SHAREHOLDER LETTER
Your Fund's Goal: Franklin Federal Money Fund 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 U.S. Government Securities Money
Market Portfolio (the Portfolio), which has the same investment goal. At
present, the Portfolio's policy is to limit its investments to U.S. Treasury
bills, notes and bonds, and to repurchase agreements collateralized by such
securities. The fund attempts to maintain a stable net asset value of $1.00 per
share.(1)
Dear Shareholder:
It's a pleasure to bring you Franklin Federal Money Fund's semi-annual report
for the period ended December 31, 1999.
During the six months under review, domestic economic growth accelerated from a
pace that was already well above the Federal Reserve Board's (the Fed's)
targeted long-term growth rate, or "speed limit," of 3.0%. The overall economy,
as measured by U.S. gross domestic product (GDP), grew at blistering annualized
rates of 5.7% and 5.8% during the third and fourth quarters of 1999,
respectively. Higher equity and real estate prices, increased wages and tight
labor markets helped spur consumer spending during the reporting period. The
booming economy also contributed to a continued downtrend in the national
unemployment rate, which reached a 30-year low of 4.1% at the end of the
reporting period.(2)
1. There is no assurance that the fund's $1.00 per share price will be
maintained. An investment in the fund is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.
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 5 of
this report.
CONTENTS
<TABLE>
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Shareholder Letter ..................... 1
Performance Summary .................... 3
Financial Highlights &
Statement of Investments ............... 4
Financial Statements ................... 6
Notes to
Financial Statements ................... 9
</TABLE>
[PYRAMID GRAPH]
A rebound in the manufacturing sector and improving international growth
contributed to the U.S. economy as it entered its ninth consecutive year of
expansion, marking the longest growth period in the nation's history. As
expected, the combination of strong domestic and overseas expansion caused the
inflation rate to rise during the reporting period. Inflation, as measured by
the year-over-year change in the Consumer Price Index (CPI), increased from 2.0%
on June 30 to 2.7% for the year ending December 31, 1999.
Seeking to stay ahead of the curve on inflation, the Fed raised the federal
funds target rate from 5.0% to 5.5% during the reporting period. In turn, bond
prices dropped but yields rose, a positive outcome for money market investors.
Bond prices and yields move inversely to one another; a decrease in price leads
to a corresponding increase in yield. The yield on the bellwether 30-year
Treasury advanced from 5.96% on June 30 to 6.48% on December 31, 1999. Despite
the Fed's 50 basis-point credit tightening maneuvers, the fund's seven-day
effective yield during the reporting period dropped uncharacteristically, from
4.36% on July 1, 1999, to 4.26% by year-end. Low repurchase (repo) rates
surfaced in late December as a result of Y2K concerns, causing a temporary slip
in yields just ahead of the New Year. Since a majority of the portfolio is
invested in these overnight repurchase agreements (which typically yield more
than short-term Treasury securities), a large portion of the fund was impacted
by the event. We should note that the fund's seven-day effective yield was 4.87%
on December 28, 1999, just prior to this anomalous year-end drop, and was
expected to rebound quickly after concerns about the computer bug passed.
2. Source: Bureau of Labor Statistics.
Going forward, underlying concerns linger regarding the economy's strength, and
the possibility that short-term interest rates may rise further in the near
future. As the world approached its date with Y2K, it became clear that the pace
of the U.S. economy was largely unaffected by the rate hikes of 1999, reviving
the specter of inflation. In light of surging consumer spending, rising
commodity prices and other inflation-inducing trends, most analysts ended the
year anticipating an even tighter monetary policy by the Fed in 2000. We will
continue to monitor political and economic events closely and make adjustments
to your portfolio as necessary.
We appreciate your support, welcome new shareholders and look forward to serving
your investment needs in the years ahead.
Sincerely,
/s/ C B Johnson
- ---------------------------
Charles B. Johnson
Chairman
Franklin Federal Money Fund
Please remember, this discussion reflects our views, opinions and portfolio
holdings as of December 31, 1999, the end of the reporting period. Our
strategies and the fund's portfolio composition will change depending on market
and economic conditions. Although historical performance is no guarantee of
future results, these insights may help you understand our investment and
management philosophy.
PERFORMANCE SUMMARY
12/31/99
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<S> <C>
Seven-day effective yield* 4.26%
Seven-day annualized yield 4.17%
</TABLE>
* The seven-day effective yield assumes the compounding of daily dividends.
Annualized and effective yields are for the seven-day period ended December 31,
1999. The fund's average weighted maturity was 42 days. Yield reflects
fluctuations in interest rates on portfolio investments, and fund expenses.
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 operating expenses and increases yield to shareholders. Without
these reductions, the portfolio's yield for the period would have been lower.
The fee waiver may be discontinued at any time upon notice to the fund's Board
of Trustees.
Past performance does not guarantee future results.
FRANKLIN FEDERAL MONEY FUND
Financial Highlights
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED JUNE 30,
DECEMBER 31, 1999 -----------------------------------------------------------
(UNAUDITED) 1999 1998 1997 1996 1995***
-------------------------------------------------------------------------------
<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 ............................ .022 .042 .047 .045 .047 .029
Less distributions from net investment income ..... (.022) (.042) (.047) (.045) (.047) (.029)
-------------------------------------------------------------------------------
Net asset value, end of period .................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
===============================================================================
Total return* ..................................... 2.25% 4.32% 4.85% 4.62% 4.80% 2.92%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ................. $217,090 $144,387 $134,621 $121,291 $127,659 $139,286
Ratios to average net assets:
Expenses(1) ...................................... 0.80%** .78% .82% .85% .84% 0.87%**
Expenses excluding waiver and payments
by affiliate(1) ................................. 0.81%** .78% .83% .86% .86% 0.88%**
Net investment income ............................ 4.42%** 4.23% 4.73% 4.54% 4.71% 4.93%**
</TABLE>
*Total return is not annualized for periods less than one year.
**Annualized
***For the period December 1, 1994 to June 30, 1995.
(1)The expense ratio includes the Fund's share of the Portfolio's allocated
expenses.
See notes to financial statements.
FRANKLIN FEDERAL MONEY FUND
STATEMENT OF INVESTMENTS, DECEMBER 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MUTUAL FUNDS 98.7%
The U.S. Government Securities Money Market Portfolio (Note 1) (COST $214,269,768) ... 214,269,768 $214,269,768
OTHER ASSETS, LESS LIABILITIES 1.3% .................................................. 2,820,146
------------
NET ASSETS 100.0% .................................................................... $217,089,914
============
</TABLE>
See notes to financial statements.
FRANKLIN FEDERAL MONEY FUND
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999 (UNAUDITED)
<TABLE>
<S> <C>
Assets:
Investments in securities, at value and cost ................ $214,269,768
Receivable for capital shares sold .......................... 6,531,473
------------
Total assets ........................................... 220,801,241
------------
Liabilities:
Payables:
Capital shares redeemed .................................... 3,355,609
Affiliates ................................................. 81,476
Shareholders ............................................... 147,416
Distributions to shareholders ............................... 74,835
Other liabilities ........................................... 51,991
------------
Total liabilities ...................................... 3,711,327
------------
Net assets, at value ........................................ $217,089,914
============
Shares outstanding .......................................... 217,089,914
============
Net asset value per share ................................... $1.00
============
</TABLE>
See notes to financial statements.
FRANKLIN FEDERAL MONEY FUND
Financial Statements (continued)
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 (UNAUDITED)
<TABLE>
<S> <C>
Investment income:
Dividends ..................................................... $4,245,517
----------
Expenses:
Administrative fees (Note 3) .................................. 341,853
Transfer agent fees (Note 3) .................................. 99,954
Reports to shareholders ....................................... 38,527
Registration and filing fees .................................. 27,042
Professional fees ............................................. 8,510
Directors' fees and expenses .................................. 3,616
Other ......................................................... 23,206
----------
Total expenses ........................................... 542,708
----------
Net investment income ................................... 3,702,809
----------
Net increase in net assets resulting from operations ........... $3,702,809
==========
</TABLE>
See notes to financial statements.
FRANKLIN FEDERAL MONEY FUND
Financial Statements (continued)
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 (UNAUDITED)
AND THE YEAR ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
DECEMBER 31, 1999 JUNE 30, 1999
---------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ....................................................................... $ 3,702,809 $ 6,525,411
Distributions to shareholders from net investment income ..................................... (3,702,809) (6,525,411)
Capital share transactions (Note 2) .......................................................... 72,703,075 9,766,182
---------------------------------
Net increase in net assets .............................................................. 72,703,075 9,766,182
Net assets (there is no undistributed net investment income at beginning or end of period):
Beginning of period .......................................................................... 144,386,839 134,620,657
---------------------------------
End of period ................................................................................ $217,089,914 $144,386,839
=================================
</TABLE>
See notes to financial statements.
FRANKLIN FEDERAL MONEY FUND
Notes to the Financial Statements (unaudited)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Franklin Federal Money Fund (the Fund) is registered under the Investment
Company Act of 1940 as a diversified, open-end investment company. The Fund
seeks to provide high current income with preservation of capital and liquidity.
The Fund invests substantially all of its assets in the U.S. Government
Securities 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
the net asset value of the Portfolio. As of December 31, 1999, the Fund owns
75.71% of the Portfolio.
b. INCOME TAXES:
No provision has been made for income taxes because the Fund's policy is to
qualify as a regulated investment company under the Internal Revenue Code and to
distribute substantially all of its taxable income.
c. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS:
Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Income and estimated expenses are accrued daily. Dividends from net investment
income and capital gains or losses are normally declared daily. Such
distributions are reinvested in additional shares of the Fund.
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. CAPITAL STOCK
At December 31, 1999, there were 5 billion shares authorized (no par value).
Transactions in the Fund's shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
DECEMBER 31, 1999 JUNE 30, 1999
-----------------------------------
<S> <C> <C>
Shares sold ...................... $ 739,086,919 $ 604,139,748
Shares issued in reinvest-
ment of distributions ........... 3,639,027 6,502,036
Shares redeemed .................. (670,022,871) (600,875,602)
-----------------------------------
Net increase ..................... $ 72,703,075 $ 9,766,182
===================================
</TABLE>
FRANKLIN FEDERAL MONEY FUND
Notes to the Financial Statements (unaudited) (continued)
3. TRANSACTIONS WITH AFFILIATES
Certain officers and directors of the Fund are also officers and/or directors of
Franklin Advisers, Inc. (Advisers) and Franklin/Templeton Investor Services,
Inc. (Investor Services), the Fund's administrative manager and transfer agent,
respectively, and of the Portfolio.
The Fund pays an administrative fee to Advisers based on the average net assets
of the Fund as follows:
<TABLE>
<CAPTION>
ANNUALIZED
FEE RATE DAILY NET ASSETS
-------------------------------------------------------------------
<S> <C>
.455% First $100 million
.330% Over $100 million, up to and including $250 million
.280% In excess of $250 million
</TABLE>
The fund received contingent deferred sales charges for the period of $12,810.
THE MONEY MARKET PORTFOLIOS
Financial Highlights
THE MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31, 1999
(UNAUDITED)
-----------------
<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 ................................. .027
Less distributions from net investment income .......... (.027)
-----------------
Net asset value, end of period ......................... $ 1.00
-----------------
Total return(a) ........................................ 2.69%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ...................... $3,628,518
Ratios to average net assets:
Expenses .............................................. .15%(b)
Expenses excluding waiver and payments by affiliate ... .16%(b)
Net investment income ................................. 5.32%(b)
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-----------------------------------------------------------------------
1999 1998 1997 1996 1995
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period ................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-----------------------------------------------------------------------
Income from investment operations -
net investment income ................................. .051 .055 .053 .055 .053
Less distributions from net investment income .......... (.051) (.055) (.053) (.055) (.053)
-----------------------------------------------------------------------
Net asset value, end of period ......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-----------------------------------------------------------------------
Total return(a) ........................................ 5.18% 5.64% 5.47% 5.66% 5.46%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ...................... $3,672,404 $2,043,629 $1,773,546 $1,550,085 $1,305,574
Ratios to average net assets:
Expenses .............................................. .15% .15% .15% .15% .15%
Expenses excluding waiver and payments by affiliate ... .15% .16% .16% .16% .16%
Net investment income ................................. 5.04% 5.50% 5.34% 5.50% 5.42%
</TABLE>
(a)Total return is not annualized for periods less than one year.
(b)Annualized
See notes to financial statements.
THE MONEY MARKET PORTFOLIOS
STATEMENT OF INVESTMENTS, DECEMBER 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
THE MONEY MARKET PORTFOLIO AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
BANK NOTES 4.1%
Bank of America NA, 5.70% - 6.03%, 1/28/00 - 3/21/00 (COST $150,000,130) .................... $ 150,000,000 $ 150,000,130
--------------
CERTIFICATES OF DEPOSIT 43.9%
ABN-AMRO Bank NV, Chicago Branch, 5.10% - 6.00%, 4/05/00 - 8/10/00 .......................... 154,000,000 153,984,546
Australia & New Zealand Banking Group, New York Branch, 6.01%, 1/06/00 ...................... 30,000,000 30,000,041
Bank of Montreal, Chicago Branch, 5.12% - 6.03%, 3/02/00 - 4/12/00 .......................... 120,000,000 119,999,716
Bayerische Landesbank, New York Branch, 5.89% - 5.99%, 2/17/00 - 3/17/00 .................... 120,000,000 120,001,678
Bayerische Vereinsbank, New York Branch, 5.55% - 5.86%, 1/10/00 - 1/24/00 ................... 90,000,000 90,000,251
Credit Agricole Indosuez, New York Branch, 5.03% - 5.98%, 1/13/00 - 3/20/00 ................. 130,000,000 130,001,940
Credit Communal De Belgique, New York Branch, 6.00%, 1/07/00 ................................ 30,000,000 30,000,049
Den Danske Bank, New York Branch, 5.98% - 6.00%, 3/30/00 - 4/14/00 .......................... 85,000,000 85,001,409
Deutsche Bank AG, New York Branch, 5.27% - 5.62%, 3/03/00 - 6/26/00 ......................... 124,000,000 123,975,744
Dresdner Bank AG, New York Branch, 5.56% - 6.06%, 1/11/00 - 3/01/00 ......................... 115,000,000 115,001,100
Lloyds Bank PLC, New York Branch, 5.90% - 5.99%, 2/24/00 - 3/31/00 .......................... 150,000,000 150,002,387
Rabobank Nederland NV, New York Branch, 5.41%, 6/01/00 ...................................... 25,000,000 24,995,999
Royal Bank of Canada, New York Branch, 5.70%, 7/03/00 ....................................... 25,000,000 24,997,585
Svenska Handelsbanken, New York Branch, 5.865% - 5.94%, 1/12/00 - 3/09/00 ................... 120,000,000 120,001,549
Toronto Dominion Bank, New York Branch, 5.10% - 6.11%, 1/19/00 - 3/23/00 .................... 155,000,000 155,001,441
UBS AG, New York Branch, 6.03%, 4/20/00 ..................................................... 30,000,000 30,001,347
Westpac Banking Corp., New York Branch, 5.91%, 3/07/00 - 3/10/00 ............................ 90,000,000 90,001,654
--------------
TOTAL CERTIFICATES OF DEPOSIT (COST $1,592,968,436) ......................................... 1,592,968,436
--------------
(a)COMMERCIAL PAPER 38.2%
American Express Credit Corp., 5.88% - 5.90%, 2/04/00 - 2/09/00 ............................. 120,000,000 119,273,616
Associates Corp. of North America, 5.90%, 4/04/00 ........................................... 35,000,000 34,460,806
Bank of Montreal, 6.01%, 1/28/00 ............................................................ 25,000,000 24,887,313
BIL North America Inc., 5.75%, 1/27/00 ...................................................... 30,000,000 29,875,417
Canadian Imperial Holdings Inc., 6.43%, 1/05/00 ............................................. 150,000,000 149,892,834
Chevron U.K. Investment PLC, 5.98%, 2/16/00 ................................................. 30,000,000 29,770,767
Ciesco LP, 5.75% - 5.90%, 1/25/00 - 2/15/00 ................................................. 120,000,000 119,265,500
Coca Cola Co., 5.86%, 3/28/00 - 3/29/00 ..................................................... 70,000,000 69,002,986
Commonwealth Bank of Australia, 5.90%, 2/23/00 .............................................. 30,000,000 29,739,417
Den Danske Corp. Inc., 6.03% - 6.05%, 1/21/00 - 2/01/00 ..................................... 60,000,000 59,744,285
Ford Motor Credit Co., 6.40%, 1/06/00 ....................................................... 150,000,000 149,866,668
General Electric Capital Corp., 5.74% - 6.01%, 1/26/00 - 3/27/00 ............................ 150,000,000 149,200,375
Halifax Building Society Ltd., 5.77% - 6.01%, 1/25/00 - 3/24/00 ............................. 60,000,000 59,434,226
International Nederlanden (U.S.) Funding Corp., 5.88%, 4/03/00 .............................. 35,000,000 34,468,350
Morgan Stanley Dean Witter & Co., 6.03% - 6.10%, 1/10/00 - 1/14/00 .......................... 140,000,000 139,740,936
National Rural Utilities Cooperative Finance Corp. Finance, 5.98%, 3/07/00 - 3/10/00 ........ 20,000,000 19,775,750
Schering Corp., 5.92%, 1/18/00 .............................................................. 25,000,000 24,930,111
UBS Finance Delaware LLC, 5.75%, 3/13/00 - 3/14/00 .......................................... 70,000,000 69,189,410
Walt Disney Co., 5.86% - 5.88%, 1/19/00 - 1/24/00 ........................................... 75,000,000 74,755,250
--------------
TOTAL COMMERCIAL PAPER (COST $1,387,274,017) ................................................ 1,387,274,017
--------------
U.S. GOVERNMENT AGENCY SECURITIES 2.8%
Federal Home Loan Mortgage Corp., 4.50%, 1/05/00 (COST $99,950,000) ......................... 100,000,000 99,950,000
--------------
TOTAL INVESTMENTS BEFORE REPURCHASE AGREEMENTS (COST $3,230,192,583) ........................ 3,230,192,583
--------------
</TABLE>
THE MONEY MARKET PORTFOLIOS
STATEMENT OF INVESTMENTS, DECEMBER 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
THE MONEY MARKET PORTFOLIO AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
(b)REPURCHASE AGREEMENTS 10.3%
Banc of America Securities LLC, 2.40%, 1/03/00 (Maturity Value $80,016,000) ................. $ 80,000,000 $ 80,000,000
Collateralized by U.S. Treasury Notes
Dresdner Kleinwort Benson, North America LLC, 2.50%, 1/03/00 (Maturity Value $80,016,667) ... 80,000,000 80,000,000
Collateralized by U.S. Treasury Notes
J.P. Morgan Securities Inc., 2.50%, 1/03/00 (Maturity Value $78,126,273) .................... 78,110,000 78,110,000
Collateralized by U.S. Treasury Notes
Morgan Stanley & Co. Inc., 2.50%, 1/03/00 (Maturity Value $79,016,458) ...................... 79,000,000 79,000,000
Collateralized by U.S. Treasury Notes
Warburg Dillon Read LLC, 2.50%, 1/03/00 (Maturity Value $55,011,458) ........................ 55,000,000 55,000,000
--------------
Collateralized by U.S. Treasury Notes
TOTAL REPURCHASE AGREEMENTS (COST $372,110,000) ............................................. 372,110,000
--------------
TOTAL INVESTMENTS (COST $3,602,302,583) 99.3% ............................................... 3,602,302,583
OTHER ASSETS, LESS LIABILITIES .7% .......................................................... 26,215,182
--------------
NET ASSETS 100.0% ........................................................................... $3,628,517,765
==============
</TABLE>
(a)Securities are traded on a discount basis; the rates shown are the discount
rates at the time of purchase by the portfolio.
(b)See Note 1(b) regarding repurchase agreements.
See notes to financial statements.
THE MONEY MARKET PORTFOLIOS
Financial Highlights
THE U.S. GOVERNMENT SECURITIES MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31, 1999
(UNAUDITED)
-----------------
<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 ................................. .025
Less distributions from net investment income .......... (.025)
-----------------
Net asset value, end of period ......................... $ 1.00
-----------------
Total return(a) ........................................ 2.55%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ...................... $283,009
Ratios to average net assets:
Expenses .............................................. .15%(b)
Expenses excluding waiver and payments by affiliate ... .16%(b)
Net investment income ................................. 5.06%(b)
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------------------------------------------------------
1999 1998 1997 1996 1995
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period ................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------------------------------------------------------------------------
Income from investment operations -
net investment income ................................. .049 .054 .052 .054 .052
Less distributions from net investment income .......... (.049) (.054) (.052) (.054) (.052)
-------------------------------------------------------------------------
Net asset value, end of period ......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------------------------------------------------------------------------
Total return(a) ........................................ 4.97% 5.53% 5.34% 5.55% 5.32%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ...................... $258,458 $263,226 $285,629 $285,701 $474,654
Ratios to average net assets:
Expenses .............................................. .15% .15% .15% .15% .15%
Expenses excluding waiver and payments by affiliate ... .15% .16% .16% .17% .16%
Net investment income ................................. 4.84% 5.40% 5.20% 5.45% 5.25%
</TABLE>
(a)Total return is not annualized for periods less than one year.
(b)Annualized
See notes to financial statements.
THE MONEY MARKET PORTFOLIOS
STATEMENT OF INVESTMENTS, DECEMBER 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
THE U.S. GOVERNMENT SECURITIES MONEY MARKET PORTFOLIO AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
GOVERNMENT SECURITIES 41.3%
U.S. Treasury Bill, 1/13/00 ................................................................. $ 72,000,000 $ 71,876,713
U.S. Treasury Notes, 6.375%, 5/15/00 ........................................................ 10,000,000 10,044,944
U.S. Treasury Notes, 5.125%, 8/31/00 ........................................................ 10,000,000 9,974,444
U.S. Treasury Notes, 6.25%, 8/31/00 ......................................................... 20,000,000 20,083,734
U.S. Treasury Notes, 4.625%, 11/30/00 ....................................................... 5,000,000 4,939,439
------------
TOTAL GOVERNMENT SECURITIES (COST $116,919,274) ............................................. 116,919,274
------------
(b)REPURCHASE AGREEMENTS 58.5%
Banc of America Securities LLC, 2.40%, 1/03/00 (Maturity Value $11,002,200) ................. 11,000,000 11,000,000
Collateralized by U.S. Treasury Notes
Barclays Capital Inc., 2.50%, 1/03/00 (Maturity Value $11,002,292) .......................... 11,000,000 11,000,000
Collateralized by U.S. Treasury Notes
Dresdner Kleinwort Benson, North America LLC, 2.50%, 1/03/00 (Maturity Value $11,002,292) ... 11,000,000 11,000,000
Collateralized by U.S. Treasury Notes
J.P. Morgan Securities Inc., 2.50%, 1/03/00 (Maturity Value $40,008,333) .................... 40,000,000 40,000,000
Collateralized by U.S. Treasury Bills and Notes
J.P. Morgan Securities Inc., 2.40%, 1/03/00 (Maturity Value $20,719,143) .................... 20,715,000 20,715,000
Collateralized by U.S. Treasury Bills and Notes
Morgan Stanley & Co. Inc., 2.50%, 1/03/00 (Maturity Value $40,008,333) ...................... 40,000,000 40,000,000
Collateralized by U.S. Treasury Bills and Notes
Morgan Stanley & Co. Inc., 2.50%, 1/03/00 (Market Value $20,719,316) ........................ 20,715,000 20,715,000
Collateralized by U.S. Treasury Bills and Notes
Warburg Dillon Read LLC, 2.50%, 1/03/00 (Maturity Value $11,002,292) ........................ 11,000,000 11,000,000
Collateralized by U.S. Treasury Notes
------------
TOTAL REPURCHASE AGREEMENTS (COST $165,430,000) ............................................. 165,430,000
------------
TOTAL INVESTMENTS (COST $282,349,274) 99.8% ................................................. 282,349,274
OTHER ASSETS, LESS LIABILITIES .2% .......................................................... 659,342
------------
NET ASSETS 100.0% ........................................................................... $283,008,616
============
</TABLE>
(b)See note 1(b) regarding repurchase agreements.
See notes to financial statements.
THE MONEY MARKET PORTFOLIOS
Financial Statements
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
THE U.S.
GOVERNMENT
THE SECURITIES
MONEY MARKET MONEY MARKET
PORTFOLIO PORTFOLIO
----------------------------------
<S> <C> <C>
Assets:
Investments in securities, at value and cost ... $3,230,192,583 $ 116,919,274
Repurchase agreements, at value and cost ....... 372,110,000 165,430,000
Cash ........................................... 24,944 1,372
Interest receivable ............................ 26,670,489 709,503
----------------------------------
Total assets .............................. 3,628,998,016 283,060,149
----------------------------------
Liabilities:
Payables to affiliates ......................... 453,487 45,781
Other liabilities .............................. 26,764 5,752
----------------------------------
Total liabilities ......................... 480,251 51,533
----------------------------------
Net assets, at value ........................... $3,628,517,765 $ 283,008,616
==================================
Shares outstanding .............................. 3,628,517,765 283,008,616
==================================
Net asset value per share ....................... $ 1.00 $ 1.00
==================================
</TABLE>
See notes to financial statements.
THE MONEY MARKET PORTFOLIOS
Financial Statements (continued)
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
THE U.S.
GOVERNMENT
THE SECURITIES
MONEY MARKET MONEY MARKET
PORTFOLIO PORTFOLIO
-------------------------------------
<S> <C> <C>
Investment income:
Interest .......................................... $ 90,215,751 $ 6,652,929
-------------------------------------
Expenses:
Management fees (Note 3) .......................... 2,491,154 193,416
Custodian fees .................................... 13,521 1,022
Reports to shareholders ........................... 1,647 688
Professional fees ................................. 29,201 3,094
Other ............................................. 5,308 1,583
-------------------------------------
Total expenses ............................... 2,540,831 199,803
Expenses waived/paid by affiliate (Note 3) ... (49,417) (6,396)
-------------------------------------
Net expenses ................................ 2,491,414 193,407
-------------------------------------
Net investment income ...................... 87,724,337 6,459,522
-------------------------------------
Net increase in net assets resulting from operations $ 87,724,337 $ 6,459,522
=====================================
</TABLE>
See notes to financial statements.
THE MONEY MARKET PORTFOLIOS
Financial Statements (continued)
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 (UNAUDITED)
AND THE YEAR ENDED JUNE 30, 1999
<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, 1999 JUNE 30, 1999 DECEMBER 31, 1999 JUNE 30, 1999
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ................... $ 87,724,337 $ 134,356,042 $ 6,459,522 $ 14,158,082
Net realized gain from investments ...... -- 651 -- --
------------------------------------------------------------------------------------
Net increase in net assets resulting
from operations .................... 87,724,337 134,356,693 6,459,522 14,158,082
Distributions to shareholders from net
investment income ....................... (87,724,337) (134,356,693)* (6,459,522) (14,158,082)
Capital share transactions (Note 2) ...... (43,886,020) 1,628,774,482 24,550,235 (4,767,997)
------------------------------------------------------------------------------------
Net increase (decrease) in net assets (43,886,020) 1,628,774,482 24,550,235 (4,767,997)
Net assets (there is no undistributed net
investment income at beginning or end
of period):
Beginning of period ..................... 3,672,403,785 2,043,629,303 258,458,381 263,226,378
------------------------------------------------------------------------------------
End of period ........................... $ 3,628,517,765 $ 3,672,403,785 $ 283,008,616 $ 258,458,381
====================================================================================
</TABLE>
*Distributions were increased by a net realized gain from investments of $651.
See notes to financial statements.
THE MONEY MARKET PORTFOLIOS
Notes to Financial Statements (unaudited)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Money Market Portfolios (the Trust) is registered under the Investment
Company Act of 1940 as a diversified, open-end 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 high current income consistent with
preservation of capital and liquidity. The following summarizes the Portfolios'
significant accounting policies.
a. SECURITY VALUATION:
Securities are valued at amortized cost which approximates value.
b. REPURCHASE AGREEMENTS:
The Portfolios may enter into repurchase agreements, which are accounted for as
a loan by the Portfolios to the seller, collateralized by securities which are
delivered to the Portfolios' custodian. The market value, including accrued
interest, of the initial collateralization is required to be at least 102% of
the dollar amount invested by the Portfolios, with the value of the underlying
securities marked to market daily to maintain coverage of at least 100%. At
December 31, 1999, all outstanding repurchase agreements held by the Portfolios
had been entered into on that date.
c. INCOME TAXES:
No provision has been made for income taxes because each Portfolio's policy is
to qualify as a regulated investment company under the Internal Revenue Code and
to distribute substantially all of its taxable income.
d. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS:
Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Interest income and estimated expenses are accrued daily. Dividends from net
investment income and capital gains or losses are normally declared daily. Such
distributions are reinvested in additional shares of the Portfolios.
Common expenses incurred by the Trust are allocated among the Portfolios based
on the ratio of net assets of each Portfolio to the combined net assets. Other
expenses are charged to each Portfolio on a specific identification basis.
e. ACCOUNTING ESTIMATES:
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the amounts of income and expense during the reporting
period. Actual results could differ from those estimates.
THE MONEY MARKET PORTFOLIOS
Notes to Financial Statements (unaudited) (continued)
2. SHARES OF BENEFICIAL INTEREST
At December 31, 1999, there were an unlimited number of shares authorized ($0.01
par value). Transactions in the Portfolios' shares were as follows:
<TABLE>
<CAPTION>
THE U.S.
THE GOVERNMENT
MONEY MARKET SECURITIES MONEY
PORTFOLIO MARKET PORTFOLIO
---------------------------------------------
<S> <C> <C>
Six months ended December 31, 1999
Shares sold .................................. $ 15,324,799,016 $ 546,033,547
Shares issued in reinvestment of distributions 87,722,893 6,453,353
Shares redeemed .............................. (15,456,407,929) (527,936,665)
---------------------------------------------
Net increase (decrease) ................. $ (43,886,020) $ 24,550,235
=============================================
Year ended June 30, 1999
Shares sold .................................. $ 13,314,265,139 $ 963,424,640
Shares issued in reinvestment of distributions 134,356,720 14,164,293
Shares redeemed .............................. (11,819,847,377) (982,356,930)
---------------------------------------------
Net increase (decrease) ................. $ 1,628,774,482 $ (4,767,997)
=============================================
</TABLE>
3. TRANSACTIONS WITH AFFILIATES
Certain officers and trustees of the Trust are also officers and/or directors of
Franklin Advisers, Inc. (Advisers) and Franklin/Templeton Investor Services,
Inc. (Investor Services), the Portfolios' investment manager and transfer agent,
respectively, and of the Franklin Money Fund, Institutional Fiduciary Trust,
Franklin Templeton Money Fund Trust, and Franklin Federal Money Fund.
The Portfolios pay an investment management fee to Advisers of .15% per year of
the average daily net assets of each Portfolio. Advisers agreed in advance to
waive management fees, as noted in the Statements of Operations.
At December 31, 1999, the shares of The Money Market Portfolio were owned by the
following funds:
<TABLE>
<CAPTION>
PERCENTAGE OF
SHARES OUTSTANDING SHARES
----------------------------------------
<S> <C> <C>
Franklin Money Fund ....................................... 2,787,557,120 76.83%
Institutional Fiduciary Trust - Money Market Portfolio .... 600,929,608 16.56%
Institutional Fiduciary Trust - Franklin Cash Reserves Fund 123,859,827 3.41%
Franklin Templeton Money Fund ............................. 116,171,210 3.20%
</TABLE>
THE MONEY MARKET PORTFOLIOS
Notes to Financial Statements (unaudited) (continued)
3. TRANSACTIONS WITH AFFILIATES (cont.)
At December 31, 1999, the shares of The U.S. Government Securities Money Market
Portfolio were owned by the following funds:
<TABLE>
<CAPTION>
PERCENTAGE OF
SHARES OUTSTANDING SHARES
----------------------------------
<S> <C> <C>
Institutional Fiduciary Trust - Franklin U.S. Government
Securities Money Market Portfolio .................... 68,738,848 24.29%
Franklin Federal Money Fund ............................ 214,269,768 75.71%
</TABLE>
4. INCOME TAXES
At June 30, 1999, The Money Market Portfolio has deferred capital losses
occurring subsequent to October 31, 1998 of $8,692. For tax purposes, such
losses will be reflected in the year ending June 30, 2000.
