January 26, 1996
Dear Shareholder,
We are pleased to bring you the second semi-annual report for the Franklin Cash
Reserves Fund, covering the period ended December 31, 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.
After February 1995, the Federal Reserve increasingly relaxed monetary policy,
which led to a slight decline in short-term interest rates. Continued sluggish
economic growth only served to raise expectations of additional cuts, and
consequently, the yield of the Franklin Cash Reserves Fund trended slightly
lower during the reporting period. Despite the changes in interest rates, our
managers have steadfastly adhered to a disciplined investment strategy, which
enables them to seek out attractive opportunities through a variety of market
conditions. We believe this approach benefits our shareholders in the long run,
and we will continue to employ this strategy going forward.
Thank you for your investment in the Franklin Cash Reserves Fund. We look
forward to serving your investment needs in the months and years to come.
Sincerely,
Charles B. Johnson
Chairman of the Board
OVERVIEW OF THE ECONOMY
After seeing the slow growth of the first half of 1995, many feared that credit
was too restrictive and that the economy was headed for a recession. The Federal
Reserve Board appeared to concur, cutting the federal funds rate -- the interest
rate banks charge each other for overnight loans -- by 25 basis points during
its Federal Open Market Committee meeting in July. The economy's response was
stronger than expected, with U.S. Gross Domestic Product (GDP) rising to a 4.2%
annual growth rate in the third quarter. Not since 1994 had the economy achieved
such solid growth; however, it proved to be unsustainable.
Signs that the economy was losing steam accumulated in the fourth quarter. The
index of leading indicators declined steadily, while retail, home, and auto
sales were sluggish, consumer spending was weak, inventory levels remained high,
and manufacturing activity slowed. The Consumer Price Index and Producer Price
Index -- two primary indicators of inflation -- suggested that there was little
short-term threat from inflation. In response to the sluggish growth and
lower-than-anticipated inflation, the Federal Reserve once again cut the federal
funds rate by 25 basis points in December. Yet the easing surprised many veteran
observers of monetary policy who believed that the Federal Reserve would await a
federal budget compromise before lowering rates.
The economy continued to show signs of slowing as we entered the new year.
Retail sales during the holiday period, for example, were anemic at best. Fear
of unemployment as many corporations restructured, as well as residual credit
card debt, apparently played an important role in restraining consumer spending.
In addition to the stagnating economy, the political nature of the upcoming
presidential election year led some observers to predict that the Federal
Reserve would cut interest rates further, but there may be no action until the
battle over the budget is resolved.
Note: On January 31, 1996, the Federal Reserve moved to cut interest rates
following its Federal Open Market Committee meeting. The target federal funds
rate was lowered 25 basis points to 5.25%, and the discount rate -- the interest
rate the district Federal Reserve banks charge member banks for short-term
liquidity needs -- was also lowered 25 basis points to 5.00%.
Thomas J. Runkel, CFA
Portfolio Manager
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 of Business
Administration degree from Santa Clara University. He is a Chartered Financial
Analyst (CFA).
FRANKLIN CASH RESERVES FUND
The Franklin Cash Reserves Fund's investment objective is to provide 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:
n U.S. government and federal agency obligations1
n Certificates of deposit
n Bankers' acceptances
n High grade commercial paper
n High grade short-term corporate obligations
n Repurchase agreements collateralized by
U.S. government securities1
The pie chart below illustrates the Portfolio's composition on December 31,
1995.
GRAPHIC MATERIAL 1 OMITTED - SEE APPENDIX AT END 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 changing interest rates.
Security Selection Criteria
Managers employ specific guidelines for determining buy and sell opportunities.
For corporate paper, the selection process generally includes the following
criteria:
n The issuer should have a long-term debt rating of single "A" or higher from
at least two major credit rating agencies
n Cash flow from operations to short-term debt should be 100% or higher
n Short-term debt-to-capital ratio should be 15% or lower
n The issuer's standard deviation of cash flow growth should be 8.5 or lower
n Profitability ratios should be positive and trending higher
n 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
Performance Summary
Falling interest rates were the primary reason for the decline in the 7-day
current yield of the Franklin Cash Reserves Fund, from 5.76% on June 30, 1995,
to 5.33% on December 31, 1995.4 In the first half of 1995, as interest rates
began to drop, we lengthened the average maturity to lock in higher rates for as
long as possible. When interest rates declined further in the second half of the
year, we continued to invest in longer maturity money market securities with
attractive yields relative to the overnight federal funds rate. We maintained a
relatively long, 46-day weighted average maturity for the Fund on December 31,
1995, as compared with 27 days on December 31, 1994, when interest rates were
higher.
Performance Figures
Period ended December 31, 1995
7-Day Current Yield:4 5.33%
7-Day Effective Yield:4 5.47%
Average Weighted Maturity: 46 days
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 any other 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.
4. Annualized and effective yields are for the 7-day period shown and reflect
fluctuations in interest rates on portfolio investments, and Fund expenses. Past
performance does not guarantee future results.
Franklin Advisers, Inc., the administrator of the Fund and manager of the
underlying portfolio, 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 0.50% per annum of average net assets. Without these
reductions, the fund's current and effective 7-day yields for the period would
have been 5.07% and 5.20%, respectively. Franklin Advisers, Inc. may discontinue
these arrangements at any time, upon notice to the Fund's Board of Trustees.
INSTITUTIONAL FIDUCIARY TRUST
Statement of Investments in Securities and Net Assets, December 31, 1995
(unaudited)
Value
Shares Franklin Cash Reserves Fund (Note 1)
Mutual Funds 100.3%
20,752,073 The Money Market Portfolio (Note 1)................... $20,752,073
-----------
Total Investments (Cost $20,752,073) 100.3%.... 20,752,073
Liabilities in Excess of Other Assets, Net (.3%) (59,208)
-----------
Net Assets 100.0% ............................. $20,692,865
===========
At December 31, 1995, there was no unrealized appreciation or depreciation for
financial statement or income tax purposes.
The accompanying notes are an integral part of these financial statements.
INSTITUTIONAL FIDUCIARY TRUST
Franklin Cash Reserves Fund
Financial Statements
Statement of Assets and Liabilities
December 31, 1995 (unaudited)
Assets:
Investments in securities, at value
and cost $20,752,073
-----------
Total assets 20,752,073
-----------
Liabilities:
Payables:
Distributions to shareholders 48,321
Distribution fees 8,084
Accrued expenses and other liabilities 2,803
-----------
Total liabilities 59,208
-----------
Net assets (equivalent to $1.00 per share
based on 20,692,865 shares of capital
stock outstanding) $20,692,865
===========
Statement of Operations
for the six months ended
December 31, 1995 (unaudited)
Investment income:
Dividends $436,658
--------
Expenses:
Administration fees (Note 4) 18,941
Distribution fees (Note 4) 17,277
Shareholder servicing costs (Note 4) 243
Registration fees 2,867
Professional fees 1,849
Reports to shareholders 1,406
Trustees' fees and expenses 430
Other 188
Expenses waived by Administrator
(Note 4) (18,941)
--------
Total expenses 24,260
--------
Net investment income $412,398
========
Statement of Changes in Net Assets
for the six months ended December 31, 1995 (unaudited)
and the year ended June 30, 1995
Six Months Year
Ended Ended
12/31/95 06/30/95
---------- ----------
Increase (decrease) in
net assets:
Operations:
Net investment income $ 412,398 $ 536,173
Distributions to shareholders
from net investment income (412,398) (536,173)
Increase in net assets from
capital share transactions
(Note 2) 6,147,561 14,544,804
---------- ----------
Net increase in
net assets 6,147,561 14,544,804
Net assets (there is no
undistributed net investment
income at beginning or end
of period):
Beginning of period 14,545,304 500
---------- ----------
End of period $20,692,865 $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 (unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES
Institutional Fiduciary Trust (the Trust) is an open-end, diversified 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 in
Securities and Net Assets, are included elsewhere in this report and should be
read in conjunction with the Fund's financial statements.
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 Fund holds Portfolio shares that are valued at its proportionate interest in
the net asset value of the Portfolio. As of December 31, 1995 the Fund owns
1.54% 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 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
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 reinvested monthly in additional shares of
these Funds 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 December 31, 1995 there was an unlimited number of no par value shares of
beneficial interest authorized. Transactions in the Fund's shares at $1.00 per
share were as follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
December 31,1995 June 30, 1995
---------------- -------------
<S> <C> <C>
Shares sold................................... $70,995,739 $55,543,343
Shares issued in reinvestment of distributions 404,380 490,930
Shares redeemed............................... (61,686,111) (31,467,764)
Changes from exercise of exchange privilege:
Shares sold.................................. 822,965 --
Shares redeemed.............................. (4,389,412) (10,021,705)
------------- -------------
Net increase.................................. $ 6,147,561 $14,544,804
============= =============
</TABLE>
3. PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities for the six months ended December 31, 1995
aggregated $47,374,942 and $41,207,798, respectively.
4. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
Under the terms of an administrative agreement, Franklin Advisers, Inc.
(Advisers), provides various administrative, statistical, and other services and
receives fees computed monthly at an annualized rate of 0.250 of 1% of the
average daily net assets. There were no fees incurred by the Fund under the
administrative agreement for the six months ended December 31, 1995. The terms
of the administrative 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 six months ended December 31, 1995, Advisers
agreed in advance to waive the administration fees of $18,941.
Under the terms of a distribution plan pursuant to Rule 12b-1 of the Investment
Company Act of 1940, the Fund reimburses Franklin/Templeton Distributors, Inc.
(Distributors), 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. The plan does not permit nor require payments of
excess costs after plan termination. Fees incurred by the Fund under the plan
aggregated $17,277 for the six months ended December 31, 1995.
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. Such costs incurred for the six months ended December
31, 1995 aggregated $243, all of which was paid to Investor Services.
Certain officers and trustees of the Trust are also officers and/or directors of
Distributors, Advisers, and Investor Services, which are all wholly-owned
subsidiaries of Franklin Resources, Inc., and The Money Market Portfolio.
5. FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout the
period are as follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
December 31,1995 June 30, 1995
---------------- -------------
<S> <C> <C>
Per share operating performance
Net asset value at beginning of period........ $1.00 $1.00
Net investment income......................... 0.028 0.052
Distributions from net investment income...... (0.028) (0.052)
---------- ----------
Net asset value at end of period.............. $1.00 $1.00
========== ==========
Total Return**................................ 2.79% 5.34%
Ratios/supplemental data
Net assets at end of period (in 000's)........ $20,693 $14,545
Ratio of expenses to average net assets+...... 0.47%* 0.40%
Ratio of expenses to average net assets
(excluding waiver and payment of expenses
by administrator)............................ 0.72%* 0.79%
Ratio of net investment income to
average net assets........................... 5.49%* 5.69%
</TABLE>
*Annualized
**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, if any, at net asset value.
+Includes the Fund's share of the Portfolio's allocated expenses. During the
periods indicated, Advisers agreed in advance to waive its administration fees
and made payments of other expenses of the Fund.
<TABLE>
<CAPTION>
THE MONEY MARKET PORTFOLIOS
Statement of Investments in Securities and Net Assets, December 31, 1995 (unaudited)
Face Value
Amount The Money Market Portfolio (Note 1)
---------------------------------------------------------------------------------------------------------------
a Short Term Investments 86.6%
Certificates of Deposit 31.1%
<S> <C> <C>
$ 40,000,000 Australia & New Zealand Banking Group, Ltd., New York Branch, 5.73% - 5.75%,
01/19/96 - 02/09/96 ........................................................ $ 40,000,098
40,000,000 Bank of Nova Scotia, Portland Branch, 5.72% - 5.78%, 01/24/96 - 02/27/96 .... 40,000,438
60,000,000 Banque Nationale de Paris, New York Branch, 5.73% - 5.80%,
01/16/96 - 02/28/96 ........................................................ 60,002,171
20,000,000 Bayerische Landesbank, New York Branch, 5.80%, 01/08/96 ..................... 20,000,076
45,000,000 Bayerische Vereinsbank, New York Branch, 5.73% - 5.78%, 01/11/96 - 02/08/96 . 45,000,000
30,000,000 Commerzbank AG, New York Branch, 5.78% - 5.80%, 01/10/96 - 01/25/96 ......... 30,000,066
20,000,000 Credit Suisse, New York Branch, 5.73%, 01/09/96 ............................. 19,999,956
20,000,000 Deutsche Bank, New York Branch, 5.76%, 01/26/96 ............................. 20,000,137
25,000,000 Generale Bank, New York Branch, 5.75%, 03/04/96 ............................. 25,001,293
40,000,000 Lloyds Bank Plc., New York Branch, 5.70% - 5.80%, 01/30/96 - 09/11/96 ....... 40,001,492
20,000,000 National Westminster Bank, New York Branch, 5.81%, 01/30/96 - 01/31/96 ...... 20,000,000
40,000,000 Societe Generale, New York Branch, 5.72% - 5.90%, 05/13/96 - 06/07/96 ....... 40,000,000
20,000,000 Svenska Handelsbanken, New York Branch, 5.82%, 02/01/96 ..................... 20,000,170
------------
Total Certificates of Deposit (Cost $420,005,897) ..................... 420,005,897
------------
Commercial Paper 55.5%
23,000,000 Abbey National North America, 5.45%, 03/14/96 ............................... 22,745,818
60,000,000 American Express Credit Corp., 5.66% - 5.68%, 01/18/96 - 02/21/96 ........... 59,667,750
25,000,000 Ameritech Corp., 5.70%, 02/26/96 ............................................ 24,778,333
55,000,000 Associates Corp. of North America, 5.66% - 5.71%, 01/17/96 - 02/20/96 ....... 54,722,581
60,000,000 AT&T Corp., 5.52% - 5.68%, 01/12/96 - 03/11/96 .............................. 59,700,562
20,000,000 Campbell Soup Co., 5.92%, 02/02/96 .......................................... 19,894,757
20,000,000 CIESCO L.P., 5.50%, 03/08/96 ................................................ 19,795,278
10,000,000 Commerzbank U.S. Finance, Inc., 5.70%, 01/12/96 ............................. 9,982,583
60,000,000 Den Danske Corp., Inc., 5.64% - 5.67%, 01/23/96 - 02/16/96 .................. 59,673,367
25,000,000 Generale Bank, Inc., 5.65%, 02/07/96 ........................................ 24,854,826
60,000,000 General Electric Capital Corp., 5.45% - 5.48%, 03/22/96 - 05/02/96 .......... 58,962,777
25,000,000 Halifax Building Society, 5.65%, 02/05/96 ................................... 24,862,673
30,000,000 Kingdom of Sweden, 5.70%, 01/16/96 - 01/31/96 ............................... 29,881,250
40,000,000 National Australian Funding (DE), Inc., 5.65% - 5.67%, 01/22/96 - 02/12/96 .. 39,802,016
55,000,000 National Rural Utilities Cooperative Finance Corp., 5.63% - 5.66%,
02/13/96 - 02/23/96 ........................................................ 54,569,881
20,000,000 PepsiCo, Inc., 5.61%, 01/29/96 .............................................. 19,912,733
10,000,000 Province of Alberta, 5.69%, 01/25/96 ........................................ 9,962,067
16,000,000 Province of British Columbia, 5.50%, 05/21/96 ............................... 15,655,334
20,000,000 Royal Bank of Canada, 5.70%, 01/22/96 - 01/29/96 ............................ 19,922,417
20,000,000 Smithkline Beecham Corp., 5.75%, 02/02/96 ................................... 19,897,778
20,000,000 Societe Generale, N.A. Inc., 5.66%, 02/14/96................................. 19,861,644
Commercial Paper (cont.)
$ 40,000,000 Svenska Handelsbanken, Inc., 5.68% - 5.71%, 01/16/96 - 02/15/96 ............. $ 39,810,415
20,000,000 Westpac Capital Corp., 5.58%, 03/20/96 ...................................... 19,755,100
20,000,000 Wool International, 5.61%, 04/12/96 ......................................... 19,682,100
------------
Total Commercial Paper (Cost $748,354,040) ............................ 748,354,040
------------
Total Investments before Repurchase Agreements
(Cost $1,168,359,937) ................................................ 1,168,359,937
------------
b Receivables from Repurchase Agreements 13.1%
25,000,000 Bear Stearns & Co. Inc., 5.75%, 01/02/96, (Maturity Value $25,015,972)
Collateral: U.S. Treasury Notes, 6.50%, 04/30/97 ........................... 25,000,000
24,985,000 Fuji Securities, Inc., 5.85%, 01/02/96, (Maturity Value $25,016,250)
Collateral: U.S. Treasury Notes, 5.125%, 06/30/98........................... 25,000,000
19,745 c J.P. Morgan Securities, Inc., 4.23%, 01/02/96, (Maturity Value $19,754) ..... 19,745
101,310,000 J.P. Morgan Securities, Inc., 5.80%, 01/02/96, (Maturity Value $101,375,289)
Collateral: U.S. Treasury Bills, 10/17/96 .................................. 101,310,000
25,200,000 SBC Capital Markets, Inc., 5.70%, 01/02/96, (Maturity Value $25,015,833)
Collateral: U.S. Treasury Notes, 4.75%, 02/15/97............................ 25,000,000
------------
Total Receivables from Repurchase Agreements (Cost $176,329,745) ...... 176,329,745
------------
Total Investments (Cost $1,344,689,682) 99.7% .................... 1,344,689,682
Other Assets and Liabilities, Net .3% ............................ 4,011,515
------------
Net Assets 100.0% ................................................ $1,348,701,197
============
At December 31, 1995, there was no unrealized appreciation or depreciation for financial statements or income tax purposes.
PORTFOLIOABBREVIATIONS:
L.P. - Limited Partnership
aCertain short-term securities are traded on a discount basis; the rate 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.
</TABLE>
<TABLE>
<CAPTION>
THE MONEY MARKET PORTFOLIOS
Statement of Investments in Securities and Net Assets, December 31, 1995 (unaudited)
Face Value
Amount The U.S. Government Securities Money Market Portfolio (Note 1)
--------------------------------------------------------------------------------------------------------------
aShort Term Government Securities 100.1%
Government Securities 12.3%
<S> <C> <C>
$40,000,000 U.S. Treasury Bills, 5.415% - 6.27%, 01/11/96 - 02/01/96 (Cost $39,876,150) .... $ 39,876,150
------------
bReceivables from Repurchase Agreements 87.8%
13,510,000 Bank of America Securities, Inc., 5.75%, 01/02/96, (Maturity Value $14,008,944)
Collateral: U.S. Treasury Notes, 7.50%, 12/31/96 .............................. 14,000,000
13,258,000 Barclays de Zoete Wedd Securities, Inc., New York, 5.50%, 01/02/96
(Maturity Value $14,008,556)
Collateral: U.S. Treasury Notes, 7.125%, 09/30/99 ............................. 14,000,000
50,000,000 Bear Stearns & Co., Inc., 5.80%, 01/02/96, (Maturity Value $50,119,278)
Collateral: U.S. Treasury Notes, 5.75%, 09/30/97 .............................. 50,087,000
19,895,000 Bear Stearns & Co., Inc., 5.80%, 01/02/96, (Maturity Value $19,925,833)
Collateral: U.S. Treasury Notes, 5.75%, 10/31/00 .............................. 19,913,000
13,470,000 Chase Securities, Inc., 5.55%, 01/02/96, (Maturity Value $14,008,633)
Collateral: U.S. Treasury Notes, 7.125%, 10/15/98 ............................. 14,000,000
13,570,000 Citicorp Securities, Inc., 5.85%, 01/02/96, (Maturity Value $14,009,100)
Collateral: U.S. Treasury Notes, 6.125%, 07/31/00 ............................. 14,000,000
13,155,000 Fuji Securities, Inc., 5.90%, 01/02/96, (Maturity Value $14,009,178)
Collateral: U.S. Treasury Notes, 8.125%, 02/15/98 ............................. 14,000,000
13,765,000 Lehman Brothers Securities, Inc., 5.85%, 01/02/96, (Maturity Value $14,009,100)
Collateral: U.S. Treasury Notes, 6.25%, 05/31/00 .............................. 14,000,000
14,055,000 Merrill Lynch, Pierce, Fenner & Smith, Inc., 5.50%, 01/02/96,
(Maturity Value $14,008,556)
Collateral: U.S. Treasury Notes, 5.625%, 10/31/97 ............................. 14,000,000
7,274 cJ.P. Morgan Securities, Inc., 3.98%, 01/02/96, (Maturity Value $7,277) ......... 7,274
61,725,000 J.P. Morgan Securities, Inc., 5.80%, 01/02/96, (Maturity Value $61,764,778)
Collateral: U.S. Treasury Bills, 08/24/95 ..................................... 61,725,000
13,470,000 Morgan Stanley & Co., Inc., 5.87%, 01/02/96, (Maturity Value $14,009,131)
Collateral: U.S. Treasury Notes, 7.125%, 10/15/98 ............................. 14,000,000
13,920,000 Nomura Securities International, Inc., 5.85%, 01/02/96, (Maturity Value $14,009,100)
Collateral: U.S. Treasury Notes, 6.50%, 04/30/97 .............................. 14,000,000
13,130,000 Swiss Bank Corp., Inc., 5.85%, 01/02/96, (Maturity Value $14,009,100)
Collateral: U.S. Treasury Notes, 7.75%, 11/30/99 .............................. 14,000,000
$13,965,000 UBS Securities, Inc., 5.80%, 01/02/96, (Maturity Value $14,009,022)
Collateral: U.S. Treasury Notes, 7.25%, 11/30/96 .............................. $ 14,000,000
------------
Total Receivables from Repurchase Agreements (Cost $285,732,274) ......... 285,732,274
------------
Total Investments (Cost $325,608,424) 100.1% ........................ $325,608,424
Liabilities in Excess of Other Assets, Net (.1)% .................... (187,636)
------------
Net Assets 100.0% ................................................... $325,420,788
============
At December 31, 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.
</TABLE>
THE MONEY MARKET PORTFOLIOS
Financial Statements
Statements of Assets and Liabilities
December 31, 1995 (unaudited)
The U.S.
Government
The Money Securities Money
Market Portfolio Market Portfolio
----------- -----------
Assets:
Investment in
securities, at value
and cost $1,168,359,937 $ 39,876,150
Receivables from
repurchase agree-
ments, at value
and cost 176,329,745 285,732,274
Receivables:
Capital shares sold 4,776,914 --
Interest 5,006,429 137,554
From affiliates 7,945 28,587
----------- -----------
Total assets 1,354,480,970 325,774,565
----------- -----------
Liabilities:
Payables:
Capital shares
repurchased 5,607,684 301,833
Management fees 158,010 50,774
Distributions to
shareholders 1,139 601
Accrued expenses
and other liabilities 12,940 569
----------- -----------
Total liabilities 5,779,773 353,777
----------- -----------
Net assets, at value $1,348,701,197 $325,420,788
=========== ===========
Shares outstanding 1,348,701,197 325,420,788
=========== ===========
Net asset value
per share $1.00 $1.00
=========== ===========
Statements of Operations
for the six months ended December 31, 1995 (unaudited)
The The U.S.
Money Government
Market Securities Money
Portfolio Market Portfolio
----------- -----------
Investment income:
Interest $40,338,781 $10,736,757
----------- -----------
Expenses:
Management fees
(Note 5) 1,028,226 278,704
Custodian fees 18,033 14,114
Reports to shareholders 16,695 4,690
Professional fees 13,191 2,356
Trustee' fees and
expenses 5,003 1,145
Other 11,711 11,819
Expenses waived by
manager (Note 5) (64,463) (27,448)
----------- -----------
Total expenses 1,028,396 285,380
----------- -----------
Net investment
income 39,310,385 10,451,377
----------- -----------
Net realized loss on
investments -- (328)
----------- -----------
Net increase in net assets
resulting from operations $39,310,385 $10,451,049
=========== ===========
The accompanying notes are an integral part of these financial statements.
<TABLE>
<CAPTION>
THE MONEY MARKET PORTFOLIOS
Financial Statements (cont.)
Statements of Changes in Net Assets for the six months ended December 31, 1995 (unaudited)
and the year ended June 30, 1995
The U.S. Government Securities
The Money Market Portfolio Money Market Portfolio
------------------------ -----------------------
Six Months Year Six Months Year
ended 12/31/95 ended 6/30/95 ended 12/31/95 ended 6/30/95
----------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ....................... $ 39,310,385 $ 65,941,077 $ 10,451,377 $ 22,234,614
Net realized gain (loss) from security
transactions ............................... -- 1,356 (328) 392
----------- ------------ ----------- -----------
Net increase in net assets resulting from
operations ................................. 39,310,385 65,942,433 10,451,049 22,235,006
Distributions to shareholders from undistributed
net investment income ....................... (39,310,385) (65,942,433)c (10,451,049)b (22,235,006)a
Increase (decrease) in net assets from capital
share transactions (Notes 2 and 6) .......... 43,126,784 1,086,385,190 (149,233,598) 256,106,321
----------- ------------ ----------- -----------
Net increase (decrease) in net assets ........ 43,126,784 1,086,385,190 (149,233,598) 256,106,321
Net assets (there is no undistributed net invest-
ment income at beginning or end of the period):
Beginning of period......................... 1,305,574,413 219,189,223 474,654,386 218,548,065
----------- ------------ ----------- -----------
End of period............................... $1,348,701,197 $1,305,574,413 $325,420,788 $474,654,386
=========== ============ =========== ===========
aDistributions were increased by a net realized gain from security transactions of $392.
bDistributions were decreased by a net realized loss from security transactions of $328.
cDistributions were increased by a net realized gain from security transactions of $1,356.
The accompanying notes are an integral part of these financial statements.
</TABLE>
THE MONEY MARKET PORTFOLIOS
Notes to Financial Statements (unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES
The Money Market Portfolios (the Money Market) is a no load, open-end management
investment company (mutual fund), registered under the Investment Company Act of
1940, as amended. The Money Market has two diversified 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 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:
The Portfolios intend 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 shareholders which will be sufficient to relieve the
Portfolios 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
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 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. A repurchase agreement is accounted for as a loan by the
Portfolio to the seller, collateralized by underlying U.S. government
securities, which are delivered to the Portfolio's custodian. The market value,
including accrued interest, of the initial collateralization is required to be
at least 102% of the dollar amount invested by the Portfolio, with the value of
the underlying securities marked to market daily to maintain coverage of at
least 100%. At December 31, 1995, all outstanding repurchase agreements held by
the Portfolios had been entered into on December 29, 1995.
The Portfolios may enter into a sweep agreement with their custodian bank. In a
sweep, the excess cash in the Portfolios' demand deposit account at the end of
the day is invested overnight. The Money Market Portfolio's 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 Trust Company
of New York. Funds are returned to the Portfolios' demand deposit accounts as
the first transaction of the next business day.
2. TRUST SHARES
At December 31, 1995, there was an unlimited number of $.01 par value shares of
beneficial interest authorized. Transactions in the Portfolios' shares at $1.00
per share for the six months ended December 31, 1995 and the year ended June 30,
1995 were as follows:
<TABLE>
<CAPTION>
The U.S. Government
The Money Securities Money
Market Portfolio Market Portfolio
------------ -------------
<S> <C> <C>
Six months ended December 31, 1995
Shares sold................................................................. $ 1,054,612,974 $ 471,576,768
Shares issued in reinvestment of distributions.............................. 39,318,379 10,450,858
Shares redeemed............................................................. (1,050,804,569) (631,261,224)
------------ -------------
Net increase (decrease)..................................................... $ 43,126,784 $ (149,233,598)
============ =============
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 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, 1995, for tax purposes, The Money Market Portfolio had an
accumulated net realized loss of $3,790. 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 for the six months ended
December 31, 1995 were as follows:
<TABLE>
<CAPTION>
The U.S. Government
The Money Securities Money
Market Portfolio Market Portfolio
------------ -------------
<S> <C> <C>
Purchases................................................................... $29,397,969,723 $33,343,479,654
============ =============
Sales....................................................................... $29,358,186,276 $33,493,137,982
============ =============
</TABLE>
5. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
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 0.150 of 1% of their average daily net assets. For the six
months ended December 31, 1995, Advisers agreed in advance to waive $64,463 and
$27,448 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 Advisers and Franklin/Templeton Investor Services, Inc. (Investor
Services), which are all wholly-owned subsidiaries of Franklin Resources, Inc.,
and the Franklin Money Fund, Franklin Templeton Money Fund Trust - Franklin
Templeton Money Fund II, Franklin Federal Money Fund, and three funds of the
Institutional Fiduciary Trust, which are the Money Market Portfolio, Franklin
Cash Reserves Fund and Franklin U.S. Government Securities Money Market
Porfolio.
As of December 31, 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............................................................. 1,066,716,166 79.09%
Institutional Fiduciary Trust - Money Market Portfolio.......................... 258,982,647 19.20%
Institutional Fiduciary Trust - Franklin Cash Reserves Fund..................... 20,752,073 1.54%
Franklin Templeton Money Fund Trust - Franklin Templeton Money Fund II.......... 2,250,311 .17%
As of December 31, 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 208,508,416 64.07%
Franklin Federal Money Fund..................................................... 116,912,372 35.93%
</TABLE>
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.
7. FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout the
period by Portfolio are as follows:
<TABLE>
<CAPTION>
Per Share Operating Performance Ratios/Supplemental Data
--------------------------------- --------------------------
Ratio of Net
Net Asset Distributions Net Assets Ratio of Investment
Period 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
- ---------------------------------------------------------------------------------------------------------------------
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
1995*** 1.00 0.029 (0.029) 1.00 2.93 1,348,701 0.15** 5.73**
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
1995*** 1.00 0.028 (0.028) 1.00 2.87 325,421 0.15** 5.62**
*July 28, 1992 (effective date of registration) to June 30, 1993.
**Annualized
***For the six months ended December 31, 1995.
++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, if any, at net asset value.
+During the periods indicated, Advisers agreed in advance to waive a portion of management fees of the Portfolios. Had such action
not been taken, the ratio of expenses to average net assets would have been as follows:
</TABLE>
<TABLE>
<CAPTION>
Ratio of Expenses to
Average Net Assets
-----------
<S> <C>
The Money Market Portfolio
1993*...................................... .17%**
1994....................................... .17
1995....................................... .16
1995***.................................... .16**
The U.S. Government Securities
Money Market Portfolio
1993*...................................... .18%**
1994....................................... .17
1995....................................... .16
1995***.................................... .17**
</TABLE>
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 12/31/95
<S> <C>
Commercial Paper 56.0%
Certificates of Deposits 31.0%
Repurchase Agreements 13.0%
</TABLE>
