ANNUAL REPORT
INSTITUTIONAL FIDUCIARY TRUST
IFT Money Market Portfolio
Franklin U.S. Government Securities Money Market Portfolio
June 30, 1999
SHAREHOLDER LETTER
Dear Shareholder:
We are pleased to bring you the annual report for Franklin's IFT Money Market
Portfolio and Franklin U.S. Government Securities Money Market Portfolio for the
period ended June 30, 1999.
During the year under review, domestic economic growth continued at a robust
pace. Real U.S. gross domestic product (GDP) growth for the first three quarters
of the fund's fiscal year averaged 4.66% annualized, and most projections for
the final quarter ending in June are also above the Federal Reserve Board's (the
Fed's) targeted long-term growth rate of 2.5%. For nearly the past year and a
half, U.S. economic performance has reflected a balance between the effects of
weakness abroad and a surge in credit-driven spending by U.S. households.
Reduced inflation associated with recession in much of the rest of the world,
along with the Fed's easing of interest rates in fall 1998 when credit growth
threatened to falter, allowed for substantial declines in interest rates. This
combination also increased equity and real estate prices that, in turn, powered
domestic spending. The result has been an enviable position of rapid economic
growth coupled with low inflation and rising asset prices.
Foreign growth is now beginning to improve. The emerging markets crisis has
largely dissipated, and forecasts point to a return to more normal growth. Even
Japan, mired in a deep recession for years, showed signs of life during the
period under review, with annualized first quarter GDP growth of 4.3%, well
above estimates.
CONTENTS
Shareholder Letter ......................................................... 1
Fund Reports
Franklin's IFT
Money Market Portfolio .................................................... 3
Franklin U.S. Government
Securities Money Market
Portfolio ................................................................. 5
Financial Highlights &
Statement of Investments ................................................... 7
Financial Statements ....................................................... 11
Notes to
Financial Statements ....................................................... 14
Independent
Auditors' Report ........................................................... 16
[Fund Category Graphics]
The prospect of sizzling domestic demand and a stronger global backdrop posed a
realistic threat that the U.S. economy might overheat. An unexpected spike in
April's inflation number coupled with strength in oil prices put the market on
notice. In response, the Fed raised the federal funds target rate 0.25%, to
5.00%, at its June meeting. The bond market has also reacted unfavorably to the
prospect of higher inflation, and the 30-year Treasury yield rose from its
all-time low of 4.70% on October 5, 1998, to 5.96% on June 30, 1999.
We continue to invest the funds' assets in only the highest quality money market
securities. Consistent with the funds' objective of providing shareholders with
a higher quality and conservative investment vehicle, we do not invest the
funds' cash in derivatives or other potentially volatile securities that we
believe involve undue risk.
Please remember, this discussion reflects our views, opinions and portfolio
holdings as of June 30, 1999, the end of the reporting period. However, market
and economic conditions are changing constantly, which can be expected to affect
our strategies and the funds' portfolio composition. Although historical
performance is no guarantee of future results, these insights may help you
understand our investment and management philosophy.
We appreciate your support, welcome new shareholders and look forward to serving
your investment needs in the years ahead.
Sincerely,
/s/ Charles B. Johnson
- ------------------------------
Charles B. Johnson
Chairman
Franklin's Institutional Fiduciary Trust
FRANKLIN'S
IFT MONEY MARKET PORTFOLIO
Franklin's IFT Money Market Portfolio (the Fund) seeks to provide a high level
of current income, consistent with capital preservation and liquidity. The Fund
invests all of its assets in the shares of The Money Market Portfolio (the
Portfolio), which has the same investment objective as the Fund's. The
Portfolio, in turn, invests in various money market instruments such as:
- - U.S. government and federal agency obligations(1)
- - Certificates of deposit
- - Bankers' acceptances
- - High grade commercial paper
- - High grade short-term corporate obligations
- - Repurchase agreements collateralized by U.S. government securities(1)
The Portfolio's composition as a percentage of total investments on June 30,
1999, is shown to the right.
MONEY MARKET PORTFOLIO
The Portfolio Composition
6/30/99
Commercial Paper 39.1%
Repurchase Agreements 30.7%
Certificates of Deposit 27.2%
Bank Notes 3.4%
1. U.S. government securities owned or held under repurchase agreement by the
Portfolio, but not shares of Franklin's IFT Money Market Portfolio, are
guaranteed by the U.S. government as to the timely payment of principal and
interest.
PERFORMANCE SUMMARY
FRANKLIN'S
IFT MONEY MARKET PORTFOLIO
Period Ended June 30, 1999
- ----------------------------------------
7-Day Current Yield(3): 4.61%
7-Day Effective Yield(3): 4.72%
Average
Weighted Maturity: 57 days
FRANKLIN'S IFT MONEY MARKET PORTFOLIO
Total Returns vs. Lipper Institutional Money Market Funds Index(2)
Periods Ended June 30, 1999
Franklin Lipper
-------- ------
One-Year 5.02% 4.97%
Three-Year 16.89% 16.44%
Five-Year 30.19% 29.32%
Ten-Year 69.49% 68.12%
2. Source for the Lipper Institutional Money Market Funds Index is Lipper
Analytical Services, Inc. As of June 30, 1999, there were 198 funds in the
institutional money market funds category. This index is unmanaged, and one
cannot invest directly in an index. Total return calculations show the change in
the value of an investment over the periods indicated and assume reinvestment of
dividends and capital gains, if any, at net asset value.
3. 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 Fund's administrator and manager of the underlying
portfolio, 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 0.35% per annum of average net assets. Without these reductions, the Fund's
current and effective 7-day yields for the period would have been 4.58% and
4.68%, respectively. Franklin Advisers, Inc. may discontinue these arrangements
at any time, upon notice to the Fund's Board of Trustees.
Past performance is not predictive of future results.
FRANKLIN U.S. GOVERNMENT SECURITIES MONEY MARKET PORTFOLIO
The Franklin U.S. Government Securities Money Market Portfolio (the Fund) seeks
to earn high current income consistent with capital preservation and liquidity.
It pursues its objective by investing all of its assets in shares of the U.S.
Government Securities Money Market Portfolio (the Portfolio), which has an
investment objective identical to the Fund's. The Portfolio, in turn, invests
primarily in repurchase agreements collateralized by U.S. government securities,
and in marketable securities issued or guaranteed by the U.S. government, its
agencies and instrumentalities.(4) The Portfolio's composition as of June 30,
1999 is shown to the right.
Franklin Templeton provides extended times for placing trades in the Franklin
U.S. Government Securities Money Market Portfolio. Investors may purchase and
redeem shares each business day, up to 4:30 p.m. Eastern time (1:30 p.m. Pacific
time). This feature gives our shareholders the opportunity to invest monies
received late in the day and earn same-day dividends, rather than allow that
money to remain idle overnight or over a weekend. When purchasing shares of the
Fund, investors may also request next-day settlement exchanges to other money
market funds in the Trust.(5)
U.S. GOVERNMENT SECURITIES
MONEY MARKET PORTFOLIO
Portfolio Composition
6/30/99
[PIE CHART]
Repurchase Agreements 68.4%
Government Securities 31.1%
4. U.S. government securities owned or held under repurchase agreement by the
underlying Portfolio, but not shares of the Franklin U.S. Government Securities
Money Market Portfolio, are guaranteed by the U.S. government as to the timely
payment of principal and interest.
5. The exchange program may be modified or discontinued by the Fund.
Shareholders using timing services will be charged a $5 fee for each exchange.
Certain funds do not permit timing accounts or there may be certain
restrictions, as detailed in each fund's prospectus.
PERFORMANCE SUMMARY
FRANKLIN
U.S. GOVERNMENT SECURITIES
MONEY MARKET PORTFOLIO
Period Ended June 30, 1999
- -------------------------------------------
7-Day Current Yield (7): 4.47%
7-Day Effective Yield (7): 4.57%
Average
Weighted Maturity: 36 days
FRANKLIN U.S. GOVERNMENT SECURITIES MONEY MARKET PORTFOLIO
Total Returns vs. Lipper Institutional U.S. Government Market Funds Index(6)
Period Ended June 30, 1999
FRANKLIN LIPPER
-------- ------
One-Year 4.81% 4.85%
Three-Year 16.42% 16.19%
Five-Year 29.35% 28.81%
Ten-Year 67.71% 66.50%
6. Source for the Lipper Institutional U.S. Government Money Market Funds
Index is Lipper Analytical Services, Inc. As of June 30, 1999, there were 96
funds in the institutional U.S. government money market funds category. This
index is unmanaged, and one cannot invest directly in an index. Total return
calculations show the change in the value of an investment over the periods
indicated and assume reinvestment of dividends and capital gains, if any, at net
asset value.
7. 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 Fund's administrator and manager of the underlying
portfolio, 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 0.35% per annum of average net assets. Without these reductions, the Fund's
current and effective 7-day yields for the period would have been 4.43% and
4.53%, respectively. Franklin Advisers, Inc. may discontinue these arrangements
at any time, upon notice to the Fund's Board of Trustees.
Past performance is not predictive of future results.
INSTITUTIONAL FIDUCIARY TRUST
Financial Highlights
MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------------------------------------------
1999 1998 1997 1996 1995
-------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ...................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------------------------------------------------------------
Income from investment operations - net
investment income ..................................... .049 .054 .053 .055 .053
Less distributions from net investment income ........... (.049) (.054) (.053) (.055) (.053)
-------------------------------------------------------------
Net asset value, end of year ............................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
=============================================================
Total return(*) ......................................... 5.02% 5.58% 5.42% 5.61% 5.46%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) ......................... $ 1,289,010 $ 175,881 $ 185,088 $ 341,295 $ 272,147
Ratios to average net assets:
Expenses(**) ........................................... .31% .20% .20% .19% .15%
Expenses excluding waiver and payments by affiliate(**). .33% .24% .24% .24% .24%
Net investment income .................................. 4.82% 5.44% 5.27% 5.45% 5.40%
</TABLE>
* Total return is not annualized for periods less than one year.
** The expense ratio includes the Fund's share of the Portfolio's allocated
expenses.
See notes to financial statements.
INSTITUTIONAL FIDUCIARY TRUST
STATEMENT OF INVESTMENTS, JUNE 30, 1999
<TABLE>
<CAPTION>
MONEY MARKET PORTFOLIO SHARES VALUE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MUTUAL FUNDS 100.5%
The Money Market Portfolio (Note 1) (COST $1,295,694,772) ................. 1,295,694,772 $1,295,694,772
OTHER ASSETS, LESS LIABILITIES (.5%) ...................................... (6,684,784)
--------------
NET ASSETS 100.0% ......................................................... $1,289,009,988
==============
</TABLE>
See notes to financial statements.
INSTITUTIONAL FIDUCIARY TRUST
Financial Highlights
FRANKLIN U.S. GOVERNMENT SECURITIES MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-----------------------------------------------------------------
1999 1998 1997 1996 1995
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ...................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-----------------------------------------------------------------
Income from investment operations - net
investment income ..................................... .047 .054 .052 .054 .052
Less distributions from net investment income ........... (.047) (.054) (.052) (.054) (.052)
-----------------------------------------------------------------
Net asset value, end of year ............................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
=================================================================
Total return(*) ......................................... 4.82% 5.51% 5.29% 5.50% 5.32%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) ......................... $ 111,566 $ 131,151 $ 136,705 $ 152,173 $ 334,830
Ratios to average net assets:
Expenses(**) ........................................... .30% .20% .20% .19% .15%
Expenses excluding waiver and payments by affiliate(**). .34% .26% .26% .26% .23%
Net investment income .................................. 4.69% 5.34% 5.14% 5.44% 5.26%
</TABLE>
* Total return is not annualized for periods less than one year.
** The expense ratio includes the Fund's share of the Portfolio's allocated
expenses.
See notes to financial statements.
INSTITUTIONAL FIDUCIARY TRUST
Statement of Investments, June 30, 1999
<TABLE>
<CAPTION>
FRANKLIN U.S. GOVERNMENT SECURITIES MONEY MARKET PORTFOLIO SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MUTUAL FUNDS 101.6%
The U.S. Government Securities Money Market Portfolio (Note 1) (Cost $113,377,163) ......... 113,377,163 $113,377,163
OTHER ASSETS, LESS LIABILITIES (1.6%) ...................................................... (1,811,131)
------------
NET ASSETS 100.0% .......................................................................... $111,566,032
============
</TABLE>
See notes to financial statements.
INSTITUTIONAL FIDUCIARY TRUST
Financial Statements
STATEMENTS OF ASSETS AND LIABILITIES
June 30, 1999
<TABLE>
<CAPTION>
FRANKLIN
U.S. GOVERNMENT
SECURITIES
MONEY MARKET MONEY MARKET
PORTFOLIO PORTFOLIO
--------------------------------
<S> <C> <C>
Assets:
Investments in securities, at value and cost ......................... $1,295,694,772 $ 113,377,163
-------------------------------
Liabilities:
Payables:
Capital shares redeemed ............................................. 6,334,683 1,690,163
Affiliates .......................................................... 146,770 22,222
Distributions to shareholders ........................................ 189,072 72,958
Other liabilities .................................................... 14,259 25,788
-------------------------------
Total liabilities ............................................... 6,684,784 1,811,131
-------------------------------
Net assets, at value .................................................. $1,289,009,988 $ 111,566,032
===============================
Shares outstanding .................................................... 1,289,009,988 111,566,032
===============================
Net asset value per share ............................................. $ 1.00 $ 1.00
===============================
</TABLE>
See notes to financial statements.
INSTITUTIONAL FIDUCIARY TRUST
Financial Statements (continued)
STATEMENTS OF OPERATIONS
for the year ended June 30, 1999
<TABLE>
<CAPTION>
FRANKLIN
U.S. GOVERNMENT
SECURITIES
MONEY MARKET MONEY MARKET
PORTFOLIO PORTFOLIO
-----------------------------
<S> <C> <C>
Investment income:
Dividends .................................................................. $ 13,919,535 $ 6,673,684
----------------------------
Expenses:
Administrative fees (Note 3) ............................................... 444,184 203,308
Transfer agent fees (Note 3) ............................................... 10,357 15,737
Reports to shareholders .................................................... 8,058 5,913
Registration and filing fees ............................................... 19,789 11,062
Professional fees .......................................................... 16,827 10,138
Trustees' fees and expenses ................................................ 9,954 6,463
Other ...................................................................... 1,458 7,171
----------------------------
Total expenses ........................................................ 510,627 259,792
Expenses waived/paid by affiliate (Note 3) ............................ (64,463) (55,500)
----------------------------
Net expenses ......................................................... 446,164 204,292
----------------------------
Net investment income ............................................... 13,473,371 6,469,392
----------------------------
Net increase in net assets resulting from operations ........................ $ 13,473,371 $ 6,469,392
============================
</TABLE>
See notes to financial statements.
INSTITUTIONAL FIDUCIARY TRUST
Financial Statements (continued)
STATEMENTS OF CHANGES IN NET ASSETS
for the years ended June 30, 1999 and 1998
<TABLE>
<CAPTION>
FRANKLIN U.S. GOVERNMENT SECURITIES
MONEY MARKET PORTFOLIO MONEY MARKET PORTFOLIO
--------------------------------------------------------------------------
1999 1998 1999 1998
--------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ........................ $ 13,473,371 $ 11,423,232 $ 6,469,392 $ 7,111,746
Distributions to shareholders from net investment
income .......................................... (13,473,371) (11,423,232) (6,469,392) (7,111,746)
Capital share transactions (Note 2) ............... 1,113,128,619 (9,206,790) (19,584,891) (5,553,740)
------------------------------------------------------------------------
Net increase (decrease) in net assets ........ 1,113,128,619 (9,206,790) (19,584,891) (5,553,740)
Net assets (there is no undistributed net investment
income at beginning or end of year):
Beginning of year ................................ 175,881,369 185,088,159 131,150,923 136,704,663
------------------------------------------------------------------------
End of year ...................................... $ 1,289,009,988 $ 175,881,369 $ 111,566,032 $ 131,150,923
========================================================================
</TABLE>
See notes to financial statements.
INSTITUTIONAL FIDUCIARY TRUST
Notes to Financial Statements
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Institutional Fiduciary Trust (the Trust) is registered under the Investment
Company Act of 1940 as an open-end investment company, consisting of three
separate series (the Funds). All Funds included in this report are diversified.
The investment objective of the funds included in this report is to seek high
current income consistent with the preservation of capital and liquidity.
The Institutional Fiduciary Trust Money Market Portfolio (Money Market Fund) and
the Franklin U.S. Government Securities Money Market Portfolio (U.S. Government
Fund) invest substantially all of their assets in the Money Market Portfolio and
the U.S. Government Securities Money Market Portfolio (the Portfolios),
respectively. The Portfolios are registered under the Investment Company Act of
1940 as diversified, open-end investment companies having the same investment
objectives as the Funds'. The financial statements of the Portfolios, including
the Statement of Investments, are included elsewhere in this report and should
be read in conjunction with the Funds' financial statements.
On November 19, 1998, the Franklin U.S. Treasury Money Market Portfolio and the
Franklin U.S. Government Agency Money Market Fund (funds of the Trust) ceased
operations pursuant to a resolution approved by the Board of Trustees.
The following summarizes the Funds' significant accounting policies.
a. SECURITY VALUATION
The Money Market Fund and the U.S. Government Fund hold Portfolio shares that
are valued at their proportionate interest in the net asset values of the Money
Market Portfolio and the U.S. Government Securities Money Market Portfolio,
respectively. At June 30, 1999, the Money Market Fund owns 35.28% of the Money
Market Portfolio and the U.S. Government Fund owns 43.87% of the U.S. Government
Securities Money Market Portfolio.
b. INCOME TAXES
No provision has been made for income taxes because each Fund's policy is to
qualify as a regulated investment company under the Internal Revenue Code and to
distribute substantially all of its taxable income.
c. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Income and estimated expenses are accrued daily. Dividends from net investment
income and capital gains or losses are normally declared daily. Such
distributions are reinvested in additional shares of the Funds.
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. Other expenses are
charged to each Fund on a specific identification basis.
d. ACCOUNTING ESTIMATES
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the amounts of income and expense during the reporting
period. Actual results could differ from those estimates.
INSTITUTIONAL FIDUCIARY TRUST
Notes to Financial Statements (continued)
2. SHARES OF BENEFICIAL INTEREST
At June 30, 1999, there were an unlimited number of shares authorized (no par
value). Transactions in the Fund's shares were as follows:
<TABLE>
<CAPTION>
FRANKLIN U.S.
GOVERNMENT
MONEY MARKET SECURITIES MONEY
PORTFOLIO MARKET PORTFOLIO
-------------------------------------
<S> <C> <C>
Year ended June 30, 1999
Shares sold .......................................................... $ 3,137,711,337 $ 716,692,153
Shares issued in reinvestment of distributions ....................... 10,832,591 4,641,979
Shares redeemed ...................................................... (2,035,415,309) (740,919,023)
------------------------------------
Net increase (decrease) .............................................. $ 1,113,128,619 $ (19,584,891)
====================================
Year ended June 30, 1998
Shares sold .......................................................... $ 1,903,990,386 $ 1,083,873,539
Shares issued in reinvestment of distributions ....................... 7,424,227 3,876,501
Shares redeemed ...................................................... (1,920,621,403) (1,093,303,780)
------------------------------------
Net decrease ......................................................... $ (9,206,790) $ (5,553,740)
====================================
</TABLE>
3. TRANSACTIONS WITH AFFILIATES
Certain officers and trustees of the Funds are also officers and/or directors of
Franklin Advisers Inc. (Advisers), Franklin/Templeton Distributors Inc.
(Distributors), and Franklin/Templeton Investor Services Inc. (Investor
Services), the Funds' investment manager, principal underwriter, and transfer
agent respectively, and of the Portfolios.
Shares of the Money Market Fund are offered to other investment companies
managed by Advisers or its affiliates.
At June 30, 1999, investment companies managed by Advisers or its affiliates
owned 989,920,119 shares of the Money Market Fund.
The Funds paid an administrative fee to Advisers of .05% per year through
October 31, 1998 and .20% per year thereafter, based on average daily net
assets.
Advisers agreed in advance to waive administrative fees as noted in the
Statement of Operations.
The Funds paid transfer agent fees of $26,094, of which $5,559 was paid to
Investor Services.
INSTITUTIONAL FIDUCIARY TRUST
Independent Auditors' Report
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES
OF INSTITUTIONAL FIDUCIARY TRUST:
In our opinion, the accompanying statements of assets and liabilities, including
the statements of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of each of the funds constituting the
Institutional Fiduciary Trust (hereafter referred to as the "Funds") at June 30,
1999, the results of each of their operations for the year then ended, the
changes in each of their net assets for each of the two years in the period then
ended and the financial highlights for each of the periods presented, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Funds' management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at June 30, 1999 with the
custodian, provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
San Francisco, California
August 3, 1999
THE MONEY MARKET PORTFOLIOS
Financial Highlights
THE MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-----------------------------------------------------------------------
1999 1998 1997 1996 1995
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ...................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-----------------------------------------------------------------------
Income from investment operations - net investment income .051 .055 .053 .055 .053
Less distributions from net investment income ........... (.051) (.055) (.053) (.055) (.053)
-----------------------------------------------------------------------
Net asset value, end of year ............................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-----------------------------------------------------------------------
Total return(*) ......................................... 5.18% 5.64% 5.47% 5.66% 5.46%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) ......................... $ 3,672,404 $ 2,043,629 $ 1,773,546 $ 1,550,085 $ 1,305,574
Ratios to average net assets:
Expenses ............................................... .15% .15% .15% .15% .15%
Expenses excluding waiver and payments by affiliate .... .15% .16% .16% .16% .16%
Net investment income .................................. 5.04% 5.50% 5.34% 5.50% 5.42%
</TABLE>
* Total return is not annualized for periods less than one year.
See notes to financial statements.
THE MONEY MARKET PORTFOLIOS
STATEMENT OF INVESTMENTS, JUNE 30, 1999
<TABLE>
<CAPTION>
PRINCIPAL
THE MONEY MARKET PORTFOLIO AMOUNT VALUE
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
BANK NOTES 3.4%
NationsBank NA, Charlotte Branch, 4.87% - 5.27%, 8/02/99 - 10/18/99 ...................... $100,000,000 $ 100,000,718
Wachovia Bank NA, North Carolina Branch, 4.92%, 8/26/99 .................................. 25,000,000 25,000,384
-------------
TOTAL BANK NOTES (COST $125,001,102) ..................................................... 125,001,102
-------------
CERTIFICATES OF DEPOSIT 27.2%
ABN-AMRO Bank NV, Chicago Branch, 5.10%, 4/07/00 ......................................... 24,000,000 23,994,659
Australia & New Zealand Banking Group, New York Branch, 5.065% - 5.09%, 09/17/99 - 9/29/99 75,000,000 75,001,493
Bank of Montreal, Chicago Branch, 5.12% - 5.245%, 3/02/00 - 4/10/00 ...................... 50,000,000 49,994,749
Bank of Nova Scotia, Portland Branch, 4.97%, 9/02/99 ..................................... 25,000,000 25,000,432
Barclays Bank PLC, New York Branch, 4.99% - 5.005%, 9/07/99 - 9/10/99 .................... 75,000,000 75,001,915
Bayerische Landesbank, New York Branch, 4.91%, 7/02/99 ................................... 25,000,000 25,000,007
Bayerische Vereinsbank, New York Branch, 4.92%, 7/01/99 - 7/06/99 ........................ 50,000,000 50,000,000
Credit Agricole Indosuez, New York Branch, 4.90% - 5.31%, 7/12/99 - 1/13/00 .............. 100,000,000 100,006,049
Credit Communal De Belgique, New York Branch, 5.01%, 9/03/99 ............................. 25,000,000 25,000,878
Den Danske Bank, New York Branch, 5.08%, 9/21/99 ......................................... 25,000,000 25,000,562
Deutsche Bank AG, New York Branch, 5.27% - 5.62%, 3/03/00 - 6/26/00 ...................... 124,000,000 123,960,604
Landesbank Hessen Thuringen, New York Branch, 4.88%, 7/14/99 ............................. 25,000,000 25,000,045
Morgan Guaranty & Trust, New York Branch, 4.95% - 5.07%, 9/22/99 - 9/23/99 ............... 50,000,000 49,989,147
National Westminster Bank PLC, New York Branch, 5.13%, 10/08/99 .......................... 25,000,000 25,000,677
Rabobank Nederland NV, New York Branch, 5.41% - 5.64%, 7/30/99 - 6/01/00 ................. 25,500,000 25,491,408
Royal Bank of Canada, New York Branch, 4.91% - 5.70%, 8/09/99 - 7/03/00 .................. 50,000,000 49,997,964
Societe Generale, New York Branch, 4.86% - 5.11%, 7/26/99 - 10/04/99 ..................... 50,000,000 50,000,000
Svenska Handelsbanken, New York Branch, 4.875%, 7/16/99 .................................. 25,000,000 25,000,050
Toronto Dominion Bank, New York Branch, 4.90% - 5.10%, 10/25/99 - 2/22/00 ................ 50,000,000 49,994,548
UBS AG, New York Branch, 4.93% - 5.27%, 10/15/99 - 11/10/99 .............................. 100,000,000 100,003,298
-------------
TOTAL CERTIFICATES OF DEPOSIT (COST $998,438,485) ........................................ 998,438,485
-------------
(a) COMMERCIAL PAPER 39.1%
Abbey National North America Corp., 4.74% - 4.82%, 7/08/99 - 7/22/99 ..................... 85,000,000 84,825,176
American Express Credit Corp., 4.79% - 5.03%, 7/08/99 - 8/20/99 .......................... 125,000,000 124,420,569
Associates Corp. of North America, 4.85% - 4.92%, 8/12/99 - 8/31/99 ...................... 100,000,000 99,300,300
BIL North America Inc., 4.805%, 7/23/99 .................................................. 25,000,000 24,926,590
Canadian Imperial Holdings Inc., 5.75%, 7/01/99 .......................................... 125,000,000 125,000,000
Chevron U.K. Investment PLC, 4.85%, 9/01/99 .............................................. 5,000,000 4,958,236
Coca Cola Co., 5.00%, 9/16/99 - 9/24/99 .................................................. 50,000,000 49,437,500
Cregem North America Inc., 4.80% - 4.87%, 7/06/99 - 8/25/99 .............................. 80,000,000 79,629,125
Den Danske Corp. Inc., 4.81% - 4.82%, 7/13/99 - 7/27/99 .................................. 50,000,000 49,872,986
Dupont De Nemours Co., 4.79%, 7/07/99 .................................................... 25,000,000 24,980,042
Ford Motor Credit Co., 5.02% - 5.05%, 9/08/99 - 9/30/99 .................................. 100,000,000 98,913,444
General Electric Capital Corp., 4.75% - 5.03%, 7/09/99 - 8/10/99 ......................... 125,000,000 124,630,611
Halifax PLC, 4.80%, 11/01/99 ............................................................. 25,000,000 24,590,000
International Nederlanden (U.S.) Funding Corp., 4.82% - 5.03%, 7/09/99 - 7/23/99 ......... 125,000,000 124,686,792
Merrill Lynch & Co. Inc., 4.80% - 4.90%, 8/04/99 - 8/27/99 ............................... 50,000,000 49,692,708
Morgan Stanley Dean Witter & Co., 4.83%, 8/05/99 - 8/06/99 ............................... 50,000,000 49,761,854
National Australian Funding (DE) Inc., 5.09%, 11/05/99 ................................... 30,000,000 29,461,308
National Rural Utilities Cooperative Finance Corp., 5.02% - 5.05%, 9/20/99 - 10/5/99 ..... 75,000,000 74,074,181
Province of British Columbia, 4.78% - 5.03%, 9/02/99 - 10/18/99 .......................... 29,359,000 29,001,338
Salomon Smith Barney Holdings Inc., 4.80% - 4.94%, 7/30/99 - 8/23/99 ..................... 50,000,000 49,721,514
</TABLE>
THE MONEY MARKET PORTFOLIOS
STATEMENT OF INVESTMENTS, JUNE 30, 1999 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
THE MONEY MARKET PORTFOLIO AMOUNT VALUE
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
(a) COMMERCIAL PAPER (CONT.)
Societe Generale NA Inc., 4.86% - 4.88%, 8/17/99 - 8/24/99 ........................... $ 50,000,000 $ 49,658,472
Svenska Handelsbanken Inc., 4.80% - 4.81%, 7/14/99 - 8/11/99 ......................... 30,000,000 29,873,297
Westpac Capital Corp., 4.80% - 4.81%, 7/13/99 - 11/09/99 ............................. 35,000,000 34,547,300
--------------
TOTAL COMMERCIAL PAPER (COST $1,435,963,343) ......................................... 1,435,963,343
--------------
TOTAL INVESTMENTS BEFORE REPURCHASE AGREEMENTS (COST $2,559,402,930) ................. 2,559,402,930
--------------
(b) REPURCHASE AGREEMENTS 30.7%
Barclays Capital Inc., 4.75%, 7/01/99 (Maturity Value $100,013,194) .................. 100,000,000 100,000,000
Collateralized by U.S. Treasury Notes
CIBC Oppenheimer Corp., 4.80%, 7/01/99 (Maturity Value $200,026,667) ................. 200,000,000 200,000,000
Collateralized by U.S. Treasury Notes
Dresdner Kleinwort Benson, North America LLC 4.75%, 7/01/99 (Maturity Value $200,026,389) 200,000,000 200,000,000
Collateralized by U.S. Treasury Notes
Goldman, Sachs & Co., 4.65%, 7/01/99 (Maturity Value $50,006,458) .................... 50,000,000 50,000,000
Collateralized by U.S. Treasury Notes
J.P. Morgan Securities Inc., 4.89%, 7/01/99 (Maturity Value $89,012,089) ............. 89,000,000 89,000,000
Collateralized by U.S. Treasury Notes
Morgan Stanley & Co. Inc., 4.75%, 7/01/99 (Maturity Value $88,871,725) ............... 88,860,000 88,860,000
Collateralized by U.S. Treasury Notes
NationsBanc Montgomery Securities LLC, 4.70%, 7/01/99 (Maturity Value $200,026,111) .. 200,000,000 200,000,000
Collateralized by U.S. Treasury Notes
Warburg Dillon Read LLC, 4.80%, 7/01/99 (Maturity Value $200,026,667) ................ 200,000,000 200,000,000
Collateralized by U.S. Treasury Notes
--------------
TOTAL REPURCHASE AGREEMENTS (COST $1,127,860,000) .................................... 1,127,860,000
--------------
TOTAL INVESTMENTS (COST $3,687,262,930) 100.4% ....................................... 3,687,262,930
OTHER ASSETS, LESS LIABILITIES (.4)% ................................................. (14,859,145)
--------------
NET ASSETS 100.0% .................................................................... $3,672,403,785
==============
</TABLE>
(a) Securities are traded on a discount basis; the rates shown are the discount
rates at the time of purchase by the portfolio.
(b) See note 1(b) regarding repurchase agreements.
See notes to financial statements.
THE MONEY MARKET PORTFOLIOS
Financial Highlights
THE U.S. GOVERNMENT SECURITIES MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------------------------------------------
1999 1998 1997 1996 1995
-------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ........................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------------------------------------------------------------
Income from investment operations - net investment income.. .049 .054 .052 .054 .052
Less distributions from net investment income ............. (.049) (.054) (.052) (.054) (.052)
-------------------------------------------------------------
Net asset value, end of year .............................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------------------------------------------------------------
Total return(*) ........................................... 4.97% 5.53% 5.34% 5.55% 5.32%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) ........................... $258,458 $263,226 $285,629 $285,701 $474,654
Ratios to average net assets:
Expenses ................................................. .15% .15% .15% .15% .15%
Expenses excluding waiver and payments by affiliate ...... .15% .16% .16% .17% .16%
Net investment income .................................... 4.84% 5.40% 5.20% 5.45% 5.25%
</TABLE>
* Total return is not annualized for periods less than one year.
See notes to financial statements.
THE MONEY MARKET PORTFOLIOS
STATEMENT OF INVESTMENTS, JUNE 30, 1999
<TABLE>
<CAPTION>
PRINCIPAL
THE U.S. GOVERNMENT SECURITIES MONEY MARKET PORTFOLIO AMOUNT VALUE
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
GOVERNMENT SECURITIES 31.1%
U.S. Treasury Notes, 6.00%, 8/15/99 .................................................. $10,000,000 $ 10,009,124
U.S. Treasury Notes, 5.875%, 8/31/99 ................................................. 15,000,000 15,027,279
U.S. Treasury Notes, 6.875%, 8/31/99 ................................................. 20,000,000 20,057,498
U.S. Treasury Notes, 7.125%, 9/30/99 ................................................. 5,000,000 5,027,612
U.S. Treasury Notes, 5.875%, 11/15/99 ................................................ 20,000,000 20,083,650
U.S. Treasury Notes, 6.375%, 05/15/00 ................................................ 10,000,000 10,104,429
------------
TOTAL GOVERNMENT SECURITIES (COST $80,309,592) ....................................... 80,309,592
------------
(b) REPURCHASE AGREEMENTS 68.4%
Barclays Capital Inc., 4.75%, 7/01/99 (Maturity Value $12,001,583)
Collateralized by U.S. Treasury Notes .............................................. 12,000,000 12,000,000
CIBC Oppenheimer Corp., 4.80%, 7/01/99 (Maturity Value $12,001,600)
Collateralized by U.S. Treasury Notes .............................................. 12,000,000 12,000,000
Dresdner Kleinwort Benson, North America LLC, 4.75%, 7/01/99 (Maturity Value
$12,001,583) Collateralized by U.S. Treasury Notes ................................. 12,000,000 12,000,000
J.P. Morgan Securities Inc., 4.79%, 7/01/99 (Maturity Value $22,437,985)
Collateralized by U.S. Treasury Bills, U.S. Treasury Notes ......................... 22,435,000 22,435,000
J.P. Morgan Securities Inc., 4.89%, 7/01/99 (Maturity Value $30,004,075)
Collateralized by U.S. Treasury Bills, U.S. Treasury Notes ......................... 30,000,000 30,000,000
Merrill Lynch Government Securities Inc., 4.65%, 7/01/99 (Maturity Value $12,001,550)
Collateralized by U.S. Treasury Notes .............................................. 12,000,000 12,000,000
Morgan Stanley & Co. Inc., 4.75%, 7/01/99 (Maturity Value $52,441,919)
Collateralized by U.S. Treasury Bills, U.S. Treasury Notes ......................... 52,435,000 52,435,000
NationsBanc Montgomery Securities LLC, 4.70%, 7/01/99 (Maturity Value $12,001,567)
Collateralized by U.S. Treasury Notes .............................................. 12,000,000 12,000,000
Warburg Dillon Read LLC, 4.80%, 7/01/99 (Maturity Value $12,001,600)
Collateralized by U.S. Treasury Notes .............................................. 12,000,000 12,000,000
------------
TOTAL REPURCHASE AGREEMENTS (COST $176,870,000) ...................................... 176,870,000
------------
TOTAL INVESTMENTS (COST $257,179,592) 99.5% .......................................... 257,179,592
OTHER ASSETS, LESS LIABILITIES .5% ................................................... 1,278,789
------------
NET ASSETS 100.0% .................................................................... $258,458,381
============
</TABLE>
b See note 1(b) regarding repurchase agreements.
See notes to financial statements.
THE MONEY MARKET PORTFOLIOS
Financial Statements
STATEMENTS OF ASSETS AND LIABILITIES
June 30, 1999
<TABLE>
<CAPTION>
THE U.S.
GOVERNMENT
THE SECURITIES
MONEY MARKET MONEY MARKET
PORTFOLIO PORTFOLIO
---------------------------------
<S> <C> <C>
Assets:
Investments in securities, at value and cost ......................... $2,559,402,930 $ 80,309,592
Repurchase agreements, at value and cost ............................. 1,127,860,000 176,870,000
Cash ................................................................. 1,482 1,226
Interest receivable .................................................. 10,623,714 1,324,040
---------------------------------
Total assets .................................................... 3,697,888,126 258,504,858
---------------------------------
Liabilities:
Payables:
Investment securities purchased ..................................... 24,997,585 --
Affiliates .......................................................... 424,491 43,814
Other liabilities .................................................... 62,265 2,663
---------------------------------
Total liabilities ............................................... 25,484,341 46,477
---------------------------------
Net assets, at value .................................................. $3,672,403,785 $258,458,381
=================================
Shares outstanding .................................................... 3,672,403,785 258,458,381
=================================
Net asset value per share ............................................. $ 1.00 $ 1.00
=================================
</TABLE>
See notes to financial statements.
THE MONEY MARKET PORTFOLIOS
Financial Statements (continued)
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
THE U.S.
GOVERNMENT
THE SECURITIES
MONEY MARKET MONEY MARKET
PORTFOLIO PORTFOLIO
---------------------------
<S> <C> <C>
Investment income:
Interest ................................................................... $138,357,052 $14,596,792
--------------------------
Expenses:
Management fees (Note 3) ................................................... 3,996,761 437,891
Custodian fees ............................................................. 26,396 2,992
Reports to shareholders .................................................... 2,109 222
Professional fees .......................................................... 52,539 5,317
Other ...................................................................... 19,159 --
--------------------------
Total expenses ........................................................ 4,096,964 446,422
Expenses waived/paid by affiliate (Note 3) ............................ (95,954) (7,712)
--------------------------
Net expenses ......................................................... 4,001,010 438,710
--------------------------
Net investment income ............................................... 134,356,042 14,158,082
--------------------------
Net realized gain from investments .......................................... 651 --
--------------------------
Net increase in net assets resulting from operations ........................ $134,356,693 $14,158,082
==========================
</TABLE>
See notes to financial statements.
THE MONEY MARKET PORTFOLIOS
Financial Statements (continued)
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
<TABLE>
<CAPTION>
THE U.S. GOVERNMENT SECURITIES
THE MONEY MARKET PORTFOLIO MONEY MARKET PORTFOLIO
----------------------------------------------------------------------------
1999 1998 1999 1998
----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ............................ $ 134,356,042 $ 108,653,664 $ 14,158,082 $ 14,190,444
Net realized gain from investments ............... 651 -- -- --
----------------------------------------------------------------------------
Net increase in net assets resulting from
operations .................................. 134,356,693 108,653,664 14,158,082 14,190,444
Distributions to shareholders from net investment
income ...................................... (134,356,693)(+) (108,653,664) (14,158,082) (14,190,444)
Capital share transactions (Note 2) ............... 1,628,774,482 270,083,314 (4,767,997) 4,597,201
----------------------------------------------------------------------------
Net increase (decrease) in net assets ........ 1,628,774,482 270,083,314 (4,767,997) 4,597,201
Net assets (there is no undistributed net investment
income at beginning or end of year):
Beginning of year ................................ 2,043,629,303 1,773,545,989 263,226,378 258,629,177
----------------------------------------------------------------------------
End of year ...................................... $3,672,403,785 $2,043,629,303 $258,458,381 $263,226,378
============================================================================
</TABLE>
+ Distributions were increased by a net realized gain from investments of $651.
See notes to financial statements.
THE MONEY MARKET PORTFOLIOS
Notes to Financial Statements
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Money Market Portfolios (the Trust) is registered under the Investment
Company Act of 1940 as an open-end, diversified investment company, consisting
of two separate portfolios (the Portfolios). The shares of the Trust are issued
in private placements and are exempt from registration under the Securities Act
of 1933. The Portfolios seek to provide a high level of current income
consistent with preservation of capital and liquidity. The following summarizes
the Portfolios' significant accounting policies.
a. SECURITY VALUATION:
Securities are valued at amortized cost which approximates value.
b. REPURCHASE AGREEMENTS:
The Portfolios may enter into repurchase agreements, which are accounted for as
a loan by the Portfolios to the seller, collateralized by securities which are
delivered to the Portfolios' custodian. The market value, including accrued
interest, of the initial collateralization is required to be at least 102% of
the dollar amount invested by the Portfolios, with the value of the underlying
securities marked to market daily to maintain coverage of at least 100%. At June
30, 1999, all outstanding repurchase agreements held by the Portfolios had been
entered into on that date.
c. INCOME TAXES:
No provision has been made for income taxes because each Portfolio's policy is
to qualify as a regulated investment company under the Internal Revenue Code and
to distribute substantially all of its taxable income.
d. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS:
Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Interest income and estimated expenses are accrued daily. Dividends from net
investment income and capital gains or losses are normally declared daily. Such
distributions are reinvested in additional shares of the Portfolios.
Common expenses incurred by the Trust are allocated among the Portfolios based
on the ratio of net assets of each Portfolio to the combined net assets. Other
expenses are charged to each Portfolio on a specific identification basis.
e. ACCOUNTING ESTIMATES:
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the amounts of income and expense during the reporting
period. Actual results could differ from those estimates.
THE MONEY MARKET PORTFOLIOS
Notes to Financial Statements (continued)
2. SHARES OF BENEFICIAL INTEREST
At June 30, 1999, there were an unlimited number of shares authorized ($0.01 par
value). Transactions in the Portfolios' shares were as follows:
<TABLE>
<CAPTION>
THE U.S.
THE GOVERNMENT
MONEY MARKET SECURITIES MONEY
PORTFOLIO MARKET PORTFOLIO
--------------------------------------
<S> <C> <C>
Year ended June 30, 1999
Shares sold ............................................................. $ 13,314,265,139 $ 963,424,640
Shares issued in reinvestment of distributions .......................... 134,356,720 14,164,293
Shares redeemed ......................................................... (11,819,847,377) (982,356,930)
--------------------------------------
Net increase (decrease) ................................................. $ 1,628,774,482 $ (4,767,997)
======================================
Year ended June 30, 1998
Shares sold ............................................................. $ 5,690,107,931 $ 963,956,819
Shares issued in reinvestment of distributions .......................... 108,652,953 14,190,262
Shares redeemed ......................................................... (5,528,677,570) (973,549,880)
--------------------------------------
Net increase ............................................................ $ 270,083,314 $ 4,597,201
======================================
</TABLE>
3. TRANSACTIONS WITH AFFILIATES
Certain officers and trustees of the Trust are also officers and/or directors of
Franklin Advisers, Inc. (Advisers) and Franklin/Templeton Investor Services,
Inc. (Investor Services), the Portfolios' investment manager and transfer agent,
respectively, and of the Franklin Money Fund, Institutional Fiduciary Trust,
Franklin Templeton Money Fund Trust, and Franklin Federal Money Fund.
The Portfolios pay an investment management fee to Advisers of .15% per year of
the average daily net assets of each Portfolio. Advisers agreed in advance to
waive management fees, as noted in the Statements of Operations.
At June 30, 1999, 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 ....................................................... 2,152,976,361 58.63%
Institutional Fiduciary Trust - Money Market Portfolio .................... 1,295,694,772 35.28%
Institutional Fiduciary Trust - Franklin Cash Reserves Fund ............... 134,822,519 3.67%
Franklin Templeton Money Fund ............................................. 88,910,133 2.42%
</TABLE>
At June 30, 1999, the shares of The U.S. Government Securities Money Market
Portfolio were owned by the following funds:
<TABLE>
<CAPTION>
PERCENTAGE OF
SHARES OUTSTANDING SHARES
-----------------------------------
<S> <C> <C>
Institutional Fiduciary Trust - Franklin U.S. Government Securities Money Market Portfolio ... 113,377,163 43.87%
Franklin Federal Money Fund .................................................................. 145,081,218 56.13%
</TABLE>
THE MONEY MARKET PORTFOLIOS
Notes to Financial Statements (continued)
4. INCOME TAXES
At June 30, 1999, The Money Market Portfolio has deferred capital losses
occurring subsequent to October 31, 1998 of $8,692. For tax purposes, such
losses will be reflected in the year ending June 30, 2000.
THE MONEY MARKET PORTFOLIOS
Independent Auditors' Report
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES
OF THE MONEY MARKET PORTFOLIOS
In our opinion, the accompanying statements of assets and liabilities, including
the statements of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of each of the portfolios constituting
The Money Market Portfolios (hereafter referred to as the "Portfolios") at June
30, 1999, the results of each of their operations for the year then ended, the
changes in each of their net assets for each of the two years in the period then
ended and the financial highlights for each of the periods presented, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Portfolios' management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at June
30, 1999 by correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.
PricewaterhouseCoopers LLP
San Francisco, California
August 3, 1999
ANNUAL REPORT
INSTITUTIONAL FIDUCIARY TRUST
THE FRANKLIN CASH RESERVES FUND
JUNE 30, 1999
SHAREHOLDER LETTER
- --------------------------------------------------------------------------------
Your fund's objective: The Franklin Cash Reserves Fund (the Fund) seeks high
current income, consistent with capital preservation and liquidity. The Fund
seeks to achieve this objective by investing all of its assets in The Money
Market Portfolio, whose investment objective is the same as the Fund's. 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.
- --------------------------------------------------------------------------------
Dear Shareholder:
We are pleased to bring you the annual report for the Franklin Cash Reserves
Fund for the period ended June 30, 1999.
During the year under review, domestic economic growth continued at a robust
pace. Real U.S. gross domestic product (GDP) growth for the first three quarters
of the fund's fiscal year averaged 4.66% annualized, and most projections for
the final quarter ending in June are also above the Federal Reserve Board's (the
Fed's) targeted long-term growth rate of 2.5%. For nearly the past year and a
half, U.S. economic performance has reflected a balance between the effects of
weakness abroad and a surge in credit-driven spending by U.S. households.
Reduced inflation associated with recession in much of the rest of the world,
along with the Fed's easing of interest rates in fall 1998 when credit growth
threatened to falter, allowed for substantial declines in interest rates. This
combination also increased equity and real estate prices that, in turn, powered
domestic spending. The result has been an enviable position of rapid economic
growth coupled with low inflation and rising asset prices.
CONTENTS
Shareholder Letter ......................................................... 1
Franklin Cash Reserves Fund ................................................ 4
Financial Highlights & Statement of Investments ............................ 6
Financial Statements ....................................................... 8
Notes to Financial Statements .............................................. 11
[PYRAMID GRAPHIC]
Foreign growth is now beginning to improve. The emerging markets crisis has
largely dissipated, and forecasts point to a return to more normal growth. Even
Japan, mired in a deep recession for years, showed signs of life during the
period under review, with annualized first quarter GDP growth of 4.3%, well
above estimates.
The prospect of sizzling domestic demand and a stronger global backdrop posed a
realistic threat that the U.S. economy might overheat. An unexpected spike in
April's inflation number coupled with strength in oil prices put the market on
notice. In response, the Fed raised the federal funds target rate 0.25%, to
5.00%, at its June meeting. The bond market has also reacted unfavorably to the
prospect of higher inflation, and the 30-year Treasury yield rose from its
all-time low of 4.70% on October 5, 1998, to 5.96% on June 30, 1999.
Reflecting a 50 basis point (0.50%) net reduction in the federal funds target
rate over the past year, the fund's seven-day yield during the reporting period
declined from 5.14% on June 30, 1998, to 3.94% on June 30, 1999.
We continue to invest the fund's assets in only the highest quality money market
securities. For example, on June 30, 1999, over 75% of the securities purchased
for the portfolio carried AA or higher long-term credit ratings by Standard &
Poor's and Moody's, national credit rating agencies, with the balance rated
A.(1) Consistent with the fund's objective of providing shareholders with a
higher quality and conservative investment vehicle, we do not invest the fund's
cash in derivatives or other potentially volatile securities that we believe
involve undue risk.
(1). This does not indicate a rating for the fund.
Please remember, this discussion reflects our views, opinions and portfolio
holdings as of June 30, 1999, the end of the reporting period. However, market
and economic conditions are changing constantly, which can be expected to affect
our strategies and the fund's portfolio composition. Although historical
performance is no guarantee of future results, these insights may help you
understand our investment and management philosophy.
We appreciate your support, welcome new shareholders and look forward to serving
your investment needs in the years ahead.
Sincerely,
/s/ Charles B. Johnson
Charles B. Johnson
Chairman
Franklin's Institutional Fiduciary Trust
FRANKLIN CASH RESERVES FUND
THE MONEY MARKET PORTFOLIO [PIE CHART]
Portfolio Composition
6/30/99
Commercial Paper 39.1%
Repurchase Agreements 30.7%
Certificates of Deposits 27.2%
Bank Notes 3.4%
The Franklin Cash Reserves Fund's investment objective is to provide high
current income, consistent with capital preservation and liquidity. The Fund
invests all of its assets in shares of The Money Market Portfolio (the
Portfolio), which has the same investment objective as the Fund's. The
Portfolio, in turn, invests in various money market instruments such as:
- - U.S. government and federal agency obligations(2)
- - Certificates of deposit
- - Bankers' acceptances
- - High grade commercial paper
- - High grade short-term corporate obligations
- - Repurchase agreements collateralized by U.S. government securities(2)
The Portfolio's composition as a percentage of total investments on June 30,
1999, is shown to the left.
2. 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.
You will find a complete listing of the Fund's portfolio holdings, including
dollar value and number of shares or principal amount, beginning on page 7 of
this report.
PERFORMANCE SUMMARY
FRANKLIN CASH RESERVES FUND
Period Ended June 30, 1999
- --------------------------------------------------------------------------------
7-Day Current Yield(4): 3.94%
7-Day Effective Yield(4): 4.02%
Average Weighted Maturity: 57 days
3. Source for the Lipper Institutional Money Market Funds Index is Lipper
Analytical Services, Inc. As of June 30, 1999, there were 198 funds in the
institutional money market funds category. This index is unmanaged, and one
cannot invest directly in an index. Total return calculations show the change in
the value of an investment over the periods indicated and assume reinvestment of
dividends and capital gains, if any, at net asset value.
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 CASH RESERVES FUND [BAR CHART]
Total Returns vs. Lipper Institutional
Money Market Funds Index(3)
Periods Ended June 30, 1999
One-Year Three-Year
Franklin Cash Reserves Fund 4.49% 15.61%
Lipper 4.97% 16.44%
Past performance is not predictive of future results.
INSTITUTIONAL FIDUCIARY TRUST
FRANKLIN CASH RESERVES FUND
Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------------------------------------------
1999 1998 1997 1996 1995
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ...................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
----------------------------------------------------------------
Income from investment operations - net investment income .044 .051 .050 .052 .052
Less distributions from net investment income ........... (.044) (.051) (.050) (.052) (.052)
----------------------------------------------------------------
Net asset value, end of year ............................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
================================================================
Total return* ........................................... 4.49% 5.28% 5.11% 5.35% 5.34%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) ......................... $135,390 $119,585 $76,510 $30,381 $14,545
Ratios to average net assets:
Expenses** ............................................. .82% .50% .50% .49% .40%
Expenses excluding waiver and payments by affiliate** .. .82% .77% .69% .73% .79%
Net investment income .................................. 4.38% 5.14% 5.00% 5.10% 5.69%
</TABLE>
*Total return is not annualized for periods less than one year.
**The expense ratio includes the Fund's share of the Portfolio's allocated
expenses.
See notes to financial statements.
INSTITUTIONAL FIDUCIARY TRUST
FRANKLIN CASH RESERVES FUND
STATEMENT OF INVESTMENTS, JUNE 30, 1999
<TABLE>
<CAPTION>
SHARES VALUE
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MUTUAL FUNDS 99.6%
The Money Market Portfolio (Note 1) (COST $134,822,519) ........................ 134,822,519 $134,822,519
OTHER ASSETS, LESS LIABILITIES .4% ............................................. 567,033
------------
NET ASSETS 100.0% .............................................................. $135,389,552
============
</TABLE>
See notes to financial statements. 7
<PAGE>
INSTITUTIONAL FIDUCIARY TRUST
FRANKLIN CASH RESERVES FUND
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999
Assets:
Investments in securities, at value and cost.................... $134,822,519
Receivables for capital shares sold ............................ 3,634,053
Total assets .............................................. 138,456,572
------------
Liabilities:
Payables:
Capital shares redeemed ....................................... 2,844,282
Affiliates .................................................... 214,756
Other liabilities .............................................. 7,982
------------
Total liabilities ......................................... 3,067,020
------------
Net assets, at value ............................................ $135,389,552
============
Shares outstanding .............................................. 135,389,552
============
Net asset value per share ....................................... $ 1.00
============
See notes to financial statements.
INSTITUTIONAL FIDUCIARY TRUST
FRANKLIN CASH RESERVES FUND
Financial Statements (Continued)
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1999
Investment income:
Dividends ....................................................... $7,456,088
----------
Expenses:
Administrative fees (Note 3) .................................... 369,360
Distribution fees (Note 3) ...................................... 369,360
Transfer agent fees (Note 3) .................................... 203,829
Reports to shareholders ......................................... 6,989
Registration and filing fees .................................... 18,041
Professional fees ............................................... 8,535
Trustees' fees and expenses ..................................... 6,906
Other ........................................................... 1,066
----------
Total expenses ............................................. 984,086
----------
Net investment income ..................................... 6,472,002
----------
Net increase in net assets resulting from operations.............. $6,472,002
==========
See notes to financial statements.
INSTITUTIONAL FIDUCIARY TRUST
FRANKLIN CASH RESERVES FUND
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
---------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ................................................................. $ 6,472,002 $ 6,018,398
Distributions to shareholders from net investment income ............................... (6,472,002) (6,018,398)
Capital share transactions (Note 2) .................................................... 15,804,969 43,074,366
---------------------------------
Net increase in net assets ........................................................ 15,804,969 43,074,366
Net assets (there is no undistributed net investment income at beginning or end of year):
Beginning of year ...................................................................... 119,584,583 76,510,217
---------------------------------
End of year ............................................................................ $ 135,389,552 $ 119,584,583
=================================
</TABLE>
See notes to financial statements.
INSTITUTIONAL FIDUCIARY TRUST
FRANKLIN CASH RESERVES FUND
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Franklin Cash Reserves Fund (the Fund) is a separate, diversified series of
Institutional Fiduciary Trust (the Trust). The Trust is registered under the
Investment Company Act of 1940 as an open-end investment company, consisting of
three separate series (the Funds). The Fund's objective is to seek high current
income consistent with the preservation of capital and liquidity.
The Fund invests substantially all of its assets in The Money Market Portfolio
(the Portfolio), which is registered under the Investment Company Act of 1940 as
a diversified, open-end 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.
The following summarizes the Fund's significant accounting policies.
a. SECURITY VALUATION
The Fund holds Portfolio shares that are valued at its proportionate interest in
net asset value of the Portfolio. As of June 30, 1999, the Fund owns 3.67% of
the Portfolio.
b. INCOME TAXES
No provision has been made for income taxes because the Fund's policy is to
qualify as a regulated investment company under the Internal Revenue Code and to
distribute substantially all of its taxable income.
c. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Income and estimated expenses are accrued daily. Dividends from net investment
income and capital gains or losses are normally declared daily. Such
distributions are reinvested in additional shares of the Fund.
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. Other expenses are
charged to each Fund on a specific identification basis.
d. ACCOUNTING ESTIMATES
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the amounts of income and expense during the reporting
period. Actual results could differ from those estimates.
INSTITUTIONAL FIDUCIARY TRUST
FRANKLIN CASH RESERVES FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SHARES OF BENEFICIAL INTEREST
At June 30, 1999, there were an unlimited number of shares authorized (no par
value). Transactions in the Fund's shares were as follows:
YEAR ENDED JUNE 30,
--------------------------------
1999 1998
--------------------------------
Shares sold ....................... $ 296,189,371 $ 326,338,904
Shares issued in reinvestment
of distributions ................. 6,445,425 5,965,145
Shares redeemed ................... (286,829,827) (289,229,683)
--------------------------------
Net increase ...................... $ 15,804,969 $ 43,074,366
================================
3. TRANSACTIONS WITH AFFILIATES
Certain officers and trustees of the Fund are also officers and/or directors of
Franklin Advisers, Inc. (Advisers), Franklin/Templeton Distributors, Inc.
(Distributors), and Franklin/Templeton Investor Services, Inc. (Investor
Services), the Fund's investment manager, principal underwriter, and transfer
agent, respectively, and of the Portfolio.
The Fund pays an administrative fee to Advisers of .25% per year of the Fund's
average daily net assets.
The Fund reimburses Distributors up to .25% per year of its average daily net
assets, for costs incurred in marketing the Fund's shares.
The Fund paid transfer agent fees of $203,829 of which $129,414 was paid to
Investor Services.
INSTITUTIONAL FIDUCIARY TRUST
FRANKLIN CASH RESERVES FUND
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS
OF INSTITUTIONAL FIDUCIARY TRUST
In our opinion, the accompanying statement of assets and liabilities, including
the statement of investments, and the related statements of operations and
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Franklin Cash Reserve Fund (the
"Fund") (one of the funds constituting the Institutional Fiduciary Trust) at
June 30, 1999, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period then ended and
the financial highlights for each of the periods presented, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at June 30, 1999 with the
custodian, provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
San Francisco, California
August 3, 1999
THE MONEY MARKET PORTFOLIOS
FINANCIAL HIGHLIGHTS
THE MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------------------------------------------------------
1999 1998 1997 1996 1995
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ...................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------------------------------------------------------------------
Income from investment operations - net investment income .051 .055 .053 .055 .053
Less distributions from net investment income ........... (.051) (.055) (.053) (.055) (.053)
--------------------------------------------------------------------
Net asset value, end of year ............................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------------------------------------------------------------------
Total return* ........................................... 5.18% 5.64% 5.47% 5.66% 5.46%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) ......................... $3,672,404 $2,043,629 $1,773,546 $1,550,085 $1,305,574
Ratios to average net assets:
Expenses ............................................... .15% .15% .15% .15% .15%
Expenses excluding waiver and payments by affiliate .... .15% .16% .16% .16% .16%
Net investment income .................................. 5.04% 5.50% 5.34% 5.50% 5.42%
</TABLE>
*Total return is not annualized for periods less than one year.
See notes to financial statements.
THE MONEY MARKET PORTFOLIOS
STATEMENT OF INVESTMENTS, JUNE 30, 1999
<TABLE>
<CAPTION>
PRINCIPAL
THE MONEY MARKET PORTFOLIO AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
BANK NOTES 3.4%
NationsBank NA, Charlotte Branch, 4.87% - 5.27%, 8/02/99 - 10/18/99 .............................. $100,000,000 $100,000,718
Wachovia Bank NA, North Carolina Branch, 4.92%, 8/26/99 .......................................... 25,000,000 25,000,384
------------
TOTAL BANK NOTES (COST $125,001,102) 125,001,102
------------
CERTIFICATES OF DEPOSIT 27.2%
ABN-AMRO Bank NV, Chicago Branch, 5.10%, 4/07/00 ................................................. 24,000,000 23,994,659
Australia & New Zealand Banking Group, New York Branch, 5.065% - 5.09%, 09/17/99 - 9/29/99 ....... 75,000,000 75,001,493
Bank of Montreal, Chicago Branch, 5.12% - 5.245%, 3/02/00 - 4/10/00 .............................. 50,000,000 49,994,749
Bank of Nova Scotia, Portland Branch, 4.97%, 9/02/99 ............................................. 25,000,000 25,000,432
Barclays Bank PLC, New York Branch, 4.99% - 5.005%, 9/07/99 - 9/10/99 ............................ 75,000,000 75,001,915
Bayerische Landesbank, New York Branch, 4.91%, 7/02/99 ........................................... 25,000,000 25,000,007
Bayerische Vereinsbank, New York Branch, 4.92%, 7/01/99 - 7/06/99 ................................ 50,000,000 50,000,000
Credit Agricole Indosuez, New York Branch, 4.90% - 5.31%, 7/12/99 - 1/13/00 ...................... 100,000,000 100,006,049
Credit Communal De Belgique, New York Branch, 5.01%, 9/03/99 ..................................... 25,000,000 25,000,878
Den Danske Bank, New York Branch, 5.08%, 9/21/99 ................................................. 25,000,000 25,000,562
Deutsche Bank AG, New York Branch, 5.27% - 5.62%, 3/03/00 - 6/26/00 .............................. 124,000,000 123,960,604
Landesbank Hessen Thuringen, New York Branch, 4.88%, 7/14/99 ..................................... 25,000,000 25,000,045
Morgan Guaranty & Trust, New York Branch, 4.95% - 5.07%, 9/22/99 - 9/23/99 ....................... 50,000,000 49,989,147
National Westminster Bank PLC, New York Branch, 5.13%, 10/08/99 .................................. 25,000,000 25,000,677
Rabobank Nederland NV, New York Branch, 5.41% - 5.64%, 7/30/99 - 6/01/00 ......................... 25,500,000 25,491,408
Royal Bank of Canada, New York Branch, 4.91% - 5.70%, 8/09/99 - 7/03/00 .......................... 50,000,000 49,997,964
Societe Generale, New York Branch, 4.86% - 5.11%, 7/26/99 - 10/04/99 ............................. 50,000,000 50,000,000
Svenska Handelsbanken, New York Branch, 4.875%, 7/16/99 .......................................... 25,000,000 25,000,050
Toronto Dominion Bank, New York Branch, 4.90% - 5.10%, 10/25/99 - 2/22/00 ........................ 50,000,000 49,994,548
UBS AG, New York Branch, 4.93% - 5.27%, 10/15/99 - 11/10/99 ...................................... 100,000,000 100,003,298
------------
TOTAL CERTIFICATES OF DEPOSIT (COST $998,438,485) ................................................ 998,438,485
------------
(a)COMMERCIAL PAPER 39.1%
Abbey National North America Corp., 4.74% - 4.82%, 7/08/99 - 7/22/99 ............................. 85,000,000 84,825,176
American Express Credit Corp., 4.79% - 5.03%, 7/08/99 - 8/20/99 .................................. 125,000,000 124,420,569
Associates Corp. of North America, 4.85% - 4.92%, 8/12/99 - 8/31/99 .............................. 100,000,000 99,300,300
BIL North America Inc., 4.805%, 7/23/99 .......................................................... 25,000,000 24,926,590
Canadian Imperial Holdings Inc., 5.75%, 7/01/99 .................................................. 125,000,000 125,000,000
Chevron U.K. Investment PLC, 4.85%, 9/01/99 ...................................................... 5,000,000 4,958,236
Coca Cola Co., 5.00%, 9/16/99 - 9/24/99 .......................................................... 50,000,000 49,437,500
Cregem North America Inc., 4.80% - 4.87%, 7/06/99 - 8/25/99 ...................................... 80,000,000 79,629,125
Den Danske Corp. Inc., 4.81% - 4.82%, 7/13/99 - 7/27/99 .......................................... 50,000,000 49,872,986
Dupont De Nemours Co., 4.79%, 7/07/99 ............................................................ 25,000,000 24,980,042
Ford Motor Credit Co., 5.02% - 5.05%, 9/08/99 - 9/30/99 .......................................... 100,000,000 98,913,444
General Electric Capital Corp., 4.75% - 5.03%, 7/09/99 - 8/10/99 ................................. 125,000,000 124,630,611
Halifax PLC, 4.80%, 11/01/99 ..................................................................... 25,000,000 24,590,000
International Nederlanden (U.S.) Funding Corp., 4.82% - 5.03%, 7/09/99 - 7/23/99 ................. 125,000,000 124,686,792
Merrill Lynch & Co. Inc., 4.80% - 4.90%, 8/04/99 - 8/27/99 ....................................... 50,000,000 49,692,708
Morgan Stanley Dean Witter & Co., 4.83%, 8/05/99 - 8/06/99 ....................................... 50,000,000 49,761,854
National Australian Funding (DE) Inc., 5.09%, 11/05/99 ........................................... 30,000,000 29,461,308
National Rural Utilities Cooperative Finance Corp., 5.02% - 5.05%, 9/20/99 - 10/5/99 ............. 75,000,000 74,074,181
Province of British Columbia, 4.78% - 5.03%, 9/02/99 - 10/18/99 .................................. 29,359,000 29,001,338
Salomon Smith Barney Holdings Inc., 4.80% - 4.94%, 7/30/99 - 8/23/99 ............................. 50,000,000 49,721,514
</TABLE>
THE MONEY MARKET PORTFOLIOS
STATEMENT OF INVESTMENTS, JUNE 30, 1999 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
THE MONEY MARKET PORTFOLIO AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
(a) COMMERCIAL PAPER (CONT.)
Societe Generale NA Inc., 4.86% - 4.88%, 8/17/99 - 8/24/99 ..................................... $ 50,000,000 $ 49,658,472
Svenska Handelsbanken Inc., 4.80% - 4.81%, 7/14/99 - 8/11/99 ................................... 30,000,000 29,873,297
Westpac Capital Corp., 4.80% - 4.81%, 7/13/99 - 11/09/99 ....................................... 35,000,000 34,547,300
--------------
TOTAL COMMERCIAL PAPER (COST $1,435,963,343) ................................................... 1,435,963,343
--------------
TOTAL INVESTMENTS BEFORE REPURCHASE AGREEMENTS (COST $2,559,402,930) ........................... 2,559,402,930
--------------
(b) REPURCHASE AGREEMENTS 30.7%
Barclays Capital Inc., 4.75%, 7/01/99 (Maturity Value $100,013,194) ............................ 100,000,000 100,000,000
Collateralized by U.S. Treasury Notes
CIBC Oppenheimer Corp., 4.80%, 7/01/99 (Maturity Value $200,026,667) ........................... 200,000,000 200,000,000
Collateralized by U.S. Treasury Notes
Dresdner Kleinwort Benson, North America LLC 4.75%, 7/01/99 (Maturity Value $200,026,389) ...... 200,000,000 200,000,000
Collateralized by U.S. Treasury Notes
Goldman, Sachs & Co., 4.65%, 7/01/99 (Maturity Value $50,006,458) .............................. 50,000,000 50,000,000
Collateralized by U.S. Treasury Notes
J.P. Morgan Securities Inc., 4.89%, 7/01/99 (Maturity Value $89,012,089) ....................... 89,000,000 89,000,000
Collateralized by U.S. Treasury Notes
Morgan Stanley & Co. Inc., 4.75%, 7/01/99 (Maturity Value $88,871,725) ......................... 88,860,000 88,860,000
Collateralized by U.S. Treasury Notes
NationsBanc Montgomery Securities LLC, 4.70%, 7/01/99 (Maturity Value $200,026,111) ............ 200,000,000 200,000,000
Collateralized by U.S. Treasury Notes
Warburg Dillon Read LLC, 4.80%, 7/01/99 (Maturity Value $200,026,667) .......................... 200,000,000 200,000,000
Collateralized by U.S. Treasury Notes
--------------
TOTAL REPURCHASE AGREEMENTS (COST $1,127,860,000) .............................................. 1,127,860,000
--------------
TOTAL INVESTMENTS (COST $3,687,262,930) 100.4% ................................................. 3,687,262,930
OTHER ASSETS, LESS LIABILITIES (.4)% ........................................................... (14,859,145)
--------------
NET ASSETS 100.0% .............................................................................. $3,672,403,785
==============
</TABLE>
(a) Securities are traded on a discount basis; the rates shown are the discount
rates at the time of purchase by the portfolio.
(b) See note 1(b) regarding repurchase agreements.
See notes to financial statements.
THE MONEY MARKET PORTFOLIOS
FINANCIAL HIGHLIGHTS
THE U.S. GOVERNMENT SECURITIES MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
---------------------------------------------------------------------
1999 1998 1997 1996 1995
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ...................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------------------------------------------------------------------
Income from investment operations - net investment income .049 .054 .052 .054 .052
Less distributions from net investment income ........... (.049) (.054) (.052) (.054) (.052)
---------------------------------------------------------------------
Net asset value, end of year ............................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------------------------------------------------------------------
Total return* ........................................... 4.97% 5.53% 5.34% 5.55% 5.32%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) ......................... $258,458 $263,226 $285,629 $285,701 $474,654
Ratios to average net assets:
Expenses ............................................... .15% .15% .15% .15% .15%
Expenses excluding waiver and payments by affiliate .... .15% .16% .16% .17% .16%
Net investment income .................................. 4.84% 5.40% 5.20% 5.45% 5.25%
</TABLE>
*Total return is not annualized for periods less than one year.
See notes to financial statements.
THE MONEY MARKET PORTFOLIOS
STATEMENT OF INVESTMENTS, JUNE 30, 1999
<TABLE>
<CAPTION>
PRINCIPAL
THE U.S. GOVERNMENT SECURITIES MONEY MARKET PORTFOLIO AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
GOVERNMENT SECURITIES 31.1%
U.S. Treasury Notes, 6.00%, 8/15/99 ................................................................... $10,000,000 $ 10,009,124
U.S. Treasury Notes, 5.875%, 8/31/99 .................................................................. 15,000,000 15,027,279
U.S. Treasury Notes, 6.875%, 8/31/99 .................................................................. 20,000,000 20,057,498
U.S. Treasury Notes, 7.125%, 9/30/99 .................................................................. 5,000,000 5,027,612
U.S. Treasury Notes, 5.875%, 11/15/99 ................................................................. 20,000,000 20,083,650
U.S. Treasury Notes, 6.375%, 05/15/00 ................................................................. 10,000,000 10,104,429
------------
TOTAL GOVERNMENT SECURITIES (COST $80,309,592) ........................................................ 80,309,592
------------
(b) REPURCHASE AGREEMENTS 68.4%
Barclays Capital Inc., 4.75%, 7/01/99 (Maturity Value $12,001,583)
Collateralized by U.S. Treasury Notes ................................................................ 12,000,000 12,000,000
CIBC Oppenheimer Corp., 4.80%, 7/01/99 (Maturity Value $12,001,600)
Collateralized by U.S. Treasury Notes ................................................................ 12,000,000 12,000,000
Dresdner Kleinwort Benson, North America LLC, 4.75%, 7/01/99 (Maturity Value $12,001,583)
Collateralized by U.S. Treasury Notes ................................................................ 12,000,000 12,000,000
J.P. Morgan Securities Inc., 4.79%, 7/01/99 (Maturity Value $22,437,985)
Collateralized by U.S. Treasury Bills, U.S. Treasury Notes ........................................... 22,435,000 22,435,000
J.P. Morgan Securities Inc., 4.89%, 7/01/99 (Maturity Value $30,004,075)
Collateralized by U.S. Treasury Bills, U.S. Treasury Notes ........................................... 30,000,000 30,000,000
Merrill Lynch Government Securities Inc., 4.65%, 7/01/99 (Maturity Value $12,001,550)
Collateralized by U.S. Treasury Notes ................................................................ 12,000,000 12,000,000
Morgan Stanley & Co. Inc., 4.75%, 7/01/99 (Maturity Value $52,441,919)
Collateralized by U.S. Treasury Bills, U.S. Treasury Notes ........................................... 52,435,000 52,435,000
NationsBanc Montgomery Securities LLC, 4.70%, 7/01/99 (Maturity Value $12,001,567)
Collateralized by U.S. Treasury Notes ................................................................ 12,000,000 12,000,000
Warburg Dillon Read LLC, 4.80%, 7/01/99 (Maturity Value $12,001,600)
Collateralized by U.S. Treasury Notes ................................................................ 12,000,000 12,000,000
------------
TOTAL REPURCHASE AGREEMENTS (COST $176,870,000) ....................................................... 176,870,000
------------
TOTAL INVESTMENTS (COST $257,179,592) 99.5% ........................................................... 257,179,592
OTHER ASSETS, LESS LIABILITIES .5% .................................................................... 1,278,789
------------
NET ASSETS 100.0% ..................................................................................... $258,458,381
============
</TABLE>
(b) See note 1(b) regarding repurchase agreements.
See notes to financial statements.
THE MONEY MARKET PORTFOLIOS
Financial Statements
STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, 1999
<TABLE>
<CAPTION>
THE U.S.
GOVERNMENT
THE SECURITIES
MONEY MARKET MONEY MARKET
PORTFOLIO PORTFOLIO
-------------------------------
<S> <C> <C>
Assets:
Investments in securities, at value and cost ... $2,559,402,930 $ 80,309,592
Repurchase agreements, at value and cost ....... 1,127,860,000 176,870,000
Cash ........................................... 1,482 1,226
Interest receivable ............................ 10,623,714 1,324,040
-------------------------------
Total assets .............................. 3,697,888,126 258,504,858
-------------------------------
Liabilities:
Payables:
Investment securities purchased ............... 24,997,585 --
Affiliates .................................... 424,491 43,814
Other liabilities .............................. 62,265 2,663
-------------------------------
Total liabilities ......................... 25,484,341 46,477
-------------------------------
Net assets, at value ............................ $3,672,403,785 $258,458,381
-------------------------------
Shares outstanding .............................. 3,672,403,785 258,458,381
-------------------------------
Net asset value per share ....................... $ 1.00 $ 1.00
-------------------------------
</TABLE>
See notes to financial statements.
THE MONEY MARKET PORTFOLIOS
Financial Statements (continued)
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
THE U.S.
GOVERNMENT
THE SECURITIES
MONEY MARKET MONEY MARKET
PORTFOLIO PORTFOLIO
-------------------------------
<S> <C> <C>
Investment income:
Interest .......................................... $ 138,357,052 $ 14,596,792
-------------------------------
Expenses:
Management fees (Note 3) .......................... 3,996,761 437,891
Custodian fees .................................... 26,396 2,992
Reports to shareholders ........................... 2,109 222
Professional fees ................................. 52,539 5,317
Other ............................................. 19,159 --
-------------------------------
Total expenses ............................... 4,096,964 446,422
Expenses waived/paid by affiliate (Note 3) ... (95,954) (7,712)
-------------------------------
Net expenses ................................ 4,001,010 438,710
-------------------------------
Net investment income ...................... 134,356,042 14,158,082
-------------------------------
Net realized gain from investments ................. 651 --
-------------------------------
Net increase in net assets resulting from operations $ 134,356,693 $ 14,158,082
-------------------------------
</TABLE>
See notes to financial statements.
THE MONEY MARKET PORTFOLIOS
Financial Statements (Continued)
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
<TABLE>
<CAPTION>
THE U.S. GOVERNMENT SECURITIES
THE MONEY MARKET PORTFOLIO MONEY MARKET PORTFOLIO
-----------------------------------------------------------------------
1999 1998 1999 1998
-----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ............................ $ 134,356,042 $ 108,653,664 $ 14,158,082 $ 14,190,444
Net realized gain from investments ............... 651 -- -- --
-----------------------------------------------------------------------
Net increase in net assets resulting from
operations ................................. 134,356,693 108,653,664 14,158,082 14,190,444
Distributions to shareholders from net investment
income .......................................... (134,356,693)+ (108,653,664) (14,158,082) (14,190,444)
Capital share transactions (Note 2) ............... 1,628,774,482 270,083,314 (4,767,997) 4,597,201
-----------------------------------------------------------------------
Net increase (decrease) in net assets ........ 1,628,774,482 270,083,314 (4,767,997) 4,597,201
Net assets (there is no undistributed net investment
income at beginning or end of year):
Beginning of year ................................ 2,043,629,303 1,773,545,989 263,226,378 258,629,177
-----------------------------------------------------------------------
End of year ...................................... $3,672,403,785 $2,043,629,303 $258,458,381 $263,226,378
=======================================================================
</TABLE>
+Distributions were increased by a net realized gain from investments of $651.
See notes to financial statements.
THE MONEY MARKET PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Money Market Portfolios (the Trust) is registered under the Investment
Company Act of 1940 as an open-end, diversified investment company, consisting
of two separate portfolios (the Portfolios). The shares of the Trust are issued
in private placements and are exempt from registration under the Securities Act
of 1933. The Portfolios seek to provide a high level of current income
consistent with preservation of capital and liquidity. The following summarizes
the Portfolios' significant accounting policies.
a. SECURITY VALUATION:
Securities are valued at amortized cost which approximates value.
b. REPURCHASE AGREEMENTS:
The Portfolios may enter into repurchase agreements, which are accounted for as
a loan by the Portfolios to the seller, collateralized by securities which are
delivered to the Portfolios' custodian. The market value, including accrued
interest, of the initial collateralization is required to be at least 102% of
the dollar amount invested by the Portfolios, with the value of the underlying
securities marked to market daily to maintain coverage of at least 100%. At June
30, 1999, all outstanding repurchase agreements held by the Portfolios had been
entered into on that date.
c. INCOME TAXES:
No provision has been made for income taxes because each Portfolio's policy is
to qualify as a regulated investment company under the Internal Revenue Code and
to distribute substantially all of its taxable income.
d. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS:
Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Interest income and estimated expenses are accrued daily. Dividends from net
investment income and capital gains or losses are normally declared daily. Such
distributions are reinvested in additional shares of the Portfolios.
Common expenses incurred by the Trust are allocated among the Portfolios based
on the ratio of net assets of each Portfolio to the combined net assets. Other
expenses are charged to each Portfolio on a specific identification basis.
e. ACCOUNTING ESTIMATES:
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the amounts of income and expense during the reporting
period. Actual results could differ from those estimates.
THE MONEY MARKET PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SHARES OF BENEFICIAL INTEREST
At June 30, 1999, there were an unlimited number of shares authorized ($0.01 par
value). Transactions in the Portfolios' shares were as follows:
<TABLE>
<CAPTION>
THE U.S.
THE GOVERNMENT
MONEY MARKET SECURITIES MONEY
PORTFOLIO MARKET PORTFOLIO
-------------------------------------
<S> <C> <C>
Year ended June 30, 1999
Shares sold .................................. $ 13,314,265,139 $ 963,424,640
Shares issued in reinvestment of distributions 134,356,720 14,164,293
Shares redeemed .............................. (11,819,847,377) (982,356,930)
-------------------------------------
Net increase (decrease) ...................... $ 1,628,774,482 $ (4,767,997)
=====================================
Year ended June 30, 1998
Shares sold .................................. $ 5,690,107,931 $ 963,956,819
Shares issued in reinvestment of distributions 108,652,953 14,190,262
Shares redeemed .............................. (5,528,677,570) (973,549,880)
-------------------------------------
Net increase ................................. $ 270,083,314 $ 4,597,201
=====================================
</TABLE>
3. TRANSACTIONS WITH AFFILIATES
Certain officers and trustees of the Trust are also officers and/or directors of
Franklin Advisers, Inc. (Advisers) and Franklin/Templeton Investor Services,
Inc. (Investor Services), the Portfolios' investment manager and transfer agent,
respectively, and of the Franklin Money Fund, Institutional Fiduciary Trust,
Franklin Templeton Money Fund Trust, and Franklin Federal Money Fund.
The Portfolios pay an investment management fee to Advisers of .15% per year of
the average daily net assets of each Portfolio. Advisers agreed in advance to
waive management fees, as noted in the Statements of Operations.
At June 30, 1999, 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 ........................................................................ 2,152,976,361 58.63%
Institutional Fiduciary Trust - Money Market Portfolio ..................................... 1,295,694,772 35.28%
Institutional Fiduciary Trust - Franklin Cash Reserves Fund................................. 134,822,519 3.67%
Franklin Templeton Money Fund .............................................................. 88,910,133 2.42%
</TABLE>
At June 30, 1999, the shares of The U.S. Government Securities Money Market
Portfolio were owned by the following funds:
<TABLE>
<CAPTION>
PERCENTAGE OF
SHARES OUTSTANDING SHARES
-----------------------------------
<S> <C> <C>
Institutional Fiduciary Trust - Franklin U.S. Government Securities Money Market Portfolio .. 113,377,163 43.87%
Franklin Federal Money Fund ................................................................. 145,081,218 56.13%
</TABLE>
THE MONEY MARKET PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. INCOME TAXES
At June 30, 1999, The Money Market Portfolio has deferred capital losses
occurring subsequent to October 31, 1998 of $8,692. For tax purposes, such
losses will be reflected in the year ending June 30, 2000.
24
<PAGE>
THE MONEY MARKET PORTFOLIOS
INDEPENDENT AUDITORS' REPORT
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES
OF THE MONEY MARKET PORTFOLIOS
In our opinion, the accompanying statements of assets and liabilities, including
the statements of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of each of the portfolios constituting
The Money Market Portfolios (hereafter referred to as the "Portfolios") at June
30, 1999, the results of each of their operations for the year then ended, the
changes in each of their net assets for each of the two years in the period then
ended and the financial highlights for each of the periods presented, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Portfolios' management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at June
30, 1999 by correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.
PricewaterhouseCoopers LLP
San Francisco, California
August 3, 1999
