CHAIRMAN'S MESSAGE
Your Fund's Objective:
The Franklin 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 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
February 18, 1997
Dear Shareholder:
We are pleased to bring you the Franklin Money Fund's semi-annual report
for the period ended December 31, 1996.
One key event that occurred at the close of the reporting period was that
Templeton Money Fund merged into Franklin Money Fund. We welcome the fund's new
shareholders.
Moderate economic growth and mild inflation characterized the six months
under review. This relatively stable environment eliminated the need for the
Federal Reserve Board (Fed) to adjust monetary policy, and the federal funds
rate (the interest rate banks charge each other for overnight loans) remained at
5.25% throughout the period.
1. Please remember, an investment in the fund is neither insured nor guaranteed
by the U.S. government or by any other entity or institution, and there can be
no assurance that the fund will be able to maintain a net asset value of $1.00
per share.
Since we maintained a relatively neutral-weighted average maturity during the
reporting period, the fund's seven-day yield reflected the stable federal funds
rate. The fund's seven-day effective yield began the period at 4.76% and
finished the period at 4.88%.
Looking forward, we expect the economy to proceed on its path of slow growth
without the threat of higher inflation. Assuming these conditions continue, the
Fed should have little reason to make any policy moves, and we believe
short-term rates are likely to remain stable. However, changes in monetary
policy are linked to the performance of the economy, and if the economy
strengthens, the Fed may raise short-term interest rates in an effort to control
potentially accelerating inflation.
This discussion reflects the strategies we employed for the fund during the six
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. 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.
As a Franklin Money Fund shareholder, you continue to benefit from convenient,
easy access to your money, and a high degree of credit safety. You can also
enjoy a wide range of services, including draft writing for amounts of $100 or
more, free draft books, and access to TeleFACTS(R), our around-the-clock
automated customer service line.
This year marks 50 years of business for Franklin Templeton. Over these years,
we have experienced profound changes in technology, regulations and customer
expectations within the mutual fund industry. As one of the largest mutual fund
families, we're proud to be an innovative industry leader, providing people like
you with an opportunity to invest in companies and governments around the globe.
We thank you for your past support and look forward to serving your investment
needs in the years ahead.
Sincerely,
Charles B. Johnson
Chairman
Franklin Money Fund
Performance Summary
Franklin Money Fund
December 31, 1996
Seven-day annualized yield 4.77%
Seven-day effective yield* 4.88%
*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 MONEY FUND
Statement of Investments in Securities and Net Assets, December 31, 1996
(unaudited)
Value
Shares (Note 1)
Mutual Funds 99.8%
1,217,967,196 The Money Market Portfolio (Note 1) ................$1,217,967,196
--------------
Total Investments (Cost $1,217,967,196) 99.8% 1,217,967,196
Other Assets and Liabilities, Net 0.2% ..... 1,908,748
--------------
Net Assets 100.0% ........................$1,219,875,944
===============
At December 31, 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 MONEY FUND
Financial Statements
Statement of Assets and Liabilities
December 31, 1996 (unaudited)
Assets:
Investment in securities, at value and cost $1,217,967,196
Cash 2,476,930
--------------
Total assets 1,220,444,126
--------------
Liabilities:
Payables:
Administration fees 312,961
Shareholder servicing costs 165,307
Capital shares repurchased 63,168
Accrued expenses and other liabilities 26,746
--------------
Total liabilities 568,182
-------------
Net assets (equivalent to $1.00 per share based on
1,219,875,944 shares of
capital stock outstanding) $1,219,875,944
===============
Statement of Operations
for the six months ended December 31, 1996 (unaudited)
Investment income:
Dividends $32,842,025
Expenses:
Administration fees (Note 5) $1,840,521
Shareholder servicing costs
(Note 5) 1,046,420
Reports to shareholders 563,201
Registration fees 86,390
Directors' fees and expenses 44,693
Professional fees 14,640
Other 13,414
--------------
Total expenses 3,609,279
--------------
Net investment income $29,232,746
===============
Statements of Changes in Net Assets for the six months ended December 31, 1996
(unaudited) and the year ended June 30, 1996
Six Months Year
ended ended
December 31, 1996 June 30, 1996
------------------- ----------------
Increase (decrease) in net assets:
Operations:
Net investment income $ 29,232,746 $ 53,719,001
Distributions to
shareholders from
net investment income (29,232,746) (53,719,001)
Increase in net assets
from capital share
transactions (Note 2) 47,237,320 153,672,341
------------ ------------
Net increase
in net assets 47,237,320 153,672,341
Net assets (there is
no undistributed net
investment income
at beginning or end
of period):
Beginning of
period 1,172,638,624 1,018,966,283
-------------- --------------
End of period $1,219,875,944 $1,172,638,624
============== ===============
The accompanying notes are an integral part of these financial statements.
FRANKLIN MONEY FUND
Notes to Financial Statements (unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES
Franklin 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's investment objective is 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. At December 31, 1996, the Fund owned
79.54% 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
distributions 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.
2. CAPITAL STOCK
At December 31, 1996, there were 5,000,000,000 shares of $.10 par value capital
stock authorized. Transactions in the Fund's shares at $1.00 per share were as
follows:
<TABLE>
<CAPTION>
Six Months Year
ended ended
December 31, 1996 June 30, 1996
<S> <C> <C>
------------------ ---------------
Shares sold................................... $ 1,398,828,398 $2,415,077,056
Shares issued in reinvestment of distributions 29,159,688 53,666,653
Shares redeemed.................. (1,380,750,766) (2,315,071,368)
---------------- -----------------
Net increase (decrease).......... $ 47,237,320 $ 153,672,341
============== ===================
</TABLE>
3. CAPITAL LOSS CARRYOVERS
At June 30, 1996, for tax purposes, the Fund had capital loss carryovers as
follows:
Capital loss carryovers expiring in: 2001.....$ 763
2002......4,038
-----
$4,801
=====
4. PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities for the six months ended December 31, 1996
aggregated $392,973,706 and $348,777,856, 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:
<TABLE>
<CAPTION>
Annualized Fee Rate Average Daily Net Assets
------------------ -------------------------------
<S> <C>
0.455% First $100 million
0.330% Over $100 million, up to and including $250 million
0.280% Over $250 million
</TABLE>
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 six months ended December 31, 1996 are noted in the Statement of Operations,
all of which was paid to Investor Services.
c. Other Affiliates and Related Party Transactions:
Certain officers and directors of the Fund are also officers and/or directors of
Advisers, Investor Services (all wholly-owned subsidiaries of Franklin
Resources, Inc.), and of the Portfolio.
6. SUBSEQUENT EVENT
On January 1, 1997, the Fund acquired all the net assets ($111,973,848) of
Templeton Money Fund pursuant to a merger approved by the shareholders of the
Templeton Money Fund on December 31, 1996.
7. FINANCIAL HIGHLIGHTS
Selected data for a share of capital stock outstanding throughout the period are
as follows:
<TABLE>
<CAPTION>
Six Months
ended Year ended June 30 Year ended November 30
------------------- ----------------------
Dec. 31, 1996 1996 1995+++ 1994 1993 1992
-------------- ------ -------- ----- ----- -----
Per Share Operating Performance
<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
----- ----- ---- ----- ----- -----
Net investment income ...... .024 .049 .030 .032 .023 .031
Distributions from net investment income (.024) (.049) (.030) (.032) (.023) (.031)
Net asset value at end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
======= ====== ======= ====== ====== =======
Total Return* .............. 2.43% 4.99% 3.07% 3.28% 2.36% 3.12%
Ratios/Supplemental Data
Net assets at end of period (in 000's) $1,219,876 $1,172,639 $1,018,966 $1,124,223 $1,040,026 $1,101,571
Ratio of expenses to average net assets++ .74%+** .75%** .80%+** .91%** .80% .79%
Ratio of net investment income
to average net assets ............ 4.81%+ 4.86% 5.19%+ 3.23% 2.32% 3.08%
</TABLE>
*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 at net asset value.
+Annualized
++Effective with fiscal year 1994, the expense ratio includes the Fund's share
of the Portfolio's allocated expenses.
+++For the seven months ended June 30, 1995.
++++For the six months ended December 31, 1996.
**Advisers 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 1994 and 1995, and a portion of the
management fees incurred by the Portfolio in 1996. 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............................. .93%
1995+++.......................... .82
1996............................. .76
1996++++......................... .75+
THE MONEY MARKET PORTFOLIOS
<TABLE>
<CAPTION>
Statement of Investments in Securities and Net Assets, December 31, 1996 (unaudited)
Face Value
Amount The Money Market Portfolio (Note 1)
aShort Term Investments 85.5%
<S> <C> <C>
Certificates of Deposit 35.7%
$32,000,000 ABN-AMRO Bank NV, Chicago Branch, 5.53% - 5.76%, 03/06/97 - 03/18/97......$ 31,997,862
25,000,000 Australia & NZ Banking Group, New York Branch, 5.37%, 02/12/97 ........... 25,000,000
45,000,000 Bank of Nova Scotia, Portland Branch, 5.47% - 5.58%, 01/24/97 - 03/20/97.. 45,000,000
25,000,000 Banque Nationale de Paris, New York Branch, 5.37%, 01/14/97........... 25,000,000
25,000,000 Bayerische Landesbank, New York Branch, 5.41%, 05/07/97 ............ 25,000,670
25,000,000 Bayerische Vereinsbank, New York Branch, 5.75%, 01/07/97............... 25,000,000
50,000,000 Credit Agricole, Chicago Branch, 5.40% - 5.47%, 05/05/97 - 05/27/97..... 50,000,000
25,000,000 Den Danske Bank, New York Branch, 5.37%, 02/05/97 ................. 25,000,120
45,000,000 Deutsche Bank, AG, New York Branch, 5.39% - 5.76%, 01/02/97 - 04/07/97.... 45,000,661
15,000,000 Dresdner Bank, AG, New York Branch, 4.94%, 01/06/97 ........................ 14,998,629
50,000,000 National Westminster Bank, Plc., New York Branch, 5.51% - 5.80%,
01/27/97 - 03/10/97 .......................................................... 50,000,000
25,000,000 Rabobank Nederland, NV, New York Branch, 5.46%, 04/18/97 ..................... 25,000,729
45,000,000 Societe Generale, New York Branch, 5.37% - 5.38%, 01/08/97 - 02/18/97 45,000,000
70,000,000 Svenska Handelsbanken, New York Branch, 5.38% - 5.48%, 03/21/97 - 03/28/97 ....70,001,588
45,000,000 Westpac Banking Corp., New York Branch, 5.40% - 5.43%, 03/11/97 - 05/12/97......45,000,000
----------
Total Certificates of Deposit (Cost $547,000,259) 547,000,259
-----------
Commercial Paper 49.8%
42,752,000 Abbey National North America, 5.28% - 5.32%, 03/11/97 - 03/17/97 42,297,795
50,000,000 American Express Credit Corp., 5.28% - 5.30%, 01/28/97 - 03/19/97............ 49,618,292
20,000,000 Ameritech Corp., 5.34%, 03/07/97 ..................... ...................... 19,807,167
25,000,000 ANZ (DE), Inc., 5.27%, 03/24/97 ............................................. 24,699,903
45,000,000 Associates Corp. of North America, 5.28% - 5.32%, 01/22/97 - 03/26/97 44,629,933
40,000,000 BIL North America, Inc., 5.33%, 01/07/97 - 01/15/97 ........................... 39,934,855
20,000,000 Canadian Imperial Holdings, Inc., 5.317%, 01/06/97 ............................ 19,985,231
30,000,000 Cheltnham & Gloucester, Plc., 5.30% - 5.32%, 01/15/97 - 03/24/97.............. 29,737,867
25,000,000 CIESCO, L.P., 5.32%, 01/10/97 ................................................. 24,966,750
30,000,000 Commonwealth Bank of Australia, 5.325% - 5.37%, 01/21/97 - 03/17/97............ 29,828,958
70,000,000 General Electric Capital Corp., 5.29% - 5.59%, 02/06/97 - 05/02/97............. 69,275,095
70,000,000 Generale Bank, Inc., 5.325% - 5.43%, 01/03/97 - 03/12/97....................... 69,551,313
50,000,000 Goldman Sachs Group, L.P., 5.34% - 5.35%, 03/14/97 - 03/20/97 ................. 49,443,208
15,000,000 Kingdom of Sweden, 5.32%, 01/21/97 ............................................ 14,955,666
70,000,000 Merrill Lynch & Co., Inc., 5.30% - 5.33%, 02/19/97 - 03/13/97...................69,363,438
50,000,000 Morgan Stanley Group, Inc., 5.34%, 03/18/97 - 03/25/97 .........................49,410,375
45,345,000 National Rural Utilities Cooperative Finance Corp., 5.31%, 01/09/97 -01/17/97...45,261,992
45,000,000 Toyota Motor Credit Corp., 5.31% - 5.32%, 01/08/97 - 01/16/97.................. 44,923,934
25,000,000 Westpac Capital Corp., 5.32%, 01/13/97 ........................................ 24,955,668
-------------
Total Commercial Paper (Cost $762,647,440)...............................762,647,440
-------------
Total Investments before Repurchase Agreements (Cost $1,309,647,699)...1,309,647,699
-------------
bReceivables from Repurchase Agreements 14.1%
$14,810,000 Bear, Stearns & Co., Inc., 6.65%, 01/02/97 (Maturity Value $15,005,542)
Collateral: U.S. Treasury Notes, 6.25%, 07/31/98 ........................... $ 15,000,000
14,815,000 CIBC Wood Gundy Securities Corp., 6.70%, 01/02/97 (Maturity Value $15,005,583)
Collateral: U.S. Treasury Notes, 6.25%, 07/31/98 ............................ 15,000,000
87,793,000 J.P. Morgan Securities, Inc., 6.60%, 01/02/97 (Maturity Value $85,971,511)
Collateral: U.S. Treasury Bills, 01/16/97 - 12/11/97
U.S. Treasury Notes, 6.75%, 05/31/99 ......................................... 85,940,000
87,225,000 Morgan Stanley & Co., Inc., 6.28%, 01/02/97 (Maturity Value $84,964,633)
Collateral: U.S. Treasury Notes, 5.75%, 12/31/98 ............................. 84,935,000
13,910,000 UBS Securities, L.L.C., 6.75%, 01/02/97 (Maturity Value $15,005,625)
Collateral: U.S. Treasury Notes, 7.875%, 08/15/01 ............................ 15,000,000
----------
Total Receivables from Repurchase Agreements (Cost $215,875,000)........ 215,875,000
-----------
Total Investments (Cost $1,525,522,699) 99.6% .....................1,525,522,699
Other Assets and Liabilities, Net 0.4%............................. 5,681,264
-------------
Net Assets 100.0% ...............................................$1,531,203,963
===============
</TABLE>
At December 31, 1996, there was no unrealized appreciation or depreciation for
financial statements or income tax purposes.
PORTFOLIO ABBREVIATIONS:
L.L.C. - Limited Liability Corp.
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, December 31, 1996
(unaudited)
<TABLE>
<CAPTION>
Face Value
Amount The U.S. Government Securities Money Market Portfolio (Note 1)
aShort Term Government Securities 100.1%
Government Securities 14.7%
<C> <S> <C>
$40,000,000 U.S. Treasury Bills, 5.05% - 5.135%, 02/06/97 - 05/22/97 (Cost $39,497,317)........$ 39,497,317
------------
bReceivables from Repurchase Agreements 85.4%
10,116,000 Aubrey G. Lanston & Co., Inc., 6.80%, 01/02/97 (Maturity Value $10,503,967)
Collateral: U.S. Treasury Notes, 7.875%, 01/15/98 ..................................10,500,000
10,755,000 B.A. Securities, Inc., 6.20%, 01/02/97 (Maturity Value $10,503,617)
Collateral: U.S. Treasury Notes, 5.25%, 12/31/97 ...................................10,500,000
10,335,000 Bear, Stearns & Co., Inc., 6.65%, 01/02/97 (Maturity Value $10,503,879)
Collateral: U.S. Treasury Notes, 6.50%, 08/31/01 ...................................10,500,000
10,730,000 Barclays de Zoete Wedd Securities, Inc., 6.50%, 01/02/97 (Maturity Value $10,503,792)
Collateral: U.S. Treasury Notes, 5.75%, 12/31/98 ...................................10,500,000
10,500,000 Chase Securities, Inc., 6.40%, 01/02/97 (Maturity Value $10,503,733)
Collateral: U.S. Treasury Notes, 6.875%, 03/31/97 ..................................10,500,000
10,370,000 CIBC Wood Gundy Securities Corp., 6.70%, 01/02/97 (Maturity Value $10,503,908)
Collateral: U.S. Treasury Notes, 6.25%, 07/31/98 ...................................10,500,000
9,555,000 Citicorp Securities, Inc., 6.75%, 01/02/97 (Maturity Value $10,503,938)
Collateral: U.S. Treasury Notes, 8.75%, 08/15/00 ...................................10,500,000
24,500,000 J.P. Morgan Securities, Inc., 6.50%, 01/02/97 (Maturity Value $24,508,847)
Collateral: U.S. Treasury Bills, 01/02/97 ..........................................24,500,000
40,000,000 J.P. Morgan Securities, Inc., 6.60%, 01/02/97 (Maturity Value $40,014,667)
Collateral: U.S. Treasury Bills, 01/02/97 ..........................................40,000,000
35,000,000 Morgan Stanley & Co., Inc., 6.28%, 01/02/97 (Maturity Value $35,012,211)
Collateral: U.S. Treasury Bills, 01/02/97 ..........................................35,000,000
24,075,000 Morgan Stanley & Co., Inc., 6.28%, 01/02/97 (Maturity Value $24,083,400)
Collateral: U.S. Treasury Bills, 01/02/97 ..........................................24,075,000
10,355,000 Nomura Securities International, Inc., 6.00%, 01/02/97 (Maturity Value $10,503,500)
Collateral: U.S. Treasury Notes, 6.75%, 06/30/99 ...................................10,500,000
10,475,000 SBC Warburg, Inc., 6.80%, 01/02/97 (Maturity Value $10,503,967)
Collateral: U.S. Treasury Notes, 6.00%, 08/31/97 ................................10,500,000
10,539,000 UBS Securities, L.L.C., 6.75%, 01/02/97 (Maturity Value $10,503,938)
Collateral: U.S. Treasury Notes, 4.75%, 02/15/97 ...................................10,500,000
------------
Total Receivables from Repurchase Agreements (Cost $228,575,000) .............228,575,000
-------------
Total Investments (Cost $268,072,317)100.1% ..............................268,072,317
Liabilities in excess of Other Assets, Net(0.1%).............................(319,309
-------------
Net Assets 100.0%.......................................................$267,753,008
=============
</TABLE>
At December 31, 1996, there was no unrealized appreciation or depreciation for
financial statement or income tax purposes.
PORTFOLIO ABBREVIATIONS:
L.L.C. - Limited Liability Corp.
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
Financial Statements
Statement of Assets and Liabilities
December 31, 1996 (unaudited)
The U.S.
Government
The Money Securities Money
Market Portfolio Market Portfolio
----------------- ------------------
Assets:
Investment in
securities, at
value and cost $1,309,647,699 $ 39,497,317
Receivables from
repurchase
agreements, at
value and cost 215,875,000 228,575,000
Cash 668,468 7,545
Receivables:
Interest 5,974,682 41,181
---------- ---------
Total assets 1,532,165,849 268,121,043
------------- -----------
Liabilities:
Payables:
Capital shares
repurchased 764,821 345,520
Management fees 186,603 11,289
Distributions to
shareholders -- 252
Accrued expenses
and other liabilities 10,462 10,974
------- --------
Total liabilities 961,886 368,035
------- --------
Net assets, at value $1,531,203,963 $267,753,008
============== =============
Shares outstanding 1,531,203,963 267,753,008
============== =============
Net asset value
per share $1.00 $1.00
============= ==========
Statement of Operations
for the six months ended December 31, 1996 (unaudited)
The U.S.
The Money Government
Market Securities Money
Market Portfolio Market Portfolio
-------------------- -------------------
Investment income:
Interest $45,035,668 $7,410,912
--------------------- --------------------
Expenses:
Management fees
(Note 5) 1,235,945 208,325
Reports to shareholders 24,798 5,341
Professional fees 21,896 4,698
Custodian fees 12,332 2,136
Trustees' fees and
expenses 6,196 884
Other 999 12,960
Management fees
waived by manager (75,306) (27,952)
----------- ---------
Total expenses 1,226,860 206,392
---------- ---------
Net investment
income 43,808,808 7,204,520
---------- ----------
Net realized gain
on investments 230 3,533
---------- -----------
Net increase in net
assets resulting
from operations $43,809,038 $7,208,053
============ ============
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 six months ended December 31,
1996 (unaudited) and the year ended June 30, 1996
<TABLE>
<CAPTION>
The U.S. Government Securities
The Money Market Portfolio Money Market Portfolio
Six Months Year Six Months Year
ended 12/31/96 ended 6/30/9 ended 12/31/96 ended 6/30/96
-------------- -------------- --------------- -------------
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C>
Net investment income........ $ 43,808,808 $ 79,011,040 $ 7,204,520 $ 17,554,934
Net realized gain from security transactions 230 -- 3,533 683
------------ ----------- ----------- ------------
Net increase in net assets resulting
from operations.............. 43,809,038 79,011,040 7,208,053 17,555,617
Distributions to shareholders from
undistributed net investment income (43,809,038)a (79,011,040) (7,208,053)b (17,555,617)c
Increase (decrease) in net assets from
capital share transactions (Note 2) (18,881,284) 244,510,834 (17,948,096) (188,953,282)
----------- ----------- ---------- -----------
Net increase (decrease) in net assets (18,881,284 244,510,834 (17,948,096) (188,953,282)
Net assets (there is no undistributed
net investment income at beginning or
end of the period):
Beginning of period ........ 1,550,085,247 1,305,574,413 285,701,104 474,654,386
------------- -------------- ------------ --------------
End of period .............. $1,531,203,963 $1,550,085,247 $267,753,008 $285,701,104
============== ============== ============= ==============
</TABLE>
aDistributions were increased by net realized gain from security transactions of
$230.
bDistributions were increased by net realized gain from security
transactions of $3,533.
cDistributions were increased by net realized gain from security transactions of
$683.
The accompanying notes are an integral part of these financial statements.
THE MONEY MARKET PORTFOLIOS
Notes to Financial Statements (unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES
The Money Market Portfolios (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 Portfolios' investment objective is 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 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:
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 the 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 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, 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 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 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.
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.
1. SIGNIFICANT ACCOUNTING POLICIES (cont.)
g. 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 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
December 31, 1996, all outstanding repurchase agreements held by the Portfolios
had been entered into on that date.
2. TRUST SHARES
At December 31, 1996, there was an unlimited number of $0.01 par value shares of
beneficial interest authorized. Transactions in each of the Portfolios' shares
at $1.00 per share for the six months ended December 31, 1996 and the year ended
June 30, 1996 were as follows:
<TABLE>
<CAPTION>
The U.S. Government
The Money Securities Money
Market Portfolio Market Portfolio
---------------- ----------------
Six months ended December 31, 1996
<S> <C> <C>
Shares sold................................... $ 1,875,368,178 $ 547,941,786
Shares issued in reinvestment of distributions 43,810,072 7,208,648
Shares redeemed .............................. (1,938,059,534) (573,098,530)
-------------- ---------------
Net decrease ................................. $ (18,881,284) $ (17,948,096)
============ =============
Year ended June 30, 1996
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)
============ =============
</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
purposes at June 30, 1996.
4. PURCHASES AND SALES OF SECURITIES
Purchases and sales/maturities of securities, including repurchase agreements,
for the six months ended December 31, 1996, were as follows:
<TABLE>
<CAPTION>
The U.S. Government
The Money Securities Money
Market Portfolio Market Portfolio
<S> <C> <C>
---------------- ----------------
Purchases..............................................$36,831,213,679 $30,361,308,906
Sales..................................................$36,850,555,181 $30,379,082,800
</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 average daily net assets. For the
six months ended December 31, 1996, Advisers agreed in advance to waive
management fees for the Portfolios, aggregating $103,258.
b. Other Affiliates and Related Party Transactions:
Certain officers and trustees of the Portfolios are also officers and/or
directors of Advisers and Franklin/Templeton Distributors, Inc. (all
wholly-owned subsidiaries of Franklin Resources, Inc.), and of the Franklin
Money Fund, Institutional Fiduciary Trust, Franklin Templeton Money Fund Trust
and Franklin Federal Money Fund.
At December 31, 1996, the shares of The Money Market Portfolio were owned by the
following funds:
<TABLE>
<CAPTION>
Percentage of
Outstanding
Shares Shares
-------- ------------
<S> <C> <C>
Franklin Money Fund........................................ 1,217,967,196 79.54%
Institutional Fiduciary Trust - Money Market Portfolio..... 254,807,998 16.64%
Institutional Fiduciary Trust - Franklin Cash Reserves Fund 51,554,346 3.37%
Franklin Templeton Money Fund Trust - Franklin Templeton Money Fund II 6,874,423 0.45%
</TABLE>
At December 31, 1996, the shares of The U.S. Government Securities Money Market
Portfolio were owned by the following funds:
<TABLE>
<CAPTION>
Percentage of
Outstanding
Shares Shares
----------- -----------
Institutional Fiduciary Trust - Franklin U.S. Government Securities
<S> <C> <C>
Money Market Portfolio................................. 142,857,653 53.35%
Franklin Federal Money Fund............................. 124,895,355 46.65%
</TABLE>
6. FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Selected data for a share of beneficial interest outstanding throughout each
period by the Portfolios are as follows:
Per Share Operating Performance Ratios/Supplemental Data
------------------------------------ -----------------------------
Ratio of Net
Net Asset Distributions Net Asset Net Assets Ratio of Investment
Year Value at Net From Net Value at at End Expenses Income
Ended Beginning Investment Investment End of Total of Period to Average to Average
June 30, of Period Income Income 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
1996 1.00 0.055 (0.055) 1.00 5.66 1,550,085 0.15 5.50
1996*** 1.00 0.030 (0.030) 1.00 2.71 1,531,204 0.15** 5.36
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
1996*** 1.00 0.027 (0.027) 1.00 2.65 267,753 0.15** 5.19
</TABLE>
*July 28, 1992 (Effective date of registration) to June 30, 1993.
**Annualized
***For the six months ended December 31, 1996.
+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 at net asset value. ++During
the periods indicated, Advisers agreed to waive in advance a portion of its
management fees of the Portfolios. 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*............................ 0.17%**
1994............................. 0.17
1995............................. 0.16
1996............................. 0.16
1996***.......................... 0.16**
The U.S. Government Securities Money Market
Portfolio
1993*............................ 0.18%**
1994............................. 0.17
1995............................. 0.16
1996............................. 0.17
1996***.......................... 0.17**
