UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORMN-CSRS
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number811-07038
The Money Market Portfolios
(Exact name of registrant as specified in charter)
One Franklin Parkway, San Mateo, CA 94403-1906
(Address of principal executive offices) (Zip code)
Craig S. Tyle, One Franklin Parkway, San Mateo, CA 94403-1906
(Name and address of agent for service)
Registrant’s telephone number, including area code: 650312-2000
Date of fiscal year end: 6/30
Date of reporting period: 12/31/19
| Item 1. | Reports to Stockholders. |
THE U.S. GOVERNMENT MONEY MARKET PORTFOLIO
Your Fund’s Expenses
As a Fund shareholder, you can incur two types of costs: (1) transaction costs, including sales charges (loads) on Fund purchases and redemptions, if applicable; and (2) ongoing Fund costs, including management fees, distribution and service(12b-1) fees, if applicable, and other Fund expenses. All mutual funds have ongoing costs, sometimes referred to as operating expenses. The table below shows ongoing costs of investing in the Fund and can help you understand these costs and compare them with those of other mutual funds. The table assumes a $1,000 investment held for the six months indicated.
Actual Fund Expenses
The table below provides information about actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of Fund expenses, is used to calculate the “Ending Account Value.” You can estimate the expenses you paid during the period by following these steps (ofcourse, your account value and expenses will differ from those in this illustration):Divide your account value by $1,000 (ifyour account had an $8,600 value, then $8,600÷ $1,000 = 8.6). Then multiply the result by the number in the row for your class of shares under the headings “Actual” and “Expenses Paid During Period” (ifActual Expenses Paid During Period were $7.50, then 8.6 x $7.50= $64.50). In this illustration, the actual expenses paid this period are $64.50.
Hypothetical Example for Comparison with Other Funds
Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other funds. To do so, compare this 5% hypothetical example for the class of shares you hold with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transactional costs. Therefore, information under the heading “Hypothetical” is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transactional costs were included, your total costs would have been higher.
| Actual (actual return after expenses) | Hypothetical (5% annual return before expenses) | |||||||||||
| Beginning Account Value 1/1/19 | Ending Account Value 12/31/19 | Paid During 1/1/19–12/31/191 | Ending Account Value 12/31/19 | Paid During 1/1/19–12/31/191 | Net Annualized Expense Ratio | |||||||
|
|
|
| |||||||||
| $1,000 | $1,009.40 | $0.76 | $1,024.38 | $0.76 | 0.15% | |||||||
1. Expenses are equal to the annualized expense ratio for thesix-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 184/366 to reflect theone-half year period.
| franklintempleton.com | Semiannual Report | 0 | ||
THE MONEY MARKET PORTFOLIOS
Financial Highlights
The U.S. Government Money Market Portfolio
| Six Months Ended | ||||||||||||||||||||||||
| December 31, 2019 | Year Ended June 30, | |||||||||||||||||||||||
(unaudited)
|
2019
| 2018
| 2017
| 2016
| 2015
| |||||||||||||||||||
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 | 0.009 | 0.021 | 0.011 | 0.003 | 0.001 | — | ||||||||||||||||||
Net realized and unrealized gains (losses)a | — | — | (— | ) | — | — | — | |||||||||||||||||
Total from investment operations | 0.009 | 0.021 | 0.011 | 0.003 | 0.001 | — | a | |||||||||||||||||
Less distributions from: | ||||||||||||||||||||||||
Net investment income | (0.009 | ) | (0.021 | ) | (0.011 | ) | (0.003 | ) | (0.001 | ) | — | |||||||||||||
Net asset value, end of period | $ 1.00 | $ 1.00 | $ 1.00 | $ 1.00 | $ 1.00 | $1.00 | ||||||||||||||||||
Total returnb | 0.94% | 2.10% | 1.15% | 0.35% | 0.07% | —% | ||||||||||||||||||
Ratios to average net assetsc | ||||||||||||||||||||||||
Expenses before waiver and payments by affiliates | 0.15% | 0.15% | 0.15% | 0.15% | 0.15% | 0.15% | ||||||||||||||||||
Expenses net of waiver and payments by affiliatesd | 0.15% | 0.15% | 0.15% | 0.15% | 0.13% | 0.09% | ||||||||||||||||||
Net investment income | 1.86% | 2.09% | 1.15% | 0.35% | 0.06% | —% | ||||||||||||||||||
Supplemental data | ||||||||||||||||||||||||
Net assets, end of period (000’s) | $19,061,944 | $23,218,541 | $23,700,037 | $21,564,546 | $22,324,993 | $27,390,400 | ||||||||||||||||||
aAmount rounds to less than $0.001 per share.
bTotal return is not annualized for periods less than one year.
cRatios are annualized for periods less than one year.
dBenefit of expense reduction rounds to less than 0.01%.
1 | Semiannual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com | ||
THE MONEY MARKET PORTFOLIOS
STATEMENT OF INVESTMENTS (UNAUDITED)
Statement of Investments, December 31, 2019 (unaudited)
The U.S. Government Money Market Portfolio
| Principal Amount | Value | |||||||
Investments 103.2% | ||||||||
U.S. Government and Agency Securities 92.4% | ||||||||
aFFCB, | ||||||||
1/02/20 | $ 79,300,000 | $ 79,297,467 | ||||||
1/14/20 | 40,000,000 | 39,977,756 | ||||||
1/17/20 | 30,000,000 | 29,979,200 | ||||||
FHLB, | ||||||||
a1/02/20 | 924,060,000 | 924,019,934 | ||||||
a1/03/20 | 461,795,000 | 461,754,817 | ||||||
a1/06/20 | 421,000,000 | 420,910,267 | ||||||
a1/08/20 | 395,000,000 | 394,875,189 | ||||||
a1/10/20 | 350,000,000 | 349,859,050 | ||||||
a1/13/20 | 50,100,000 | 50,074,115 | ||||||
a1/15/20 | 302,000,000 | 301,815,021 | ||||||
a1/17/20 | 100,000,000 | 99,926,089 | ||||||
a1/22/20 | 200,000,000 | 199,807,500 | ||||||
a1/24/20 | 300,000,000 | 299,689,500 | ||||||
a1/27/20 | 181,100,000 | 180,890,729 | ||||||
a1/29/20 | 150,000,000 | 149,815,200 | ||||||
a1/31/20 | 25,000,000 | 24,967,729 | ||||||
a2/07/20 | 150,000,000 | 149,762,737 | ||||||
a2/12/20 | 300,000,000 | 299,450,850 | ||||||
a2/14/20 | 200,000,000 | 199,616,467 | ||||||
a2/19/20 | 150,000,000 | 149,678,437 | ||||||
a3/06/20 | 42,000,000 | 41,882,458 | ||||||
a4/01/20 | 140,000,000 | 139,452,250 | ||||||
bFRN, 1.545%, (SOFR + 0.005%), 1/17/20 | 150,000,000 | 150,000,000 | ||||||
bFRN, 1.59%, (SOFR + 0.05%), 1/17/20 | 50,000,000 | 50,000,000 | ||||||
bFRN, 1.56%, (SOFR + 0.02%), 2/21/20 | 118,000,000 | 118,000,000 | ||||||
bFRN, 1.575%, (SOFR + 0.035%), 2/21/20 | 35,000,000 | 35,000,000 | ||||||
bFRN, 1.57%, (SOFR + 0.03%), 3/06/20 | 120,000,000 | 120,000,000 | ||||||
bFRN, 1.605%, (SOFR + 0.065%), 3/26/20 | 190,000,000 | 190,000,000 | ||||||
bFRN, 1.57%, (SOFR + 0.03%), 3/27/20 | 56,000,000 | 56,000,000 | ||||||
bFRN, 1.565%, (SOFR + 0.025%), 4/22/20 | 71,000,000 | 71,000,000 | ||||||
bFRN, 1.575%, (SOFR + 0.035%), 5/08/20 | 200,000,000 | 200,000,000 | ||||||
bFRN, 1.62%, (SOFR + 0.08%), 5/11/20 | 175,000,000 | 175,000,000 | ||||||
bFRN, 1.56%, (SOFR + 0.02%), 5/14/20 | 100,000,000 | 100,000,000 | ||||||
bFRN, 1.575%, (SOFR + 0.035%), 6/19/20 | 150,000,000 | 150,000,000 | ||||||
bFRN, 1.57%, (SOFR + 0.03%), 7/17/20 | 79,000,000 | 79,000,000 | ||||||
bFRN, 1.64%, (SOFR + 0.10%), 7/17/20 | 200,000,000 | 200,000,000 | ||||||
bFRN, 1.55%, (SOFR + 0.01%), 7/22/20 | 200,000,000 | 200,000,000 | ||||||
bFRN, 1.64%, (SOFR + 0.10%), 7/29/20 | 24,000,000 | 24,000,000 | ||||||
FHLMC, | ||||||||
a1/02/20 | 263,000,000 | 262,991,043 | ||||||
a1/03/20 | 250,000,000 | 249,990,139 | ||||||
bFRN, 1.56%, (SOFR + 0.02%), 1/03/20 | 200,000,000 | 200,000,000 | ||||||
bFRN, 1.55%, (SOFR + 0.01%), 2/21/20 | 200,000,000 | 200,000,000 | ||||||
bFRN, 1.56%, (SOFR + 0.02%), 2/28/20 | 250,000,000 | 250,000,000 | ||||||
bFRN, 1.58%, (SOFR + 0.04%), 4/03/20 | 150,000,000 | 150,000,000 | ||||||
| franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Semiannual Report | 2 | ||
THE MONEY MARKET PORTFOLIOS
STATEMENT OF INVESTMENTS (UNAUDITED)
The U.S. Government Money Market Portfolio(continued)
| Principal Amount | Value | |||||||
Investments(continued) | ||||||||
U.S. Government and Agency Securities(continued) | ||||||||
FHLMC, (continued) | ||||||||
bFRN, 1.54%, (SOFR), 4/13/20 | $ 200,000,000 | $ 200,000,000 | ||||||
bFRN, 1.58%, (SOFR + 0.04%), 5/06/20 | 250,000,000 | 250,000,000 | ||||||
bFRN, 1.545%, (SOFR + 0.005%), 5/13/20 | 300,000,000 | 300,000,000 | ||||||
bFRN, 1.545%, (SOFR + 0.005%), 5/20/20 | 50,000,000 | 50,000,000 | ||||||
bFRN, 1.565%, (SOFR + 0.025%), 5/22/20 | 250,000,000 | 250,000,000 | ||||||
bFRN, 1.545%, (SOFR + 0.005%), 8/07/20 | 250,000,000 | 250,000,000 | ||||||
a FNMA, | ||||||||
1/02/20 | 250,000,000 | 249,991,667 | ||||||
1/03/20 | 250,000,000 | 249,990,278 | ||||||
1/15/20 | 100,000,000 | 99,938,944 | ||||||
aU.S. Treasury Bill, | ||||||||
1/02/20 | 590,000,000 | 589,968,178 | ||||||
1/07/20 | 300,000,000 | 299,923,500 | ||||||
1/09/20 | 450,000,000 | 449,805,667 | ||||||
1/14/20 | 400,000,000 | 399,781,167 | ||||||
1/16/20 | 576,570,000 | 576,133,373 | ||||||
1/21/20 | 290,000,000 | 289,751,889 | ||||||
1/23/20 | 180,315,000 | 180,135,386 | ||||||
2/04/20 | 440,000,000 | 439,368,356 | ||||||
2/06/20 | 300,000,000 | 299,544,000 | ||||||
2/13/20 | 475,000,000 | 474,082,965 | ||||||
2/20/20 | 316,660,000 | 315,982,699 | ||||||
3/05/20 | 459,345,000 | 458,002,772 | ||||||
3/12/20 | 330,000,000 | 328,986,672 | ||||||
3/19/20 | 300,000,000 | 298,999,000 | ||||||
4/09/20 | 295,000,000 | 293,628,987 | ||||||
4/16/20 | 300,000,000 | 298,569,000 | ||||||
4/23/20 | 300,000,000 | 298,493,333 | ||||||
5/07/20 | 150,000,000 | 149,187,729 | ||||||
5/21/20 | 139,460,000 | 138,618,824 | ||||||
6/04/20 | 344,330,000 | 342,009,837 | ||||||
6/11/20 | 290,000,000 | 288,016,400 | ||||||
6/18/20 | 290,000,000 | 287,889,847 | ||||||
|
| |||||||
Total U.S. Government and Agency Securities (Cost $17,615,284,414) | 17,615,284,414 | |||||||
|
| |||||||
cRepurchase Agreements 10.8% | ||||||||
BNP Paribas Securities Corp., 1.55%, 1/02/20 (Maturity Value $100,861,111) | ||||||||
Collateralized by U.S. Treasury Notes, 1.375%, 05/31/21 (valued at $102,103,172) | 100,000,000 | 100,000,000 | ||||||
Deutsche Bank Securities Inc., 1.55%, 1/02/20 (Maturity Value $52,004,478) | ||||||||
Collateralized by U.S. Treasury Notes, 1.50% - 2.25%, 3/31/23 – 2/29/24 (valued at $53,040,049) | 52,000,000 | 52,000,000 | ||||||
Federal Reserve Bank of New York, 1.45%, 1/02/20 (Maturity Value $1,750,140,972) | ||||||||
Collateralized by U.S. Treasury Notes, 1.875% – 3.00%, 7/31/22 – 8/15/48 (valued at $1,750,141,031) | 1,750,000,000 | 1,750,000,000 | ||||||
Goldman Sachs & Co., 1.50%, 1/02/20 (Maturity Value $50,004,167) | ||||||||
Collateralized by U.S. Treasury Notes, 2.50%, 1/31/24 (valued at $51,090,691) | 50,000,000 | 50,000,000 | ||||||
3 | Semiannual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com | ||
THE MONEY MARKET PORTFOLIOS
STATEMENT OF INVESTMENTS (UNAUDITED)
The U.S. Government Money Market Portfolio(continued)
| Principal Amount | Value | |||||||||
Investments(continued) | ||||||||||
cRepurchase Agreements(continued) | ||||||||||
HSBC Securities Inc., 1.50%, 1/02/20 (Maturity Value $100,008,333) | ||||||||||
Collateralized by U.S. Government and Agency Securities, 1.625% – 4.00%, 12/31/21 – 12/20/43 (valued at $102,000,021) | $100,000,000 | $ 100,000,000 | ||||||||
|
| |||||||||
Total Repurchase Agreements (Cost $2,052,000,000) | 2,052,000,000 | |||||||||
|
| |||||||||
Total Investments (Cost $19,667,284,414) 103.2% | 19,667,284,414 | |||||||||
Other Assets, less Liabilities (3.2)% | (605,340,049 | ) | ||||||||
|
| |||||||||
Net Assets 100.0% | $19,061,944,365 | |||||||||
|
| |||||||||
See Abbreviations on page 11.
aThe security was issued on a discount basis with no stated coupon rate.
bThe coupon rate shown represents the rate at period end.
cSee Note 1(b) regarding repurchase agreement.
| franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Semiannual Report | 4 | ||
THE MONEY MARKET PORTFOLIOS
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
December 31, 2019 (unaudited)
The U.S. Government Money Market Portfolio
Assets: | ||||
Investments in unaffiliated securities, at amortized cost | $17,615,284,414 | |||
Unaffiliated repurchase agreements, at value and cost | 2,052,000,000 | |||
Cash | 27,134,882 | |||
Receivables: | ||||
Interest | 9,675,765 | |||
|
| |||
Total assets | 19,704,095,061 | |||
|
| |||
Liabilities: | ||||
Payables: | ||||
Investment securities purchased | 639,432,667 | |||
Management fees | 2,457,814 | |||
Distributions to shareholders | 31,637 | |||
Accrued expenses and other liabilities | 228,578 | |||
|
| |||
Total liabilities | 642,150,696 | |||
|
| |||
Net assets, at value | $19,061,944,365 | |||
|
| |||
Net assets consist of: | ||||
Paid-in capital | $19,061,847,936 | |||
Total distributable earnings (losses) | 96,429 | |||
|
| |||
Net assets, at value | $19,061,944,365 | |||
|
| |||
Shares outstanding | 19,061,849,535 | |||
|
| |||
Net asset value per share | $1.00 | |||
|
| |||
5 | Semiannual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com | ||
THE MONEY MARKET PORTFOLIOS
FINANCIAL STATEMENTS
Statement of Operations
for the six months ended December 31, 2019 (unaudited)
The U.S. Government Money Market Portfolio
Investment income: | ||||
Interest: | ||||
Unaffiliated issuers | $209,908,609 | |||
|
| |||
Expenses: | ||||
Management fees (Note 3a) | 15,617,175 | |||
Custodian fees (Note 4) | 78,309 | |||
Reports to shareholders | 3,980 | |||
Registration and filing fees | 168 | |||
Professional fees | 70,538 | |||
Other | 79,365 | |||
|
| |||
Total expenses | 15,849,535 | |||
Expense reductions (Note 4) | (28,669 | ) | ||
|
| |||
Net expenses | 15,820,866 | |||
|
| |||
Net investment income | 194,087,743 | |||
|
| |||
Net realized gain (loss) from: | ||||
Investments: | ||||
Unaffiliated issuers | 101,798 | |||
|
| |||
Net increase (decrease) in net assets resulting from operations | $194,189,541 | |||
|
| |||
| franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Semiannual Report | 6 | ||
THE MONEY MARKET PORTFOLIOS
FINANCIAL STATEMENTS
Statements of Changes in Net Assets
The U.S. Government Money Market Portfolio
Six Months Ended December 31, 2019 (unaudited) | Year Ended June 30, 2019 | |||||||
| ||||||||
Increase (decrease) in net assets: | ||||||||
Operations: | ||||||||
Net investment income | $ | 194,087,743 | $ | 478,383,410 | ||||
Net realized gain (loss) | 101,798 | 11,348 | ||||||
|
| |||||||
Net increase (decrease) in net assets resulting from operations | 194,189,541 | 478,394,758 | ||||||
|
| |||||||
Distributions to shareholders | (194,087,743 | ) | (478,383,410 | ) | ||||
|
| |||||||
Capital share transactions (Note 2) | (4,156,698,593 | ) | (481,506,776 | ) | ||||
|
| |||||||
Net increase (decrease) in net assets | (4,156,596,795 | ) | (481,495,428 | ) | ||||
Net assets: | ||||||||
Beginning of period | 23,218,541,160 | 23,700,036,588 | ||||||
|
| |||||||
End of period | $19,061,944,365 | $ | 23,218,541,160 | |||||
|
| |||||||
7 | Semiannual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com | ||
THE MONEY MARKET PORTFOLIOS
Notes to Financial Statements (unaudited)
The U.S. Government Money Market Portfolio
1. Organization and Significant Accounting Policies
The Money Market Portfolios (Trust) is registered under the Investment Company Act of 1940 (1940 Act) as anopen-end management investment company, consisting of one portfolio, The U.S. Government Money Market Portfolio (Portfolio) and applies the specialized accounting and reporting guidance in U.S. Generally Accepted Accounting Principles (U.S. GAAP). The shares of the Portfolio are issued in private placements and are exempt from registration under the Securities Act of 1933.
The following summarizes the Portfolio’s significant accounting policies.
a. Financial Instrument Valuation
Securities are valued at amortized cost, which approximates fair value. Amortized cost is an income-based approach which involves valuing an instrument at its cost and thereafter assuming a constant amortization to maturity of any discount or premium. Under compliance policies and procedures approved by the Portfolio’s Board of Trustees (the Board), Franklin Templeton Services, LLC, an affiliate of the investment manager, has responsibility for oversight of valuation, including leading the cross-functional Valuation Committee (VC).
b. Repurchase Agreements
The Portfolio enters into repurchase agreements, which are accounted for as a loan by the Portfolio to the seller, collateralized by securities which are delivered to the Portfolio’s custodian. The fair value, including accrued interest, of the initial collateralization is required to be at least 102% (if the counterparty is a bank or broker-dealer) or 100% (if the counterparty is the Federal Reserve Bank of New York) of the dollar amount invested by the Portfolio, with the value of the underlying securities marked to market daily to maintain coverage of at least 100%. Repurchase agreements are subject to the terms of Master Repurchase Agreements (MRAs) with approved counterparties (sellers). The MRAs contain various provisions, including but not limited to events of default and maintenance of collateral for repurchase agreements. In the event of default by either the seller or the Portfolio, certain MRAs may permit thenon-defaulting party to net andclose-out all transactions, if any, traded under such agreements. The Portfolio may sell securities it holds as collateral and apply the proceeds towards the repurchase price and any other amounts owed by the seller to the
Portfolio in the event of default by the seller. This could involve costs or delays in addition to a loss on the securities if their value falls below the repurchase price owed by the seller. All repurchase agreements held by the Portfolio at period end, as indicated in the Statement of Investments, had been entered into on December 31, 2019.
c. Income Taxes
It is the Portfolio’s policy to qualify as a regulated investment company under the Internal Revenue Code. The Portfolio intends to distribute to shareholders substantially all of its taxable income and net realized gains to relieve it from federal income and excise taxes. As a result, no provision for U.S. federal income taxes is required.
The Portfolio may recognize an income tax liability related to its uncertain tax positions under U.S. GAAP when the uncertain tax position has a less than 50% probability that it will be sustained upon examination by the tax authorities based on its technical merits. As of December 31, 2019, the Portfolio has determined that no tax liability is required in its financial statements related to uncertain tax positions for any open tax years (or expected to be taken in future tax years). Open tax years are those that remain subject to examination and are based on the statute of limitations in each jurisdiction in which the Portfolio invests.
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. Amortization of premium and accretion of discount on debt securities are included in interest income. Dividends from net investment income are normally declared daily; these dividends may be reinvested or paid monthly to shareholders. Distributions from net realized capital gains are recorded on theex-dividend date. Distributable earnings are determined according to income tax regulations (tax basis) and may differ from earnings recorded in accordance with U.S. GAAP. These differences may be permanent or temporary. Permanent differences are reclassified among capital accounts to reflect their tax character. These reclassifications have no impact on net assets or the results of operations. Temporary differences are not reclassified, as they may reverse in subsequent periods.
| franklintempleton.com | Semiannual Report | 8 | ||
THE MONEY MARKET PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
The U.S. Government Money Market Portfolio(continued)
1. Organization and Significant Accounting Policies(continued)
e. Accounting Estimates
The preparation of financial statements in accordance with U.S. GAAP 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 expenses during the reporting period. Actual results could differ from those estimates.
f. Guarantees and Indemnifications
Under the Trust’s organizational documents, its officers and trustees are indemnified by the Trust against certain liabilities arising out of the performance of their duties to the Trust.
Additionally, in the normal course of business, the Trust, on behalf of the Portfolio, enters into contracts with service providers that contain general indemnification clauses. The Trust’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Trust that have not yet occurred. Currently, the Trust expects the risk of loss to be remote.
2. Shares of Beneficial Interest
At December 31, 2019, there were an unlimited number of shares authorized (without par value). Transactions in the Portfolio’s shares at $1.00 per share were as follows:
| Six Months Ended December 31, 2019 | Year Ended June 30, 2019 | |||||||
| ||||||||
Shares sold | $ | 18,940,144,549 | $ | 28,749,969,710 | ||||
Shares issued in reinvestment of distributions | 194,066,857 | 478,384,571 | ||||||
Shares redeemed | (23,290,909,999 | ) | (29,709,861,057) | |||||
|
| |||||||
Net increase (decrease) | $ | (4,156,698,593 | ) | $ | (481,506,776) | |||
|
| |||||||
3. Transactions with Affiliates
Franklin Resources, Inc. is the holding company for various subsidiaries that together are referred to as Franklin Templeton. Certain officers and trustees of the Trust are also officers, directors, and/or trustees of Franklin U.S. Government Money Fund, Institutional Fiduciary Trust, and of the following subsidiaries:
| Subsidiary | Affiliation | |
Franklin Advisers, Inc. (Advisers) | Investment manager | |
Franklin Templeton Investor Services, LLC (Investor Services) | Transfer agent |
a. Management Fees
The Portfolio pays an investment management fee to Advisers of 0.15% per year of the average daily net assets of the Portfolio.
b. Transfer Agent Fees
Investor Services, under terms of an agreement, performs shareholder servicing for the Portfolio and is not paid by the Portfolio for the services.
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THE MONEY MARKET PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
The U.S. Government Money Market Portfolio(continued)
c. Other Affiliated Transactions
At December 31, 2019, the shares of the Portfolio were owned by the following investment companies:
| Shares | Percentage of Outstanding Shares | |||||
| Institutional Fiduciary Trust—Money Market Portfolio | 15,988,211,214 | 83.9% | ||||
Franklin U.S. Government Money Fund | 3,073,638,321 | 16.1% | ||||
| 19,061,849,535 | 100.0% | |||||
4. Expense Offset Arrangement
The Portfolio has entered into an arrangement with its custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Portfolio’s custodian expenses. During the period ended December 31, 2019, the custodian fees were reduced as noted in the Statement of Operations.
5. Income Taxes
For tax purposes, capital losses may be carried over to offset future capital gains.
At June 30, 2019, the capital loss carryforwards were as follows:
Capital loss carryforwards not subject to expiration: | ||||
Short term | $ | 5,369 |
At December 31, 2019, the cost of investments for book and income tax purposes was the same.
6. Fair Value Measurements
The Portfolio follows a fair value hierarchy that distinguishes between market data obtained from independent sources (observable inputs) and the Portfolio’s own market assumptions (unobservable inputs). These inputs are used in determining the value of the Portfolio’s financial instruments and are summarized in the following fair value hierarchy:
| • | Level 1 – quoted prices in active markets for identical financial instruments |
| • | Level 2 – other significant observable inputs (including quoted prices for similar financial instruments, interest rates, prepayment speed, credit risk, etc.) |
| • | Level 3 – significant unobservable inputs (including the Portfolio’s own assumptions in determining the fair value of financial instruments) |
The input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level. Money market securities may be valued using amortized cost, in accordance with the 1940 Act. Generally, amortized cost reflects the current fair value of a security, but since the value is not obtained from a quoted price in an active market, such securities were valued using Level 2 inputs.
At December 31, 2019, all of the Portfolio’s investments in financial instruments carried at fair value were valued using Level 2 inputs.
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THE MONEY MARKET PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
The U.S. Government Money Market Portfolio(continued)
7. Subsequent Events
The Portfolio has evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure.
Abbreviations | ||||
| Selected Portfolio | ||||
| FFCB | Federal Farm Credit Bank | |||
| FHLB | Federal Home Loan Bank | |||
| FHLMC | Federal Home Loan Mortgage Corp. | |||
| FNMA | Federal National Mortgage Association | |||
| FRN | Floating Rate Note | |||
| SOFR | Secured Overnight Financing Rate | |||
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| Item 2. | Code of Ethics. |
(a) The Registrant has adopted a code of ethics that applies to its principal executive officers and principal financial and accounting officer.
(c) N/A
(d) N/A
(f) Pursuant to Item 13(a)(1), the Registrant is attaching as an exhibit a copy of its code of ethics that applies to its principal executive officers and principal financial and accounting officer.
| Item 3. | Audit Committee Financial Expert. |
(a)(1) The Registrant has an audit committee financial expert serving on its audit committee.
(2) The audit committee financial expert is Mary C. Choksi and she is “independent” as defined under the relevant Securities and Exchange Commission Rules and Releases.
Item 4. | Principal Accountant Fees and Services. | N/A | ||
Item 5. | Audit Committee of Listed Registrants. | N/A | ||
Item 6. | Schedule of Investments. | N/A | ||
Item 7. | Disclosure of Proxy Voting Policies and Procedures forClosed-End Management Investment Companies. | N/A | ||
Item 8. | Portfolio Managers ofClosed-End Management Investment Companies. | N/A | ||
Item 9. | Purchases of Equity Securities byClosed-End Management Investment Company and Affiliated Purchasers. | N/A | ||
| Item 10. | Submission of Matters to a Vote of Security Holders. |
There have been no changes to the procedures by which shareholders may recommend nominees to the Registrant’s Board of Trustees that would require disclosure herein.
| Item 11. | Controls and Procedures. |
(a)Evaluation of Disclosure Controls and Procedures. The Registrant maintains disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in the Registrant’s filings under the Securities Exchange Act of 1934, as amended, and the Investment Company Act of 1940 is recorded, processed, summarized and reported within the periods specified in the rules and forms of the Securities and Exchange Commission. Such information is accumulated and communicated to the Registrant’s management, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. The Registrant’s management, including the principal executive officer and the principal financial officer, recognizes that any set of controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.
Within 90 days prior to the filing date of this Shareholder Report on FormN-CSR, the Registrant had carried out an evaluation, under the supervision and with the participation of the Registrant’s management, including the Registrant’s principal executive officer and the Registrant’s principal financial officer, of the effectiveness of the design and operation of the Registrant’s disclosure controls and procedures. Based on such evaluation, the Registrant’s principal executive officer and principal financial officer concluded that the Registrant’s disclosure controls and procedures are effective.
(b)Changes in Internal Controls. There have been no changes in the Registrant’s internal control over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect the internal control over financial reporting.
| Item 12. | Disclosure of Securities Lending Activities forClosed-End Management Investment Company. N/A |
| Item 13. | Exhibits. |
(a)(1) Code of Ethics
(a)(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Matthew T. Hinkle, Chief Executive Officer - Finance and Administration, and Gaston Gardey, Chief Financial Officer and Chief Accounting Officer
(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Matthew T. Hinkle, Chief Executive Officer - Finance and Administration, and Gaston Gardey, Chief Financial Officer and Chief Accounting Officer
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| THE MONEY MARKET PORTFOLIOS | ||
| By | S\MATTHEW T. HINKLE | |
| Matthew T. Hinkle | ||
| Chief Executive Officer - Finance and Administration | ||
Date | February 28, 2020 | |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| By | S\MATTHEW T. HINKLE | |
| Matthew T. Hinkle | ||
| Chief Executive Officer - Finance and Administration | ||
Date | February 28, 2020 |
| By | S\GASTON GARDEY | |
| Gaston Gardey | ||
| Chief Financial Officer and Chief Accounting Officer | ||
Date | February 28, 2020 |