SHAREHOLDER LETTER
CONTENTS
Shareholder Letter .................................. 1
Performance Summary ................................. 4
Financial Highlights &
Statement of Investments ............................ 5
Financial Statements ................................ 7
Notes to
Financial Statements ................................ 8
Your Fund's Objective: 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
Dear Shareholder:
It's a pleasure to bring you Franklin Money Fund's semi-annual report for the
period ended December 31, 1997.
Strong economic growth coupled with mild inflation characterized most of the
reporting period. For the third and fourth quarters of 1997, Gross Domestic
Product (GDP) grew at an annualized rate of 3.9% and 3.4%, respectively, which
is considerably higher than the Federal Reserve Board's (the Fed's) targeted
2.5% long-term growth rate.2# In addition, the unemployment rate declined to
4.7% on December 31, 1997 -- the lowest in 25 years -- largely as a result of
the country's economic strength.3# However, the Fed did not react to the
continued economic strength for a couple of reasons. Despite robust economic
growth, consumer prices increased by only 1.8% in 1997, the smallest increase in
11 years. The Asian financial crisis in October also prevented the Fed from
taking any steps that might induce further volatility in the international
financial markets.
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.
2. Source:Bureau of Labor Statistics.
3. Source:ibid.
The fund's seven-day annualized yield reflected the relatively flat interest
rate environment over the six-month reporting period. It began the period
yielding 4.92%, and was at 5.05% on December 31, 1997.
We believe the economy is in the later stages of its current business cycle.
Increased capital spending and higher private consumption could stimulate more
growth, which ultimately may lead to wage inflation. However, further
improvements in manufacturing productivity and lower exports to the Far East,
resulting from the Asian crisis, should mitigate any impact wages have on
overall consumer prices. As a result, we feel the Fed will continue to wait on
the sidelines, and assess the impact of these variables on economic growth and
inflation.
Please remember, this discussion reflects our views and opinions as of December
31, 1997, the end of the reporting period. However, market and economic
conditions are changing constantly, which may affect our strategies and
portfolio holdings. Although historic performance is no guarantee of future
results, these insights may help you understand our investment and management
philosophy.
We will continue to invest the fund's assets in securities that are among the
highest quality available to money market portfolios. Since the fund's objective
is to provide shareholders with a high quality, conservative investment, we do
not invest in leveraged derivatives or other potentially volatile securities 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 also can
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.
We appreciate your support, welcome new shareholders, and look forward to
serving your investment needs in the years ahead.
Sincerely,
Charles B. Johnson
Chairman
Franklin Money Fund
You may find a complete listing of the fund's portfolio holdings, including the
number of shares and dollar values, beginning on page 5 of this report.
PERFORMANCE SUMMARY
Franklin Money Fund
12/31/97
Seven-Day Annualized Yield 5.05%
Seven-Day Effective Yield1 5.18%
1. 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.
Franklin Advisers Inc., the fund's administrator, and the manager of the fund's
underlying portfolio have agreed in advance to waive a portion of 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.
Past performance is not predictive of future results.
FRANKLIN MONEY FUND
Financial Highlights
<TABLE>
<CAPTION>
Six Months Ended
December 31, 1997 Year Ended June 30, Year Ended November 30,
(unaudited) 1997 1996 1995* 1994 1993
<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 ......... .025 .048 .049 .030 .032 .023
Less distributions from net
investment income .............. (.025) (.048) (.049) (.030) (.032) (.023)
-----------------------------------------------------------------
Net asset value, end of period . $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
-----------------------------------------------------------------
Total return** ................. 2.53% 4.88% 4.99% 3.07% 3.28% 2.36%
Ratios/supplemental data
Net assets, end of period (000's) $1,628,388 $1,498,238 $1,172,639 $1,018,966 $1,124,223 $1,040,026
Ratios to average net assets:
Expenses1,2 ................... .71%*** .73% .75% .80%*** .91% .80%
Expenses excluding waiver and
payments by affiliate1,2 ..... .72%*** .74% .76% .82%*** .93% --
Net investment income ......... 5.00%*** 4.78% 4.86% 5.19%*** 3.23% 2.32%
*For the seven months ended June 30, 1995
**Total return is not annualized
***Annualized
1During the periods indicated, Advisers agreed in advance to waive a portion of
its management fees incurred by the Portfolio, and a portion of its
administration fees incurred by the Fund for 1994 and 1995.
2Effective with fiscal year 1994, the expense ratio includes the Fund's share of
the Portfolio's allocated expenses.
See notes to financial statements.
FRANKLIN MONEY FUND
Statement of Investments, December 31, 1997 (unaudited)
Mutual Funds 99.8%
<S> <C> <C>
The Money Market Portfolio (Note 1) 1,625,839,866$1,625,839,866
--------------
Total Investments (Cost $1,625,839,866) 99.8% 1,625,839,866
Other Assets, less Liabilities, 0.2% 2,548,122
--------------
Net Assets 100.0% $1,628,387,988
==============
</TABLE>
See notes to financial statements.
FRANKLIN MONEY FUND
Financial Statements
Statement of Assets and Liabilities
December 31, 1997 (unaudited)
Assets:
Investments in securities, at value and cost $1,625,839,866
Receivables for capital shares sold 35,439,788
-------------
Total assets 1,661,279,654
-------------
Liabilities:
Payables:
Capital shares redeemed 21,389,625
Affiliates 678,761
Shareholders 10,362,047
Other liabilities 461,233
-------------
Total liabilities 32,891,666
-------------
Net assets, at value (equivalent to $1.00
per share based on 1,628,387,988 shares
of capital stock outstanding) $1,628,387,988
=============
Statement of Operations
for the six months ended December 31, 1997 (unaudited)
Investment income:
Dividends $42,874,556
Expenses:
Administrative fees (Note 3) $2,301,052
Transfer agent fees (Note 3) 1,192,595
Reports to shareholders 584,391
Other 275,868
-------------
Total expenses 4,353,906
-------------
Net investment income $38,520,650
=============
Statements of Changes in Net Assets for the six months ended December 31, 1997
(unaudited)and the year ended June 30, 1997
Six Months Ended Year Ended
December 31, 1997 June 30, 1997
Increase (decrease)
in net assets:
Operations:
Net investment income $ 38,520,650 $ 63,687,936
Distributions to share-
holders from net
investment income (38,520,650) (63,687,936)
Capital share
transactions (Note 2) 130,150,094 325,599,270
--------------------------------
Net increase
in net assets 130,150,094 325,599,270
Net assets (there is no
undistributed net invest-
ment income at beginning
or end of period):
Beginning of period 1,498,237,894 1,172,638,624
----------------------------------
End of period $1,628,387,988 $1,498,237,894
===================================
See notes to financial statements.
FRANKLIN MONEY FUND
Notes to Financial Statements (unaudited)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Franklin Money Fund (the Fund) is registered under the Investment Company Act of
1940 as a diversified, open-end investment company. The Fund seeks high current
income.
The Fund invests substantially all of its assets in The Money Market Portfolio
(the Portfolio), which is registered under the Investment Company Act of 1940 as
a diversified, open end investment company having the same investment objectives
as the Fund. The financial statements of the Portfolio, including the Statement
of Investments, are included elsewhere in this report and should be read in
conjunction with the Fund's financial statements.
The following summarizes the Fund's significant accounting policies.
a. Security Valuation
The Fund holds Portfolio shares that are valued at its proportionate interest in
net asset value of the Portfolio. As of December 31, 1997, the Fund owns 83.29%
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
distribute all of its taxable income.
c. Security Transactions, Investment Income, Expenses and Distributions
Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
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 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, 1997, there were an unlimited number of shares authorized ($0.01
par value). Transactions in the Fund's shares were as follows:
Six Months Ended Year Ended
December 31, 1997 June 30, 1997
Shares sold ................... $3,634,789,219 $4,254,731,056
Shares issued in connection
with merger* ................. -- 111,973,848
Shares issued on reinvestment
of distributions ............. 38,459,088 63,447,512
Shares redeemed ............... (3,543,098,213) (4,104,553,146)
--------------------------------
Net increase .................. $ 130,150,094 $ 325,599,270
================================
*During the fiscal year ended June 30, 1997, the Fund acquired the net assets of
Templeton Money Fund pursuant to a plan of reorganization approved by the Fund's
shareholders.
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 investment manager and transfer agent,
respectively, and of the Money Market Portfolios.
The Fund pays an administrative fee to Advisers based on the average daily net
assets of the Fund as follows:
Annualized Fee Rate Net Assets
.455% First $100 million
.330% Over $100 million, up to and including $250 million
.280% Over $250 million
The Fund paid transfer agent fees of $1,192,595, of which $1,124,282 was paid to
Investor Services.
4. INCOME TAXES
At June 30, 1997, the Fund had tax basis capital losses which may be carried
over to offset future capital gains. Such losses expire as follows:
Capital loss carryovers expiring in:
2001 .............................................. $ 763
2002 .............................................. 4,038
$4,801
THE MONEY MARKET PORTFOLIOS
Financial Highlights
The Money Market Portfolio
<TABLE>
<CAPTION>
Six Months Ended
December 31, 1997 Year Ended June 30,
(unaudited) 1997 1996 1995 1994 1993*
<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........... .028 .056 .055 .053 .033 .027
Less distributions from
net investment income............ (.028) (.056) (.055) (.053) (.033) (.027)
-----------------------------------------------------------------------
Net asset value, end of period..... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
=====================================================================
Total return**..................... 2.81% 5.47% 5.66% 5.46% 3.33% 2.92%***
Ratios/supplemental data
Net assets, end of period (000's).. $1,952,039 $1,773,546 $1,550,085 $1,305,574 $219,189 $222,358
Ratios to average net assets:
Expenses.......................... .15%*** .15% .15% .15% .15% .15%***
Expenses excluding waiver
and payments by affiliate........ .16%*** .16% .16% .16% .17% .17%***
Net investment income............. 5.55%*** 5.34% 5.50% 5.42% 3.25% 3.18%***
*For the period July 28, 1992 (effective date) to June 30, 1993.
**Total return is not annualized.
***Annualized
</TABLE>
See notes to financial statements.
THE MONEY MARKET PORTFOLIOS
Statement of Investments, December 31, 1997 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
The Money Market Portfolio AMOUNT VALUE
<S> <C> <C>
Certificates of Deposit 41.5%
ABN-AMRO Bank NV, Chicago Branch, 5.77% - 6.14%, 5/01/98 - 6/17/98 ...... $ 50,000,000 $ 50,013,179
Australia & NZ Banking Group, New York Branch, 5.67%, 3/10/98 ........... 25,000,000 25,000,000
Bank of Montreal, Chicago Branch, 5.675% - 5.76%, 1/27/98 - 5/13/98 ..... 75,000,000 75,001,261
Bank of Nova Scotia, Portland Branch, 5.75%, 6/22/98 .................... 25,000,000 25,000,000
Barclays Bank, Plc., New York Branch, 5.79%, 3/03/98 - 3/04/98 .......... 50,000,000 50,000,842
Bayerische Landesbank, New York Branch, 5.755%, 6/16/98 - 6/18/98 ....... 50,000,000 50,001,128
Bayerische Vereinsbank, New York Branch, 5.75% - 5.85%, 5/14/98 - 6/15/98 75,000,000 75,000,000
Commerzbank AG, New York Branch, 5.625% - 6.075%, 1/09/98 - 5/27/98 ..... 75,000,000 75,017,989
Credit Agricole, New York Branch, 5.70%, 5/11/98 ........................ 25,000,000 25,000,000
Deutsche Bank AG, New York Branch, 5.64%, 1/16/98 ....................... 25,000,000 25,000,000
Generale Bank, New York Branch, 5.76%, 2/25/98 .......................... 25,000,000 25,000,376
Morgan Guaranty & Trust, New York Branch, 5.94%, 3/20/98 ................ 25,000,000 25,000,000
Rabobank Nederland NV, New York Branch, 5.70%, 5/12/98 .................. 25,000,000 25,001,768
Royal Bank of Canada, New York Branch, 5.80% - 6.04%, 6/05/98 - 6/15/98 . 30,000,000 29,996,573
Societe Generale, New York Branch, 5.69% - 5.80%, 1/09/98 - 3/19/98 ..... 55,000,000 54,993,402
Svenska Handelsbanken, New York Branch, 5.75% - 5.78%, 2/23/98 - 3/02/98 75,000,000 75,000,801
Swiss Bank Corp., New York Branch, 5.74% - 5.76%, 2/11/98 - 5/08/98 ..... 75,000,000 75,000,000
Westdeutsch Landesbank, New York Branch, 5.68%, 1/26/98 ................. 25,000,000 25,000,000
-------------
Total Certificates of Deposit (Cost $810,027,319)........................ 810,027,319
-------------
a Commercial Paper 37.6%
Abbey National North America, 5.55% - 5.60%, 1/21/98 - 4/27/98 .......... 75,000,000 74,389,583
ABN AMRO North America Finance, 5.54%, 4/30/98 .......................... 25,000,000 24,542,181
Associates Corp. of North America, 5.55% - 5.60%, 1/14/98 - 2/10/98 ..... 75,000,000 74,685,972
AT&T Corp., 5.53%, 2/03/98 .............................................. 25,000,000 24,873,271
BIL North America, Inc., 5.53%, 1/07/98 ................................. 25,000,000 24,976,958
CIESCO, L.P., 5.60%, 2/05/98 ............................................ 25,000,000 24,863,889
Commonwealth Bank of Australia, 5.495% - 5.54%, 2/18/98 - 5/07/98 ....... 55,000,000 54,295,450
Credit Agricole U.S.A., Inc., 5.55%, 1/30/98 ............................ 25,000,000 24,888,229
Den Danske Corp., Inc., 5.595%, 1/22/98 ................................. 25,000,000 24,918,406
Deutsche Bank Financial, Inc., 5.55%, 1/06/98 ........................... 25,000,000 24,980,729
General Electric Capital Corp., 5.55% - 5.69%, 1/08/98 - 2/12/98 ........ 75,000,000 74,699,985
Generale Bank, Inc., 5.51% - 5.54%, 2/13/98 - 2/19/98 ................... 50,000,000 49,647,076
Halifax Building Society, 5.53%, 1/05/98 ................................ 25,000,000 24,984,639
Merrill Lynch & Co., Inc., 5.60%, 1/28/98 ............................... 15,000,000 14,937,000
Metlife Funding, Inc., 5.68% - 5.72%, 2/06/98 - 2/26/98 ................. 50,000,000 49,636,111
Morgan Stanley Group, Inc., 5.60%, 2/09/98 .............................. 25,000,000 24,848,333
National Australian Funding (DE), Inc., 5.595%, 1/20/98 ................. 25,000,000 24,926,177
National Rural Utilities Cooperative Finance Corp., 5.54%, 1/15/98 ...... 25,000,000 24,946,139
Siemens Capital Corp., 5.59%, 6/25/98 ................................... 25,000,000 24,320,660
Toyota Motor Credit Corp., 5.61% - 5.70%, 2/27/98 - 6/19/98 ............. 30,000,000 29,296,479
Wool International, Inc., 5.49%, 2/12/98 ................................ 15,000,000 14,903,926
-------------
Total Commercial Paper (Cost $734,561,193) .............................. 734,561,193
-------------
Total Investments before Repurchase Agreements (Cost $1,544,588,512) .... 1,544,588,512
-------------
a,dRepurchase Agreements 20.7%
BancAmerica Robertson Stephens, 5.40%, 1/02/98 (Maturity Value $65,019,500)
Collateralized by U.S. Treasury Notes .................................. $ 65,000,000 $ 65,000,000
Chase Securities, Inc., 5.40%, 1/02/98 (Maturity Value $65,019,500)
Collateralized by U.S. Treasury Notes................................... 65,000,000 65,000,000
Dresdner Kleinwort Benson North America, L.L.C., 5.25%, 1/02/98
(Maturity Value $65,018,958)
Collateralized by U.S. Treasury Notes................................... 65,000,000 65,000,000
J.P. Morgan Securities, Inc., 6.25%, 1/02/98 (Maturity Value $104,431,248)
Collateralized by U.S. Treasury Notes................................... 104,395,000 104,395,000
Morgan Stanley & Co., Inc., 6.20%, 1/02/98 (Maturity Value $104,430,958)
Collateralized by U.S. Treasury Notes................................... 104,395,000 104,395,000
-------------
Total Repurchase Agreements (Cost $403,790,000).......................... 403,790,000
-------------
Total Investments (Cost $1,948,378,512) 99.8%............................ 1,948,378,512
Other Assets, less Liabilities .2%....................................... 3,660,401
-------------
Net Assets 100.0% ....................................................... $1,952,038,913
=============
</TABLE>
aSecurities are traded on a discount basis; the rates shown are the discount
rates at the time of purchase by the Portfolio.
See notes to financial statements.
THE MONEY MARKET PORTFOLIOS
Financial Highlights
The U.S. Government Securities Money Market Portfolio
<TABLE>
<CAPTION>
Six Months Ended
December 31, 1997 Year Ended June 30,
(unaudited) 1997 1996 1995 1994 1993*
<S> <C> <C> <C> <C> <C> <C>
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
----------------------------------------------------------------------
Income from investment operations
- net investment income............ .027 .052 .054 .052 .032 .021
Less distributions from
net investment income.............. (.027) (.052) (.054) (.052) (.032) (.021)
----------------------------------------------------------------------
Net asset value, end of period...... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
======================================================================
Total return**...................... 2.76% 5.34% 5.55% 5.32% 3.25% 2.27%***
Ratios/supplemental data
Net assets, end of period (000's)... $243,983 $258,629 $285,701 $474,654 $218,548 $310,319
Ratios to average net assets:
Expenses........................... .15%*** .15% .15% .15% .15% .15%***
Expenses excluding waiver and
payments by affiliate............. .17%*** .16% .17% .16% .17% .18%***
Net investment income.............. 5.44%*** 5.20% 5.45% 5.25% 3.20% 3.05%***
</TABLE>
*For the period July 28, 1992 (effective date) to June 30, 1993.
**Total return is not annualized.
***Annualized
See notes to financial statements.
THE MONEY MARKET PORTFOLIOS
Statement of Investments, December 31, 1997 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
The U.S. Government Securities Money Market Portfolio AMOUNT VALUE
aGovernment Securities 20.3%
<S> <C> <C>
U.S. Treasury Bills, 5.65%, 1/08/98 ....................................... $10,000,000 $ 9,989,014
U.S. Treasury Bills, 5.40%, 4/30/98 ....................................... 10,000,000 9,821,500
U.S. Treasury Notes, 5.25%, 7/31/98 ....................................... 10,000,000 9,979,308
U.S. Treasury Notes, 4.75%, 9/30/98 ....................................... 20,000,000 19,866,959
-------------
Total Government Securities (Cost $49,656,781)............................. 49,656,781
-------------
Repurchase Agreements 79.6%
BancAmerica Robertson Stephens, 6.40%, 1/02/98 (Maturity Value $10,003,556)
Collateralized by U.S. Treasury Notes..................................... 10,000,000 10,000,000
Barclays Capital Group, Inc., 6.50%, 1/02/98 (Maturity Value $10,003,611)
Collateralized by U.S. Treasury Notes..................................... 10,000,000 10,000,000
BT Alex Brown, Inc., 5.75%, 1/02/98 (Maturity Value $10,003,194)
Collateralized by U.S. Treasury Bills..................................... 10,000,000 10,000,000
Chase Securities, Inc., 6.10%, 1/02/98 (Maturity Value $10,003,389)
Collateralized by U.S. Treasury Notes..................................... 10,000,000 10,000,000
CIBC Wood Gundy Securities Corp., 6.45%, 1/02/98 (Maturity Value $10,003,583)
Collateralized by U.S. Treasury Notes..................................... 10,000,000 10,000,000
Deutsche Morgan Grenfell/C.J. Lawrence, Inc., 6.40%,
1/02/98 (Maturity Value $10,003,556)
Collateralized by U.S. Treasury Notes..................................... 10,000,000 10,000,000
J.P. Morgan Securities, Inc., 6.15%, 1/02/98 (Maturity Value $22,072,539)
Collateralized by U.S. Treasury Bills and U.S. Treasury Notes............. 22,065,000 22,065,000
J.P. Morgan Securities, Inc., 6.25%, 1/02/98 (Maturity Value $30,010,417)
Collateralized by U.S. Treasury Bills and U.S. Treasury Notes ............ 30,000,000 30,000,000
Merrill Lynch Government Securities, Inc., 6.00%, 1/02/98
(Maturity Value $10,003,333) Collateralized by U.S. Treasury Notes ........ 10,000,000 10,000,000
Morgan Stanley & Co., Inc., 6.20%, 1/02/98 (Maturity Value $52,082,933)
Collateralized by U.S. Treasury Bills .................................... 52,065,000 52,065,000
SBC Warburg Dillon Read, Inc., 6.50%, 1/02/98 (Maturity Value $10,003,611)
Collateralized by U.S. Treasury Notes .................................... 10,000,000 10,000,000
UBS Securities, L.L.C., 6.45%, 1/02/98 (Maturity Value $10,003,583)
Collateralized by U.S. Treasury Notes..................................... 10,000,000 10,000,000
-------------
Total Repurchase Agreements (Cost $194,130,000) ........................... 194,130,000
-------------
Total Investments (Cost $243,786,781) 99.9%................................ 243,786,781
Other Assets, less Liabilities .1% ........................................ 196,109
-------------
Net Assets 100.0% ......................................................... $243,982,890
=============
</TABLE>
aSecurities are traded on a discount basis; the rates shown are the discount
rates at the time of purchase by the Portfolio.
See notes to financial statements.
THE MONEY MARKET PORTFOLIOS
Financial Statements
<TABLE>
<CAPTION>
Statements of Assets and Liabilities
December 31, 1997 (unaudited)
The U.S.
Government
Securities
The Money Money Market
Market Portfolio Portfolio
<S> <C> <C>
Assets:
Investments in securities, at value and cost............................... $1,544,588,512 $49,656,781
Repurchase agreements, at value and cost................................... 403,790,000 194,130,000
Cash....................................................................... 1,679 3,930
Receivables:
Capital shares sold....................................................... 80,234 --
Interest.................................................................. 8,993,889 496,074
------------------------------
Total assets................................................................ 1,957,454,314 244,286,785
==============================
Liabilities:
Payables:
Capital shares redeemed................................................... 5,165,275 257,698
Affiliates................................................................ 232,119 28,311
Distributions to shareholders.............................................. 3,711 --
Other liabilities.......................................................... 14,296 17,886
------------------------------
Total liabilities........................................................... 5,415,401 303,895
------------------------------
Net assets, at value........................................................ $1,952,038,913 $243,982,890
==============================
Shares outstanding.......................................................... 1,952,038,913 243,982,890
==============================
Net asset value per share................................................... $1.00 $1.00
==============================
</TABLE>
See notes to financial statements.
THE MONEY MARKET PORTFOLIOS
Financial Statements (continued)
<TABLE>
<CAPTION>
Statements of Operations
for the six months ended December 31, 1997 (unaudited)
The U.S.
Government
Securities
The Money Money Market
Market Portfolio Portfolio
<S> <C> <C>
Investment income:
Interest................................................................... $53,164,949 $7,232,180
------------------------------
Expenses:
Management fees (Note 3)................................................... 1,410,043 195,260
Custodian fees............................................................. 9,612 5,461
Reports to shareholders.................................................... 21,824 4,192
Professional fees.......................................................... 21,259 4,596
Trustees' fees and expenses................................................ 3,800 579
Other...................................................................... 29,506 10,841
------------------------------
Total expenses............................................................ 1,496,044 220,929
Expenses waived/paid by affiliate (Note 3)................................ (85,712) (25,457)
-------------------------------
Net expenses................................................................ 1,410,332 195,472
------------------------------
Net investment income...................................................... 51,754,617 7,036,708
------------------------------
Net increase in net assets resulting from operations........................ $51,754,617 $7,036,708
==============================
</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, 1997 (unaudited)
and the year ended June 30, 1997
<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, 1997 June 30, 1997December 31, 1997June 30, 1997
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income .................... $ 51,754,617 $ 90,724,056 $ 7,036,708 $ 14,032,778
Net realized gain (loss)
from investments ........................ -- (931) -- 3,978
-------------------------------------------------------------
Net increase in net assets
resulting from operations ................. 51,754,617 90,723,125 7,036,708 14,036,756
Distributions to shareholders from
net investment income .................... (51,754,617) (90,723,125)a (7,036,708) (14,036,756)b
Capital share transactions (Note 2) ....... 178,492,924 223,460,742 (14,646,287) (27,071,927)
--------------------------------------------------------------
Net increase (decrease) in net assets ...... 178,492,924 223,460,742 (14,646,287) (27,071,927)
Net assets (there is no undistributed net investment
income at beginning or end of period):
Beginning of period ....................... 1,773,545,989 1,550,085,247 258,629,177 285,701,104
-------------------------------------------------------------
End of period ............................. $1,952,038,913 $1,773,545,989 $243,982,890 $258,629,177
=============================================================
</TABLE>
aDistributions were decreased by a net realized loss from investments of $931.
bDistributions were increased by a net realized gain from investments of $3,978.
See notes to financial statements.
THE MONEY MARKET PORTFOLIOS
Notes to Financial Statements (unaudited)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Money Market Portfolios (Money Market) is registered under the Investment
Company Act of 1940 as an open-end, diversified investment company, consisting
of two separate portfolios (the Portfolios). The shares of the Money Market are
issued in private placements and are exempt from registration under the
Securities Act of 1933. The Portfolios' investment objective is high current
income. 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, 1997, 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
distribute all of its taxable income.
d. Security Transactions, Investment Income, Expenses and Distributions:
Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Interest income and estimated expenses are accrued daily. Dividends from net
investment income and capital gains or losses are normally declared daily. Such
distributions are reinvested in additional shares of the Portfolios.
Common expenses incurred by the Money Market 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.
2. SHARES OF BENEFICIAL INTEREST
At December 31, 1997, there were an unlimited number of shares authorized ($0.01
par value). Transactions in the Portfolios' shares were as follows:
The U.S.
Government
Securities
The Money Money Market
Market Portfolio Portfolio
Six months ended
December 31, 1997
Shares sold ....................$2,732,924,579 $616,546,090
Shares issued in reinvestment
of distributions .............. 51,752,178 7,036,446
Shares redeemed ................ (2,606,183,833) (638,228,823)
Net increase (decrease) ......... $ 178,492,924 $(14,646,287)
Year ended June 30, 1997
Shares sold ....................$4,134,527,818 $937,979,469
Shares issued in reinvestment
of distributions .............. 90,722,912 14,037,460
Shares redeemed ................ (4,001,789,988) (979,088,856)
Net increase (decrease) ......... $ 223,460,742 $(27,071,927)
3. TRANSACTIONS WITH AFFILIATES
Certain officers and trustees of the Portfolios are also officers and/or
directors of Franklin Advisers, Inc. (Advisers) and Franklin/Templeton Investor
Services, Inc. (Investor Services), the Portfolios' investment manager and
transfer agent, respectively, and of the Franklin Money Fund, Institutional
Fiduciary Trust, Franklin Templeton Money Fund Trust and Franklin Federal Money
Fund.
The Portfolios pay an investment management fee to Advisers of .15% per year of
the average daily net assets of each Portfolio. Advisers agreed in advance to
waive management fees for the Portfolios, as noted in the Statement of
Operations.
3. TRANSACTIONS WITH AFFILIATES (cont.)
At December 31, 1997, the shares of The Money Market Portfolio were owned by the
following funds:
Percentage of
Outstanding
Shares Shares
Franklin Money Fund 1,625,839,866 83.29%
Institutional Fiduciary Trust-
Money Market Portfolio 192,790,791 9.88%
Institutional Fiduciary Trust-
Franklin Cash Reserves Fund 101,329,704 5.19%
Franklin Templeton Money Fund Trust-
Franklin Templeton Money Fund II 32,078,552 1.64%
At December 31, 1997, the shares of The U.S. Government Securities Money Market
Portfolio were owned by the following funds:
Percentage of
Outstanding
Shares Shares
Institutional Fiduciary Trust-
Franklin U.S Government
Securities Money Market Portfolio 117,534,517 48.17%
Franklin Federal Money Fund 126,448,373 51.83%
4. INCOME TAXES
At June 30, 1997, The Money Market Portfolio had tax basis capital losses of
$3,560, which may be carried over to offset future capital gains. Such losses
expire in 2002.
At June 30, 1997, The Money Market Portfolio had deferred capital losses
occurring subsequent to October 31, 1996 of $1,161. For tax purposes, such
losses will be reflected in the year ending June 30, 1998.
