SHAREHOLDER LETTER
Your Fund's Goal: 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 goal. 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 semiannual report for the
period ended December 31, 1998.
The domestic economy continued to grow at a healthy pace during the period under
review. Higher income levels coupled with a robust real estate market and
increasing stock prices fueled the consumer sector, which was the primary driver
of domestic growth. Consumption also buoyed the labor market, with the
unemployment rate reaching 4.5% this year, the lowest in 28 years. The overall
economy, as measured by U.S. Gross Domestic Product, grew at an annualized rate
of 3.9% for 1998, with an especially strong 5.6% annualized rate in the fourth
quarter, well above the Federal Reserve Board's (the Fed's) targeted long-term
growth rate of 2.5%.(2)
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.
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
Shareholder Letter ....................................................... 1
Performance Summary ...................................................... 3
Financial Highlights &
Statement of Investments ................................................. 4
Financial Statements ..................................................... 6
Notes to
Financial Statements ..................................................... 7
FUND CATEGORY
[PYRAMID GRAPH]
<PAGE>
Meanwhile, exports were hit hard by the emerging markets crisis that prevailed
for much of the reporting period, hampering the U.S. manufacturing sector and
producing record trade deficits. As a result, gains in the consumer sector stood
in stark contrast to declines in the manufacturing and export sectors. Increased
competition from low-cost imports exacerbated rising domestic wage costs and a
weakening U.S. export sector.
The extent of problems in emerging economies took the financial community by
surprise. Many institutional investors became averse to virtually any security
with credit risk, which seemed to paralyze the credit markets. An ensuing
"flight to quality" fueled tremendous demand for U.S. Treasuries, a traditional
safe haven in times of market and political turmoil. The yield on three-month
Treasury bills, usually a reasonable proxy for the fund, declined from 5.32% on
January 2, 1998, to 4.48% on December 31, 1998, falling as low as 3.65% on
October 16, 1998, before rebounding.(3) Put into a historical context,
three-month Treasury yields have averaged 5.06% over the last five years,
fluctuating from as low as 2.89% on January 27, 1994, to as high as 6.07% on
February 1, 1995. The "credit crunch" prompted the Fed to cut the federal funds
target rate three times over seven weeks, for a total of 75 basis points
(0.75%), bringing it to 4.75% on November 17, 1998. This revitalized the credit
markets and spurred equity prices in the process. Reflecting lower short-term
interest rates, the fund's seven-day yield during the reporting period declined
from 5.00% on July 1, 1998, to 4.51% on December 31, 1998.
We continue to invest the fund's assets in only higher quality money market
securities. For example, over 75% of the paper purchased by the fund carries
long-term credit ratings of "AA" or higher by Standard & Poor's and Moody's, two
national credit rating agencies.(4) Consistent with the fund's goal of providing
shareholders with a higher-quality and conservative investment
3. Bond prices are inversely related to their yields. An increase in price leads
to a corresponding decrease in yield.
4. The ratings do not indicate Moody's and Standard & Poor's ratings of the
fund.
2
<PAGE>
vehicle, we do not invest the fund's cash in derivatives or other potentially
volatile securities that we believe involve undue risk.
Going forward, underlying concerns linger regarding the economy's strength.
Balanced against these concerns, however, remains a profound environment of low
inflation and interest rates that have so far helped propel consumer spending.
Additionally, should economic growth slow, the Fed may make further changes to
the federal funds target rate.
Please remember, this discussion reflects our views, opinions and portfolio
holdings as of December 31, 1998, the end of the reporting period. However,
market and economic conditions are changing constantly, which can be expected to
affect our strategies and the fund's portfolio composition. Although historical
performance is no guarantee of future results, these insights may help you
understand our investment and management philosophy.
As a Franklin Money Fund shareholder, you enjoy certain advantages of investing
in a money market fund. With our policy of seeking to maintain a stable $1.00
net asset value per share, Franklin Money Fund can provide relative stability in
a volatile market environment. You have the added benefit of convenient, easy
access to your money, draft writing, free draft books and a high degree of
credit safety.
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 Money Fund
PERFORMANCE SUMMARY
12/31/98
<TABLE>
<S> <C>
Seven-day annualized yield 4.51%
Seven-day effective yield* 4.61%
</TABLE>
*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, 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 would have been lower. The fee waiver
may be discontinued at any time upon notice to the fund's Board of Trustees.
Past performance is not predictive of future results.
3
<PAGE>
FRANKLIN MONEY FUND
Financial Highlights
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED JUNE 30,
DECEMBER 31, 1998 ---------------------------------------------------------
(UNAUDITED) 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 ............................ .024 .050 .048 .049 .030
Less distributions from net investment
income ........................................... (.024) (.050) (.048) (.049) (.030)
------------------------------------------------------------------------------
Net asset value, end of period .................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
==============================================================================
Total return(*) ................................... 2.46% 5.10% 4.88% 4.99% 3.07%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ................. $2,184,483 $1,722,424 $1,498,238 $1,172,639 $1,018,966
Ratios to average net assets:
Expenses(1) ...................................... .63%** .68% .73% .75% .80%**
Expenses excluding waiver and
payments by affiliate(1) ........................ .64%** .69% .74% .76% .82%**
Net investment income ............................ 4.86%** 4.99% 4.78% 4.86% 5.19%**
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
NOVEMBER 30,
1994
------------
<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 ............................ .032
Less distributions from net investment
income ........................................... (.032)
------------
Net asset value, end of period .................... $ 1.00
============
Total return(*) ................................... 3.28%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ................. $1,124,223
Ratios to average net assets:
Expenses(1) ...................................... .91%
Expenses excluding waiver and
payments by affiliate(1) ........................ .93%
Net investment income ............................ 3.23%
</TABLE>
* Total return is not annualized.
** Annualized.
(1)The expense ratio includes the Fund's share of the Portfolio's allocated
expenses.
+ For the period December 1, 1994 to June 30, 1995.
4 See notes to financial statements.
<PAGE>
FRANKLIN MONEY FUND
STATEMENT OF INVESTMENTS, DECEMBER 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
MUTUAL FUNDS 100.9%
The Money Market Portfolio (Note 1) (Cost $2,204,122,234) ... 2,204,122,234 $ 2,204,122,234
OTHER ASSETS, LESS LIABILITIES (.9%) ........................ (19,638,756)
---------------
NET ASSETS 100.0% ........................................... $ 2,184,483,478
===============
</TABLE>
See notes to financial statements. 5
<PAGE>
FRANKLIN MONEY FUND
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31,1998 (UNAUDITED)
<TABLE>
<S> <C>
Assets:
Investments in securities, at value and cost $2,204,122,234
Receivables for capital shares sold 36,286,950
--------------
Total assets 2,240,409,184
--------------
Liabilities:
Payables:
Capital shares redeemed 47,868,603
Affiliates 620,650
Shareholders 7,125,216
Other liabilities 311,237
--------------
Total liabilities 55,925,706
--------------
Net assets, at value $2,184,483,478
==============
Shares outstanding 2,184,483,478
==============
Net asset value per share $ 1.00
==============
</TABLE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31,1998 (UNAUDITED)
<TABLE>
<S> <C>
Investment income:
Dividends $54,838,415
-----------
Expenses:
Administrative fees (Note 3) 3,017,885
Transfer agent fees (Note 3) 1,300,290
Reports to shareholders 572,766
Registration and filing fees 65,712
Professional fees 16,019
Directors' fees and expenses 38,150
-----------
Total expenses 5,010,822
-----------
Net investment income $49,827,593
===========
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1998 (UNAUDITED)
AND THE YEAR ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
SIX MONTHS YEAR
ENDED ENDED
DECEMBER 31, 1998 JUNE 30, 1998
---------------------------------------
<S> <C> <C>
Increase (decrease) in
net assets:
Operations:
Net investment income $ 49,827,593 $ 80,832,633
Distributions to
shareholders from net
investment income (49,827,593) (80,832,633)
Capital share transactions
(Note 2) 462,059,409 224,186,175
---------------------------------------
Net increase in
net assets 462,059,409 224,186,175
Net assets (there is no
undistributed net
investment income at
beginning or end of
period):
Beginning of period 1,722,424,069 1,498,237,894
---------------------------------------
End of period $ 2,184,483,478 $ 1,722,424,069
=======================================
</TABLE>
6 See notes to financial statements.
<PAGE>
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 to provide a
high level of current income consistent with preservation of capital.
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, 1998, the Fund owns 83.35%
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 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.
7
<PAGE>
FRANKLIN MONEY FUND
Notes to Financial Statements (unaudited) (continued)
2. CAPITAL STOCK
At December 31, 1998, there were an unlimited number of shares authorized ($0.01
par value). Transactions in the Fund's shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS YEAR
ENDED ENDED
DECEMBER 31, 1998 JUNE 30, 1998
---------------------------------------
<S> <C> <C>
Shares sold .............. $ 6,454,310,916 $ 8,456,151,266
Shares issued in
reinvestment
of distributions ....... 49,756,548 80,528,046
Shares redeemed .......... (6,042,008,055) (8,312,493,137)
---------------------------------------
Net increase ............. $ 462,059,409 $ 224,186,175
=======================================
</TABLE>
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 Money Market Portfolios.
The Fund pays an administrative fee to Advisers based on the average daily net
assets of the Fund as follows:
<TABLE>
<CAPTION>
ANNUALIZED
FEE RATE NET ASSETS
-------------------------------------------------------------------
<S> <C>
.455% First $100 million
.330% Over $100 million,up to and including $250 million
.280% Over $250 million
</TABLE>
4. INCOME TAXES
At June 30, 1998, the Fund had tax basis capital losses which may be carried
over to offset future capital gains. Such losses expire as follows:
<TABLE>
<CAPTION>
Capital loss carryovers expiring in:
<S> <C>
2001 .................................. $ 763
2002 .................................. 4,038
------
$4,801
======
</TABLE>
8
<PAGE>
THE MONEY MARKET PORTFOLIOS
Financial Highlights
THE MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31, 1998
(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* ..................................... 2.71%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ................. $2,644,509
Ratios to average net assets:
Expenses ......................................... .15%**
Expenses excluding waiver and payments
by affiliate .................................... .16%**
Net investment income ............................ 5.33%**
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-----------------------------------------------------------------
1998 1997 1996 1995 1994
-----------------------------------------------------------------
<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 ............................ .055 .053 .055 .053 .033
Less distributions from net investment income ..... (.055) (.053) (.055) (.053) (.033)
-----------------------------------------------------------------
Net asset value, end of period .................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
=================================================================
Total return* ..................................... 5.64% 5.47% 5.66% 5.46% 3.33%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ................. $2,043,629 $1,773,546 $1,550,085 $1,305,574 $219,189
Ratios to average net assets:
Expenses ......................................... .15% .15% .15% .15% .15%
Expenses excluding waiver and payments
by affiliate .................................... .16% .16% .16% .16% .17%
Net investment income ............................ 5.50% 5.34% 5.50% 5.42% 3.25%
</TABLE>
*Total return is not annualized.
**Annualized
See notes to financial statements. 9
<PAGE>
THE MONEY MARKET PORTFOLIOS
STATEMENT OF INVESTMENTS,DECEMBER 31,1998 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
THE MONEY MARKET PORTFOLIO AMOUNT VALUE
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
BANK NOTES 8.7%
Nations Bank NA, 4.98% - 5.12%, 4/07/99 - 6/10/99 ...................................... $ 100,000,000 $ 100,002,936
NBD Bank, 5.10% - 5.15%, 2/10/99 - 3/15/99 ............................................. 50,000,000 50,000,776
Wachovia Bank NA, 5.18% - 5.60%, 1/07/99 - 3/05/99 ..................................... 80,000,000 80,000,060
--------------
TOTAL BANK NOTES (COST $230,003,772) ................................................... 230,003,772
--------------
CERTIFICATES OF DEPOSIT 39.8%
ABN-AMRO Bank NV, Chicago Branch, 4.93% - 5.72%,2/24/99 - 6/07/99 ...................... 90,300,000 90,308,459
Australia & New Zealand Banking Group, New York Branch, 5.625%, 1/11/99 ................ 25,000,000 25,000,000
Bank of Nova Scotia, Portland Branch, 5.08% - 5.51%, 1/05/99 - 3/22/99 ................. 100,000,000 100,000,000
Barclays Bank PLC, New York Branch, 5.53%, 2/23/99 ..................................... 9,500,000 9,502,454
Bayerische Landesbank, New York Branch, 4.98% - 5.55%, 1/29/99 - 6/25/99 ............... 70,000,000 70,006,358
Bayerische Vereinsbank, New York Branch, 4.95% - 5.33%, 1/04/99 - 6/29/99 .............. 80,000,000 80,000,000
Commerzbank AG, New York Branch, 5.43%, 1/19/99 - 1/26/99 .............................. 50,000,000 50,000,293
Credit Agricole, New York Branch, 5.08% - 5.74%, 3/10/99 - 4/26/99 ..................... 47,300,000 47,332,968
Den Danske Bank, New York Branch, 5.10% - 5.41%, 1/19/99 - 3/11/99 ..................... 50,000,000 50,001,069
Deutsche Bank AG, New York Branch, 5.62% - 5.685%, 2/26/99 - 6/03/99 ................... 40,000,000 40,013,839
Dresdner Bank AG, New York Branch, 4.96% - 5.34%, 2/16/99 - 2/19/99 .................... 75,000,000 75,007,008
Landesbank Hessen Thuringen, New York Branch, 5.27%, 1/12/99 ........................... 25,000,000 25,000,038
National Westminster Bank PLC, New York Branch, 5.22% - 5.745%, 1/13/99 - 4/06/99 ...... 65,000,000 64,986,898
Rabobank Nederland NV, New York Branch, 4.95% - 5.64%, 1/04/99 - 7/30/99 ............... 100,500,000 100,502,880
Royal Bank of Canada, New York Branch, 5.68%, 3/29/99 .................................. 50,000,000 50,012,578
Societe Generale, New York Branch, 5.58%, 1/22/99 ...................................... 25,000,000 24,998,921
Swiss Bank Corp., New York Branch, 5.81%, 4/29/99 ...................................... 25,000,000 24,996,906
Toronto Dominion Bank, New York Branch, 5.62%, 1/25/99 ................................. 25,000,000 25,000,000
UBS AG, New York Branch, 5.12%, 5/05/99 ................................................ 25,000,000 25,000,000
Westdeutsche Landesbank, New York Branch, 5.18% - 5.64%, 2/04/99 - 2/05/99 ............. 60,000,000 60,013,745
Westpac Banking Corp., New York Branch, 5.55%, 1/20/99 ................................. 15,000,000 14,998,761
--------------
TOTAL CERTIFICATES OF DEPOSIT (COST $1,052,683,175) .................................... 1,052,683,175
--------------
(a)COMMERCIAL PAPER 43.7%
Abbey National North America, 5.05% - 5.12%, 2/03/99 - 2/09/99 ......................... 55,000,000 54,718,542
American Express Credit Corp., 5.00% - 5.05%, 1/07/99 - 3/03/99 ........................ 75,000,000 74,744,410
Associates Corp.of North America, 5.05% - 5.35%, 1/06/99 - 2/11/99 ..................... 105,000,000 104,648,188
Barclays U.S.Funding Corp., 5.10%, 1/27/99 ............................................. 25,000,000 24,907,917
Canadian Imperial Holdings, Inc., 4.94% - 5.04%, 1/28/99 - 4/12/99 ..................... 50,000,000 49,559,014
Chevron U.K.Investment PLC, 5.34%, 1/19/99 ............................................. 10,000,000 9,973,300
CICSCO LP, 5.35%, 1/21/99 - 1/22/99 .................................................... 50,000,000 49,847,674
Commonwealth Bank of Australia, 4.99% - 5.07%, 3/04/99 - 4/01/99 ....................... 65,000,000 64,313,778
Cregem North America Inc., 5.06%, 3/24/99 - 3/25/99 .................................... 50,000,000 49,420,208
General Electric Capital Corp., 4.92% - 5.44%, 1/14/99 - 5/04/99 ....................... 105,000,000 104,307,958
International Lease Finance Corp., 5.12%, 2/01/99 ...................................... 5,000,000 4,977,956
International Nederlanden (U.S.) Funding Corp., 5.06% - 5.10%, 2/12/99 - 3/30/99 ....... 95,000,000 94,221,701
J.P.Morgan & Co.Inc., 4.90% - 5.01%, 3/17/99 - 6/28/99 ................................. 75,000,000 73,783,451
Lloyds Bank PLC, 5.18%, 1/21/99 ........................................................ 25,000,000 24,928,056
Morgan Stanley Dean Witter & Co., 5.34%, 1/13/99 ....................................... 25,000,000 24,955,500
National Rural Utilities Cooperative Finance Corp., 5.03% - 5.09%, 1/27/99 - 3/19/99 ... 64,000,000 63,496,486
Procter & Gamble Co., 5.28%, 1/11/99 ................................................... 15,068,000 15,045,900
Province of British Columbia, 4.90% - 5.29%, 3/08/99 - 6/16/99 ......................... 35,000,000 34,467,117
</TABLE>
10
<PAGE>
THE MONEY MARKET PORTFOLIOS
STATEMENT OF INVESTMENTS,DECEMBER 31,1998 (UNAUDITED)(CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
THE MONEY MARKET PORTFOLIO AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
(a)COMMERCIAL PAPER (CONT.)
Royal Bank of Canada, 5.46%, 1/15/99 ...................................... $ 25,000,000 $ 24,946,917
Svenska Handelsbanken Inc., 5.05%, 1/20/99 ................................ 25,000,000 24,933,368
Toronto Dominion Holdings USA Inc., 4.83%, 6/14/99 ........................ 25,000,000 24,449,917
Toyota Motor Credit Corp., 5.08%, 2/02/99 ................................. 25,000,000 24,887,111
UBS Finance (DE) Inc., 4.88% - 5.47%, 1/14/99 - 5/24/99 ................... 60,000,000 59,647,628
Westpac Capital Corp., 4.80% - 4.96%, 2/08/99 - 5/10/99 ................... 75,000,000 74,144,776
--------------
TOTAL COMMERCIAL PAPER (COST $1,155,326,873) .............................. 1,155,326,873
--------------
TOTAL INVESTMENTS BEFORE REPURCHASE AGREEMENTS (COST $2,438,013,820) ...... 2,438,013,820
--------------
REPURCHASE AGREEMENTS 7.0%
J.P.Morgan Securities Inc., 4.75%, 1/04/99 (Maturity Value $94,329,759)
Collateralized by U.S.Treasury Notes ..................................... 94,280,000 94,280,000
Morgan Stanley & Co.Inc., 4.65%, 1/04/99 (Maturity Value $90,086,521)
Collateralized by U.S.Treasury Notes ..................................... 90,040,000 90,040,000
--------------
TOTAL REPURCHASE AGREEMENTS (COST $184,320,000) ........................... 184,320,000
--------------
TOTAL INVESTMENTS (COST $2,622,333,820) 99.2% ............................. 2,622,333,820
OTHER ASSETS, LESS LIABILITIES .8% ........................................ 22,175,079
--------------
NET ASSETS 100.0% ......................................................... $2,644,508,899
==============
</TABLE>
(a)Securities 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. 11
<PAGE>
THE MONEY MARKET PORTFOLIOS
Financial Highlights
THE U.S.GOVERNMENT SECURITIES MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31,1998
(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 ............................ .026
Less distributions from net investment income ..... (.026)
----------------
Net asset value, end of period .................... $ 1.00
================
Total return* ..................................... 2.59%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ................. $292,833
Ratios to average net assets:
Expenses ......................................... .15%**
Expenses excluding waiver and payments
by affiliate .................................... .16%**
Net investment income ............................ 5.10%**
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
---------------------------------------------------------------------
1998 1997 1996 1995 1994
---------------------------------------------------------------------
<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 ............................ .054 .052 .054 .052 .032
Less distributions from net investment income ..... (.054) (.052) (.054) (.052) (.032)
---------------------------------------------------------------------
Net asset value, end of period .................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
=====================================================================
Total return(*) ................................... 5.53% 5.34% 5.55% 5.32% 3.25%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ................. $263,226 $285,629 $285,701 $474,654 $218,548
Ratios to average net assets:
Expenses ......................................... .15% .15% .15% .15% .15%
Expenses excluding waiver and payments
by affiliate .................................... .16% .16% .17% .16% .17%
Net investment income ............................ 5.40% 5.20% 5.45% 5.25% 3.20%
</TABLE>
*Total return is not annualized.
**Annualized
12 See notes to financial statements.
<PAGE>
THE MONEY MARKET PORTFOLIOS
STATEMENT OF INVESTMENTS, DECEMBER 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
THE U.S. GOVERNMENT SECURITIES MONEY MARKET PORTFOLIO AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
GOVERNMENT SECURITIES 19.0%
U.S. Treasury Notes, 7.00%, 4/15/99 .......................................................... $ 5,000,000 $ 5,019,736
U.S. Treasury Notes, 6.00%, 8/15/99 .......................................................... 10,000,000 10,045,392
U.S. Treasury Notes, 5.875%, 8/31/99 ......................................................... 15,000,000 15,107,475
U.S. Treasury Notes, 6.875%, 8/31/99 ......................................................... 20,000,000 20,227,562
U.S. Treasury Notes, 7.125%, 9/30/99 ......................................................... 5,000,000 5,081,996
------------
TOTAL GOVERNMENT SECURITIES (COST $55,482,161) ............................................... 55,482,161
------------
REPURCHASE AGREEMENTS 80.7%
Barclays Capital Inc., 4.70%, 1/04/99 (Maturity Value $15,007,833)
Collateralized by U.S. Treasury Notes ....................................................... 15,000,000 15,000,000
Bear, Stearns & Co. Inc., 4.70%, 1/04/99 (Maturity Value $15,007,833)
Collateralized by U.S. Treasury Notes ....................................................... 15,000,000 15,000,000
Chase Securities Inc., 4.50%, 1/04/99 (Maturity Value $15,007,500)
Collateralized by U.S. Treasury Notes ....................................................... 15,000,000 15,000,000
CIBC Oppenheimer Corp., 4.75%, 1/04/99 (Maturity Value $15,007,917)
Collateralized by U.S. Treasury Notes ....................................................... 15,000,000 15,000,000
Donaldson, Lufkin & Jenrette Securities Corp., 5.00%, 1/04/99 (Maturity Value $15,008,333)
Collateralized by U.S. Treasury Notes ....................................................... 15,000,000 15,000,000
Dresdner Kleinwort Benson, North America LLC, 4.25%, 1/04/99 (Maturity Value $15,007,083)
Collateralized by U.S. Treasury Notes ....................................................... 15,000,000 15,000,000
J.P. Morgan Securities Inc., 4.65%, 1/04/99 (Maturity Value $13,186,810)
Collateralized by U.S. Treasury Bills, U.S. Treasury Notes .................................. 13,180,000 13,180,000
J.P. Morgan Securities Inc., 4.75%, 1/04/99 (Maturity Value $30,015,833)
Collateralized by U.S. Treasury Bills, U.S. Treasury Notes .................................. 30,000,000 30,000,000
Merrill Lynch Government Securities Inc., 4.75%, 1/04/99 (Maturity Value $15,007,917)
Collateralized by U.S. Treasury Notes ....................................................... 15,000,000 15,000,000
Morgan Stanley & Co. Inc., 4.65%, 1/04/99 (Maturity Value $43,202,310)
Collateralized by U.S. Treasury Bills, U.S. Treasury Notes .................................. 43,180,000 43,180,000
NationsBanc Montgomery Securities LLC, 4.70%, 1/04/99 (Maturity Value $15,007,833)
Collateralized by U.S. Treasury Notes ....................................................... 15,000,000 15,000,000
Paribas Corp., 4.85%, 1/04/99 (Maturity Value $15,008,083)
Collateralized by U.S. Treasury Notes ....................................................... 15,000,000 15,000,000
Warburg Dillon Read LLC, 4.75%, 1/04/99 (Maturity Value $15,007,917)
Collateralized by U.S. Treasury Notes ....................................................... 15,000,000 15,000,000
------------
TOTAL REPURCHASE AGREEMENTS (COST $236,360,000) .............................................. 236,360,000
------------
TOTAL INVESTMENTS (COST $291,842,161) 99.7% .................................................. 291,842,161
OTHER ASSETS, LESS LIABILITIES .3% ........................................................... 990,881
------------
NET ASSETS 100.0% ............................................................................ $292,833,042
============
</TABLE>
See notes to financial statements. 13
<PAGE>
THE MONEY MARKET PORTFOLIOS
Financial Statements
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31,1998 (UNAUDITED)
<TABLE>
<CAPTION>
THE U.S.
GOVERNMENT
SECURITIES
THE MONEY MONEY MARKET
MARKET PORTFOLIO PORTFOLIO
----------------------------------
<S> <C> <C>
Assets:
Investments in securities, at value and cost ... $2,438,013,820 $ 55,482,161
Repurchase agreements, at value and cost ....... 184,320,000 236,360,000
Cash ........................................... 5,393 5,533
Receivables:
Capital shares sold ........................... 1,360,142 --
Interest ...................................... 21,437,673 1,190,077
----------------------------------
Total assets .............................. 2,645,137,028 293,037,771
----------------------------------
Liabilities:
Payables:
Capital shares redeemed ....................... 229,548 142,262
Affiliates .................................... 317,855 39,317
Other liabilities .............................. 80,726 23,150
----------------------------------
Total liabilities ......................... 628,129 204,729
----------------------------------
Net assets, at value ............................ $2,644,508,899 $ 292,833,042
==================================
Shares outstanding .............................. 2,644,508,899 292,833,042
==================================
Net asset value per share ....................... $ 1.00 $ 1.00
==================================
</TABLE>
14 See notes to financial statements.
<PAGE>
THE MONEY MARKET PORTFOLIOS
Financial Statements (continued)
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31,1998 (UNAUDITED)
<TABLE>
<CAPTION>
THE U.S.
GOVERNMENT
SECURITIES
THE MONEY MONEY MARKET
MARKET PORTFOLIO PORTFOLIO
---------------------------------
<S> <C> <C>
Investment income:
Interest .............................................. $ 68,305,549 $ 7,829,666
Expenses:
Management fees (Note 3) .............................. 1,881,196 225,450
Custodian fees ........................................ 9,186 1,415
Reports to shareholders ............................... 2,865 477
Professional fees ..................................... 27,417 4,635
Trustees' fees and expenses ........................... 3,522 556
Other ................................................. 48,613 6,994
---------------------------------
Total expenses ....................................... 1,972,799 239,527
Expenses waived/paid by affiliate (Note 3) ........... (89,633) (14,063)
---------------------------------
Net expenses ..................................... 1,883,166 225,464
---------------------------------
Net investment income ........................... 66,422,383 7,604,202
---------------------------------
Net realized gain from investments ..................... 9,343 --
---------------------------------
Net increase in net assets resulting from operations ... $ 66,431,726 $ 7,604,202
=================================
</TABLE>
See notes to financial statements. 15
<PAGE>
THE MONEY MARKET PORTFOLIOS
Financial Statements (continued)
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED DECEMBER 31,1998 (UNAUDITED)
AND THE YEAR ENDED JUNE 30,1998
<TABLE>
<CAPTION>
THE MONEY MARKET PORTFOLIO
----------------------------------------
SIX MONTHS ENDED YEAR ENDED
DECEMBER 31, 1998 JUNE 30, 1998
----------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ................................ $ 66,422,383 $ 108,653,664
Net realized gain from investments ................... 9,343 --
----------------------------------------
Net increase in net assets resulting
from operations ................................. 66,431,726 108,653,664
Distributions to shareholders from
net investment income ................................ (66,431,726)+ (108,653,664)
Capital share transactions (Note 2) ................... 600,879,596 270,083,314
----------------------------------------
Net increase in net assets ....................... 600,879,596 270,083,314
Net assets (there is no undistributed net investment
income at beginning or end of period):
Beginning of period .................................. 2,043,629,303 1,773,545,989
----------------------------------------
End of period ........................................ $ 2,644,508,899 $ 2,043,629,303
========================================
</TABLE>
<TABLE>
<CAPTION>
THE U.S. GOVERNMENT SECURITIES
MONEY MARKET PORTFOLIO
------------------------------------
SIX MONTHS ENDED YEAR ENDED
DECEMBER 31, 1998 JUNE 30, 1998
------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ................................ $ 7,604,202 $ 14,190,444
Net realized gain from investments ................... -- --
------------------------------------
Net increase in net assets resulting
from operations ................................. 7,604,202 14,190,444
Distributions to shareholders from
net investment income ................................ (7,604,202) (14,190,444)
Capital share transactions (Note 2) ................... 29,606,664 4,597,201
------------------------------------
Net increase in net assets ....................... 29,606,664 4,597,201
Net assets (there is no undistributed net investment
income at beginning or end of period):
Beginning of period .................................. 263,226,378 258,629,177
------------------------------------
End of period ........................................ $ 292,833,042 $ 263,226,378
====================================
</TABLE>
+Distributions were increased by a net realized gain from investments of
$9,343.
16 See notes to financial statements.
<PAGE>
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 an open-end, diversified 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 a high level of current income
consistent with preservation of capital. 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, 1998, 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 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.
17
<PAGE>
THE MONEY MARKET PORTFOLIOS
Notes to Financial Statements (unaudited) (continued)
2. SHARES OF BENEFICIAL INTEREST
At December 31, 1998, 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.
GOVERNMENT
SECURITIES
THE MONEY MONEY MARKET
MARKET PORTFOLIO PORTFOLIO
------------------------------------
<S> <C> <C>
Six months ended December 31,1998
Shares sold ....................... $ 4,379,369,896 $ 460,850,849
Shares issued in reinvestment
of distributions ................. 66,431,528 7,604,453
Shares redeemed ................... (3,844,921,828) (438,848,638)
------------------------------------
Net increase ...................... $ 600,879,596 $ 29,606,664
====================================
Year ended June 30, 1998
Shares sold ....................... $ 5,690,107,931 $ 963,956,819
Shares issued in reinvestment
of distributions ................. 108,652,953 14,190,262
Shares redeemed ................... (5,528,677,570) (973,549,880)
------------------------------------
Net increase ...................... $ 270,083,314 $ 4,597,201
====================================
</TABLE>
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, as noted in the Statement of Operations.
At December 31, 1998, 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 ......................... 2,204,122,234 83.35%
Institutional Fiduciary Trust -
Money Market Portfolio .................... 206,805,583 7.82%
Institutional Fiduciary Trust -
Franklin Cash Reserves Fund ............... 128,722,090 4.87%
Franklin Templeton Money Fund Trust -
Franklin Templeton Money Fund II .......... 104,858,992 3.96%
</TABLE>
18
<PAGE>
THE MONEY MARKET PORTFOLIOS
Notes to Financial Statements (unaudited) (continued)
3. TRANSACTIONS WITH AFFILIATES (cont.)
At December 31, 1998, the shares of The U.S. Government Securities Money Market
Portfolio were owned by the following funds:
<TABLE>
<CAPTION>
PERCENTAGE OF
OUTSTANDING
SHARES SHARES
-------------------------------
<S> <C> <C>
Institutional Fiduciary Trust -
Franklin U.S.Government
Securities Money Market Portfolio .... 139,387,867 47.60%
Franklin Federal Money Fund ........... 153,445,175 52.40%
</TABLE>
4. INCOME TAXES
At June 30, 1998, the Money Market Portfolio had tax basis capital losses of
$4,721 which may be carried over to offset future capital gains. Such losses
expire as follows:
<TABLE>
<S> <C>
Capital loss carryovers expiring in:
2002 .................................. $3,560
2006 .................................. 1,161
------
$4,721
======
</TABLE>
19
<PAGE>
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