CHAIRMAN'S MESSAGE
Your Fund's Objective:
The Franklin Templeton Money Fund II seeks to provide a high level of current
income, consistent with liquidity and preservation of capital. The fund invests
all of its assets in the shares of The Money Market Portfolio (the Portfolio),
which has the same investment objective. The Portfolio, in turn, invests in
various money market instruments such as U.S. government securities and other
U.S. dollar-denominated securities. The fund attempts to maintain a stable net
asset value of $1.00 per share.1
August 15, 1996
Dear Shareholder:
We are pleased to bring you the Franklin Templeton Money Fund Trust's annual
report for the period ended June 30, 1996.
Slow economic growth and mild inflation characterized most of the period under
review. Nearing the end of a two-year economic slowdown, the first seven months
of this fiscal year were distinctly different from the last five months. In an
attempt to stimulate economic activity, the Federal Reserve Board (Fed) cut its
federal funds rate (the interest rate banks charge each other for overnight
loans) from 6.00% to 5.75% in July 1995, then to 5.50% in December. Despite
these cuts, gross domestic product (GDP), a measure of the nation's economic
output, grew at an annual rate of only 0.3% in the fourth quarter of 1995.2 The
Fed once again lowered its federal funds rate in late January 1996 to 5.25%.
1. Please remember, an investment in the fund is neither insured nor guaranteed
by the U.S. government, and there can be no assurance that the fund will be able
to maintain a stable net asset value of $1.00 per share.
GDP expanded at an annual rate of 2.0% during the first quarter of 1996,
however, following the release of surprisingly impressive employment reports.
Consumer confidence, industrial production, and employment figures, which are
three key indicators of future economic strength, surged through the end of the
reporting period. GDP increased at an estimated annual rate of 4.2% during the
second quarter of 1996.
Short-term market rates reflected this growth pattern. The 90-day Treasury bill
yield dropped from 5.57% on June 30, 1995, to 5.14% on March 30, 1996. Three
months later, this yield rose to 5.16%.3
Since we maintained a relatively short-weighted average maturity during the
reporting period (54 days on June 30, 1996), the fund's seven-day yield
generally followed the movements in Treasury bill rates. The fund's seven-day
yield began the period at 4.42% and ended it at 4.06%.
We continue to invest in the highest quality securities available to money
market portfolios. Since the fund's objective is to provide shareholders with a
high-quality, conservative investment, we do not invest in leveraged derivatives
or other potentially volatile securities that we believe involve undue risk.
This discussion reflects the strategies we employed for the fund during the 12
months under review and includes our opinions as of the close of the period.
Since economic and market conditions are constantly changing, our strategies,
evaluations, conclusions and decisions regarding portfolio holdings, may change
as new circumstances arise. Although past performance of a specific investment
or sector cannot guarantee future performance, such information can be useful in
analyzing securities we purchase or sell for the fund.
2. Source for all GDP figures: U.S. Commerce Dept.
3. Source: Bloomberg.
Looking forward, lower unemployment rates and stronger business activity should
work to strengthen the economy. If economic growth continues at its current
pace, however, the Fed may raise short-term interest rates as it seeks to
prevent inflation from getting out of control.
Thank you for your continued support of the Franklin Templeton Money Fund Trust,
and we look forward to serving you in the years to come.
Sincerely,
Charles B. Johnson
Chairman
Franklin Templeton Money Fund Trust
PERFORMANCE SUMMARY
Franklin Templeton Money Fund Trust
June 30, 1996
Seven-day annualized yield 3.98%
Seven-day effective yield* 4.06%
*The seven-day effective yield assumes the compounding of daily dividends, and
reflects fluctuations in interest rates on portfolio investments, as well as
fund expenses. Yields should be viewed in terms of the current, low rate of
inflation--just as high inflation usually results in higher yields, low
inflation often results in lower yields. Past performance is not predictive of
future results.
Franklin Advisers, Inc., the fund's administrator and the manager of the fund's
underlying portfolio, has agreed in advance to waive a portion of its fees,
which reduces expenses and increases yield to shareholders. Without these
reductions, the fund's yield would have been lower. The fee waiver may be
discontinued at any time upon notice to the fund's Board of Directors.
FRANKLIN TEMPLETON MONEY FUND TRUST
Statement of Investments in Securities and Net Assets, June 30, 1996
<TABLE>
<CAPTION>
Value
Shares Franklin Templeton Money Fund II (Note 1)
- -------------------------------------------------------------------------------------------------------------------
Mutual Funds 101.8%
<S> <C> <C>
4,593,844 The Money Market Portfolio (Note 1) .................................................. $4,593,844
-------------
Total Investments (Cost $4,593,844) 101.8% .................................... 4,593,844
Liabilities in Excess of Other Assets (1.8)% .................................. (83,390)
-------------
Net Assets 100.0% ............................................................. $4,510,454
=============
</TABLE>
At June 30, 1996, there was no unrealized appreciation or depreciation for
financial statement or income tax purposes.
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON MONEY FUND TRUST
Franklin Templeton Money Fund II
Financial Statements
Statement of Assets and Liabilities
June 30, 1996
Assets:
Investments in securities, at value and cost $4,593,844
Receivable from affiliates 14,883
Unamortized organization costs (Note 2) 5,942
----------
Total assets 4,614,669
----------
Liabilities:
Payables:
Capital shares repurchased 102,858
Distributions to shareholders 158
Accrued expenses and other liabilities 1,199
-----------
Total liabilities 104,215
-----------
Net assets (equivalent to $1.00 per share
based on 4,510,454 shares of capital
stock outstanding) $4,510,454
===========
Statement of Operations
for the year ended June 30, 1996
Investment Income:
Dividends $104,696
Expenses:
Administration fees (Note 5) $ 9,098
Distribution fees (Note 5) 3,048
Shareholder servicing costs (Note 5) 3,934
Registration and filing fees 19,723
Professional fees 10,032
Reports to shareholders 1,880
Amortization of organization costs
(Note 2) 1,584
Other 690
Administration fees waived
by manager (Note 5) (9,098)
Other expenses assumed
by manager (Note 5) (16,039)
--------
Total expenses 24,852
--------
Net investment income $ 79,844
========
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON MONEY FUND TRUST
Franklin Templeton Money Fund II
Financial Statements (cont.)
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
for the years ended June 30, 1996 and 1995
1996 1995*
--------- --------
Increase (decrease) in net assets:
Operations:
<S> <C> <C>
Net investment income .............................................................. $ 79,844 $ 835
Distributions to shareholders from net investment income............................. (79,844) (835)
Increase in net assets from capital share transactions (Note 3)...................... 4,358,698 151,756
--------- --------
Net increase in net assets ..................................................... 4,358,698 151,756
Net assets (there is no undistributed net investment
income at beginning or end of the period):
Beginning of period................................................................. 151,756 --
--------- --------
End of period....................................................................... $4,510,454 $151,756
========= ========
</TABLE>
*April 13, 1995 (effective date) to June 30, 1995.
The accompanying notes are an integral part of these financial statements.
FRANKLIN TEMPLETON MONEY FUND TRUST
Franklin Templeton Money Fund II
Notes to Financial Statements
1. SIGNIFICANT ACCOUNTING POLICIES
Franklin Templeton Money Fund II (the Fund) is a no-load, open-end, diversified
series of the Franklin Templeton Money Fund Trust (the Trust), a management
investment company (mutual fund), registered under the Investment Company Act of
1940, as amended. The Fund is the Trust's only series. The Fund's investment
objectives are high current income consistent with capital preservation and
liquidity.
The Fund invests substantially all of its assets in The Money Market Portfolio
(the Portfolio), which is a no-load, open-end, diversified management investment
company having the same investment objectives as the Fund. The financial
statements of the Portfolio, including the Statement of Investments in
Securities and Net Assets, are included elsewhere in this report and should be
read in conjunction with the Fund's financial statements.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles for
investment companies.
a. Security Valuation:
The Fund holds Portfolio shares that are valued at its proportionate interest in
the net asset value of the Portfolio. As of June 30, 1996, the Fund owns 0.30%
of the Portfolio.
b. Income Taxes:
The Fund intends to continue to qualify for the tax treatment applicable to
regulated investment companies under the Internal Revenue Code and to make the
requisite distributions to its shareholders which will be sufficient to relieve
it from income and excise taxes.
c. Security Transactions:
Security transactions are accounted for on the date the securities are purchased
or sold (trade date). Realized gains and losses on security transactions are
determined on the basis of specific identification.
d. Investment Income, Expenses and Distributions:
Net investment income includes income, calculated on an accrual basis, and
estimated expenses which are accrued daily. The total available for distribution
is computed daily and includes the net investment income, plus or minus any
gains or losses on security transactions and any changes in unrealized portfolio
appreciation or depreciation.
Distributions are normally declared each day the New York Stock Exchange is open
for business, equal to the total available for distribution (as defined above),
and are payable to shareholders of record as of the close of business the
preceding day. Such distributions are automatically reinvested daily in
additional shares of the Fund at net asset value.
e. Accounting Estimates:
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the amounts of income and expense during the reporting
period. Actual results could differ from those estimates.
FRANKLIN TEMPLETON MONEY FUND TRUST
Franklin Templeton Money Fund II
Notes to Financial Statements (cont.)
2. ORGANIZATION COSTS
The organization costs of the Fund are amortized on a straight-line basis over a
period of five years from the effective date of registration under the
Securities Act of 1933. In the event Franklin Resources, Inc. (Resources) (which
was the sole shareholder prior to the effective date) redeems its initial shares
within the five-year period, the pro-rata share of the then-unamortized deferred
organization costs will be deducted from the redemption price paid to Resources.
New investors exchanging into the Fund subsequent to that date bear such costs
during the amortization period only as such charges are accrued daily against
investment income.
3. TRUST SHARES
At June 30, 1996, there was an unlimited number of $.01 par value shares of
beneficial interest authorized. Transactions in the Fund's shares were as
follows:
<TABLE>
<CAPTION>
Year Ended Period Ended
June 30, 1996 June 30, 1995*
------------- --------------
<S> <C> <C>
Shares sold ............................................. $ 19,289,858 $150,921
Shares issued in reinvestment of distributions .......... 68,559 835
Shares redeemed.......................................... (14,999,719) --
------------- --------------
Net increase ............................................ $4,358,698 $151,756
============= ==============
</TABLE>
*April 13, 1995 (effective date) to June 30,1995.
4. PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities for the year ended June 30, 1996 aggregated
$17,605,623 and $13,163,016, respectively.
5. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
a. Administration Agreement:
Under the terms of an administration agreement, Franklin Advisers, Inc.
(Advisers) provides various administrative, statistical and other services, and
receives fees computed monthly based on the average daily net assets of the Fund
as follows:
Annualized Fee Rate Average Daily Net Assets
- ------------------ ---------------------------------------------------
0.455% First $100 million
0.330% Over $100 million, up to and including $250 million
0.280% In excess of $250 million
The terms of the agreement provide that aggregate annual expenses of the Fund be
limited to the extent necessary to comply with the limitations set forth in the
laws, regulations, and administrative interpretations of the states in which the
Fund's shares are registered. For the year ended June 30, 1996, the Fund's
expenses did not exceed these limitations. However, Advisers agreed in advance
to waive administration fees and assume payment of other expenses, as noted in
the Statement of Operations.
FRANKLIN TEMPLETON MONEY FUND TRUST
Franklin Templeton Money Fund II
Notes to Financial Statements (cont.)
5. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES (cont.)
b. Shareholder Services Agreement:
Under the terms of a shareholder services agreement with Franklin/Templeton
Investor Services, Inc. (Investor Services), the Fund pays costs on a per
shareholder account basis. Shareholder servicing costs incurred by the Fund for
the year ended June 30, 1996, aggregated $3,934, all of which was paid to
Investor Services.
c. Distribution Plans and Underwriting Agreement:
Under the terms of a distribution plan pursuant to Rule 12b-1 of the Investment
Company Act of 1940 (the Plan), the Fund reimburses Franklin/Templeton
Distributors, Inc. (Distributors), in an amount up to 0.65% per annum of the
Fund's average daily net assets for costs incurred in the promotion, offering
and marketing of the Fund's shares. The Plan does not permit nor require
payments of excess costs after termination.
In its capacity as underwriter for the shares of the Fund, Distributors also
received contingent deferred sales charges relating to transactions in the Fund
of $1,484.
d. Other Affiliates and Related Party Transactions:
Certain officers and trustees of the Trust are also officers and/or directors of
Distributors, Advisers, Investor Services (all wholly-owned subsidiaries of
Resources), and of the Portfolio.
6. FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout the
<TABLE>
<CAPTION>
period are as follows:
Year Ended Period Ended
June 30, 1996 June 30, 1995+
------------- -------------
<S> <C> <C>
Per Share Operating Performance
Net asset value at beginning of period ................... $1.00 $1.00
Net investment income .................................... .039 .007
Distributions from net investment income ................. (.039) (.007)
------------- -------------
Net asset value at end of period ......................... $1.00 $1.00
============= =============
Total Return** ........................................... 3.96% .73%
Ratios/Supplemental Data
Net assets at end of period (in 000's) ................... $4,510 $152
Ratio of expenses to average net assets1,2 ............... 1.40% 1.83%*
Ratio of expenses to average net assets (before fee
waiver)1,2............................................... 2.67% 1.84%*
Ratio of net investment income to average net assets ..... 4.00% 4.42%*
</TABLE>
+April 13, 1995 (effective date) to June 30, 1995.
*Annualized
**Total Return measures the change in value of an investment over the periods
indicated. It is not annualized. It does not include the contingent deferred
sales charge, and assumes reinvestment of dividends and capital gains, at net
asset value.
1Includes the Fund's share of the Portfolio's allocated expenses.
2Advisers agreed in advance to waive a portion of its management fees incurred
by the Portfolio during the periods indicated, and a portion of its
administration fees incurred by the Fund for the year ended June 30, 1996.
FRANKLIN TEMPLETON MONEY FUND TRUST
Franklin Templeton Money Fund II
Report of Independent Auditors
To the Shareholders and Board of Trustees
of Franklin Templeton Money Fund Trust:
We have audited the accompanying statement of assets and liabilities of the
Franklin Templeton Money Fund II of the Franklin Templeton Money Fund Trust,
including the statement of investments in securities and net assets, as of June
30, 1996, and the related statement of operations for the year then ended, the
statements of changes in net assets and the financial highlights for each of the
periods presented. These financial statements and financial highlights are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1996. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Franklin Templeton Money Fund II of the Franklin Templeton Money Fund Trust as
of June 30, 1996, the results of its operations for the year then ended, the
changes in net assets and the financial highlights for each of the periods
presented, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
San Francisco, California
August 6, 1996
THE MONEY MARKET PORTFOLIOS
Statement of Investments in Securities and Net Assets, June 30, 1996
<TABLE>
<CAPTION>
Face Value
Amount THE MONEY MARKET PORTFOLIO (Note 1)
- ----------------------------------------------------------------------------------------------------------------
aShort Term Investments 90.5%
Bank Notes .6%
<C> <C> <C>
$ 10,000,000 Bank of America NT & SA, 5.45%, 09/18/96 (Cost $9,999,766) .................... $ 9,999,766
-----------
Certificates of Deposit 22.3%
65,000,000 Bank of Nova Scotia, Portland Branch, 5.035% - 5.58%, 07/05/96 - 01/24/97 ..... 64,999,984
35,000,000 Bayerische Landesbank, New York Branch, 5.06% - 5.36%, 07/08/96 - 07/10/96 .... 35,000,141
25,000,000 Commerzbank, AG, New York Branch, 5.37%, 09/06/96 ............................. 25,000,459
25,000,000 Credit Suisse, New York Branch, 5.35%, 09/13/96 ............................... 25,000,506
15,000,000 Dresdner Bank, AG, New York Branch, 4.94%, 01/06/97 ........................... 14,948,167
20,000,000 Lloyds Bank, Plc., New York Branch, 5.70%, 09/11/96 ........................... 20,000,378
25,000,000 National Westminster Bank, New York Branch, 5.50%, 09/12/96 ................... 25,000,000
20,000,000 Rabobank Nederland, NV, New York Branch, 5.37%, 09/09/96 ...................... 20,000,380
20,000,000 Royal Bank of Canada, New York Branch, 5.02%, 08/01/96 ........................ 20,000,313
75,000,000 Societe Generale, New York Branch, 5.36% - 5.51%, 08/15/96 - 10/09/96 ......... 75,000,381
20,000,000 Westpac Banking Corp., New York Branch, 5.36%, 09/05/96 ....................... 20,000,000
-----------
Total Certificates of Deposit (Cost $344,950,709)........................ 344,950,709
-----------
Commercial Paper 67.6%
20,000,000 ABN AMRO North America Finance, Inc., 4.975%, 08/26/96 ........................ 19,845,222
20,000,000 AIG Funding, Inc., 5.39%, 09/23/96 ............................................ 19,748,465
60,000,000 American Express Credit Corp., 4.88% - 5.28%, 07/22/96 - 08/20/96 ............. 59,694,249
20,000,000 ANZ (DE), Inc., 5.27%, 08/29/96 ............................................... 19,827,261
65,000,000 Associates Corp. of North America, 5.27% - 5.28%, 07/01/96 - 09/03/96 ......... 64,621,600
65,000,000 AT&T Corp., 4.91% - 5.30%, 07/19/96 - 09/20/96 ................................ 64,555,765
30,000,000 BBV Finance, Inc., 5.32% - 5.39%, 08/07/96 - 09/16/96 ......................... 29,775,358
60,000,000 Canadian Imperial Holdings, Inc., 5.27% - 5.44%, 07/02/96 - 09/16/96 .......... 59,570,954
35,000,000 Cheltnham & Gloucester Building Society, 5.33% - 5.38%, 09/09/96 - 09/25/96 ... 34,599,939
65,000,000 CIESCO, L.P., 5.27% - 5.29%, 07/25/96 - 08/28/96 .............................. 64,623,425
35,000,000 Den Danske Corp., Inc., 5.27% - 5.275%, 07/22/96 - 08/30/96 ................... 34,749,467
65,000,000 General Electric Capital Corp., 5.27% - 5.31%, 07/31/96 - 08/12/96 ............ 64,651,476
65,000,000 Generale Bank, Inc., 5.07% - 5.31%, 07/11/96 - 08/14/96 ....................... 64,683,717
40,000,000 Halifax Building Society, 4.88% - 5.26%, 08/08/96 - 09/26/96 .................. 39,642,745
40,000,000 Metlife Funding, Inc., 5.28% - 5.40%, 08/26/96 - 10/01/96 ..................... 39,555,755
40,000,000 National Rural Utilities Cooperative Finance Corp., 5.28% - 5.39%,
08/16/96 - 09/18/96 .......................................................... 39,628,506
15,245,000 PepsiCo, Inc., 5.38%, 09/25/96 ................................................ 15,049,068
75,000,000 Prudential Funding Corp., 5.27% - 5.32%, 07/30/96 - 09/10/96 .................. 74,463,990
55,350,000 Schering Corp., 5.31% - 5.38%, 08/27/96 - 10/03/96 ............................ 54,664,248
65,000,000 Svenska Handelsbanken, Inc., 5.29% - 5.40%, 07/15/96 - 09/17/96 ............... 64,522,195
20,000,000 Toronto Dominion Holdings USA, Inc., 5.28%, 08/21/96 .......................... 19,850,400
40,000,000 Toyota Motor Credit Corp., 5.38% - 5.39%, 09/19/96 - 10/01/96 ................. 39,485,466
The accompanying notes are an integral part of these financial statements.
THE MONEY MARKET PORTFOLIOS
Statement of Investments in Securities and Net Assets, June 30, 1996 (cont.)
Face Value
Amount THE MONEY MARKET PORTFOLIO (Note 1)
- ----------------------------------------------------------------------------------------------------------------
aShort Term Investments (cont.)
Commercial Paper (cont.)
<C> <C> <C>
$ 20,000,000 Westpac Capital Corp., 5.27%, 07/29/96 ........................................ $ 19,918,021
40,119,000 Wool International, 4.90% - 5.30%, 07/12/96 - 08/23/96 ........................ 39,932,821
-------------
Total Commercial Paper (Cost $1,047,660,113)............................ 1,047,660,113
-------------
Total Investments before Repurchase Agreements
(Cost $1,402,610,588).................................................. 1,402,610,588
-------------
bReceivables from Repurchase Agreements 9.3%
79,993,000 J.P. Morgan Securities, Inc., 5.42%, 07/01/96 (Maturity Value $74,133,469)
Collateral: U.S. Treasury Bills, 06/26/97 .................................... 74,100,000
69,620,000 Morgan Stanley & Co., Inc., 5.35%, 07/01/96 (Maturity Value $70,031,208)
Collateral: U.S. Treasury Notes, 6.875%, 02/28/97 ............................ 70,000,000
-------------
Total Receivables from Repurchase Agreements (Cost $144,100,000)......... 144,100,000
-------------
Total Investments (Cost $1,546,710,588) 99.8%....................... 1,546,710,588
Other Assets and Liabilities, Net .2%............................... 3,374,659
-------------
Net Assets 100.0% .................................................. $1,550,085,247
==============
</TABLE>
At June 30, 1996, there was no unrealized appreciation or depreciation for
financial statement or income tax purposes.
PORTFOLIO ABBREVIATIONS:
L.P. - Limited Partnership
aCertain short-term securities are traded on a discount basis; the rates shown
are the discount rates at the time of purchase by the Fund. Other securities
bear interest at the rates shown, payable at fixed dates or upon maturity.
bFace amount for repurchase agreements is for the underlying collateral.
The accompanying notes are an integral part of these financial statements.
THE MONEY MARKET PORTFOLIOS
Statement of Investments in Securities and Net Assets, June 30, 1996
<TABLE>
<CAPTION>
Face Value
Amount The U.S. Government Securities Money Market Portfolio (Note 1)
- -----------------------------------------------------------------------------------------------------------------
aShort Term Government Securities100.1%
Government Securities 17.3%
<C> <C> <C>
$ 50,000,000 U.S. Treasury Bills, 4.75% - 5.14%, 08/08/96 - 12/12/96 (Cost $49,361,211) ..... $ 49,361,211
-------------
bReceivables from Repurchase Agreements 82.8%
11,690,000 B.A. Securities, Inc., 5.40%, 07/01/96 (Maturity Value $12,005,400)
Collateral: U.S. Treasury Notes, 8.00%, 01/15/97 .............................. 12,000,000
12,530,000 B.T. Securities Corp., 5.42%, 07/01/96 (Maturity Value $12,005,420)
Collateral: U.S. Treasury Notes, 5.25%, 01/31/01 .............................. 12,000,000
11,509,000 Barclays de Zoete Wedd Securities, Inc., New York, 5.35%, 07/01/96
(Maturity Value $12,005,350)
Collateral: U.S. Treasury Notes, 7.875%, 01/15/98 ............................. 12,000,000
12,185,000 Chase Securities, Inc., 5.40%, 07/01/96 (Maturity Value $12,005,400)
Collateral: U.S. Treasury Notes, 6.125%, 05/31/97 ............................. 12,000,000
12,120,000 Citicorp Securities, Inc., 5.50%, 07/01/96 (Maturity Value $12,005,500)
Collateral: U.S. Treasury Notes, 5.75%, 09/30/97 .............................. 12,000,000
12,195,000 Merrill Lynch Government Securities, Inc., 5.20%, 07/01/96
(Maturity Value $12,005,200)
Collateral: U.S. Treasury Notes, 5.875%, 04/30/98 ............................. 12,000,000
18,201,000 J.P. Morgan Securities, Inc., 5.32%, 07/01/96 (Maturity Value $17,507,758)
Collateral: U.S. Treasury Bills, 11/07/96 ..................................... 17,500,000
57,501,000 J.P. Morgan Securities, Inc., 5.42%, 07/01/96 (Maturity Value $55,024,842)
Collateral: U.S. Treasury Bills, 12/12/96 ..................................... 55,000,000
68,530,000 Morgan Stanley & Co., Inc., 5.35%, 07/01/96 (Maturity Value $68,015,310)
Collateral: U.S. Treasury Bills, 09/12/96
U.S. Treasury Notes, 5.75% - 11.75%, 09/30/96 - 02/15/01........... 67,985,000
12,506,000 SBC Capital Markets, Inc., 5.47%, 07/01/96 (Maturity Value $12,005,470)
Collateral: U.S. Treasury Notes, 5.125%, 11/30/98 ............................. 12,000,000
11,507,000 UBS Securities, Inc., 5.43%, 07/01/96 (Maturity Value $12,005,430)
Collateral: U.S. Treasury Notes, 8.125%, 02/15/98 ............................. 12,000,000
-------------
Total Receivables from Repurchase Agreements (Cost $236,485,000).......... 236,485,000
-------------
Total Investments (Cost $285,846,211) 100.1% ........................ $285,846,211
Liabilities in Excess of Other Assets (.1)% ......................... (145,107)
-------------
Net Assets 100.0%.................................................... $285,701,104
=============
At June 30, 1996, there was no unrealized appreciation or depreciation for
financial statement or income tax purposes.
aCertain short-term securities are traded on a discount basis; the rates shown
are the discount rates at the time of purchase by the Fund. Other securities
bear interest at the rates shown, payable at fixed dates or upon maturity.
bFace amount for repurchase agreements is for the underlying collateral.
</TABLE>
The accompanying notes are an integral part of these financial statements.
THE MONEY MARKET PORTFOLIOS
Financial Statements
Statements of Assets and Liabilities
June 30, 1996
The U.S.
Government
The Money Securities Money
Market Portfolio Market Portfolio
------------------ ------------------
Assets:
Investment in securities,
at value and cost $1,402,610,588 $ 49,361,211
Receivables from
repurchase agree-
ments, at value
and cost 144,100,000 236,485,000
Cash 3,626 --
Receivables:
Interest 4,328,950 106,080
From affiliates 6,003 19,602
------------------ ------------------
Total assets 1,551,049,167 285,971,893
------------------ ------------------
Liabilities:
Payables:
Capital shares
repurchased 767,784 233,906
Management fees 170,313 29,565
Accrued expenses and
other liabilities 25,823 7,318
----------------- -------------------
Total liabilities 963,920 270,789
----------------- -------------------
Net assets, at value $1,550,085,247 $285,701,104
================= ===================
Shares outstanding 1,550,085,247 285,701,104
================= ===================
Net asset value per share $1.00 $1.00
================= ===================
Statements of Operations
for the year ended June 30, 1996
The U.S.
Government
The Money Securities Money
Market Portfolio Market Portfolio
------------------ ------------------
Investment income:
Interest $81,172,665 $18,038,015
------------------ ------------------
Expenses:
Management fees
(Note 5a) 44,663 8,889
Custodian fees 26,784 22,841
Reports to shareholders 27,241 5,685
Trustees' fees and
expenses 7,447 10,769
Other 21,476 10,049
Management fees
waived by manager (128,505) (59,534)
------------------ ------------------
Total expenses 2,161,625 483,081
------------------ ------------------
Net investment
income 79,011,040 17,554,934
------------------ ------------------
Net realized gain on
investments -- 683
------------------ ------------------
Net increase in net
assets resulting from
operations $79,011,040 $17,555,617
================== ==================
The accompanying notes are an integral part of these financial statements.
THE MONEY MARKET PORTFOLIOS
Financial Statements (cont.)
Statements of Changes in Net Assets
for the years ended June 30, 1996 and 1995
<TABLE>
<CAPTION>
The U.S. Government Securities
The Money Market Portfolio Money Market Portfolio
------------------------------ --------------------------------
1996 1995 1996 1995
------------- ------------- -------------- --------------
Operations:
<S> <C> <C> <C> <C>
Net investment income........................... $ 79,011,040 $ 65,941,077 $ 17,554,934 $ 22,234,614
Net realized gain from security transactions.... -- 1,356 683 392
------------- ------------- -------------- --------------
Net increase in net assets resulting from
operations...................................... 79,011,040 65,942,433 17,555,617 22,235,006
Distributions to shareholders from undistributed
net investment income........................... (79,011,040) (65,942,433)a (17,555,617)b (22,235,006)c
Increase (decrease) in net assets from capital
share transactions (Note 2)..................... 244,510,834 1,086,385,190 (188,953,282) 256,106,321
------------- ------------- -------------- --------------
Net increase (decrease) in net assets............ 244,510,834 1,086,385,190 (188,953,282) 256,106,321
Net assets (there is no undistributed net
investment income at beginning or end
of the year):
Beginning of year.............................. 1,305,574,413 219,189,223 474,654,386 218,548,065
------------- ------------- -------------- --------------
End of year.................................... $1,550,085,247 $1,305,574,413 $285,701,104 $474,654,386
============= ============= ============== ==============
</TABLE>
aDistributions were increased by a net realized gain from security transactions
of $1,356.
bDistributions were increased by a net realized gain from security transactions
of $683.
cDistributions were increased by a net realized gain from security transactions
of $392.
The accompanying notes are an integral part of these financial statements.
THE MONEY MARKET PORTFOLIOS
Notes to Financial Statements
1. SIGNIFICANT ACCOUNTING POLICIES
The Money Market Portfolios (the Money Market) is a no load, open-end,
diversified management investment company (mutual fund), registered under the
Investment Company Act of 1940, as amended. The Money Market has two portfolios
(the Portfolios) consisting of The Money Market Portfolio and The U.S.
Government Securities Money Market Portfolio. The portfolio's investment
objectives are high current income consistent with capital preservation and
liquidity. Each of the Portfolios issues a separate series of shares and
maintains a totally separate and distinct investment portfolio. The shares of
the Money Market are issued in private placements and are thus exempt from
registration under the Securities Act of 1933.
The following is a summary of significant accounting policies consistently
followed by the Portfolios in the preparation of their financial statements. The
policies are in conformity with generally accepted accounting principles for
investment companies.
a. Security Valuations:
Securities in the Portfolios are valued at amortized cost, which approximates
value. Each of the Portfolios must maintain a dollar weighted average maturity
of 90 days or less and only purchase instruments having remaining maturities of
397 days or less. If a Portfolio has a remaining weighted average maturity of
greater than 90 days, the Portfolio will be stated at value based on recorded
closing sales on a national securities exchange or, in the absence of a recorded
sale, within the range of the most recent quoted bid and asked prices. The
trustees have established procedures designed to stabilize, to the extent
reasonably possible, each Portfolio's price per share as computed for the
purpose of sales and redemptions at $1.00.
b. Income Taxes:
Each Portfolio intends to continue to qualify for the tax treatment applicable
to regulated investment companies under the Internal Revenue Code and to make
the requisite distributions to their shareholders which will be sufficient to
relieve it from income and excise taxes. Each Portfolio is treated as a separate
entity in the determination of compliance with the Internal Revenue Code.
c. Security Transactions:
Security transactions are accounted for on the date the securities are purchased
or sold (trade date). Realized gains and losses on security transactions are
determined on the basis of specific identification.
d. Investment Income, Expenses and Distributions:
Net investment income includes income, calculated on an accrual basis,
amortization of original issue and market discount or premium, if any, and
estimated expenses which are accrued daily. The total available for distribution
is computed daily and includes the net investment income, plus or minus any
gains or losses on security transactions and changes in unrealized portfolio
appreciation or depreciation, if any.
Distributions are normally declared each day the New York Stock Exchange is open
for business, equal to the total available for distributions (as defined above),
and are payable to shareholders of record as of the close of business that day.
Such distributions are automatically reinvested daily in additional shares of
the Portfolio at net asset value.
e. Expense Allocation:
Common expenses incurred by the Money Market are allocated among the Portfolios
based on the ratio of net assets of each Portfolio to the combined net assets.
In all other respects, expenses are charged to each Portfolio as incurred on a
specific identification basis.
THE MONEY MARKET PORTFOLIOS
Notes to Financial Statements (cont.)
1. SIGNIFICANT ACCOUNTING POLICIES (cont.)
f. Accounting Estimates:
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the amounts of income and expense during the reporting
period. Actual results could differ from those estimates.
g. Repurchase Agreements:
The Portfolios may enter into a joint repurchase agreement whereby their
uninvested cash balances are deposited into a joint cash account to be used to
invest in one or more repurchase agreements with government securities dealers
recognized by the Federal Reserve Board and/or member banks of the Federal
Reserve System. The value and face amount of the joint repurchase agreement are
allocated to the Portfolios based on their pro rata interest.
A repurchase agreement is accounted for as a loan by the Portfolios to the
seller, collateralized by underlying U.S. government securities, which are
delivered to the Portfolios' custodian. The market value, including accrued
interest, of the initial collateralization is required to be at least 102% of
the dollar amount invested by the Portfolios, with the value of the underlying
securities marked to market daily to maintain coverage of at least 100%. At June
30, 1996, all outstanding repurchase agreements held by the Portfolios had been
entered into on June 28, 1996.
2. TRUST SHARES
Transactions in each of the Portfolio's shares at $1.00 per share were as
follows:
<TABLE>
<CAPTION>
The U.S. Government
The Money Securities Money
Market Portfolio Market Portfolio
------------------ -------------------
1996
<S> <C> <C>
Shares sold................................................................. $2,507,821,633 $ 824,267,024
Shares issued in reinvestment of distributions.............................. 79,019,113 17,555,181
Shares redeemed............................................................. (2,342,329,912) (1,030,775,487)
------------------ -------------------
Net increase (decrease)..................................................... $ 244,510,834 $ (188,953,282)
================== ===================
1995
Shares sold................................................................. $ 2,811,245,134 $ 2,270,754,653
Shares issued in reinvestment of distributions.............................. 65,932,187 22,235,271
Shares redeemed............................................................. (2,923,489,920) (2,175,508,395)
Shares issued in connection with assets transfer (Note 6)................... 1,132,697,789 138,624,792
------------------ -------------------
Net increase................................................................ $ 1,086,385,190 256,106,321
================== ===================
</TABLE>
3. CAPITAL LOSS CARRYOVERS
At June 30, 1996, for tax purposes, The Money Market Portfolio had an
accumulated net realized capital loss carryover expiring in year 2002 of $3,790.
For tax purposes, the aggregate cost of securities are the same for financial
statement purposes at June 30, 1996.
THE MONEY MARKET PORTFOLIOS
Notes to Financial Statements (cont.)
4. PURCHASES AND SALES OF SECURITIES
Purchases and sales/maturities of securities, including repurchase agreements,
for the year ended June 30, 1996, were as follows:
<TABLE>
<CAPTION>
The U.S. Government
The Money Securities Money
Market Portfolio Market Portfolio
------------------ -------------------
<S> <C> <C>
Purchases................................................................... $ 60,355,427,309 $ 62,680,289,047
Sales....................................................................... $ 60,113,260,920 $ 62,869,560,372
</TABLE>
5. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
a. Management Agreement:
Under the terms of a management agreement, Franklin Advisers, Inc. (Advisers)
provides investment advice, administrative services, office space and facilities
to the Portfolios, and receives fees computed monthly based on the average daily
net assets of the Portfolios during the month. The Portfolios pay fees equal to
an annualized rate of 15/100 of 1% of their daily net assets. For the year ended
June 30, 1996, the Portfolios expenses did not exceed these limitations.
However, Advisers agreed in advance to waive management fees and assume payment
of other expenses, as noted in the Statements of Operations.
b. Other Affiliates and Related Party Transactions:
Certain officers and trustees of the Portfolios are also officers and/or
directors of Advisers and Investor Services (all wholly-owned subsidiaries of
Franklin Resources, Inc.).
6. ASSET TRANSFER
On August 1, 1994, the Franklin Money Fund and the Franklin Federal Money Fund
transferred substantially all of their assets, respectively, into The Money
Market Portfolio and The U.S. Government Securities Money Market Portfolio. The
transfers were accompanied by a tax-free exchange of 1,132,697,789 capital
shares of The Money Market Portfolio for net assets valued at $1,132,697,789 of
the Franklin Money Fund and 138,624,792 capital shares of The U.S. Government
Securities Money Market Portfolio for net assets valued at $138,624,792 of the
Franklin Federal Money Fund.
As of June 30,1996, the shares of The Money Market Portfolio were owned by the
following funds:
<TABLE>
<CAPTION>
Percentage of
Shares Outstanding Shares
-------------- ------------------
<S> <C> <C>
Franklin Money Fund.......................................................................... 1,173,771,347 75.72%
Institutional Fiduciary Trust - Money Market Portfolio....................................... 341,314,800 22.02%
Institutional Fiduciary Trust - Franklin Cash Reserves Fund.................................. 30,405,256 1.96%
Franklin Templeton Money Fund Trust - Franklin Templeton Money Fund II....................... 4,593,844 0.30%
As of June 30,1996, the shares of The U.S. Government Securities Money Market
Portfolio were owned by the following funds:
Percentage of
Shares Outstanding Shares
-------------- ------------------
<S> <C> <C>
Institutional Fiduciary Trust - Franklin U.S. Government Securities Money Market Portfolio... 152,155,022 53.26%
Franklin Federal Money Fund.................................................................. 133,546,082 46.74%
</TABLE>
THE MONEY MARKET PORTFOLIOS
Notes to Financial Statements (cont.)
7. FINANCIAL HIGHLIGHTS
Selected data for each share of beneficial interest outstanding throughout each
period are as follows:
<TABLE>
<CAPTION>
Per Share Operating Performance Ratios/Supplemental Data
-------------------------------------------------- --------------------------------------
Net Asset Distributions Net Assets Ratio of Ratio of Net
Year Values at Net From Net Net Asset at End Expenses Income
Ended Beginning Investment Investment Values at Total of Period to Average to Average
June 30 of Period Income Income End of Period Return+ (in 000's) Net Assets++ Net Assets
- -------------------------------------------------------------------------------------------------------------------
The Money Market Portfolio
<C> <C> <C> <C> <C> <C> <C> <C> <C>
1993* $1.00 $0.027 $(0.027) $1.00 2.92%** $ 222,358 0.15%** 3.18%**
1994 1.00 0.033 (0.033) 1.00 3.33 219,189 0.15 3.25
1995 1.00 0.053 (0.053) 1.00 5.46 1,305,574 0.15 5.42
1996 1.00 0.055 (0.055) 1.00 5.66 1,550,085 0.15 5.50
The U.S. Government Securities Money Market Portfolio
1993* 1.00 0.021 (0.021) 1.00 2.27** 310,319 0.15** 3.05**
1994 1.00 0.032 (0.032) 1.00 3.25 218,548 0.15 3.20
1995 1.00 0.052 (0.052) 1.00 5.32 474,654 0.15 5.25
1996 1.00 0.054 (0.054) 1.00 5.55 285,701 0.15 5.45
</TABLE>
*July 28, 1992 (Effective date of registration) to June 30, 1993.
**Annualized
+Total return measures the change in value of an investment over the periods
indicated. It is not annualized (except as noted). It assumes reinvestment of
dividends and capital gains at net asset value.
++Advisers agreed in advance to waive a portion of its management fees of the
Portfolios during the periods indicated. Had such action not been taken, the
ratios of expenses to average net assets would have been as follows:
Ratio of Expenses to
Average Net Assets
--------------------
The Money Market Portfolio
1993*...................................... .17%**
1994....................................... .17
1995....................................... .16
1996....................................... .16
The U.S. Government Securities
Money Market Portfolio
1993*...................................... .18**
1994....................................... .17
1995....................................... .16
1996....................................... .17
THE MONEY MARKET PORTFOLIOS
Report of Independent Auditors
To the Shareholders and Board of Trustees
The Money Market Portfolios
We have audited the accompanying statements of assets and liabilities of the two
portfolios comprising The Money Market Portfolios, including each Portfolio's
statement of investments in securities and net assets, as of June 30, 1996, and
the related statements of operations for the year them ended, the statements of
changes in net assets and the financial highlights for each of the periods
presented thereon. These financial statements and financial highlights for each
of the two years in the period then ended are the responsibility of the
Portfolios' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1996, by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
two Portfolios comprising The Money Market Portfolios as of June 30, 1996, the
results of their operations for the year then ended, the changes in their net
assets for each of the two years in the period then ended, and their financial
highlights for each of the periods presented, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
San Francisco, California
August 6, 1996
LITERATURE REQUEST
