000
68,530,000 Morgan Stanley & Co., Inc., 5.35%, 07/01/96 (Maturity Value $68,015,310)
Collateral: U.S. Treasury Bills, 09/12/96
U.S. Treasury Notes, 5.75% - 11.75%, 09/30/96 - 02/15/01........................... 67,985,000
12,506,000 SBC Capital Markets, Inc., 5.47%, 07/01/96 (Maturity Value $12,005,470)
Collateral: U.S. Treasury Notes, 5.125%, 11/30/98 ............................................. 12,000,000
11,507,000 UBS Securities, Inc., 5.43%, 07/01/96 (Maturity Value $12,005,430)
Collateral: U.S. Treasury Notes, 8.125%, 02/15/98 ............................................. 12,000,000
-------------
Total Receivables from Repurchase Agreements (Cost $236,485,000).......................... 236,485,000
-------------
Total Investments (Cost $285,846,211) 100.1% ........................................ $285,846,211
Liabilities in Excess of Other Assets (.1)% ......................................... (145,107)
-------------
Net Assets 100.0%.................................................................... $285,701,104
=============
</TABLE>
At June 30, 1996, there was no unrealized appreciation or depreciation for
financial statement or income tax purposes.
aCertain 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.
bFace amount for repurchase agreements is for the underlying collateral.
The accompanying notes are an integral part of these financial statements.
THE MONEY MARKET PORTFOLIOS
Financial Statements
Statements of Assets and Liabilities
June 30, 1996
The U.S.
Government
The Money Securities Money
Market Portfolio Market Portfolio
----------- -----------
Assets:
Investment in securities,
at value and cost $1,402,610,588 $ 49,361,211
Receivables from
repurchase agree-
ments, at value
and cost 144,100,000 236,485,000
Cash 3,626 --
Receivables:
Interest 4,328,950 106,080
From affiliates 6,003 19,602
----------- -----------
Total assets 1,551,049,167 285,971,893
----------- -----------
Liabilities:
Payables:
Capital shares
repurchased 767,784 233,906
Management fees 170,313 29,565
Accrued expenses and
other liabilities 25,823 7,318
----------- -----------
Total liabilities 963,920 270,789
----------- -----------
Net assets, at value $1,550,085,247 $285,701,104
=========== ===========
Shares outstanding 1,550,085,247 285,701,104
=========== ===========
Net asset value per share $1.00 $1.00
=========== ===========
Statements of Operations
for the year ended June 30, 1996
The The U.S.
Money Government
Market Securities Money
Portfolio Market Portfolio
--------- -----------
Investment income:
Interest $81,172,665 $18,038,015
--------- -----------
Expenses:
Management fees
(Note 5a) 2,162,519 484,382
Professional fees 44,663 8,889
Custodian fees 26,784 22,841
Reports to shareholders 27,241 5,685
Trustees' fees and
expenses 7,447 10,769
Other 21,476 10,049
Management fees
waived by manager (128,505) (59,534)
--------- -----------
Total expenses 2,161,625 483,081
--------- -----------
Net investment
income 79,011,040 17,554,934
--------- -----------
Net realized gain on
investments -- 683
--------- -----------
Net increase in net
assets resulting from
operations $79,011,040 $17,555,617
========= ===========
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, 1996 and 1995
<TABLE>
<CAPTION>
The U.S. Government Securities
The Money Market Portfolio Money Market Portfolio
------------------------ -----------------------
1996 1995 1996 1995
----------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income........................ $ 79,011,040 $ 65,941,077 $ 17,554,934 $ 22,234,614
Net realized gain from security transactions. -- 1,356 683 392
----------- ------------ ----------- -----------
Net increase in net assets resulting from
operations................................... 79,011,040 65,942,433 17,555,617 22,235,006
Distributions to shareholders from undistributed
net investment income........................ (79,011,040) (65,942,433)a (17,555,617)b (22,235,006)c
Increase (decrease) in net assets from capital
share transactions (Note 2).................. 244,510,834 1,086,385,190 (188,953,282) 256,106,321
----------- ------------ ----------- -----------
Net increase (decrease) in net assets......... 244,510,834 1,086,385,190 (188,953,282) 256,106,321
Net assets (there is no undistributed net
investment income at beginning or end
of the year):
Beginning of year........................... 1,305,574,413 219,189,223 474,654,386 218,548,065
----------- ------------ ----------- -----------
End of year................................. $1,550,085,247 $1,305,574,413 $285,701,104 $474,654,386
=========== ============ =========== ===========
</TABLE>
aDistributions were increased by a net realized gain from security transactions
of $1,356.
bDistributions were increased by a net realized gain from security transactions
of $683.
cDistributions were increased by a net realized gain from security transactions
of $392.
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. The portfolio's investment
objectives are high current income consistent with capital preservation and
liquidity. 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 Valuations:
Securities in the Portfolios 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 asked 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:
Each Portfolio 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 their shareholders which will be sufficient to
relieve it from income and excise taxes. 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.
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 distribution
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 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 daily 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. Accounting Estimates:
The preparation of financial statements in accordance with generally accepted
accounting principles 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 expense during the reporting
period. Actual results could differ from those estimates.
g. Repurchase Agreements:
The Portfolios may enter into a joint repurchase agreement whereby their
uninvested cash balances are deposited into a joint cash account to be used to
invest in one or more repurchase agreements with government securities dealers
recognized by the Federal Reserve Board and/or member banks of the Federal
Reserve System. The value and face amount of the joint repurchase agreement are
allocated to the Portfolios based on their pro rata interest.
A repurchase agreement is accounted for as a loan by the Portfolios to the
seller, collateralized by underlying U.S. government securities, which are
delivered to the Portfolios' 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 Portfolios, with the value of the underlying
securities marked to market daily to maintain coverage of at least 100%. At June
30, 1996, all outstanding repurchase agreements held by the Portfolios had been
entered into on June 28, 1996.
2. TRUST SHARES
Transactions in each of the Portfolio's shares at $1.00 per share were as
follows:
<TABLE>
<CAPTION>
The U.S. Government
The Money Securities Money
Market Portfolio Market Portfolio
------------ -------------
<S> <C> <C>
1996
Shares sold................................................................. $2,507,821,633 $ 824,267,024
Shares issued in reinvestment of distributions.............................. 79,019,113 17,555,181
Shares redeemed............................................................. (2,342,329,912) (1,030,775,487)
------------ -------------
Net increase (decrease)..................................................... $ 244,510,834 $ (188,953,282)
============ =============
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 6)................... 1,132,697,789 138,624,792
------------ -------------
Net increase................................................................ $ 1,086,385,190 $ 256,106,321
============ =============
</TABLE>
3. CAPITAL LOSS CARRYOVERS
At June 30, 1996, for tax purposes, The Money Market Portfolio had an
accumulated net realized capital loss carryover expiring in year 2002 of $3,790.
For tax purposes, the aggregate cost of securities are the same for financial
statement purposes at June 30, 1996.
4. PURCHASES AND SALES OF SECURITIES
Purchases and sales/maturities of securities, including repurchase agreements,
for the year ended June 30, 1996, were as follows:
<TABLE>
<CAPTION>
The U.S. Government
The Money Securities Money
Market Portfolio Market Portfolio
------------ -------------
<S> <C> <C>
Purchases................................................................... $60,355,427,309 $62,680,289,047
Sales....................................................................... $60,113,260,920 $62,869,560,372
</TABLE>
5. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
a. Management Agreement:
Under the terms of a management agreement, Franklin Advisers, Inc. (Advisers)
provides investment advice, administrative services, office space and facilities
to the Portfolios, and receives fees computed monthly based on the average daily
net assets of the Portfolios during the month. The Portfolios pay fees equal to
an annualized rate of 15/100 of 1% of their daily net assets. For the year ended
June 30, 1996, the Portfolios expenses did not exceed these limitations.
However, Advisers agreed in advance to waive management fees and assume payment
of other expenses, as noted in the Statements of Operations.
b. Other Affiliates and Related Party Transactions:
Certain officers and trustees of the Portfolios are also officers and/or
directors of Advisers and Investor Services (all wholly-owned subsidiaries of
Franklin Resources, Inc.).
6. ASSET TRANSFER
On August 1, 1994, the Franklin Money Fund and the Franklin Federal Money Fund
transferred substantially all of their 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 30,1996, 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............................................................. 1,173,771,347 75.72%
Institutional Fiduciary Trust - Money Market Portfolio.......................... 341,314,800 22.02%
Institutional Fiduciary Trust - Franklin Cash Reserves Fund..................... 30,405,256 1.96%
Franklin Templeton Money Fund Trust - Franklin Templeton Money Fund II.......... 4,593,844 0.30%
</TABLE>
As of June 30,1996, the shares of The U.S. Government Securities Money Market
Portfolio were owned by the following funds:
<TABLE>
<CAPTION>
Percentage of
Shares Outstanding Shares
--------- ------------
<S> <C> <C>
Institutional Fiduciary Trust - Franklin U.S. Government Securities Money Market Portfolio.. 152,155,022 53.26%
Franklin Federal Money Fund................................................................. 133,546,082 46.74%
</TABLE>
7. FINANCIAL HIGHLIGHTS
Selected data for each share of beneficial interest outstanding throughout each
period are as follows:
<TABLE>
<CAPTION>
Per Share Operating Performance Ratios/Supplemental Data
------------------------------------ ---------------------------
Net Asset Distributions Net Assets Ratio of Ratio of Net
Year Values at Net From Net Net Asset at End Expenses Income
Ended Beginning Investment Investment Values at Total of Period to Average to Average
June 30 of Period Income Income End of Period Return+ (in 000's) Net Assets++ Net Assets
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
The Money Market Portfolio
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
1996 1.00 0.055 (0.055) 1.00 5.66 1,550,085 0.15 5.50
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
1996 1.00 0.054 (0.054) 1.00 5.55 285,701 0.15 5.45
</TABLE>
*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 is not annualized (except as noted). It assumes reinvestment of
dividends and capital gains at net asset value.
++Advisers agreed in advance to waive a portion of its management fees of the
Portfolios during the periods indicated. 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
1993*...................................... .17%**
1994....................................... .17
1995....................................... .16
1996....................................... .16
The U.S. Government Securities
Money Market Portfolio
1993*...................................... .18**
1994....................................... .17
1995....................................... .16
1996....................................... .17
THE MONEY MARKET PORTFOLIOS
Report of Independent Auditors
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, 1996, and
the related statements of operations for the year them ended, the statements of
changes in net assets and the financial highlights for each of the periods
presented thereon. These financial statements and financial highlights for each
of the two years in the period then ended 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, 1996, by correspondence with the custodian. 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, 1996, 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 their financial
highlights for each of the periods presented, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
San Francisco, California
August 6, 1996
To ensure the highest quality of service, telephone calls to or from our service
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