SHAREHOLDER LETTER
January 15, 1999
Dear Shareholder:
It's a pleasure to bring you the semi-annual report for Franklin's Institutional
Fiduciary Trust (the Trust) for the period ended December 31, 1998.
The Trust was developed specifically to meet the needs of institutional
investors. Part of the $220 billion Franklin Templeton Group, the Trust consists
of three separate and distinct series. This report pertains to the following
money market funds: Franklin's IFT Money Market Portfolio and the Franklin U.S.
Government Securities Money Market Portfolio. Each portfolio in the Trust has a
unique composition designed to meet specific investor preferences.
During the six months under review, the U.S. economy began to appear like a tale
of two economies - a healthy and expanding domestic sector contrasted with a
fragile and ailing export-oriented sector. Despite momentary dips in many
CONTENTS
Shareholder Letter ............. 1
Funds at a Glance .............. 5
Fund Reports
Franklin's IFT
Money Market Portfolio ........ 6
Franklin U.S. Government
Securities Money Market
Portfolio ..................... 10
Financial Highlights &
Statement of Investments ....... 14
Financial Statements ........... 18
Notes to
Financial Statements ........... 21
[PYRAMID - FUND CATEGORY GRAPH]
<PAGE>
economic indicators, the gross domestic product grew at a 3.9% annualized rate
in the third quarter of 1998, masking much of the underlying divergence.
Consumer spending remained robust and the housing market regained its momentum,
after ebbing slightly at the end of the summer. Consumer confidence rose in
November, after tumbling in October, as retail sales bounced back, signaling
that consumers remained guardedly optimistic about the economy, the stock market
and their jobs. Housing starts, which fell in September, rose beyond
expectations in October, registering the biggest gain in 13 months, and remained
solid in November.
Meanwhile, exports were hit hard by the emerging market turmoil that prevailed
for much of the reporting period, hampering the U.S. manufacturing sector and
producing record trade deficits. The National Association of Purchasing Managers
Index in December indicated that manufacturing activity slowed for the seventh
straight month. Durable goods orders for cars, appliances and other heavy
machinery, fell in October, the first decrease in five months. However, orders
rose more strongly than expected in November, surprising many economists.
2
<PAGE>
Because of the problems in the world markets during much of the period, many
financial institutions curtailed their lending, creating a "credit crunch."
Beginning with the Russian debt crisis and culminating with the emergency bail
out of a major hedge fund, capital worldwide became less available, adversely
affecting many companies.
Taking note of these factors, the Federal Reserve Board's (Fed's) monetary
policy panel, the Federal Open Market Committee, cut the federal funds target
rate three times, for a total of 0.75% since late September, to 4.75%, in an
effort to stimulate growth. The Fed's moves were aimed at providing liquidity to
the financial system and making it easier for major corporations to obtain
favorable lending from banks.
The bond and stock markets reacted to the Fed's loosening of monetary policy in
two opposite ways. After the 30-year U.S. Treasury bond reached a record-low
yield of 4.70% on October 5, 1998, the U.S. bond market quickly lost ground, as
investors became less enthusiastic about committing capital to fixed-income
markets. On December 31, 1998, the yield on the 30-year Treasury bond stood at
5.09%, 8.3% higher than the yield
3
<PAGE>
on October 5, 1998. The 10-year Treasury yield declined from 5.43% on July 1,
1998 to 4.65% at the end of the reporting period. The stock market was a
different story. After losing more than 20% of their value in the third-quarter
correction, many stocks rebounded strongly. On November 23, 1998, the Dow
Jones(R) Industrial Average reached an all-time high of 9,374.27, with many
other indices registering record highs as well. The Nasdaq Composite and S&P
500(R) Indices, two widely followed market indicators, continued to surge
through December, reaching all-time highs at the end of the month.
Thank you for your continued support of Franklin's Institutional Fiduciary
Trust. We look forward to serving your investment needs in the months and years
to come.
/s/ Charles B. Johnson
- ----------------------
Charles B. Johnson
Chairman of the Board
Institutional Fiduciary Trust
/s/ Thomas J. Runkel
- --------------------
Thomas J. Runkel, CFA
Portfolio Manager
Institutional Fiduciary Trust
4
<PAGE>
FUNDS AT A GLANCE
December 31, 1998
PORTFOLIOS/
CHARACTERISTICS
<TABLE>
<CAPTION>
FRANKLIN'S FRANKLIN
IFT U.S. GOVERNMENT
MONEY MARKET SECURITIES MONEY
PORTFOLIO MARKET PORTFOLIO
(#0140) (#0142)
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
7-DAY CURRENT YIELD(1) 4.86% 4.53%
- ----------------------------------------------------------------------------------------------
AVERAGE WEIGHTED MATURITY 56 days 47 days
- ----------------------------------------------------------------------------------------------
Agencies
----------------------------------------------------------------------------
BAs
----------------------------------------------------------------------------
Principal CDs 40.1%
Holdings(2) ----------------------------------------------------------------------------
Commercial Paper 44.1%
----------------------------------------------------------------------------
Repos 7.0% 81.0%
----------------------------------------------------------------------------
Bank Notes 8.8%
----------------------------------------------------------------------------
Treasuries 19.0%
</TABLE>
(1). Yield reflects the interest income per share earned by the funds'
investments for the 7-day period ended December 31, 1998, calculated as an
annual percentage rate.
(2). The mix of each fund's or underlying portfolio's holdings of approved
investments or maturities will fluctuate. U.S. government securities owned or
held under repurchase agreements by the funds or their underlying portfolios,
but not shares of the funds, are guaranteed by the U.S. government, its agencies
or instrumentalities, as to the timely payment of principal and interest.
Shares of the funds are not deposits or obligations of any bank or financial
institution. They are not insured or guaranteed by any such institution, the
FDIC, the U.S. government or any government agency, and involve investment
risks, including possible loss of the principal amount invested.
5
<PAGE>
FRANKLIN'S IFT
MONEY MARKET PORTFOLIO
The investment objective for Franklin's IFT Money Market Portfolio (the Fund) is
high current income, consistent with capital preservation and liquidity. It
pursues this objective by investing all of its assets in The Money Market
Portfolio (the Portfolio), which has an investment objective identical to 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
- - Banker's acceptances
- - High grade commercial paper
- - High grade short-term corporate obligations
- - Repurchase agreements collateralized by U.S. government securities1
The Portfolio's composition as of December 31, 1998 is shown on the left.
THE MONEY MARKET PORTFOLIO
PORTFOLIO COMPOSITION
12/31/98
Commercial Paper
44.1%
Certificates
of Deposit 40.1%
Bank Notes 8.8%
Repurchase
Agreements 7.0%
(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.
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 15 of
this report.
6
<PAGE>
The money market securities in which the Portfolio invests are among the highest
quality available. As such, the Portfolio does not invest in exotic derivatives
or other potentially volatile securities that we think involve undue risk.
Instead, we seek to provide shareholders with a high-quality, conservative
investment. Also, the Portfolio maintains an average weighted maturity of 90
days or less, which is relatively short and allows the Portfolio to adjust
quickly to changing interest rates.
Through investing in a portfolio of high-quality, short-term securities, the
Fund seeks to provide a high level of credit safety combined with a stable net
asset value.(2) As a result, investors often use Franklin's IFT Money Market
Portfolio for assets held in fiduciary, advisory, and custodial capacities. The
Fund's competitive yield has also made it an attractive alternative cash
management tool for corporations, banks, savings and loan associations, and
trust companies.(3)
(2). An investment in Franklin's IFT Money Market Portfolio is neither insured
nor guaranteed by the U.S. government or by any other entity or institution.
There is no assurance that the $1.00 share price will be maintained.
(3). Regulated investors should review their applicable investment restrictions
to determine whether the Fund is a permissible investment.
7
<PAGE>
PERFORMANCE SUMMARY
During the reporting period, the threat of rising inflation due to international
concern, prompted the Federal Reserve Board to lower the federal funds target
rate to 4.75%. As a result, the 7-day current yield is lower, 4.86% compared to
5.41% as of June 30, 1998.(4) The average weighted maturity of 56 days was
maintained throughout the period even with the adverse conditions.
Total returns for the one-, three-, five-, and ten-year periods ended December
31, 1998, are shown on the right. As you can see, the Fund consistently
outperformed its benchmark, the Lipper Institutional Money Market Funds Index,
for all these periods.(5)
8 Past performance is not predictive of future results.
<PAGE>
FRANKLIN INSTITUTIONAL MONEY MARKET PORTFOLIO
TOTAL RETURN INDEX COMPARISON (4,5)
PERIODS ENDED DECEMBER 31, 1998
[BAR CHART PERFORMANCE FIGURES]
Franklin Lipper
1-Quarter 1.27% 1.25%
1-Year 5.45% 5.30%
3-Year 17.25% 16.69%
5-Year 29.48% 28.52%
10-Year 73.47% 72.00%
PERFORMANCE FIGURES
Period Ended December 31, 1998
<TABLE>
- -------------------------------------------------------
<S> <C>
7-Day Current Yield:(4) 4.86%
7-Day Effective Yield:(4) 4.98%
Average Weighted Maturity: 56 days
</TABLE>
(4). Annualized and effective yields are for the 7-day period shown and reflect
fluctuations in interest rates on portfolio investments, and Fund expenses. Past
performance does not guarantee future results.
Franklin Advisers, Inc., the Fund's administrator and manager of the underlying
portfolio, has agreed in advance to waive a portion of its management fees and
make payments of certain other expenses to limit total operating expenses to no
more than 0.35% per annum of average net assets. Without these reductions, the
Fund's current and effective 7-day yields for the period would have been 4.82%
and 4.94%, respectively. Franklin Advisers, Inc. may discontinue these
arrangements at any time, upon notice to the Fund's Board of Trustees.
(5). 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. Source for the Lipper Institutional Money
Market Funds Index is Lipper Analytical Services, Inc. As of December 31, 1998,
there were 200 funds in the institutional money market funds category. This
index is unmanaged, and one cannot invest directly in an index.
Past performance is not predictive of future results.
9
<PAGE>
FRANKLIN U.S. GOVERNMENT
SECURITIES MONEY MARKET PORTFOLIO
[PIE CHART PORTFOLIO COMPOSITION]
U.S. GOVERNMENT SECURITIES
MONEY MARKET PORTFOLIO
PORTFOLIO COMPOSITION
12/31/98
Repurchase Agreements 81.0%
Treasuries 19.0%
The Franklin U.S. Government Securities Money Market Portfolio's (the Fund)
investment objective is to earn high current income consistent with capital
preservation and liquidity. It pursues this 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.(1) The Portfolio's
composition as of December 31, 1998 is shown to the left.
The Portfolio was created to comply with the investment criteria of many state,
county, and city governments. It may be an appropriate investment choice for
government investors, corporations, banks, and savings and loan associations
because of its history of principal stability and high degree of credit
safety.(2)
(1). 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.
(2). Regulated investors should review their applicable investment restrictions
to determine whether the Fund is a permissible investment.
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 17 of
this report.
10
<PAGE>
Its emphasis on high credit quality has helped the Portfolio earn the highest
possible ratings, "AAAm," by Standard and Poor's.(3)
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/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 any other money
market funds in the Trust.(4)
[TIME ZONE GRAPHIC]
(3). The AAAm rating reflects Standard & Poor's(R) assessment of the overall
credit quality of the underlying Portfolio, based primarily on the Portfolio's
stated investment objectives and policies. It considers, for example, the credit
quality of Portfolio's investments and management, but does not reflect the
yield or the market price of the Fund's shares nor approval by Standard &
Poor's(R). Ratings are subject to change.
(4). 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.
11
<PAGE>
PERFORMANCE SUMMARY
During the reporting period, the threat of rising inflation, due to global
market turmoil, forced the Federal Reserve Board to cut the federal funds target
rate by 75 basis points to 4.75%. These conditions and the additional global
turmoil lowered the current yield to 4.53%, compared to 5.39% as of June 30,
1998.(5) The average weighted maturity of 24 days on June 30, 1998, was expanded
to 47 days as December 31, 1998.
The graph to the right illustrates how the total returns for the Franklin U.S.
Government Securities Money Market Portfolio performed against its benchmark,
the Lipper Institutional U.S. Government Money Market Funds Index for the one-,
three-, five and ten-year periods ended December 31, 1998.(6)
12 Past performance is not predictive of future results.
<PAGE>
FRANKLIN U.S. GOVERNMENT SECURITIES MONEY MARKET PORTFOLIO
TOTAL RETURN INDEX COMPARISON (5,6)
PERIOD ENDED DECEMBER 31, 1998
[BAR CHART PERFORMANCE FIGURES]
Franklin Lipper
1-Quarter 1.18% 1.20%
1-Year 5.30% 5.19%
3-Year 16.81% 16.49%
5-Year 28.69% 28.02%
10-Year 71.48% 70.20%
PERFORMANCE FIGURES
Period Ended December 31, 1998
<TABLE>
- -----------------------------------------
<S> <C>
7-Day Current Yield:(5) 4.53%
7-Day Effective Yield:(5) 4.63%
Average Weighted Maturity: 47 days
</TABLE>
(5). 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, has agreed in
advance to waive a portion of its management fees and make payments of certain
other expenses to limit total operating expenses to no more than 0.35% per annum
of average net assets. Without these reductions, the Fund's current and
effective 7-day yields for the period would have been 4.50% and 4.60%,
respectively. Franklin Advisers, Inc. may discontinue these arrangements at any
time, upon notice to the Fund's Board of Trustees.
(6). 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. Source for the Lipper Institutional Treasury
Money Market Funds Index is Lipper Analytical Services, Inc. As of December 31,
1998, there were 95 funds in the institutional U.S. government money market
funds category. This index is unmanaged, and one cannot invest directly in an
index.
An investment in the Franklin U.S. Government Securities Money Market Portfolio
is neither insured nor guaranteed by the U.S. government or by any other entity
or institution. There is no assurance that the $1.00 share price will be
maintained.
Past performance is not predictive of future results. 13
<PAGE>
INSTITUTIONAL FIDUCIARY TRUST
Financial Highlights
MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
SIX MONTHS ENDED ------------------------------------------------------
DECEMBER 31, 1998 1998 1997 1996 1995 1994
(UNAUDITED) ------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ................ $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
----- ----- ----- ----- ----- -----
Income from investment operations -
net investment income .............................. .026 .054 .053 .055 .053 .033
Less distributions from net investment income ....... (.026) (.054) (.053) (.055) (.053) (.033)
----- ----- ----- ----- ----- -----
Net asset value, end of period ...................... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
----- ----- ----- ----- ----- -----
Total return* ....................................... 2.65% 5.58% 5.42% 5.61% 5.46% 3.35%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ................... $206,730 $175,881 $185,088 $341,295 $272,147 $218,254
Ratios to average net assets:
Expenses(1) ........................................ .25%** .20% .20% .19% .15% .15%
Expenses excluding waiver and payments by affiliate(1) .30%** .24% .24% .24% .24% .25%
Net investment income .............................. 5.22%** 5.44% 5.27% 5.45% 5.40% 3.24%
</TABLE>
*Total return is not annualized.
**Annualized
(1) The expense ratio includes the Fund's share of the Portfolio's allocated
expenses.
14 See notes to financial statements.
<PAGE>
INSTITUTIONAL FIDUCIARY TRUST
STATEMENT OF INVESTMENTS, DECEMBER 31, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
MONEY MARKET PORTFOLIO SHARES VALUE
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
MUTUAL FUNDS
The Money Market Portfolio (Note 1) (COST $206,805,583) ................... 206,805,583 $206,805,583
OTHER ASSETS, LESS LIABILITIES ............................................ (75,624)
------------
NET ASSETS 100.0% ......................................................... $206,729,959
</TABLE>
See notes to financial statements. 15
<PAGE>
INSTITUTIONAL FIDUCIARY TRUST
Financial Highlights
FRANKLIN U.S. GOVERNMENT SECURITIES MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED JUNE 30,
DECEMBER 31, 1998 ---------------------------------------------
(UNAUDITED) 1998 1997 1996 1995 1994
---------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
-------- -------- -------- -------- ------- --------
Income from investment operations -
net investment income .025 .054 .052 .054 .052 .032
Less distributions from net investment income (.025) (.054) (.052) (.054) (.052) (.032)
-------- -------- -------- -------- ------- --------
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
-------- -------- -------- -------- ------- --------
Total return* 2.55% 5.51% 5.29% 5.50% 5.32% 3.25%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) $139,328 $131,151 $136,705 $152,173 $334,830 $218,547
Ratios to average net assets:
Expenses(1) .25%** .20% .20% .19% .15% .15%
Expenses excluding waiver and payments by affiliate(1) .31%** .26% .26% .26% .23% .25%
Net investment income 4.98%** 5.34% 5.14% 5.44% 5.26% 3.20%
</TABLE>
*Total return is not annualized.
**Annualized
(1)The expense ratio includes the Fund's share of the Portfolio's allocated
expenses.
16 See notes to financial statements.
<PAGE>
INSTITUTIONAL FIDUCIARY TRUST
STATEMENT OF INVESTMENTS, DECEMBER 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
FRANKLIN U.S. GOVERNMENT SECURITIES MONEY MARKET PORTFOLIO SHARES VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MUTUAL FUNDS 100.0%
The U.S. Government Securities Money Market Portfolio (Note 1) (COST $139,387,867) 139,387,867 $139,387,867
OTHER ASSETS, LESS LIABILITIES (60,025)
-------------
NET ASSETS 100.0% $139,327,842
</TABLE>
See notes to financial statements. 17
<PAGE>
INSTITUTIONAL FIDUCIARY TRUST
Financial Statements
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
FRANKLIN
U.S. GOVERNMENT
SECURITIES
MONEY MARKET MONEY MARKET
PORTFOLIO PORTFOLIO
-----------------------------
Assets:
<S> <C> <C>
Investments in securities, at value and cost $206,805,583 $139,387,867
Receivables:
Investment securities sold 229,548 142,262
Capital shares sold 1,360,142 --
------------ ------------
Total assets 208,395,273 139,530,129
------------ ------------
Liabilities:
Payables:
Investment securities purchased 1,360,142 --
Affiliates 54,187 46,504
Distributions to shareholders 227,218 142,262
Other liabilities 23,767 13,521
------------ ------------
Total liabilities 1,665,314 202,287
------------ ------------
Net assets, at value $206,729,959 $139,327,842
------------ ------------
Shares outstanding 206,729,959 139,327,842
------------ ------------
Net asset value per share $1.00 $1.00
------------ ------------
</TABLE>
18 See notes to financial statements.
<PAGE>
INSTITUTIONAL FIDUCIARY TRUST
Financial Statements (continued)
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
FRANKLIN
U.S. GOVERNMENT
SECURITIES
MONEY MARKET MONEY MARKET
PORTFOLIO PORTFOLIO
--------- ---------
<S> <C> <C>
Investment income:
Dividends .................................................................... $5,885,647 $3,716,333
---------- ----------
Expenses:
Administrative fees (Note 3) ................................................. 109,679 75,596
Transfer agent fees (Note 3) ................................................. 7,485 11,140
Custodian fees ............................................................... 765 2,183
Reports to shareholders ...................................................... 3,570 4,146
Registration and filing fees ................................................. 24,503 9,283
Professional fees ............................................................ 3,411 3,762
Trustees' fees and expenses .................................................. 4,803 4,094
Other ........................................................................ 2,120 2,214
---------- ----------
Total expenses ............................................................ 156,336 112,418
Expenses waived/paid by affiliate (Note 3) ................................ (46,195) (36,834)
---------- ----------
Net expenses ............................................................. 110,141 75,584
---------- ----------
Net investment income ................................................... 5,775,506 3,640,749
---------- ----------
Net increase in net assets resulting from operations .......................... $5,775,506 $3,640,749
========== ==========
</TABLE>
See notes to financial statements. 19
<PAGE>
INSTITUTIONAL FIDUCIARY TRUST
Financial Statements (continued)
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1998 (UNAUDITED)
AND THE YEAR ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
FRANKLIN U.S. GOVERNMENT SECURITIES
MONEY MARKET PORTFOLIO MONEY MARKET PORTFOLIO
----------------------------------- ------------------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
DECEMBER 31, 1998 JUNE 30, 1998 DECEMBER 31, 1998 JUNE 30, 1998
----------------------------------- ------------------------------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ............................ $ 5,775,506 $ 11,423,232 $ 3,640,749 $ 7,111,746
Distributions to shareholders from net
investment income ................................ (5,775,506) (11,423,232) (3,640,749) (7,111,746)
Capital share transactions (Note 2) ............... 30,848,590 (9,206,790) 8,176,919 (5,553,740)
------------- ------------- ------------- -------------
Net increase (decrease) in net assets ........ 30,848,590 (9,206,790) 8,176,919 (5,553,740)
Net assets (there is no undistributed net investment
income at beginning or end of period):
Beginning of period .............................. 175,881,369 185,088,159 131,150,923 136,704,663
------------- ------------- ------------- -------------
End of period .................................... $ 206,729,959 $ 175,881,369 $ 139,327,842 $ 131,150,923
============= ============= ============= =============
</TABLE>
20 See notes to financial statements.
<PAGE>
INSTITUTIONAL FIDUCIARY TRUST
Notes to Financial Statements (unaudited)
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 four
separate series (the Funds). All Funds included in this report are diversified.
The Funds included in this report seek to provide a high level of current income
consistent with preservation of capital.
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 Statements 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 December 31, 1998, the Money Market Fund owns 7.82% of the
Money Market Portfolio and the U.S. Government Fund owns 47.60% of the U.S.
Government Securities Money Market Portfolio. The Portfolios' shares held by the
Funds are valued at the net asset value of the Portfolios.
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 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. Dividend income is recorded on
the ex-dividend date. 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.
21
<PAGE>
INSTITUTIONAL FIDUCIARY TRUST
Notes to Financial Statements (unaudited) (continued)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONT.)
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.
2. SHARES OF BENEFICIAL INTEREST
At December 31, 1998, there were an unlimited number of shares authorized (no
par value). Transactions in the Funds' shares were as follows:
<TABLE>
<CAPTION>
FRANKLIN
U.S. GOVERNMENT
SECURITIES
MONEY MARKET MONEY MARKET
PORTFOLIO PORTFOLIO
-----------------------------------------
<S> <C> <C>
Six months ended December 31, 1998
Shares sold .................................... $ 929,022,690 $ 418,502,728
Shares issued in reinvestment of distributions.. 4,272,521 2,603,753
Shares redeemed ................................ (902,446,621) (412,929,562)
--------------- ---------------
Net increase ................................... $ 30,848,590 $ 8,176,919
=============== ===============
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 Trust 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.
The Funds pay an administrative fee to Advisers of .20% per year of the Funds'
average daily net assets.
Advisers agreed in advance to waive administrative fees, as noted in the
Statements of Operations.
The Funds paid transfer agent fees of $18,625, of which $2,602 was paid to
Investor Services.
22
<PAGE>
THE MONEY MARKET PORTFOLIOS
Financial Highlights
THE MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED JUNE 30,
DECEMBER 31, 1998 ------------------------------------------------------------
(UNAUDITED) 1998 1997 1996 1995 1994
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period ............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
----------- ---------- ---------- ---------- ---------- --------
Income from investment operations -
net investment income ........................... .027 .055 .053 .055 .053 .033
Less distributions from net investment income .... (.027) (.055) (.053) (.055) (.053) (.033)
----------- ---------- ---------- ---------- ---------- --------
Net asset value, end of period ................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
----------- ---------- ---------- ---------- ---------- --------
Total return* .................................... 2.71% 5.64% 5.47% 5.66% 5.46% 3.33%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ................ $ 2,644,509 $2,043,629 $1,773,546 $1,550,085 $1,305,574 $219,189
Ratios to average net assets:
Expenses ........................................ .15%** .15% .15% .15% .15% .15%
Expenses excluding waiver and payments
by affiliate ................................... .16%** .16% .16% .16% .16% .17%
Net investment income ........................... 5.33%** 5.50% 5.34% 5.50% 5.42% 3.25%
</TABLE>
*Total return is not annualized.
**Annualized
See notes to financial statements. 23
<PAGE>
THE MONEY MARKET PORTFOLIOS
STATEMENT OF INVESTMENTS, DECEMBER 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
THE MONEY MARKET PORTFOLIO AMOUNT VALUE
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
BANK NOTES 8.7%
Nations Bank NA, 4.98% - 5.12%, 4/07/99 - 6/10/99 .................................. $100,000,000 $ 100,002,936
NBD Bank, 5.10% - 5.15%, 2/10/99 - 3/15/99 ......................................... 50,000,000 50,000,776
Wachovia Bank NA, 5.18% - 5.60%, 1/07/99 - 3/05/99 ................................. 80,000,000 80,000,060
-------------
TOTAL BANK NOTES (COST $230,003,772) ............................................... 230,003,772
-------------
CERTIFICATES OF DEPOSIT 39.8%
ABN-AMRO Bank NV, Chicago Branch, 4.93% - 5.72%, 2/24/99 - 6/07/99 ................. 90,300,000 90,308,459
Australia & New Zealand Banking Group, New York Branch, 5.625%, 1/11/99 ............ 25,000,000 25,000,000
Bank of Nova Scotia, Portland Branch, 5.08% - 5.51%, 1/05/99 - 3/22/99 ............. 100,000,000 100,000,000
Barclays Bank PLC, New York Branch, 5.53%, 2/23/99 ................................. 9,500,000 9,502,454
Bayerische Landesbank, New York Branch, 4.98% - 5.55%, 1/29/99 - 6/25/99 ........... 70,000,000 70,006,358
Bayerische Vereinsbank, New York Branch, 4.95% - 5.33%, 1/04/99 - 6/29/99 .......... 80,000,000 80,000,000
Commerzbank AG, New York Branch, 5.43%, 1/19/99 - 1/26/99 .......................... 50,000,000 50,000,293
Credit Agricole, New York Branch, 5.08% - 5.74%, 3/10/99 - 4/26/99 ................. 47,300,000 47,332,968
Den Danske Bank, New York Branch, 5.10% - 5.41%, 1/19/99 - 3/11/99 ................. 50,000,000 50,001,069
Deutsche Bank AG, New York Branch, 5.62% - 5.685%, 2/26/99 - 6/03/99 ............... 40,000,000 40,013,839
Dresdner Bank AG, New York Branch, 4.96% - 5.34%, 2/16/99 - 2/19/99 ................ 75,000,000 75,007,008
Landesbank Hessen Thuringen, New York Branch, 5.27%, 1/12/99 ....................... 25,000,000 25,000,038
National Westminster Bank PLC, New York Branch, 5.22% - 5.745%, 1/13/99 - 4/06/99 .. 65,000,000 64,986,898
Rabobank Nederland NV, New York Branch, 4.95% - 5.64%, 1/04/99 - 7/30/99 ........... 100,500,000 100,502,880
Royal Bank of Canada, New York Branch, 5.68%, 3/29/99 .............................. 50,000,000 50,012,578
Societe Generale, New York Branch, 5.58%, 1/22/99 .................................. 25,000,000 24,998,921
Swiss Bank Corp., New York Branch, 5.81%, 4/29/99 .................................. 25,000,000 24,996,906
Toronto Dominion Bank, New York Branch, 5.62%, 1/25/99 ............................. 25,000,000 25,000,000
UBS AG, New York Branch, 5.12%, 5/05/99 ............................................ 25,000,000 25,000,000
Westdeutsche Landesbank, New York Branch, 5.18% - 5.64%, 2/04/99 - 2/05/99 ......... 60,000,000 60,013,745
Westpac Banking Corp., New York Branch, 5.55%, 1/20/99 ............................. 15,000,000 14,998,761
-------------
TOTAL CERTIFICATES OF DEPOSIT (COST $1,052,683,175) ................................ 1,052,683,175
-------------
(a) COMMERCIAL PAPER 43.7%
Abbey National North America, 5.05% - 5.12%, 2/03/99 - 2/09/99 ..................... 55,000,000 54,718,542
American Express Credit Corp., 5.00% - 5.05%, 1/07/99 - 3/03/99 .................... 75,000,000 74,744,410
Associates Corp. of North America, 5.05% - 5.35%, 1/06/99 - 2/11/99 ................ 105,000,000 104,648,188
Barclays U.S. Funding Corp., 5.10%, 1/27/99 ........................................ 25,000,000 24,907,917
Canadian Imperial Holdings, Inc., 4.94% - 5.04%, 1/28/99 - 4/12/99 ................. 50,000,000 49,559,014
Chevron U.K. Investment PLC, 5.34%, 1/19/99 ........................................ 10,000,000 9,973,300
CIESCO LP, 5.35%, 1/21/99 - 1/22/99 ................................................ 50,000,000 49,847,674
Commonwealth Bank of Australia, 4.99% - 5.07%, 3/04/99 - 4/01/99 ................... 65,000,000 64,313,778
Cregem North America Inc., 5.06%, 3/24/99 - 3/25/99 ................................ 50,000,000 49,420,208
General Electric Capital Corp., 4.92% - 5.44%, 1/14/99 - 5/04/99 ................... 105,000,000 104,307,958
International Lease Finance Corp., 5.12%, 2/01/99 .................................. 5,000,000 4,977,956
International Nederlanden (U.S.) Funding Corp., 5.06% - 5.10%, 2/12/99 - 3/30/99 ... 95,000,000 94,221,701
J.P. Morgan & Co. Inc., 4.90% - 5.01%, 3/17/99 - 6/28/99 ........................... 75,000,000 73,783,451
Lloyds Bank PLC, 5.18%, 1/21/99 .................................................... 25,000,000 24,928,056
Morgan Stanley Dean Witter & Co., 5.34%, 1/13/99 ................................... 25,000,000 24,955,500
National Rural Utilities Cooperative Finance Corp., 5.03% - 5.09%, 1/27/99 - 3/19/99 64,000,000 63,496,486
Procter & Gamble Co., 5.28%, 1/11/99 ............................................... 15,068,000 15,045,900
Province of British Columbia, 4.90% - 5.29%, 3/08/99 - 6/16/99 ..................... 35,000,000 34,467,117
</TABLE>
24
<PAGE>
THE MONEY MARKET PORTFOLIOS
STATEMENT OF INVESTMENTS, DECEMBER 31, 1998 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
THE MONEY MARKET PORTFOLIO AMOUNT VALUE
-----------------------------------------------------------------------------------------------------------
<S> <C> <C>
(a) COMMERCIAL PAPER (CONT.)
Royal Bank of Canada, 5.46%, 1/15/99 ................................... $ 25,000,000 $ 24,946,917
Svenska Handelsbanken Inc., 5.05%, 1/20/99 ............................. 25,000,000 24,933,368
Toronto Dominion Holdings USA Inc., 4.83%, 6/14/99 ..................... 25,000,000 24,449,917
Toyota Motor Credit Corp., 5.08%, 2/02/99 .............................. 25,000,000 24,887,111
UBS Finance (DE) Inc., 4.88% - 5.47%, 1/14/99 - 5/24/99 ................ 60,000,000 59,647,628
Westpac Capital Corp., 4.80% - 4.96%, 2/08/99 - 5/10/99 ................ 75,000,000 74,144,776
--------------
TOTAL COMMERCIAL PAPER (COST $1,155,326,873) ........................... 1,155,326,873
--------------
TOTAL INVESTMENTS BEFORE REPURCHASE AGREEMENTS (COST $2,438,013,820) ... 2,438,013,820
--------------
REPURCHASE AGREEMENTS 7.0%
J.P. Morgan Securities Inc., 4.75%, 1/04/99 (Maturity Value $94,329,759)
Collateralized by U.S. Treasury Notes ................................. 94,280,000 94,280,000
Morgan Stanley & Co. Inc., 4.65%, 1/04/99 (Maturity Value $90,086,521)
Collateralized by U.S. Treasury Notes ................................. 90,040,000 90,040,000
--------------
TOTAL REPURCHASE AGREEMENTS (COST $184,320,000) ........................ 184,320,000
--------------
TOTAL INVESTMENTS (COST $2,622,333,820) 99.2% .......................... 2,622,333,820
OTHER ASSETS, LESS LIABILITIES .8% ..................................... 22,175,079
--------------
NET ASSETS 100.0% ...................................................... $2,644,508,899
==============
</TABLE>
(a) Securities are traded on a discount basis; the rates shown are the discount
rates at the time of purchase by the portfolio.
See notes to financial statements. 25
<PAGE>
THE MONEY MARKET PORTFOLIOS
Financial Highlights
THE U.S. GOVERNMENT SECURITIES MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED JUNE 30,
DECEMBER 31, 1998 ------------------------------------------------------
(UNAUDITED) 1998 1997 1996 1995 1994
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period ............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- -------- -------- -------- -------- --------
Income from investment operations -
net investment income ........................... .026 .054 .052 .054 .052 .032
Less distributions from net investment income .... (.026) (.054) (.052) (.054) (.052) (.032)
--------- -------- -------- -------- -------- --------
Net asset value, end of period ................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- -------- -------- -------- -------- --------
Total return* .................................... 2.59% 5.53% 5.34% 5.55% 5.32% 3.25%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ................ $ 292,833 $263,226 $285,629 $285,701 $474,654 $218,548
Ratios to average net assets:
Expenses ........................................ .15%** .15% .15% .15% .15% .15%
Expenses excluding waiver and payments
by affiliate .................................... .16%** .16% .16% .17% .16% .17%
Net investment income ........................... 5.10%** 5.40% 5.20% 5.45% 5.25% 3.20%
</TABLE>
*Total return is not annualized.
**Annualized
26 See notes to financial statements.
<PAGE>
THE MONEY MARKET PORTFOLIOS
STATEMENT OF INVESTMENTS, DECEMBER 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
THE U.S. GOVERNMENT SECURITIES MONEY MARKET PORTFOLIO AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
GOVERNMENT SECURITIES 19.0%
U.S. Treasury Notes, 7.00%, 4/15/99 ...................................................... $ 5,000,000 $ 5,019,736
U.S. Treasury Notes, 6.00%, 8/15/99 ...................................................... 10,000,000 10,045,392
U.S. Treasury Notes, 5.875%, 8/31/99 ..................................................... 15,000,000 15,107,475
U.S. Treasury Notes, 6.875%, 8/31/99 ..................................................... 20,000,000 20,227,562
U.S. Treasury Notes, 7.125%, 9/30/99 ..................................................... 5,000,000 5,081,996
------------
TOTAL GOVERNMENT SECURITIES (COST $55,482,161) ........................................... 55,482,161
------------
REPURCHASE AGREEMENTS 80.7%
Barclays Capital Inc., 4.70%, 1/04/99 (Maturity Value $15,007,833)
Collateralized by U.S. Treasury Notes ................................................... 15,000,000 15,000,000
Bear, Stearns & Co. Inc., 4.70%, 1/04/99 (Maturity Value $15,007,833)
Collateralized by U.S. Treasury Notes ................................................... 15,000,000 15,000,000
Chase Securities Inc., 4.50%, 1/04/99 (Maturity Value $15,007,500)
Collateralized by U.S. Treasury Notes ................................................... 15,000,000 15,000,000
CIBC Oppenheimer Corp., 4.75%, 1/04/99 (Maturity Value $15,007,917)
Collateralized by U.S. Treasury Notes ................................................... 15,000,000 15,000,000
Donaldson, Lufkin & Jenrette Securities Corp., 5.00%, 1/04/99 (Maturity Value $15,008,333)
Collateralized by U.S. Treasury Notes ................................................... 15,000,000 15,000,000
Dresdner Kleinwort Benson, North America LLC, 4.25%, 1/04/99 (Maturity Value $15,007,083)
Collateralized by U.S. Treasury Notes ................................................... 15,000,000 15,000,000
J.P. Morgan Securities Inc., 4.65%, 1/04/99 (Maturity Value $13,186,810)
Collateralized by U.S. Treasury Bills, U.S. Treasury Notes .............................. 13,180,000 13,180,000
J.P. Morgan Securities Inc., 4.75%, 1/04/99 (Maturity Value $30,015,833)
Collateralized by U.S. Treasury Bills, U.S. Treasury Notes .............................. 30,000,000 30,000,000
Merrill Lynch Government Securities Inc., 4.75%, 1/04/99 (Maturity Value $15,007,917)
Collateralized by U.S. Treasury Notes ................................................... 15,000,000 15,000,000
Morgan Stanley & Co. Inc., 4.65%, 1/04/99 (Maturity Value $43,202,310)
Collateralized by U.S. Treasury Bills, U.S. Treasury Notes .............................. 43,180,000 43,180,000
NationsBanc Montgomery Securities LLC, 4.70%, 1/04/99 (Maturity Value $15,007,833)
Collateralized by U.S. Treasury Notes ................................................... 15,000,000 15,000,000
Paribas Corp., 4.85%, 1/04/99 (Maturity Value $15,008,083)
Collateralized by U.S. Treasury Notes ................................................... 15,000,000 15,000,000
Warburg Dillon Read LLC, 4.75%, 1/04/99 (Maturity Value $15,007,917)
Collateralized by U.S. Treasury Notes ................................................... 15,000,000 15,000,000
------------
TOTAL REPURCHASE AGREEMENTS (COST $236,360,000) .......................................... 236,360,000
------------
TOTAL INVESTMENTS (COST $291,842,161) 99.7% .............................................. 291,842,161
OTHER ASSETS, LESS LIABILITIES .3% ....................................................... 990,881
------------
NET ASSETS 100.0% ........................................................................ $292,833,042
============
</TABLE>
See notes to financial statements. 27
<PAGE>
THE MONEY MARKET PORTFOLIOS
Financial Statements
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
THE U.S.
GOVERNMENT
SECURITIES
THE MONEY MONEY MARKET
MARKET PORTFOLIO PORTFOLIO
---------------------------------
<S> <C> <C>
Assets:
Investments in securities, at value and cost $2,438,013,820 $ 55,482,161
Repurchase agreements, at value and cost ... 184,320,000 236,360,000
Cash ....................................... 5,393 5,533
Receivables:
Capital shares sold ........................ 1,360,142 --
Interest ................................... 21,437,673 1,190,077
-------------- --------------
Total assets ............................. 2,645,137,028 293,037,771
-------------- --------------
Liabilities:
Payables:
Capital shares redeemed ................... 229,548 142,262
Affiliates ................................ 317,855 39,317
Other liabilities .......................... 80,726 23,150
-------------- --------------
Total liabilities ........................ 628,129 204,729
-------------- --------------
Net assets, at value ........................ $2,644,508,899 $ 292,833,042
-------------- --------------
Shares outstanding .......................... 2,644,508,899 292,833,042
-------------- --------------
Net asset value per share ................... $ 1.00 $ 1.00
============== ==============
</TABLE>
28 See notes to financial statements.
<PAGE>
THE MONEY MARKET PORTFOLIOS
Financial Statements (continued)
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
THE U.S.
GOVERNMENT
SECURITIES
THE MONEY MONEY MARKET
MARKET PORTFOLIO PORTFOLIO
--------------------------------
<S> <C> <C>
Investment income:
Interest .......................................... $ 68,305,549 $ 7,829,666
------------ ------------
Expenses:
Management fees (Note 3) .......................... 1,881,196 225,450
Custodian fees .................................... 9,186 1,415
Reports to shareholders ........................... 2,865 477
Professional fees ................................. 27,417 4,635
Trustees' fees and expenses ....................... 3,522 556
Other ............................................. 48,613 6,994
------------ ------------
Total expenses .................................. 1,972,799 239,527
Expenses waived/paid by affiliate (Note 3) ...... (89,633) (14,063)
------------ ------------
Net expenses ................................. 1,883,166 225,464
------------ ------------
Net investment income ..................... 66,422,383 7,604,202
------------ ------------
Net realized gain from investments ................. 9,343 --
------------ ------------
Net increase in net assets resulting from operations $ 66,431,726 $ 7,604,202
============ ============
</TABLE>
See notes to financial statements. 29
<PAGE>
THE MONEY MARKET PORTFOLIOS
Financial Statements (continued)
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1998 (UNAUDITED)
AND THE YEAR ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
THE U.S. GOVERNMENT SECURITIES
THE MONEY MARKET PORTFOLIO MONEY MARKET PORTFOLIO
----------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
DECEMBER 31, 1998 JUNE 30, 1998 DECEMBER 31, 1998 JUNE 30, 1998
----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ............................ $ 66,422,383 $ 108,653,664 $ 7,604,202 $ 14,190,444
Net realized gain from investments ............... 9,343 -- -- --
--------------- --------------- --------------- ---------------
Net increase in net assets resulting
from operations ................................ 66,431,726 108,653,664 7,604,202 14,190,444
Distributions to shareholders from
net investment income ............................. (66,431,726)+ (108,653,664) (7,604,202) (14,190,444)
Capital share transactions (Note 2) ............... 600,879,596 270,083,314 29,606,664 4,597,201
--------------- --------------- --------------- ---------------
Net increase in net assets ..................... 600,879,596 270,083,314 29,606,664 4,597,201
Net assets (there is no undistributed net investment
income at beginning or end of period):
Beginning of period ................................ 2,043,629,303 1,773,545,989 263,226,378 258,629,177
--------------- --------------- --------------- ---------------
End of period ...................................... $ 2,644,508,899 $ 2,043,629,303 $ 292,833,042 $ 263,226,378
=============== =============== =============== ===============
</TABLE>
+Distributions were increased by a net realized gain from investments of $9,343.
30 See notes to financial statements.
<PAGE>
THE MONEY MARKET PORTFOLIOS
Notes to Financial Statements (unaudited)
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. 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
December 31, 1998, 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 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.
31
<PAGE>
THE MONEY MARKET PORTFOLIOS
Notes to Financial Statements (unaudited) (continued)
2. SHARES OF BENEFICIAL INTEREST
At December 31, 1998, 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.
GOVERNMENT
SECURITIES
THE MONEY MONEY MARKET
MARKET PORTFOLIO PORTFOLIO
----------------------------------
<S> <C> <C>
Six months ended December 31, 1998
Shares sold ..................... $ 4,379,369,896 $ 460,850,849
Shares issued in reinvestment
of distributions ................ 66,431,528 7,604,453
Shares redeemed ................. (3,844,921,828) (438,848,638)
--------------- ---------------
Net increase .................... $ 600,879,596 $ 29,606,664
=============== ===============
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 Portfolios 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 Statement of Operations.
At December 31, 1998, the shares of The Money Market Portfolio were owned by the
following funds:
<TABLE>
<CAPTION>
PERCENTAGE OF
OUTSTANDING
SHARES SHARES
----------------------------
<S> <C> <C>
Franklin Money Fund ................. 2,204,122,234 83.35%
Institutional Fiduciary Trust -
Money Market Portfolio ............. 206,805,583 7.82%
Institutional Fiduciary Trust -
Franklin Cash Reserves Fund ........ 128,722,090 4.87%
Franklin Templeton Money Fund Trust -
Franklin Templeton Money Fund II ... 104,858,992 3.96%
</TABLE>
32
<PAGE>
THE MONEY MARKET PORTFOLIOS
Notes to Financial Statements (unaudited) (continued)
3. TRANSACTIONS WITH AFFILIATES (CONT.)
At December 31, 1998, the shares of The U.S. Government Securities Money Market
Portfolio were owned by the following funds:
<TABLE>
<CAPTION>
PERCENTAGE OF
OUTSTANDING
SHARES SHARES
---------------------------
<S> <C> <C>
Institutional Fiduciary Trust -
Franklin U.S. Government
Securities Money Market Portfolio .. 139,387,867 47.60%
Franklin Federal Money Fund ......... 153,445,175 52.40%
</TABLE>
4. INCOME TAXES
At June 30, 1998, the Money Market Portfolio had tax basis capital losses of
$4,721 which may be carried over to offset future capital gains. Such losses
expire as follows:
<TABLE>
<S> <C>
Capital loss carryovers expiring in:
2002 ................................... $3,560
2006 ................................... 1,161
------
$4,721
======
</TABLE>
33
<PAGE>
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<PAGE>
This page intentionally left blank.
<PAGE>
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<PAGE>
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 (the 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.
- --------------------------------------------------------------------------------
January 15, 1999
Dear Shareholder:
It's a pleasure to bring you the semi-annual report for the Franklin Cash
Reserves Fund (the Fund) for the period ended December 31, 1998.
The Fund is a series of Franklin's Institutional Fiduciary Trust, which is
offered exclusively to qualified retirement plan participants and other
institutional investors, including corporations, banks, savings and loan
associations, and government entities.
CONTENTS
Shareholder Letter .................................................... 1
Franklin Cash Reserves Fund ........................................... 5
Financial Highlights & Statement of Investments ....................... 8
Financial Statements .................................................. 10
Notes to Financial Statements ......................................... 13
[PYRAMID GRAPHIC - FUND CATEGORY]
<PAGE>
During the six months under review, the U.S. economy began to appear like a tale
of two economies - a healthy and expanding domestic sector contrasted with a
fragile and ailing export-oriented sector. Despite momentary dips in many
economic indicators, the gross domestic product grew at a 3.9% annualized rate
in the third quarter of 1998, masking much of the underlying divergence.
Consumer spending remained robust and the housing market regained its momentum,
after ebbing slightly at the end of the summer. Consumer confidence rose in
November, after tumbling in October, as retail sales bounced back, signaling
that consumers remained guardedly optimistic about the economy, the stock market
and their jobs. Housing starts, which fell in September, rose beyond
expectations in October, registering the biggest gain in 13 months, and remained
solid in November.
Meanwhile, exports were hit hard by the emerging market turmoil that prevailed
for much of the reporting period, hampering the U.S. manufacturing sector and
producing record trade deficits. The National Association of Purchasing Managers
Index in December indicated that manufacturing activity slowed for the seventh
straight month. Durable goods orders for cars, appliances and other heavy
machinery, fell in October, the first decrease in five months. However, orders
rose more strongly than expected in November, surprising many economists.
2
<PAGE>
Because of the problems in the world markets during much of the period, many
financial institutions curtailed their lending, creating a "credit crunch."
Beginning with the Russian debt crisis and culminating with the emergency bail
out of a major hedge fund, capital worldwide became less available, adversely
affecting many companies.
Taking note of these factors, the Federal Reserve Board's (Fed's) monetary
policy panel, the Federal Open Market Committee, cut the federal funds target
rate three times, for a total of 0.75% since late September, to 4.75%, in an
effort to stimulate growth. The Fed's moves were aimed at providing liquidity to
the financial system and making it easier for major corporations to obtain
favorable lending from banks.
The bond and stock markets reacted to the Fed's loosening of monetary policy in
two opposite ways. After the 30-year U.S. Treasury bond reached a record-low
yield of 4.70% on October 5,
3
<PAGE>
1998, the U.S. bond market quickly lost ground, as investors became less
enthusiastic about committing capital to fixed-income markets. On December 31,
1998, the yield on the 30-year Treasury bond stood at 5.09%, 8.3% higher than
the yield on October 5, 1998. The 10-year Treasury yield from 5.43% on July 1,
1998 to 4.65% at the end of the reporting period. The stock market was a
different story. After losing more than 20% of their value in the third-quarter
correction, many stocks rebounded strongly. On November 23, 1998, the Dow
Jones(R) Industrial Average reached an all-time high of 9,374.27, with many
other indices registering record highs as well. The Nasdaq Composite and S&P
500(R) Indices, two widely followed market indicators, continued to surge
through December, reaching all-time highs at the end of the month.
Thank you for your investment in the Franklin Cash Reserves Fund. We look
forward to serving your investment needs in the months and years ahead.
Sincerely,
/s/ Charles B. Johnson
Charles B. Johnson
Chairman
Franklin Cash Reserves Fund
/s/ Tom Runkel
Tom Runkel
Portfolio Manager
Franklin Cash Reserves Fund
4
<PAGE>
FRANKLIN CASH RESERVES FUND
The Franklin Cash Reserve Fund's investment objective is to provide high current
income, consistent with capital preservation and liquidity. It seeks to achieve
this by investing all of its assets in The Money Market Portfolio, whose
investment objective is the same as the Fund's. The Portfolio, in turn, invests
in various money market instruments such as:
- - U.S. government and federal agency obligations(1)
- - Certificates of deposit
- - Banker's acceptances
- - High grade commercial paper
- - High grade short-term corporate obligations
- - Repurchase agreements collateralized by U.S. government securities(1)
The chart to the right illustrates the Portfolio's composition on December 31,
1998.
The Portfolio's holdings are limited to money market instruments within the two
highest rating categories assigned by Standard & Poor's, or in non-rated
securities determined by the managers to be of comparable quality. Also, the
Portfolio invests 100% of its assets in securities with remaining maturities of
(1.) U.S. government securities owned by the Portfolio or held under repurchase
agreement, but not shares of the Franklin Cash Reserves Fund, are guaranteed by
the U.S. government as to the timely payment of principal and interest.
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 9 of
this report.
[PIE CHART - THE MONEY MARKET PORTFOLIO]
Commercial Paper 44.1%
Certificates of Deposits 40.1%
Treasuries 8.8%
Repurchase Agreements 7.0%
5
<PAGE>
397 days or less. Such relatively short maturities allow the Portfolio to adjust
quickly to changing interest rates.
SECURITY SELECTION CRITERIA
Portfolio managers employ specific guidelines for determining buy-and-sell
opportunities. For corporate paper, the selection process generally includes the
following criteria:
Issuer should have a long-term debt rating of "A" or higher from at least two
major credit rating agencies
- - Cash flow from operations to short-term debt should be 100% or higher
- - Short-term debt-to-capital ratio should be 15% or lower
- - Issuer's standard deviation of cash flow growth should be 8.5 or lower
- - Profitability ratios should be positive and trending higher
- - Total debt-to-capital ratio should be 35% or lower
Through investing in a portfolio of high quality, short-term securities, the
Franklin Cash Reserves Fund is designed to provide a high level of credit safety
combined with a stable net asset value.(2) As a result, investors often use the
Fund for qualified retirement assets, as well as monies held in fiduciary,
advisory and custodial capacities. Its competitive yield has also made it an
attractive alternative cash management tool for corporations, banks, savings and
loan associations and trust companies.(3)
(2.) An investment in the Franklin Cash Reserves Fund is neither insured nor
guaranteed by the U.S. government or by any other entity or institution. There
is no assurance that the $1.00 share price will be maintained.
(3.) Regulated investors should review their applicable investment restrictions
to determine whether the fund is a permissible investment.
6
<PAGE>
PERFORMANCE SUMMARY
During the second half of 1998, the Federal Reserve Board cut the federal funds
target rate to 4.75%. The interest rate environment over the last six months was
reflected in the Fund's seven-day yield, which began the period at 4.85% on June
30, 1998 and finished at 4.42%, as of December 31, 1998. The average weighted
maturity of 56 days was maintained throughout the period even with the adverse
conditions.
The graph to the right illustrates how the total returns for the Franklin Cash
Reserves Fund performed against its benchmark, the Lipper Institutional Money
Market Funds Index for the one- and three-year periods ended December 31, 1998.
[BAR CHART - FRANKLIN CASH RESERVES FUND]
FRANKLIN CASH RESERVES FUND
Total Return Index Comparison (4)
Periods Ended December 31, 1998
<TABLE>
<CAPTION>
Franklin Cash Lipper Institutional
Reserves Fund Money Market Funds
-------------- ---------------------
<S> <C> <C>
1-Year 5.03% 5.30%
3-Years 16.11% 16.69%
</TABLE>
PERFORMANCE FIGURES
PERIOD ENDED DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
7-Day Current Yield: 4.42%
7-Day Effective Yield: 4.52%
Average Weighted Maturity: 56 days
</TABLE>
4. Source for the Lipper Institutional Money Market Funds Index is Lipper
Analytical Services, Inc. As of December 31, 1998, there were 200 funds in the
institutional money market 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.
Past performance is not predictive of future results.
7
<PAGE>
INSTITUTIONAL FIDUCIARY TRUST
FRANKLIN CASH RESERVES FUND
Financial Highlights
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED JUNE 30,
DECEMBER 31, 1998 ---------------------------------------------
(UNAUDITED) 1998 1997 1996 1995
-----------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period .................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-----------------------------------------------------------------
Income from investment operations - net investment income .024 .051 .050 .052 .052
Less distributions from net investment income ........... (.024) (.051) (.050) (.052) (.052)
-----------------------------------------------------------------
Net asset value, end of period .......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
=================================================================
Total return* ........................................... 2.39% 5.28% 5.11% 5.35% 5.34%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ....................... $ 141,685 $ 119,585 $ 76,510 $ 30,381 $ 14,545
Ratios to average net assets:
Expenses(1) ............................................ .77%** .50% .50% .49% .40%
Expenses excluding waiver and payments by affiliate(1) . .78%** .77% .69% .73% .79%
Net investment income .................................. 4.72%** 5.14% 5.00% 5.10% 5.69%
</TABLE>
* Total return is not annualized.
** Annualized
(1) The expense ratio includes the Fund's share of the Portfolio's allocated
expenses.
8
See notes to financial statements.
<PAGE>
INSTITUTIONAL FIDUCIARY TRUST
FRANKLIN CASH RESERVES FUND
STATEMENT OF INVESTMENTS, DECEMBER 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
- -----------------------------------------------------------------------------------------
<S> <C> <C>
MUTUAL FUNDS 90.9%
The Money Market Portfolio (Note 1) (COST $128,722,090) .... 128,722,090 $128,722,090
OTHER ASSETS, LESS LIABILITIES 9.1% ........................ 12,963,144
------------
NET ASSETS 100.0% .......................................... $141,685,234
============
</TABLE>
9
See notes to financial statements.
<PAGE>
INSTITUTIONAL FIDUCIARY TRUST
FRANKLIN CASH RESERVES FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998 (UNAUDITED)
<TABLE>
<S> <C>
Assets:
Investments in securities, at value and cost ........... $128,722,090
Receivables for capital shares sold .................... 14,034,245
------------
Total assets ....................................... 142,756,335
------------
Liabilities:
Payables:
Capital shares redeemed ............................... 966,428
Affiliates ............................................ 101,830
Other liabilities ...................................... 2,843
------------
Total liabilities .................................. 1,071,101
------------
Net assets, at value .................................... $141,685,234
============
Shares outstanding ...................................... 141,685,234
============
Net asset value per share ............................... $ 1.00
============
</TABLE>
10
See notes to financial statements.
<PAGE>
INSTITUTIONAL FIDUCIARY TRUST
FRANKLIN CASH RESERVES FUND
Financial Statements (continued)
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1998 (UNAUDITED)
<TABLE>
<S> <C>
Investment income:
Dividends .................................................. $3,636,198
----------
Expenses:
Administrative fees (Note 3) ............................... $ 171,418
Distribution fees (Note 3) ................................. 171,418
Transfer agent fees (Note 3) ............................... 60,983
Custodian fees ............................................. 491
Reports to shareholders .................................... 3,948
Registration and filing fees ............................... 9,432
Professional fees .......................................... 2,942
Trustees' fees and expenses ................................ 3,301
Other ...................................................... 384
----------
Total expenses ......................................... 424,317
----------
Net investment income ................................. 3,211,881
----------
Net increase in net assets resulting from operations ........ $3,211,881
==========
</TABLE>
11
See notes to financial statements.
<PAGE>
INSTITUTIONAL FIDUCIARY TRUST
FRANKLIN CASH RESERVES FUND
Financial Statements (continued)
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1998 (UNAUDITED)
AND THE YEAR ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
SIX MONTHS YEAR
ENDED ENDED
DECEMBER 31, 1998 JUNE 30, 1998
-------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ................................... $ 3,211,881 $ 6,018,398
Distributions to shareholders from net investment income . (3,211,881) (6,018,398)
Capital share transactions (Note 2) ...................... 22,100,651 43,074,366
------------- -------------
Net increase in net assets ............................ 22,100,651 43,074,366
Net assets (there is no undistributed net investment income
at beginning or end of period):
Beginning of period ...................................... 119,584,583 76,510,217
------------- -------------
End of period ............................................ $ 141,685,234 $ 119,584,583
============= =============
</TABLE>
12
See notes to financial statements.
<PAGE>
INSTITUTIONAL FIDUCIARY TRUST
FRANKLIN CASH RESERVES FUND
Notes to Financial Statements (Unaudited)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Franklin Cash Reserves Fund (the Fund) is a separate, diversified series of
Institutional Fiduciary Trust (the Trust), which is an open-end investment
company registered under the Investment Company Act of 1940. The Fund seeks to
provide a high level of current income consistent with preservation of capital.
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 December 31, 1998, the Fund owns 4.87%
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 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.
13
<PAGE>
INSTITUTIONAL FIDUCIARY TRUST
FRANKLIN CASH RESERVES FUND
Notes to Financial Statements (Unaudited) (continued)
2. SHARES OF BENEFICIAL INTEREST
At December 31, 1998, there were an unlimited number of shares authorized (no
par value). Transactions in the Fund's shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS YEAR
ENDED ENDED
DECEMBER 31, 1998 JUNE 30, 1998
---------------------------------
<S> <C> <C>
Shares sold ................. $ 151,579,571 $ 326,338,904
Shares issued in reinvestment
of distributions ........... 3,193,435 5,965,145
Shares redeemed ............. (132,672,355) (289,229,683)
------------- -------------
Net increase ................ $ 22,100,651 $ 43,074,366
============= =============
</TABLE>
3. TRANSACTIONS WITH AFFILIATES
Certain officers and trustees of the Trust 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 administrative manager, principal underwriter, and
transfer agent, respectively, and of The Money Market Portfolios.
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.
14
<PAGE>
THE MONEY MARKET PORTFOLIOS
Financial Highlights
THE MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED JUNE 30,
DECEMBER 31, 1998 ---------------------------------------------------------
(UNAUDITED) 1998 1997 1996 1995
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period .......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
----------- ----------- ----------- ----------- -----------
Income from investment operations -
net investment income ........................ .027 .055 .053 .055 .053
Less distributions from net investment income . (.027) (.055) (.053) (.055) (.053)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period ................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
=========== =========== =========== =========== ===========
Total return* ................................. 2.71% 5.64% 5.47% 5.66% 5.46%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ............. $ 2,644,509 $ 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 ................................ .16%** .16% .16% .16% .16%
Net investment income ........................ 5.33%** 5.50% 5.34% 5.50% 5.42%
</TABLE>
<TABLE>
<CAPTION>
Year Ended
June 30,
---------
1994
---------
<S> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period .......... $ 1.00
---------
Income from investment operations -
net investment income ........................ .033
Less distributions from net investment income . (.033)
---------
Net asset value, end of period ................ $ 1.00
=========
Total return* ................................. 3.33%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ............. $ 219,189
Ratios to average net assets:
Expenses ..................................... .15%
Expenses excluding waiver and payments
by affiliate ................................ .17%
Net investment income ........................ 3.25%
</TABLE>
* Total return is not annualized.
** Annualized
15
See notes to financial statements.
<PAGE>
THE MONEY MARKET PORTFOLIOS
STATEMENT OF INVESTMENTS, DECEMBER 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
THE MONEY MARKET PORTFOLIO AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
BANK NOTES 8.7%
Nations Bank NA, 4.98% - 5.12%, 4/07/99 - 6/10/99 .................................. $ 100,000,000 $ 100,002,936
NBD Bank, 5.10% - 5.15%, 2/10/99 - 3/15/99 ......................................... 50,000,000 50,000,776
Wachovia Bank NA, 5.18% - 5.60%, 1/07/99 - 3/05/99 ................................. 80,000,000 80,000,060
--------------
TOTAL BANK NOTES (COST $230,003,772) ............................................... 230,003,772
--------------
CERTIFICATES OF DEPOSIT 39.8%
ABN-AMRO Bank NV, Chicago Branch, 4.93% - 5.72%, 2/24/99 - 6/07/99 ................. 90,300,000 90,308,459
Australia & New Zealand Banking Group, New York Branch, 5.625%, 1/11/99 ............ 25,000,000 25,000,000
Bank of Nova Scotia, Portland Branch, 5.08% - 5.51%, 1/05/99 - 3/22/99 ............. 100,000,000 100,000,000
Barclays Bank PLC, New York Branch, 5.53%, 2/23/99 ................................. 9,500,000 9,502,454
Bayerische Landesbank, New York Branch, 4.98% - 5.55%, 1/29/99 - 6/25/99 ........... 70,000,000 70,006,358
Bayerische Vereinsbank, New York Branch, 4.95% - 5.33%, 1/04/99 - 6/29/99 .......... 80,000,000 80,000,000
Commerzbank AG, New York Branch, 5.43%, 1/19/99 - 1/26/99 .......................... 50,000,000 50,000,293
Credit Agricole, New York Branch, 5.08% - 5.74%, 3/10/99 - 4/26/99 ................. 47,300,000 47,332,968
Den Danske Bank, New York Branch, 5.10% - 5.41%, 1/19/99 - 3/11/99 ................. 50,000,000 50,001,069
Deutsche Bank AG, New York Branch, 5.62% - 5.685%, 2/26/99 - 6/03/99 ............... 40,000,000 40,013,839
Dresdner Bank AG, New York Branch, 4.96% - 5.34%, 2/16/99 - 2/19/99 ................ 75,000,000 75,007,008
Landesbank Hessen Thuringen, New York Branch, 5.27%, 1/12/99 ....................... 25,000,000 25,000,038
National Westminster Bank PLC, New York Branch, 5.22% - 5.745%, 1/13/99 - 4/06/99 .. 65,000,000 64,986,898
Rabobank Nederland NV, New York Branch, 4.95% - 5.64%, 1/04/99 - 7/30/99 ........... 100,500,000 100,502,880
Royal Bank of Canada, New York Branch, 5.68%, 3/29/99 .............................. 50,000,000 50,012,578
Societe Generale, New York Branch, 5.58%, 1/22/99 .................................. 25,000,000 24,998,921
Swiss Bank Corp., New York Branch, 5.81%, 4/29/99 .................................. 25,000,000 24,996,906
Toronto Dominion Bank, New York Branch, 5.62%, 1/25/99 ............................. 25,000,000 25,000,000
UBS AG, New York Branch, 5.12%, 5/05/99 ............................................ 25,000,000 25,000,000
Westdeutsche Landesbank, New York Branch, 5.18% - 5.64%, 2/04/99 - 2/05/99 ......... 60,000,000 60,013,745
Westpac Banking Corp., New York Branch, 5.55%, 1/20/99 ............................. 15,000,000 14,998,761
--------------
TOTAL CERTIFICATES OF DEPOSIT (COST $1,052,683,175) ................................ 1,052,683,175
--------------
(a)COMMERCIAL PAPER 43.7%
Abbey National North America, 5.05% - 5.12%, 2/03/99 - 2/09/99 ..................... 55,000,000 54,718,542
American Express Credit Corp., 5.00% - 5.05%, 1/07/99 - 3/03/99 .................... 75,000,000 74,744,410
Associates Corp. of North America, 5.05% - 5.35%, 1/06/99 - 2/11/99 ................ 105,000,000 104,648,188
Barclays U.S. Funding Corp., 5.10%, 1/27/99 ........................................ 25,000,000 24,907,917
Canadian Imperial Holdings, Inc., 4.94% - 5.04%, 1/28/99 - 4/12/99 ................. 50,000,000 49,559,014
Chevron U.K. Investment PLC, 5.34%, 1/19/99 ........................................ 10,000,000 9,973,300
CIESCO LP, 5.35%, 1/21/99 - 1/22/99 ................................................ 50,000,000 49,847,674
Commonwealth Bank of Australia, 4.99% - 5.07%, 3/04/99 - 4/01/99 ................... 65,000,000 64,313,778
Cregem North America Inc., 5.06%, 3/24/99 - 3/25/99 ................................ 50,000,000 49,420,208
General Electric Capital Corp., 4.92% - 5.44%, 1/14/99 - 5/04/99 ................... 105,000,000 104,307,958
International Lease Finance Corp., 5.12%, 2/01/99 .................................. 5,000,000 4,977,956
International Nederlanden (U.S.) Funding Corp., 5.06% - 5.10%, 2/12/99 - 3/30/99 ... 95,000,000 94,221,701
J.P. Morgan & Co. Inc., 4.90% - 5.01%, 3/17/99 - 6/28/99 ........................... 75,000,000 73,783,451
Lloyds Bank PLC, 5.18%, 1/21/99 .................................................... 25,000,000 24,928,056
Morgan Stanley Dean Witter & Co., 5.34%, 1/13/99 ................................... 25,000,000 24,955,500
National Rural Utilities Cooperative Finance Corp., 5.03% - 5.09%, 1/27/99 - 3/19/99 64,000,000 63,496,486
Procter & Gamble Co., 5.28%, 1/11/99 ............................................... 15,068,000 15,045,900
Province of British Columbia, 4.90% - 5.29%, 3/08/99 - 6/16/99 ..................... 35,000,000 34,467,117
</TABLE>
16
<PAGE>
THE MONEY MARKET PORTFOLIOS
STATEMENT OF INVESTMENTS, DECEMBER 31, 1998 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
THE MONEY MARKET PORTFOLIO AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
(a)COMMERCIAL PAPER (CONT.)
Royal Bank of Canada, 5.46%, 1/15/99 ................................... $ 25,000,000 $ 24,946,917
Svenska Handelsbanken Inc., 5.05%, 1/20/99 ............................. 25,000,000 24,933,368
Toronto Dominion Holdings USA Inc., 4.83%, 6/14/99 ..................... 25,000,000 24,449,917
Toyota Motor Credit Corp., 5.08%, 2/02/99 .............................. 25,000,000 24,887,111
UBS Finance (DE) Inc., 4.88% - 5.47%, 1/14/99 - 5/24/99 ................ 60,000,000 59,647,628
Westpac Capital Corp., 4.80% - 4.96%, 2/08/99 - 5/10/99 ................ 75,000,000 74,144,776
--------------
TOTAL COMMERCIAL PAPER (COST $1,155,326,873) ........................... 1,155,326,873
--------------
TOTAL INVESTMENTS BEFORE REPURCHASE AGREEMENTS (COST $2,438,013,820) ... 2,438,013,820
--------------
REPURCHASE AGREEMENTS 7.0%
J.P. Morgan Securities Inc., 4.75%, 1/04/99 (Maturity Value $94,329,759)
Collateralized by U.S. Treasury Notes ................................. 94,280,000 94,280,000
Morgan Stanley & Co. Inc., 4.65%, 1/04/99 (Maturity Value $90,086,521)
Collateralized by U.S. Treasury Notes ................................. 90,040,000 90,040,000
--------------
TOTAL REPURCHASE AGREEMENTS (COST $184,320,000) ........................ 184,320,000
--------------
TOTAL INVESTMENTS (COST $2,622,333,820) 99.2% .......................... 2,622,333,820
OTHER ASSETS, LESS LIABILITIES .8% ..................................... 22,175,079
--------------
NET ASSETS 100.0% ...................................................... $2,644,508,899
==============
</TABLE>
(a) Securities are traded on a discount basis; the rates shown are the discount
rates at the time of purchase by the portfolio.
17
See notes to financial statements.
<PAGE>
THE MONEY MARKET PORTFOLIOS
Financial Highlights
THE U.S. GOVERNMENT SECURITIES MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED JUNE 30,
DECEMBER 31, 1998 ------------------------------------------------------------
(UNAUDITED) 1998 1997 1996 1995 1994
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period .......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- --------- --------- --------- --------- ---------
Income from investment operations -
net investment income ........................ .026 .054 .052 .054 .052 .032
Less distributions from net investment income . (.026) (.054) (.052) (.054) (.052) (.032)
--------- --------- --------- --------- --------- ---------
Net asset value, end of period ................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========= ========= ========= ========= =========
Total return* ................................. 2.59% 5.53% 5.34% 5.55% 5.32% 3.25%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ............. $ 292,833 $ 263,226 $ 285,629 $ 285,701 $ 474,654 $ 218,548
Ratios to average net assets:
Expenses ..................................... .15%** .15% .15% .15% .15% .15%
Expenses excluding waiver and payments
by affiliate ................................ .16%** .16% .16% .17% .16% .17%
Net investment income ........................ 5.10%** 5.40% 5.20% 5.45% 5.25% 3.20%
</TABLE>
* Total return is not annualized.
** Annualized
18
See notes to financial statements.
<PAGE>
THE MONEY MARKET PORTFOLIOS
STATEMENT OF INVESTMENTS, DECEMBER 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
THE U.S. GOVERNMENT SECURITIES MONEY MARKET PORTFOLIO AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
GOVERNMENT SECURITIES 19.0%
U.S. Treasury Notes, 7.00%, 4/15/99 ...................................................... $ 5,000,000 $ 5,019,736
U.S. Treasury Notes, 6.00%, 8/15/99 ...................................................... 10,000,000 10,045,392
U.S. Treasury Notes, 5.875%, 8/31/99 ..................................................... 15,000,000 15,107,475
U.S. Treasury Notes, 6.875%, 8/31/99 ..................................................... 20,000,000 20,227,562
U.S. Treasury Notes, 7.125%, 9/30/99 ..................................................... 5,000,000 5,081,996
------------
TOTAL GOVERNMENT SECURITIES (COST $55,482,161) ........................................... 55,482,161
------------
REPURCHASE AGREEMENTS 80.7%
Barclays Capital Inc., 4.70%, 1/04/99 (Maturity Value $15,007,833)
Collateralized by U.S. Treasury Notes ................................................... 15,000,000 15,000,000
Bear, Stearns & Co. Inc., 4.70%, 1/04/99 (Maturity Value $15,007,833)
Collateralized by U.S. Treasury Notes ................................................... 15,000,000 15,000,000
Chase Securities Inc., 4.50%, 1/04/99 (Maturity Value $15,007,500)
Collateralized by U.S. Treasury Notes ................................................... 15,000,000 15,000,000
CIBC Oppenheimer Corp., 4.75%, 1/04/99 (Maturity Value $15,007,917)
Collateralized by U.S. Treasury Notes ................................................... 15,000,000 15,000,000
Donaldson, Lufkin & Jenrette Securities Corp., 5.00%, 1/04/99 (Maturity Value $15,008,333)
Collateralized by U.S. Treasury Notes ................................................... 15,000,000 15,000,000
Dresdner Kleinwort Benson, North America LLC, 4.25%, 1/04/99 (Maturity Value $15,007,083)
Collateralized by U.S. Treasury Notes ................................................... 15,000,000 15,000,000
J.P. Morgan Securities Inc., 4.65%, 1/04/99 (Maturity Value $13,186,810)
Collateralized by U.S. Treasury Bills, U.S. Treasury Notes .............................. 13,180,000 13,180,000
J.P. Morgan Securities Inc., 4.75%, 1/04/99 (Maturity Value $30,015,833)
Collateralized by U.S. Treasury Bills, U.S. Treasury Notes .............................. 30,000,000 30,000,000
Merrill Lynch Government Securities Inc., 4.75%, 1/04/99 (Maturity Value $15,007,917)
Collateralized by U.S. Treasury Notes ................................................... 15,000,000 15,000,000
Morgan Stanley & Co. Inc., 4.65%, 1/04/99 (Maturity Value $43,202,310)
Collateralized by U.S. Treasury Bills, U.S. Treasury Notes .............................. 43,180,000 43,180,000
NationsBanc Montgomery Securities LLC, 4.70%, 1/04/99 (Maturity Value $15,007,833)
Collateralized by U.S. Treasury Notes ................................................... 15,000,000 15,000,000
Paribas Corp., 4.85%, 1/04/99 (Maturity Value $15,008,083)
Collateralized by U.S. Treasury Notes ................................................... 15,000,000 15,000,000
Warburg Dillon Read LLC, 4.75%, 1/04/99 (Maturity Value $15,007,917)
Collateralized by U.S. Treasury Notes ................................................... 15,000,000 15,000,000
------------
TOTAL REPURCHASE AGREEMENTS (COST $236,360,000) .......................................... 236,360,000
------------
TOTAL INVESTMENTS (COST $291,842,161) 99.7% .............................................. 291,842,161
OTHER ASSETS, LESS LIABILITIES .3% ....................................................... 990,881
------------
NET ASSETS 100.0% ........................................................................ $292,833,042
============
</TABLE>
19
See notes to financial statements.
<PAGE>
THE MONEY MARKET PORTFOLIOS
Financial Statements
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
THE U.S.
GOVERNMENT
SECURITIES
THE MONEY MONEY MARKET
MARKET PORTFOLIO PORTFOLIO
---------------------------------
<S> <C> <C>
Assets:
Investments in securities, at value and cost $2,438,013,820 $ 55,482,161
Repurchase agreements, at value and cost ... 184,320,000 236,360,000
Cash ....................................... 5,393 5,533
Receivables:
Capital shares sold ....................... 1,360,142 --
Interest .................................. 21,437,673 1,190,077
-------------- --------------
Total assets ............................ 2,645,137,028 293,037,771
-------------- --------------
Liabilities:
Payables:
Capital shares redeemed ................... 229,548 142,262
Affiliates ................................ 317,855 39,317
Other liabilities .......................... 80,726 23,150
-------------- --------------
Total liabilities ....................... 628,129 204,729
-------------- --------------
Net assets, at value ........................ $2,644,508,899 $ 292,833,042
============== ==============
Shares outstanding .......................... 2,644,508,899 292,833,042
============== ==============
Net asset value per share ................... $ 1.00 $ 1.00
============== ==============
</TABLE>
20
See notes to financial statements.
<PAGE>
THE MONEY MARKET PORTFOLIOS
Financial Statements (continued)
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
THE U.S.
GOVERNMENT
SECURITIES
THE MONEY MONEY MARKET
MARKET PORTFOLIO PORTFOLIO
---------------- ------------
<S> <C> <C>
Investment income:
Interest ............................................ $ 68,305,549 $ 7,829,666
------------ ------------
Expenses:
Management fees (Note 3) ............................ 1,881,196 225,450
Custodian fees ...................................... 9,186 1,415
Reports to shareholders ............................. 2,865 477
Professional fees ................................... 27,417 4,635
Trustees' fees and expenses ......................... 3,522 556
Other ............................................... 48,613 6,994
------------ ------------
Total expenses ..................................... 1,972,799 239,527
Expenses waived/paid by affiliate (Note 3) ......... (89,633) (14,063)
------------ ------------
Net expenses ................................... 1,883,166 225,464
------------ ------------
Net investment income ......................... 66,422,383 7,604,202
------------ ------------
Net realized gain from investments ................... 9,343 --
------------ ------------
Net increase in net assets resulting from operations . $ 66,431,726 $ 7,604,202
============ ============
</TABLE>
See notes to financial statements. 21
<PAGE>
THE MONEY MARKET PORTFOLIOS
Financial Statements (continued)
STATEMENTS OF CHANGES IN NET ASSETS
for the six months ended December 31, 1998 (unaudited)
and the year ended June 30, 1998
<TABLE>
<CAPTION>
THE U.S. GOVERNMENT SECURITIES
THE MONEY MARKET PORTFOLIO MONEY MARKET PORTFOLIO
-------------------------------------- ---------------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
DECEMBER 31, 1998 JUNE 30, 1998 DECEMBER 31, 1998 JUNE 30, 1998
----------------- --------------- ----------------- ---------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ..................... $ 66,422,383 $ 108,653,664 $ 7,604,202 $ 14,190,444
Net realized gain from investments ........ 9,343 -- -- --
--------------- --------------- --------------- ---------------
Net increase in net assets resulting
from operations ........................ 66,431,726 108,653,664 7,604,202 14,190,444
Distributions to shareholders from
net investment income ..................... (66,431,726)+ (108,653,664) (7,604,202) (14,190,444)
Capital share transactions (Note 2) ........ 600,879,596 270,083,314 29,606,664 4,597,201
--------------- --------------- --------------- ---------------
Net increase in net assets .............. 600,879,596 270,083,314 29,606,664 4,597,201
Net assets (there is no undistributed net
investment income at beginning or end of
period):
Beginning of period ....................... 2,043,629,303 1,773,545,989 263,226,378 258,629,177
--------------- --------------- --------------- ---------------
End of period ............................. $ 2,644,508,899 $ 2,043,629,303 $ 292,833,042 $ 263,226,378
=============== =============== =============== ===============
</TABLE>
+Distributions were increased by a net realized gain from investments of $9,343.
22 See notes to financial statements.
<PAGE>
THE MONEY MARKET PORTFOLIOS
Notes to Financial Statements (unaudited)
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. 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
December 31, 1998, 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 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.
23
<PAGE>
THE MONEY MARKET PORTFOLIOS
Notes to Financial Statements (unaudited) (continued)
2. SHARES OF BENEFICIAL INTEREST
At December 31, 1998, 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.
GOVERNMENT
SECURITIES
THE MONEY MONEY MARKET
MARKET PORTFOLIO PORTFOLIO
---------------- ---------------
<S> <C> <C>
Six months ended December 31, 1998
Shares sold......................... $ 4,379,369,896 $ 460,850,849
Shares issued in reinvestment
of distributions.................... 66,431,528 7,604,453
Shares redeemed..................... (3,844,921,828) (438,848,638)
--------------- ---------------
Net increase........................ $ 600,879,596 $ 29,606,664
=============== ===============
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 Portfolios 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 Statement of Operations.
At December 31, 1998, the shares of The Money Market Portfolio were owned by the
following funds:
<TABLE>
<CAPTION>
PERCENTAGE OF
OUTSTANDING
SHARES SHARES
---------- -------------
<S> <C> <C>
Franklin Money Fund .................... 2,204,122,234 83.35%
Institutional Fiduciary Trust -
Money Market Portfolio ................ 206,805,583 7.82%
Institutional Fiduciary Trust -
Franklin Cash Reserves Fund ........... 128,722,090 4.87%
Franklin Templeton Money Fund Trust -
Franklin Templeton Money Fund II ...... 104,858,992 3.96%
</TABLE>
24
<PAGE>
THE MONEY MARKET PORTFOLIOS
Notes to Financial Statements (unaudited) (continued)
3. TRANSACTIONS WITH AFFILIATES (cont.)
At December 31, 1998, the shares of The U.S. Government Securities Money Market
Portfolio were owned by the following funds:
<TABLE>
<CAPTION>
PERCENTAGE OF
OUTSTANDING
SHARES SHARES
--------- -------------
<S> <C> <C>
Institutional Fiduciary Trust -
Franklin U.S. Government
Securities Money Market Portfolio .... 139,387,867 47.60%
Franklin Federal Money Fund ........... 153,445,175 52.40%
</TABLE>
4. INCOME TAXES
At June 30, 1998, the Money Market Portfolio had tax basis capital losses of
$4,721 which may be carried over to offset future capital gains. Such losses
expire as follows:
Capital loss carryovers expiring in:
2002 ................................... $3,560
2006 ................................... 1,161
-----
$4,721
======
25
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