July 6, 1995
Dear Shareholder,
We are pleased to bring you the first annual report for the Franklin Cash
Reserves Fund, covering the fiscal year ended June 30, 1995.
The Franklin Cash Reserves Fund commenced operations on July 1, 1994, and is a
series of Franklin's Institutional Fiduciary Trust. It is offered exclusively to
qualified retirement plan participants and other institutional investors,
including corporations, banks, savings and loan associations and government
entities. Its investment objective is to seek high current income consistent
with capital preservation and liquidity. The fund's underlying portfolio is
managed to maintain a stable net asset value of $1.00 per share, although there
is no guarantee that it will accomplish this goal.
The fund benefited from Federal Reserve interest rate increases over the course
of the reporting period. As short-term interest rates have risen, our portfolio
managers have held a relatively short, average weighted maturity for the fund's
underlying portfolio, generally enabling the portfolio to reinvest quickly into
instruments offering higher current yields. The portfolio managers are
continually monitoring the economy and carefully evaluating the effects on
short-term interest rates.
Our management approach for the fund is founded on discipline and quality.
Adherence to traditional, time-proven strategies has been a central part of our
money fund philosophy for nearly twenty years, and our managers emphasize
quality in their selection of instruments for the portfolio. As such, the fund's
underlying portfolio does not invest in exotic derivatives or other potentially
volatile instruments, which we believe involve undue risk. We seek to protect
the interests of our shareholders and retirement plan participants and offer
them a conservative, high-quality investment vehicle.
We thank you for your support of the Franklin Cash Reserves Fund, and we look
forward to serving your investment needs into the future.
Sincerely,
Charles B. Johnson
Chairman of the Board
OVERVIEW OF THE ECONOMY
Over the last twelve months, the economy's rapid expansion slowed to a more
sustainable pace. During the final two quarters of 1994, U.S. Gross Domestic
Product (GDP) averaged 4.55%. In recognition of this high growth rate and the
potential for higher inflation, the Federal Reserve Board raised the federal
funds rate -- the interest rate banks charge each other for overnight loans and
one of the most sensitive indicators of the direction of interest rates -- by 50
basis points in August 1994, and 75 basis points in November 1994.
These actions resulted in a slower economy during the first few months of 1995.
Weak home sales and auto sales, and a decline in the National Association of
Purchasing Managers (NAPM) index all contributed to a moderate first quarter GDP
of 2.7%. However, robust labor markets, higher corporate earnings and continued
tight conditions in the manufacturing sector still warranted caution for
potential inflation. With this in mind, the Federal Reserve raised its target
for the federal funds rate by another 50 basis points at its Federal Open Market
Committee (FOMC) meeting in February. Continued slow growth in 1995 caused the
Federal Reserve to cease making additional rate changes until its July FOMC
meeting.
As of this writing, the Federal Reserve announced at the conclusion of its July
FOMC meeting that it had reduced its target for the federal funds rate by 25
basis points, to 5.75%. This cut in short-term interest rates was the first in
nearly three years and reverses a trend that began in February 1994, when the
Federal Reserve moved on seven occasions to raise the federal funds rate by a
total of three percentage points.
Looking forward, although many of the economic indicators have been mixed,
slower manufacturing activity and a decline in the number of jobs in the economy
led some to expect that the Federal Reserve would further ease monetary policy.
It is unclear whether the July 1995 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.
Tom Runkel is a portfolio manager for Franklin's taxable money market funds. He
joined Franklin in 1983 and served as an equity and money market trader from
1985 to 1989.
Mr. Runkel received a Bachelor of Science degree in political science from the
University of California at Davis and a Master in Business Administration degree
from Santa Clara University. He is a Chartered Financial Analyst (CFA).
Thomas J. Runkel, CFA
Portfolio Manager
FRANKLIN CASH RESERVES FUND
The Franklin Cash Reserves Fund's investment objective is high current income,
consistent with capital preservation and liquidity. It seeks to achieve this
objective by investing all of its assets in The Money Market Portfolio (the
Portfolio) whose investment objective is the same as the fund's. The Portfolio,
in turn, invests in various money market instruments, such as:
U.S. government and federal agency obligations1
Certificates of deposit
Bankers' acceptances
High grade commercial paper
High grade short-term corporate obligations
Repurchase agreements collateralized by
U.S. government securities1
The pie chart below illustrates the Portfolio's composition on June 30, 1995.
GRAPHIC MATERIAL 1 OMMITED SEE APPENDIX AT AND OF DOCUMENT
The Portfolio's holdings are limited to money market instruments within the two
highest rating categories assigned by Standard & Poor's Corporation or Moody's
Investors Service, or in non-rated securities determined by the managers to be
of comparable quality. In addition, the Portfolio invests 100% of its assets in
securities with remaining maturities of 397 days or less. Such relatively short
maturities allow the Portfolio to adjust quickly to changes in interest rates.
Security Selection Criteria
Managers employ specific guidelines for determining buy and sell opportunities.
For corporate paper, the selection process includes the following criteria:
The issuer should have a long-term debt rating of "A" or higher from at
least two major credit rating agencies
Cash flow from operations to short-term debt should be 100% or higher
Short-term debt-to-capital ratio should be 15% or lower
The issuer's standard deviation of cash flow growth should be 8.5 or
lower
Profitability ratios should be positive and trending higher
Total debt-to-capital ratio should be 35% or lower
Through investing in a portfolio of high quality, short-term securities, the
Franklin Cash Reserves Fund can provide a high level of credit safety combined
with a stable net asset value.2 As a result, investors often use the Franklin
Cash Reserves Fund for qualified retirement assets, as well as monies held in
fiduciary, advisory and custodial capacities. Its competitive yield has also
made it an attractive alternative cash management tool for corporations, banks,
savings and loan associations and trust companies.3
1. U.S. government securities owned by the Portfolio or held under repurchase
agreement, but not shares of the Franklin Cash Reserves Fund, are guaranteed by
the U.S. government as to the timely payment of principal and interest.
2. An investment in the Franklin Cash Reserves Fund is neither insured nor
guaranteed by the U.S. government or by another entity or institution. There is
no assurance that the $1.00 share price will be maintained.
3. Regulated investors should review their applicable investment restrictions to
determine whether the fund is a permissible investment.
PERFORMANCE SUMMARY
The increase in short-term interest rates during the reporting period helped
raise the yield of the Franklin Cash Reserves Fund. The 7-day current yield rose
from 4.16% on July 5, 1994, to 5.76% on June 30, 1995.4 The fund maintains a
relatively short, average weighted maturity, which allowed us to adapt quickly
to changes in interest rates. As interest rates began to fall during the latter
half of fiscal year 1995, we began lengthening the average maturity to lock in
higher rates. On June 30, 1995, the Fund's underlying portfolio held a
relatively short average weighted maturity of 60 days, an increase from the 48
day average maturity on June 30, 1994.
The chart to the right illustrates how the 7-day current yield for the Franklin
Cash Reserves Fund has performed versus the IBC/Donoghue's Money Fund
Averages/First Tier Institutional-Only yields for the one-year period ended June
30, 1995.5 Of course, past performance cannot guarantee future results.
GRAPHIC MATERIAL 2 OMITTED SEE APPENDIX AT END OF DOCUMENT
Performance Figures
Period ended June 30, 1995
7-Day Current Yield:4 5.76%
7-Day Effective Yield:4 5.93%
Average Weighted Maturity: 60 days
4. Annualized yields are for the seven-day period(s) shown and reflect
fluctuations in interest rates on portfolio investments and fund expenses. Past
performance does not guarantee future results.
The fund's manager has agreed in advance to waive a portion of its management
fees and make payments of certain other expenses to limit total operating
expenses to no more than 0.40% per annum of average net assets. Without these
reductions, the fund's yield would have been lower, and the current and
effective 7-day yields for the year ended June 30, 1995, would have been 5.43%
and 5.58%, respectively. The fund's manager may discontinue these arrangements
at any time, upon notice to the fund's Board of Trustees.
5. Source: Money Fund Report(R), IBC/Donoghue's Money Fund Averages/First Tier
Institutional-Only. As of June 27, 1995, there were 109 funds in this category.
INSTITUTIONAL FIDUCIARY TRUST
Statement of Investments in Securities and Net Assets, June 30, 1995
<TABLE>
<CAPTION>
Value
Shares Franklin Cash Reserves Fund (Note 1)
<S> <C> <C>
00,000,000 Mutual Funds 100% $00,000,000)
14,585,078 The Money Market Portfolio (Note 1).................................................. $14,585,078
------------
Total Investments (Cost $14,585,078) 100.0% .............................. 14,585,078
Liabilities in Excess of Other Assets, Net (.3%).......................... (39,774)
------------
Net Assets 100.0% ........................................................ $14,545,304
============
</TABLE>
At June 30, 1995, there was no unrealized appreciation or depreciation for
financial statements or income tax purposes.
The accompanying notes are an integral part of these financial statements.
INSTITUTIONAL FIDUCIARY TRUST
Franklin Cash Reserves Fund
Financial Statements
Statement of Assets and Liabilities
June 30, 1995
Assets:
Investments in securities, at value
and cost $14,585,078
Receivables from affiliates (Note 4) 15,444
-----------
Total assets 14,600,522
-----------
Liabilities:
Payables:
Distributions to shareholders 45,188
Distribution fees 6,504
Shareholder servicing costs 48
Accrued expenses and other liabilities 3,478
-----------
Total liabilities 55,218
-----------
Net assets (equivalent to $1.00 per share
based on 14,545,304 shares of capital
stock outstanding) $14,545,304
===========
Statement of Operations
for the year ended June 30, 1995
Investment income:
Dividends $559,372
--------
Expenses:
Administration fees, net (Note 4) --
Distribution fees (Note 4) 19,156
Shareholder servicing costs (Note 4) 144
Registration fees 7,860
Professional fees 4,133
Reports to shareholders 3,476
Directors' fees and expenses 606
Other 372
Payments from Manager (Note 4) (12,548)
--------
Total expenses 23,199
--------
Net investment income $536,173
--------
Statement of Changes in Net Assets
for the year ended June 30, 1995
Increase (decrease) in net assets:
Operations:
Net investment income $ 536,173
Distributions to shareholders from
net investment income (536,173)
Increase in net assets from
capital share transactions (Note 2) 14,544,804
-----------
Net increase in net assets 14,544,804
Net assets (there is no undistributed
net investment income at beginning
or end of year):
Beginning of year 500
-----------
End of year $14,545,304
-----------
The accompanying notes are an integral part of these financial statements.
INSTITUTIONAL FIDUCIARY TRUST
Franklin Cash Reserves Fund
Notes to Financial Statements
1. SIGNIFICANT ACCOUNTING POLICIES
Institutional Fiduciary Trust (the Trust) is a diversified, open-end management
investment company (mutual fund), registered under the Investment Company Act of
1940, as amended. The Trust currently consists of eight separate and distinct
Funds. This report pertains only to the Franklin Cash Reserves Fund (the Fund).
Each of the Funds issues a separate series of the Trust's shares and maintains a
totally separate and distinct investment portfolio.
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, are
included elsewhere in this report and should be read in conjunction with the
Fund's financial statements.
On June 20, 1995, the Board of Trustees eliminated the AEA Cash Management Fund,
a series of the Trust.
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles for
investment companies.
a. Security Valuation:
The Portfolio's shares held by the Fund are valued at their proportionate
interest at net asset value of the Portfolio. As of June 30, 1995, the Fund owns
1.12% of the Portfolio. The trustees have established procedures designed to
stabilize, to the extent reasonably possible, the fund's price per share as
computed for the purpose of sales and redemptions at $1.00.
b. Income Taxes:
The Trust 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 Fund 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, 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 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 declared daily and reinvested monthly in
additional shares of the Fund at net asset value.
e. Expense Allocation:
Common expenses incurred by the Trust are allocated among the Funds based on the
ratio of net assets of each Fund to the combined net assets. In all other
respects, expenses are charged to each Fund as incurred on a specific
identification basis.
2. TRUST SHARES
At June 30, 1995, there was an unlimited number of no par value shares of
beneficial interest authorized, and paid-in capital aggregated $14,545,304.
Transactions in the Fund's shares at $1.00 per share for the year ended June 30,
1995 were as follows:
<TABLE>
<CAPTION>
<S> <C>
Shares sold...................................... $55,543,343
Shares issued in reinvestment of distributions .. 490,930
Shares redeemed.................................. (31,467,764)
Changes from exercise of exchange privilege:
Shares redeemed................................. (10,021,705)
------------
Net increase..................................... $14,544,804
============
</TABLE>
3. PURCHASES AND SALES OF SECURITIES
Aggregate purchases and sales of securities for the year ended June 30, 1995
aggregated $49,120,570 and $34,535,992, respectively.
4. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
Franklin Advisers, Inc. ("Advisers"), under the terms of an administration
agreement, provides various administrative, statistical, and other services, and
receives fees computed monthly on the last day of the month at an annualized
rate of 25/100 of 1% of the average daily net assets. There were no fees
incurred by the Fund under the management agreement for the year ended June 30,
1995. The terms of this 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. The Fund's expenses did not exceed these
limitations; however, for the year ended June 30, 1995, Franklin Advisers, Inc.
agreed in advance to waive the administration fees of $23,461 and made payments
of $12,548 for other expenses as reflected in the Statement of Operations.
Under the terms of a distribution plan pursuant to Rule 12b-1 of the Investment
Company Act of 1940, the Fund will reimburse Franklin/Templeton Distributors,
Inc. in an amount up to .25% per annum of the Fund's average daily net assets
for the costs incurred in the furnishing and promotion, offering and marketing
of the Fund's shares. Fees incurred by the Fund under the agreement aggregated
$19,156 for the year ended June 30, 1995.
Under the terms of a shareholder servicing agreement with Franklin/Templeton
Investor Services, Inc., the Funds pay costs on a per shareholder account basis.
Shareholder servicing costs incurred for the year ended June 30, 1995 aggregated
$144 of which $96 was paid to Franklin/Templeton Investor Services, Inc.
Certain officers and trustees of the Trust are also officers and/or directors of
Franklin/Templeton Distributors, Inc., Franklin Advisers, Inc., and
Franklin/Templeton Investor Services, Inc., all wholly-owned subsidiaries of
Franklin Resources, Inc.
5. FINANCIAL HIGHLIGHTS
Selected data for each share of beneficial interest outstanding throughout the
year are as follows:
<TABLE>
<CAPTION>
1995
--------
<S> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value at beginning of year ................ $1.00
Net investment income ............................... 0.052
Distributions from net investment income ............ (0.052)
--------
Net asset value at end of year ...................... $1.00
========
TOTAL RETURN+ ....................................... 5.34%
RATIOS/SUPPLEMENTAL DATA
Net assets at end of year (in 000's)................. $14,545
Ratio of expenses to average net assets1,2........... 0.40%
Ratio of expenses to average net assets
(excluding Advisers' waiver and payment of Fund and
Portfolio's expenses) .............................. 0.79%
Ratio of net investment income to average net assets 5.69%
+Total return measures the change in value of an investment over the year
indicated. It assumes reinvestment of dividends and capital gains, if any, at
net asset value and is not annualized.
1Includes the Fund's share of the Portfolio's allocated expenses.
2During the period indicated, Advisers agreed to waive in advance a portion of
its Fund's administration fees and Portfolio's management fees and made payments
of other expenses of the Fund.
</TABLE>
INSTITUTIONAL FIDUCIARY TRUST
Franklin Cash Reserves Fund
Report of Independent Auditors
To the Shareholders and Board of Trustees
of Institutional Fiduciary Trust
We have audited the accompanying statement of assets and liabilities of the
Franklin Cash Reserves Fund of the Institutional Fiduciary Trust, including the
statement of investments in securities and net assets, as of June 30, 1995, and
the related statements of operations and changes in net assets, and the
financial highlights for the year then ended. These financial statements and
financial highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit.
We conducted our audit 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 investments and cash held by the custodian
as of June 30, 1995. 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 audit provides 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
Franklin Cash Reserves Fund of the Institutional Fiduciary Trust as of June 30,
1995, and the results of its operations, the changes in net assets, and the
financial highlights for the year then ended, 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 Notes6.1%
<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 Deposit15.3%
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 Notes1.6%
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 Agreements16.2%
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.
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.
cSee 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 Assets100.0%................................................................................ $474,654,386
=============
</TABLE>
At June 30, 1995, 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.
cSee 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.
Franklin Cash Reserves Fund
APPENDIX
DESCRIPTION OF GRAPHIC MATERIAL OMITTED FROM EDGAR FILING
(PURSUANT TO ITEM 304 (a) of REGULATION S-T)
GRAPHIC MATERIAL (1)
This chart shows in pie chart format the fund's securities breakdown by security
type as a percentage of the fund's total net assets.
<TABLE>
<CAPTION>
Portfolio Composition on 6/30/95
<S> <C>
Medium Term Notes 1.6%
Bank Notes 6.1%
Commercial Paper 60.8%
Repurchase Agreements 16.2%
Certificates of Deposits 15.3%
</TABLE>
GRAPHIC MATERIAL(2)
The following line graph hypothetically compares the 7-day yields of the
Franklin Cash Reserves Fund to that of IBC/Donoghue's First Tier,
Institutional-Only, from 7/5/94 to 6/30/95.
<TABLE>
<CAPTION>
Date Franklin Donoghue's
<S> <C> <C>
7/5/94 4.16% 4.01%
7/12/94 4.25% 4.05%
7/19/94 4.25% 4.07%
7/26/94 4.25% 4.11%
8/2/94 4.25% 4.14%
8/9/94 4.35% 4.14%
8/16/94 4.35% 4.17%
8/23/94 4.35% 4.33%
8/30/94 4.35% 4.39%
9/6/94 4.43% 4.43%
9/13/94 4.42% 4.45%
9/20/94 4.61% 4.48%
9/27/94 4.58% 4.52%
10/4/94 4.67% 4.58%
10/11/94 4.70% 4.60%
10/18/94 4.72% 4.62%
10/25/94 4.81% 4.65%
11/1/94 4.83% 4.70%
11/8/94 4.83% 4.70%
11/15/94 4.92% 4.80%
11/22/94 5.25% 5.06%
11/29/94 5.28% 5.15%
12/6/94 5.30% 5.22%
12/13/94 5.37% 5.30%
12/20/94 5.42% 5.37%
12/27/94 5.52% 5.43%
1/3/95 5.57% 5.52%
1/10/95 5.61% 5.50%
1/17/95 5.36% 5.50%
1/24/95 5.37% 5.50%
1/31/95 5.39% 5.56%
2/7/95 5.63% 5.70%
2/14/95 5.68% 5.75%
2/21/95 5.69% 5.81%
2/28/95 5.73% 5.81%
3/7/95 5.75% 5.80%
3/14/95 5.80% 5.81%
3/21/95 5.79% 5.82%
3/28/95 5.78% 5.85%
4/4/95 5.85% 5.88%
4/11/95 5.75% 5.82%
4/18/95 5.77% 5.83%
4/25/95 5.74% 5.81%
5/2/95 5.76% 5.83%
5/9/95 5.77% 5.81%
5/16/95 5.79% 5.81%
5/23/95 5.80% 5.79%
5/30/95 5.76% 5.80%
6/6/95 5.79% 5.78%
6/13/95 5.78% 5.77%
6/20/95 5.77% 5.77%
6/27/95 5.79% 5.75%
</TABLE>
