Fund Objective:
Seeks to provide shareholders with 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 U.S. Government Securities Money Market Portfolio (the
Portfolio), which has the same investment objective. At present, it is the
Portfolio's policy to limit its investments to U.S. Treasury bills, notes and
bonds, and to repurchase agreements collateralized by such securities.* The fund
is managed to maintain a $1.00 share price.**
To reduce the volume of mail shareholders receive and to reduce expenses, only
one copy of most Fund reports, such as the Fund's annual and semi-annual
reports, may be mailed to a household. Additional reports may be obtained,
without charge, by calling Fund Information at 1-800/DIAL BEN (1-800/342-5236).
CHAIRMAN'S MESSAGE
February 15, 1996
Dear Shareholder:
We are pleased to bring you the semi-annual report of the Franklin Federal Money
Fund covering the period ended December 31, 1995.
During the third quarter of 1995, the economy appeared to be growing more
quickly than in the previous two quarters. However, growth slowed considerably
during the fourth quarter, indicated by sluggish retail, home and auto sales.
Inflation also remained subdued. In response, the Federal Reserve Board lowered
the federal funds rate twice during the reporting period: to 5.75% from 6.00% in
July, and further to 5.50% in December.
*U.S. government securities owned by the Portfolio or held under repurchase
agreement, but not shares of the fund, are guaranteed by the U.S. government,
its agencies or instrumentalities as to the timely payment of principal and
interest.
**An investment in the fund is neither insured nor guaranteed by the
U.S. government or by any other entity or institution. There is no assurance
that the fund will be able to maintain a stable net asset value of $1.00 per
share.
In this economic environment, your fund's performance closely followed interest
rates. As of December 31, 1995, its seven-day effective yield, which assumes the
compounding of daily dividends, was 5.00%. The fund's seven-day annualized yield
was 4.88%.
During the reporting period, we continued to emphasize liquidity and safety by
purchasing only the highest-quality securities available to money market
portfolios.
Over the past six months, three-month Treasury bill yields declined to 4.91% on
December 31, 1995, from 5.35% on June 30, 1995, while the federal funds rate was
5.75% for the majority of the reporting period. In response, we invested more of
the portfolio's assets in overnight repurchase agreements. Overnight repurchase
agreements represented 88% of the fund's portfolio on December 31, 1995, up 12%
from 76% on June 30, 1995.
+Source: Micropal. Three-month Treasury bill represented by 91-day Treasury
bill.
An overnight repurchase agreement is made when a bank or broker sells securities
to an investor with a temporary cash surplus and agrees to buy them back the
following day. Such transactions are settled in immediately-available federal
funds. Our concentration in this area served to lower the weighted average
maturity of the fund to 6 days, from 31 days six months earlier.
Looking forward, we anticipate slow economic growth, subdued inflation and
declining interest rates. Of course, we will continue to manage the fund for
high quality and liquidity. We will not invest in leveraged derivatives or other
potentially volatile securities that involve undue risk.
As a Franklin Federal Money Fund shareholder, you continue to benefit from
convenience, easy access to your money, and a high degree of credit safety. You
also enjoy a wide range of services, including free checks, unlimited
check-writing for amounts of at least $100, free wiring privileges and a 24-hour
automated customer service line.
Furthermore, the Franklin Templeton Group offers a selection of over 115
different mutual funds, each with its own investment objective. If your
investment needs change, chances are we offer a fund to match your new goals.
Thank you for your continued support of the Franklin Federal Money Fund, and we
look forward to serving you in the years to come.
Sincerely,
Charles B. Johnson
Chairman
Franklin Federal Money Fund
Performance Summary
Franklin Federal Money Fund
December 31, 1995
Seven-day annualized yield 4.88%
Seven-day effective yield 5.00%
++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 indicative 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.
<TABLE>
<CAPTION>
FRANKLIN FEDERAL MONEY FUND
Statement of Investments in Securities and Net Assets, December 31, 1995 (unaudited)
Value
Shares (Note 1)
Mutual Funds 100.8%
<S> <C> <C>
116,912,372 The U.S. Government Securities Money Market Portfolio (Note 1) .................. $116,912,372
-------------
Total Investments (Cost $116,912,372) 100.8% ..................................... 116,912,372
Liabilities in Excess of Other Assets, Net (0.8%) ................................ (924,168)
-------------
Net Assets 100.0% ................................................................ $115,988,204
=============
</TABLE>
At December 31, 1995, there was no unrealized appreciation or depreciation for
financial statement or income tax purposes.
The accompanying notes are an integral part of these financial statements.
FRANKLIN FEDERAL MONEY FUND
Financial Statements
Statement of Assets and Liabilities
December 31, 1995 (unaudited)
Assets:
Investments in securities,
at value and cost $116,912,372
Cash 8,674
Receivables:
Capital shares sold 499,508
--------------
Total assets 117,420,554
-------------
Liabilities:
Payables:
Capital shares repurchased 1,281,738
Administration fees 44,748
Distributions to shareholders 40,467
Shareholder servicing costs 15,225
Accrued expenses and other liabilities 50,172
--------------
Total liabilities 1,432,350
--------------
Net assets (equivalent to $1.00 per share
based on 115,988,204 shares of capital
stock outstanding) $115,988,204
==============
Statement of Operations
for the six months ended December 31, 1995 (unaudited)
Investment income:
Dividends $3,484,907
Expenses:
Administration fees (Note 4) $268,058
Shareholder servicing costs
(Note 4) 91,140
Reports to shareholders 50,399
Registration fees 33,510
Professional fees 8,970
Directors' fees and expenses 5,775
Other 4,364
--------------
Total expenses 462,216
--------------
Net investment income $3,022,691
==============
Statements of Changes in Net Assets
for the six months ended December 31, 1995 (unaudited)
and the period ended June 30, 1995
Six Months
Ended Period Ended
December 31,1995 June 30, 1995
------------ --------------
Increase in net assets:
Operations:
Net investment
income $ 3,022,691 $ 4,128,822
------------ --------------
Net increase
in net assets
resulting from
operations 3,022,691 4,128,822
Distributions to
shareholders from
undistributed net
investment income: (3,022,691) (4,128,822)
Decrease in net assets
from capital share
transactions (Note 2) (23,297,856) (29,243,795)
------------ --------------
Net decrease
in net assets (23,297,856) (29,243,795)
Net assets (there is
no undistributed net
investment income
at beginning or end
of period)
Beginning of
period 139,286,060 168,529,855
------------ --------------
End of period $115,988,204 $139,286,060
============ ==============
The accompanying notes are an integral part of these financial statements.
FRANKLIN FEDERAL MONEY FUND
Notes to Financial Statements (unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES
Franklin Federal Money Fund (the Fund) is a no-load, open-end, diversified
management investment company (mutual fund), registered under the Investment
Company Act of 1940, as amended.
The Fund invests substantially all of its assets in The U.S. Government
Securities 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.
On December 13, 1994, the Board of Directors authorized a change in the fiscal
year end of the Fund from November 30 to June 30.
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 December 31, 1995, the Fund owns
35.93% of the Portfolio.
b. Income Tax:
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
distributions is computed daily and includes the net investment income, plus or
minus any gains or losses on security transactions and changes in unrealized
portfolio appreciation or depreciation, if any.
Distributions are normally declared for each day the New York Stock Exchange is
open for business, equal to the total available for distributions (as defined
above), and are payable to shareholders of record as of the close of business
the preceding day. Such distributions are automatically reinvested daily in
additional shares of the Fund at net asset value.
2. CAPITAL STOCK
At December 31, 1995, there was 5,000,000,000 shares of no par value capital
stock authorized. Transactions in the capital stock at $1.00 per share were as
follows:
<TABLE>
<CAPTION>
Six Months Period
Ended Ended
December 31, 1995 June 30, 1995
------------ -----------
<S> <C> <C>
Shares sold................................................................. $ 60,426,087 $ 82,049,245
Shares issued in reinvestment of distributions.............................. 2,997,512 4,114,636
Shares redeemed............................................................. (78,425,917) (121,831,762)
Changes from exercise of exchange privilege:
Shares sold................................................................ 55,853,746 134,273,108
Shares redeemed............................................................ (64,149,284) (127,849,022)
------------ -----------
Net decrease ............................................................... $(23,297,856) $ (29,243,795)
============ ===========
</TABLE>
3. PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities for the six months ended December 31, 1995
aggregated $54,215,966 and $77,127,568, respectively.
4. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
Under the terms of an administration agreement, Franklin Advisers, Inc.
(Advisers) provides various administrative, statistical, and other services, and
receives fees calculated at the annual rate of 0.455 of 1% for the first $100
million of the Fund's average daily net assets; 0.330 of 1% of its net assets
over $100 million up to $250 million; 0.280 of 1% of its net assets in excess of
$250 million. The terms of the agreement provide that aggregrate annual expenses
of the Fund be limited to the extent necessary to comply with the limitations
set forth in the laws, regulations and administrative interpretations of the
states in which the Fund's shares are registered. The Fund's expenses did not
exceed these limitations.
Under the terms of a shareholder service agreement with Franklin/Templeton
Investor Services, Inc. (Investor Services), the Fund pays costs on a per
shareholder account basis. Such costs incurred for the six months ended December
31, 1995 aggregated $91,140, of which $90,756 was paid to Investor Services.
Certain officers and directors of the Fund are also officers and/or directors of
Advisers, and/or Investor Services, which are both wholly-owned subsidiaries of
Franklin Resources, Inc. and the Portfolio.
<TABLE>
<CAPTION>
5. FINANCIAL HIGHLIGHTS
Selected data for a share of capital stock outstanding throughout the periods are as follows:
Six Months Period
Ended Ended Year Ended November 30,
December 31, 1995June 30, 1995*** 1994 1993 1992
-------------- ------------ ------- ------- --------
Per Share Operating Performance
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of period....... $1.00 $1.00 $1.00 $1.00 $1.00
-------------- ------------ ------- ------- --------
Net investment income........................ 0.024 .029 .031 .022 .029
Distributions from net investment income..... (0.024) (.029) (.031) (.022) (.029)
-------------- ------------ ------- ------- --------
Net asset value at end of period............. $1.00 $1.00 $1.00 $1.00 $1.00
============== ============ ======= ======= ========
Total Return**............................... 2.46% 2.92% 3.15% 2.22% 2.97%
Ratios/Supplemental Data
Net assets at end of period (in 000's)....... $115,988 $139,286 $168,530 $120,933 $134,931
Ratio of expenses to average net assets++.... 0.90%*+ 0.87%*+ 0.98%+ 0.90% 0.85%
Ratio of net income to average net assets.... 4.90%* 4.93%* 3.15% 2.20% 2.95%
*Annualized
**Total return measures the change in value of an investment over the periods indicated. It is not annualized. It assumes
reinvestment of dividends and capital gains, if any, at net asset value.
***The fiscal year 1995 includes only seven months ending on June 30, 1995.
+++For the six months ended December 31, 1995.
++Effective with fiscal year 1994, the expense ratio includes the Fund's share of Portfolio's allocated expenses.
+During the periods indicated, Advisers, the investment manager of the Portfolio, agreed in advance to waive a portion of
its management fees. Had such action not been taken, the Fund's ratio of expenses to average net assets would have been
as follows:
Ratio of
Expenses
to Average
Net Assets++
1994............................................ 0.99%
1995***......................................... 0.88%*
1995+++......................................... 0.91%*
</TABLE>
<TABLE>
<CAPTION>
THE MONEY MARKET PORTFOLIOS
Statement of Investments in Securities and Net Assets, December 31, 1995 (unaudited)
Face Value
Amount The Money Market Portfolio (Note 1)
---------------------------------------------------------------------------------------------------------------
a Short Term Investments 86.6%
Certificates of Deposit 31.1%
<S> <C> <C>
$ 40,000,000 Australia & New Zealand Banking Group, Ltd., New York Branch, 5.73% - 5.75%,
01/19/96 - 02/09/96 ........................................................ $ 40,000,098
40,000,000 Bank of Nova Scotia, Portland Branch, 5.72% - 5.78%, 01/24/96 - 02/27/96 .... 40,000,438
60,000,000 Banque Nationale de Paris, New York Branch, 5.73% - 5.80%,
01/16/96 - 02/28/96 ........................................................ 60,002,171
20,000,000 Bayerische Landesbank, New York Branch, 5.80%, 01/08/96 ..................... 20,000,076
45,000,000 Bayerische Vereinsbank, New York Branch, 5.73% - 5.78%, 01/11/96 - 02/08/96 . 45,000,000
30,000,000 Commerzbank AG, New York Branch, 5.78% - 5.80%, 01/10/96 - 01/25/96 ......... 30,000,066
20,000,000 Credit Suisse, New York Branch, 5.73%, 01/09/96 ............................. 19,999,956
20,000,000 Deutsche Bank, New York Branch, 5.76%, 01/26/96 ............................. 20,000,137
25,000,000 Generale Bank, New York Branch, 5.75%, 03/04/96 ............................. 25,001,293
40,000,000 Lloyds Bank Plc., New York Branch, 5.70% - 5.80%, 01/30/96 - 09/11/96 ....... 40,001,492
20,000,000 National Westminster Bank, New York Branch, 5.81%, 01/30/96 - 01/31/96 ...... 20,000,000
40,000,000 Societe Generale, New York Branch, 5.72% - 5.90%, 05/13/96 - 06/07/96 ....... 40,000,000
20,000,000 Svenska Handelsbanken, New York Branch, 5.82%, 02/01/96 ..................... 20,000,170
------------
Total Certificates of Deposit (Cost $420,005,897) ..................... 420,005,897
------------
Commercial Paper 55.5%
23,000,000 Abbey National North America, 5.45%, 03/14/96 ............................... 22,745,818
60,000,000 American Express Credit Corp., 5.66% - 5.68%, 01/18/96 - 02/21/96 ........... 59,667,750
25,000,000 Ameritech Corp., 5.70%, 02/26/96 ............................................ 24,778,333
55,000,000 Associates Corp. of North America, 5.66% - 5.71%, 01/17/96 - 02/20/96 ....... 54,722,581
60,000,000 AT&T Corp., 5.52% - 5.68%, 01/12/96 - 03/11/96 .............................. 59,700,562
20,000,000 Campbell Soup Co., 5.92%, 02/02/96 .......................................... 19,894,757
20,000,000 CIESCO L.P., 5.50%, 03/08/96 ................................................ 19,795,278
10,000,000 Commerzbank U.S. Finance, Inc., 5.70%, 01/12/96 ............................. 9,982,583
60,000,000 Den Danske Corp., Inc., 5.64% - 5.67%, 01/23/96 - 02/16/96 .................. 59,673,367
25,000,000 Generale Bank, Inc., 5.65%, 02/07/96 ........................................ 24,854,826
60,000,000 General Electric Capital Corp., 5.45% - 5.48%, 03/22/96 - 05/02/96 .......... 58,962,777
25,000,000 Halifax Building Society, 5.65%, 02/05/96 ................................... 24,862,673
30,000,000 Kingdom of Sweden, 5.70%, 01/16/96 - 01/31/96 ............................... 29,881,250
40,000,000 National Australian Funding (DE), Inc., 5.65% - 5.67%, 01/22/96 - 02/12/96 .. 39,802,016
55,000,000 National Rural Utilities Cooperative Finance Corp., 5.63% - 5.66%,
02/13/96 - 02/23/96 ........................................................ 54,569,881
20,000,000 PepsiCo, Inc., 5.61%, 01/29/96 .............................................. 19,912,733
10,000,000 Province of Alberta, 5.69%, 01/25/96 ........................................ 9,962,067
16,000,000 Province of British Columbia, 5.50%, 05/21/96 ............................... 15,655,334
20,000,000 Royal Bank of Canada, 5.70%, 01/22/96 - 01/29/96 ............................ 19,922,417
20,000,000 Smithkline Beecham Corp., 5.75%, 02/02/96 ................................... 19,897,778
20,000,000 Societe Generale, N.A. Inc., 5.66%, 02/14/96................................. 19,861,644
Commercial Paper (cont.)
$ 40,000,000 Svenska Handelsbanken, Inc., 5.68% - 5.71%, 01/16/96 - 02/15/96 ............. $ 39,810,415
20,000,000 Westpac Capital Corp., 5.58%, 03/20/96 ...................................... 19,755,100
20,000,000 Wool International, 5.61%, 04/12/96 ......................................... 19,682,100
------------
Total Commercial Paper (Cost $748,354,040) ............................ 748,354,040
------------
Total Investments before Repurchase Agreements
(Cost $1,168,359,937) ................................................ 1,168,359,937
------------
b Receivables from Repurchase Agreements 13.1%
25,000,000 Bear Stearns & Co. Inc., 5.75%, 01/02/96, (Maturity Value $25,015,972)
Collateral: U.S. Treasury Notes, 6.50%, 04/30/97 ........................... 25,000,000
24,985,000 Fuji Securities, Inc., 5.85%, 01/02/96, (Maturity Value $25,016,250)
Collateral: U.S. Treasury Notes, 5.125%, 06/30/98........................... 25,000,000
19,745 c J.P. Morgan Securities, Inc., 4.23%, 01/02/96, (Maturity Value $19,754) ..... 19,745
101,310,000 J.P. Morgan Securities, Inc., 5.80%, 01/02/96, (Maturity Value $101,375,289)
Collateral: U.S. Treasury Bills, 10/17/96 .................................. 101,310,000
25,200,000 SBC Capital Markets, Inc., 5.70%, 01/02/96, (Maturity Value $25,015,833)
Collateral: U.S. Treasury Notes, 4.75%, 02/15/97............................ 25,000,000
------------
Total Receivables from Repurchase Agreements (Cost $176,329,745) ...... 176,329,745
------------
Total Investments (Cost $1,344,689,682) 99.7% .................... 1,344,689,682
Other Assets and Liabilities, Net .3% ............................ 4,011,515
------------
Net Assets 100.0% ................................................ $1,348,701,197
============
At December 31, 1995, there was no unrealized appreciation or depreciation for financial statements or income tax purposes.
PORTFOLIOABBREVIATIONS:
L.P. - Limited Partnership
aCertain short-term securities are traded on a discount basis; the rate shown
are the discount rates at the time of purchase by the Fund. Other securities
bear interest at the rates shown, payable at fixed dates or upon maturity.
bFace amount for repurchase agreements is for the underlying collateral.
cSee Note 1(f) regarding sweep repurchase agreement.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
THE MONEY MARKET PORTFOLIOS
Statement of Investments in Securities and Net Assets, December 31, 1995 (unaudited)
Face Value
Amount The U.S. Government Securities Money Market Portfolio (Note 1)
--------------------------------------------------------------------------------------------------------------
aShort Term Government Securities 100.1%
Government Securities 12.3%
<S> <C> <C>
$40,000,000 U.S. Treasury Bills, 5.415% - 6.27%, 01/11/96 - 02/01/96 (Cost $39,876,150) .... $ 39,876,150
------------
bReceivables from Repurchase Agreements 87.8%
13,510,000 Bank of America Securities, Inc., 5.75%, 01/02/96, (Maturity Value $14,008,944)
Collateral: U.S. Treasury Notes, 7.50%, 12/31/96 .............................. 14,000,000
13,258,000 Barclays de Zoete Wedd Securities, Inc., New York, 5.50%, 01/02/96
(Maturity Value $14,008,556)
Collateral: U.S. Treasury Notes, 7.125%, 09/30/99 ............................. 14,000,000
50,000,000 Bear Stearns & Co., Inc., 5.80%, 01/02/96, (Maturity Value $50,119,278)
Collateral: U.S. Treasury Notes, 5.75%, 09/30/97 .............................. 50,087,000
19,895,000 Bear Stearns & Co., Inc., 5.80%, 01/02/96, (Maturity Value $19,925,833)
Collateral: U.S. Treasury Notes, 5.75%, 10/31/00 .............................. 19,913,000
13,470,000 Chase Securities, Inc., 5.55%, 01/02/96, (Maturity Value $14,008,633)
Collateral: U.S. Treasury Notes, 7.125%, 10/15/98 ............................. 14,000,000
13,570,000 Citicorp Securities, Inc., 5.85%, 01/02/96, (Maturity Value $14,009,100)
Collateral: U.S. Treasury Notes, 6.125%, 07/31/00 ............................. 14,000,000
13,155,000 Fuji Securities, Inc., 5.90%, 01/02/96, (Maturity Value $14,009,178)
Collateral: U.S. Treasury Notes, 8.125%, 02/15/98 ............................. 14,000,000
13,765,000 Lehman Brothers Securities, Inc., 5.85%, 01/02/96, (Maturity Value $14,009,100)
Collateral: U.S. Treasury Notes, 6.25%, 05/31/00 .............................. 14,000,000
14,055,000 Merrill Lynch, Pierce, Fenner & Smith, Inc., 5.50%, 01/02/96,
(Maturity Value $14,008,556)
Collateral: U.S. Treasury Notes, 5.625%, 10/31/97 ............................. 14,000,000
7,274 cJ.P. Morgan Securities, Inc., 3.98%, 01/02/96, (Maturity Value $7,277) ......... 7,274
61,725,000 J.P. Morgan Securities, Inc., 5.80%, 01/02/96, (Maturity Value $61,764,778)
Collateral: U.S. Treasury Bills, 08/24/95 ..................................... 61,725,000
13,470,000 Morgan Stanley & Co., Inc., 5.87%, 01/02/96, (Maturity Value $14,009,131)
Collateral: U.S. Treasury Notes, 7.125%, 10/15/98 ............................. 14,000,000
13,920,000 Nomura Securities International, Inc., 5.85%, 01/02/96, (Maturity Value $14,009,100)
Collateral: U.S. Treasury Notes, 6.50%, 04/30/97 .............................. 14,000,000
13,130,000 Swiss Bank Corp., Inc., 5.85%, 01/02/96, (Maturity Value $14,009,100)
Collateral: U.S. Treasury Notes, 7.75%, 11/30/99 .............................. 14,000,000
$13,965,000 UBS Securities, Inc., 5.80%, 01/02/96, (Maturity Value $14,009,022)
Collateral: U.S. Treasury Notes, 7.25%, 11/30/96 .............................. $ 14,000,000
------------
Total Receivables from Repurchase Agreements (Cost $285,732,274) ......... 285,732,274
------------
Total Investments (Cost $325,608,424) 100.1% ........................ $325,608,424
Liabilities in Excess of Other Assets, Net (.1)% .................... (187,636)
------------
Net Assets 100.0% ................................................... $325,420,788
============
At December 31, 1995, there was no unrealized appreciation or depreciation for financial statement or income tax purposes.
aCertain short-term securities are traded on a discount basis; the rates shown
are the discount rates at the time of purchase by the Fund. Other securities
bear interest at the rates shown, payable at fixed dates or upon maturity.
bFace amount for repurchase agreements is for the underlying collateral.
cSee Note 1(f) regarding sweep repurchase agreement.
The accompanying notes are an integral part of these financial statements.
</TABLE>
THE MONEY MARKET PORTFOLIOS
Financial Statements
Statements of Assets and Liabilities
December 31, 1995 (unaudited)
The U.S.
Government
The Money Securities Money
Market Portfolio Market Portfolio
----------- -----------
Assets:
Investment in
securities, at value
and cost $1,168,359,937 $ 39,876,150
Receivables from
repurchase agree-
ments, at value
and cost 176,329,745 285,732,274
Receivables:
Capital shares sold 4,776,914 --
Interest 5,006,429 137,554
From affiliates 7,945 28,587
----------- -----------
Total assets 1,354,480,970 325,774,565
----------- -----------
Liabilities:
Payables:
Capital shares
repurchased 5,607,684 301,833
Management fees 158,010 50,774
Distributions to
shareholders 1,139 601
Accrued expenses
and other liabilities 12,940 569
----------- -----------
Total liabilities 5,779,773 353,777
----------- -----------
Net assets, at value $1,348,701,197 $325,420,788
=========== ===========
Shares outstanding 1,348,701,197 325,420,788
=========== ===========
Net asset value
per share $1.00 $1.00
=========== ===========
Statements of Operations
for the six months ended December 31, 1995 (unaudited)
The The U.S.
Money Government
Market Securities Money
Portfolio Market Portfolio
----------- -----------
Investment income:
Interest $40,338,781 $10,736,757
----------- -----------
Expenses:
Management fees
(Note 5) 1,028,226 278,704
Custodian fees 18,033 14,114
Reports to shareholders 16,695 4,690
Professional fees 13,191 2,356
Trustee' fees and
expenses 5,003 1,145
Other 11,711 11,819
Expenses waived by
manager (Note 5) (64,463) (27,448)
----------- -----------
Total expenses 1,028,396 285,380
----------- -----------
Net investment
income 39,310,385 10,451,377
----------- -----------
Net realized loss on
investments -- (328)
----------- -----------
Net increase in net assets
resulting from operations $39,310,385 $10,451,049
=========== ===========
The accompanying notes are an integral part of these financial statements.
<TABLE>
<CAPTION>
THE MONEY MARKET PORTFOLIOS
Financial Statements (cont.)
Statements of Changes in Net Assets for the six months ended December 31, 1995 (unaudited)
and the year ended June 30, 1995
The U.S. Government Securities
The Money Market Portfolio Money Market Portfolio
------------------------ -----------------------
Six Months Year Six Months Year
ended 12/31/95 ended 6/30/95 ended 12/31/95 ended 6/30/95
----------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ....................... $ 39,310,385 $ 65,941,077 $ 10,451,377 $ 22,234,614
Net realized gain (loss) from security
transactions ............................... -- 1,356 (328) 392
----------- ------------ ----------- -----------
Net increase in net assets resulting from
operations ................................. 39,310,385 65,942,433 10,451,049 22,235,006
Distributions to shareholders from undistributed
net investment income ....................... (39,310,385) (65,942,433)c (10,451,049)b (22,235,006)a
Increase (decrease) in net assets from capital
share transactions (Notes 2 and 6) .......... 43,126,784 1,086,385,190 (149,233,598) 256,106,321
----------- ------------ ----------- -----------
Net increase (decrease) in net assets ........ 43,126,784 1,086,385,190 (149,233,598) 256,106,321
Net assets (there is no undistributed net invest-
ment income at beginning or end of the period):
Beginning of period......................... 1,305,574,413 219,189,223 474,654,386 218,548,065
----------- ------------ ----------- -----------
End of period............................... $1,348,701,197 $1,305,574,413 $325,420,788 $474,654,386
=========== ============ =========== ===========
aDistributions were increased by a net realized gain from security transactions of $392.
bDistributions were decreased by a net realized loss from security transactions of $328.
cDistributions were increased by a net realized gain from security transactions of $1,356.
The accompanying notes are an integral part of these financial statements.
</TABLE>
THE MONEY MARKET PORTFOLIOS
Notes to Financial Statements (unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES
The Money Market Portfolios (the Money Market) is a no load, open-end management
investment company (mutual fund), registered under the Investment Company Act of
1940, as amended. The Money Market has two diversified portfolios (the
Portfolios) consisting of The Money Market Portfolio and The U.S. Government
Securities Money Market Portfolio. Each of the Portfolios issues a separate
series of shares and maintains a totally separate and distinct investment
portfolio. The shares of the Money Market are issued in private placements and
are thus exempt from registration under the Securities Act of 1933.
The following is a summary of significant accounting policies consistently
followed by the Portfolios in the preparation of their financial statements. The
policies are in conformity with generally accepted accounting principles for
investment companies.
a. Security Valuation:
Portfolio securities are valued at amortized cost, which approximates value.
Each of the Portfolios must maintain a dollar weighted average maturity of 90
days or less and only purchase instruments having remaining maturities of 397
days or less. If a Portfolio has a remaining weighted average maturity of
greater than 90 days, the Portfolio will be stated at value based on recorded
closing sales on a national securities exchange or, in the absence of a recorded
sale, within the range of the most recent quoted bid and asked prices. The
Trustees have established procedures designed to stabilize, to the extent
reasonably possible, each Portfolio's price per share as computed for the
purpose of sales and redemptions at $1.00.
b. Income Taxes:
The Portfolios intend to continue to qualify for the tax treatment applicable to
regulated investment companies under the Internal Revenue Code and to make the
requisite distributions to shareholders which will be sufficient to relieve the
Portfolios from income and excise taxes. Each Portfolio is treated as a separate
entity in the determination of compliance with the Internal Revenue Code.
c. Security Transactions:
Security transactions are accounted for on the date the securities are purchased
or sold (trade date). Realized gains and losses on security transactions are
determined on the basis of specific identification.
d. Investment Income, Expenses and Distributions:
Net investment income includes income, calculated on an accrual basis,
amortization of original issue and market discount or premium, if any, and
estimated expenses which are accrued daily. The total available for
distributions is computed daily and includes the net investment income, plus or
minus any gains or losses on security transactions and changes in unrealized
portfolio appreciation or depreciation, if any.
Distributions are normally declared each day the New York Stock Exchange is open
for business, equal to the total available for distributions (as defined above),
and are payable to shareholders of record as of the close of business that day.
Such distributions are automatically reinvested monthly in additional shares of
the Portfolio at net asset value.
e. Expense Allocation:
Common expenses incurred by the Money Market are allocated among the Portfolios
based on the ratio of net assets of each Portfolio to the combined net assets.
In all other respects, expenses are charged to each Portfolio as incurred on a
specific identification basis.
1. SIGNIFICANT ACCOUNTING POLICIES (cont.)
f. Repurchase Agreements:
The Portfolios may enter into repurchase agreements with government securities
dealers recognized by the Federal Reserve Board and/or member banks of the
Federal Reserve System. A repurchase agreement is accounted for as a loan by the
Portfolio to the seller, collateralized by underlying U.S. government
securities, which are delivered to the Portfolio's custodian. The market value,
including accrued interest, of the initial collateralization is required to be
at least 102% of the dollar amount invested by the Portfolio, with the value of
the underlying securities marked to market daily to maintain coverage of at
least 100%. At December 31, 1995, all outstanding repurchase agreements held by
the Portfolios had been entered into on December 29, 1995.
The Portfolios may enter into a sweep agreement with their custodian bank. In a
sweep, the excess cash in the Portfolios' demand deposit account at the end of
the day is invested overnight. The Money Market Portfolio's cash is invested in
a AAA rated time deposit of Morgan Guaranty Trust Company's Nassau branch. The
U.S. Government Securities Money Market Portfolio's excess cash is invested in a
U.S. government-backed repurchase agreement with Morgan Guaranty Trust Company
of New York. Funds are returned to the Portfolios' demand deposit accounts as
the first transaction of the next business day.
2. TRUST SHARES
At December 31, 1995, there was an unlimited number of $.01 par value shares of
beneficial interest authorized. Transactions in the Portfolios' shares at $1.00
per share for the six months ended December 31, 1995 and the year ended June 30,
1995 were as follows:
<TABLE>
<CAPTION>
The U.S. Government
The Money Securities Money
Market Portfolio Market Portfolio
------------ -------------
<S> <C> <C>
Six months ended December 31, 1995
Shares sold................................................................. $ 1,054,612,974 $ 471,576,768
Shares issued in reinvestment of distributions.............................. 39,318,379 10,450,858
Shares redeemed............................................................. (1,050,804,569) (631,261,224)
------------ -------------
Net increase (decrease)..................................................... $ 43,126,784 $ (149,233,598)
============ =============
Year ended June 30, 1995
Shares sold................................................................. $ 2,811,245,134 $ 2,270,754,653
Shares issued in reinvestment of distributions.............................. 65,932,187 22,235,271
Shares redeemed............................................................. (2,923,489,920) (2,175,508,395)
Shares issued in connection with assets transfer (Note 6)................... 1,132,697,789 138,624,792
------------ -------------
Net increase................................................................ $ 1,086,385,190 $ 256,106,321
============ =============
</TABLE>
3. CAPITAL LOSS CARRYOVERS
At June 30, 1995, for tax purposes, The Money Market Portfolio had an
accumulated net realized loss of $3,790. For tax purposes, the aggregate cost of
securities are the same for financial statement purposes at June 30, 1995.
4. PURCHASES AND SALES OF SECURITIES
Aggregate purchases and sales/maturities of securities for the six months ended
December 31, 1995 were as follows:
<TABLE>
<CAPTION>
The U.S. Government
The Money Securities Money
Market Portfolio Market Portfolio
------------ -------------
<S> <C> <C>
Purchases................................................................... $29,397,969,723 $33,343,479,654
============ =============
Sales....................................................................... $29,358,186,276 $33,493,137,982
============ =============
</TABLE>
5. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
Under the terms of a management agreement, Franklin Advisers, Inc. (Advisers),
provides investment advice, administrative services, office space and facilities
to the Portfolios, and receives fees computed monthly based on the average daily
net assets of the Portfolios during the month. The Portfolios pay fees equal to
an annualized rate of 0.150 of 1% of their average daily net assets. For the six
months ended December 31, 1995, Advisers agreed in advance to waive $64,463 and
$27,448 of the management fees for The Money Market Portfolio and The U.S.
Government Securities Money Market Portfolio, respectively.
Certain officers and trustees of the Portfolios are also officers and/or
directors of Advisers and Franklin/Templeton Investor Services, Inc. (Investor
Services), which are all wholly-owned subsidiaries of Franklin Resources, Inc.,
and the Franklin Money Fund, Franklin Templeton Money Fund Trust - Franklin
Templeton Money Fund II, Franklin Federal Money Fund, and three funds of the
Institutional Fiduciary Trust, which are the Money Market Portfolio, Franklin
Cash Reserves Fund and Franklin U.S. Government Securities Money Market
Porfolio.
As of December 31, 1995, the shares of The Money Market Portfolio were owned by
the following funds:
<TABLE>
<CAPTION>
Percentage of
Shares Outstanding Shares
---------- ------------
<S> <C> <C>
Franklin Money Fund............................................................. 1,066,716,166 79.09%
Institutional Fiduciary Trust - Money Market Portfolio.......................... 258,982,647 19.20%
Institutional Fiduciary Trust - Franklin Cash Reserves Fund..................... 20,752,073 1.54%
Franklin Templeton Money Fund Trust - Franklin Templeton Money Fund II.......... 2,250,311 .17%
As of December 31, 1995, the shares of The U.S. Government Securities Money
Market Portfolio were owned by the following funds:
Percentage of
Shares Outstanding Shares
---------- ------------
Institutional Fiduciary Trust-Franklin U.S. Government Securities Money Market Portfolio 208,508,416 64.07%
Franklin Federal Money Fund..................................................... 116,912,372 35.93%
</TABLE>
6. ASSETS TRANSFER
On August 1, 1994, the Franklin Money Fund and the Franklin Federal Money Fund
transferred substantially all of their net assets, respectively, into The Money
Market Portfolio and The U.S. Government Securities Money Market Portfolio. The
transfers were accompanied by a tax-free exchange of 1,132,697,789 capital
shares of The Money Market Portfolio for net assets valued at $1,132,697,789 of
the Franklin Money Fund and 138,624,792 capital shares of The U.S. Government
Securities Money Market Portfolio for net assets valued at $138,624,792 of the
Franklin Federal Money Fund.
7. FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout the
period by Portfolio are as follows:
<TABLE>
<CAPTION>
Per Share Operating Performance Ratios/Supplemental Data
--------------------------------- --------------------------
Ratio of Net
Net Asset Distributions Net Assets Ratio of Investment
Period Values at Net From Net Net Asset at End Expenses Income
Ended Beginning Investment Investment Values at Total of Period to Average to Average
June 30 of Period Income Income End of Period Return++ (in 000's) Net Assets+ Net Assets
- ---------------------------------------------------------------------------------------------------------------------
The Money Market Portfolio
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1993* $1.00 $0.027 $(0.027) $1.00 2.92% $ 222,358 0.15%** 3.18%**
1994 1.00 0.033 (0.033) 1.00 3.33 219,189 0.15 3.25
1995 1.00 0.053 (0.053) 1.00 5.46 1,305,574 0.15 5.42
1995*** 1.00 0.029 (0.029) 1.00 2.93 1,348,701 0.15** 5.73**
The U.S. Government Securities Money Market Portfolio
1993* 1.00 0.021 (0.021) 1.00 2.27 310,319 0.15** 3.05**
1994 1.00 0.032 (0.032) 1.00 3.25 218,548 0.15 3.20
1995 1.00 0.052 (0.052) 1.00 5.32 474,654 0.15 5.25
1995*** 1.00 0.028 (0.028) 1.00 2.87 325,421 0.15** 5.62**
*July 28, 1992 (effective date of registration) to June 30, 1993.
**Annualized
***For the six months ended December 31, 1995.
++Total return measures the change in value of an investment over the periods indicated. It is not annualized. It assumes
reinvestment of dividends and capital gains, if any, at net asset value.
+During the periods indicated, Advisers agreed in advance to waive a portion of management fees of the Portfolios. Had such action
not been taken, the ratio of expenses to average net assets would have been as follows:
</TABLE>
<TABLE>
<CAPTION>
Ratio of Expenses to
Average Net Assets
-----------
<S> <C>
The Money Market Portfolio
1993*...................................... .17%**
1994....................................... .17
1995....................................... .16
1995***.................................... .16**
The U.S. Government Securities
Money Market Portfolio
1993*...................................... .18%**
1994....................................... .17
1995....................................... .16
1995***.................................... .17**
</TABLE>
