UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSRS
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-07038
---------
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: (650) 312-2000
--------------
Date of fiscal year end: 06/30
-----
Date of reporting period: 12/31/05
--------
Item 1. Reports to Stockholders.
FINANCIAL HIGHLIGHTS
THE MONEY MARKET PORTFOLIO
-----------------------------------------------------------------------------------------
SIX MONTHS
ENDED
DECEMBER 31,
2005 YEAR ENDED JUNE 30,
(UNAUDITED) 2005 2004 2003 2002 2001
-----------------------------------------------------------------------------------------
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 ............... 0.018 0.020 0.009 0.014 0.026 0.059
Less distributions from net investment
income .............................. (0.018) (0.020) (0.009) (0.014) (0.026) (0.059)
-----------------------------------------------------------------------------------------
Net asset value, end of period ....... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
=========================================================================================
Total return(a) ...................... 1.82% 2.06% 0.94% 1.41% 2.63% 6.08%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) .... $5,626,123 $5,676,479 $5,505,394 $5,331,200 $4,734,196 $4,490,919
Ratios to average net assets:
Expenses ............................ 0.16%(b) 0.16% 0.16% 0.15% 0.16% 0.16%
Expenses net of waiver and
payments by affiliate .............. 0.16%(b) 0.16% 0.15% 0.15% 0.15% 0.15%
Net investment income ............... 3.57%(b) 2.04% 0.93% 1.39% 2.56% 5.91%
(a) Total return is not annualized for periods less than one year.
(b) Annualized.
20 | See notes to financial statements. | Semiannual Report
THE MONEY MARKET PORTFOLIOS
STATEMENT OF INVESTMENTS, DECEMBER 31, 2005 (UNAUDITED)
- -------------------------------------------------------------------------------------------------------------
PRINCIPAL
THE MONEY MARKET PORTFOLIO AMOUNT VALUE
- -------------------------------------------------------------------------------------------------------------
BANK NOTES (COST $200,000,801) 3.6%
Bank of America NA, 4.29%, 1/30/06 ........................................ $200,000,000 $ 200,000,801
--------------
CERTIFICATES OF DEPOSIT 50.7%
Abbey National Treasury Services PLC, Stamford Branch, 4.24% - 4.29%,
1/31/06 - 2/01/06 ....................................................... 200,000,000 200,001,156
ABN AMRO Bank, N.V., Chicago Branch, 4.295%, 2/03/06 ...................... 200,000,000 200,000,858
Bank of Montreal, Chicago Branch, 4.24% - 4.28%, 1/10/06 - 1/20/06 ........ 200,000,000 200,000,761
Bank of Nova Scotia, Portland Branch, 4.24%, 1/11/06 ...................... 100,000,000 100,000,277
Banque Nationale de Paris, San Francisco Branch, 4.39%, 3/03/06 ........... 200,000,000 200,000,000
Barclay's Bank PLC, New York Branch, 4.235% - 4.39%, 1/23/06 - 2/28/06 .... 200,000,000 200,002,226
Calyon North America Inc., New York Branch, 4.38%, 2/23/06 - 2/24/06 ...... 200,000,000 200,000,000
DEPFA Bank PLC, New York Branch, 4.30%, 1/20/06 ........................... 75,000,000 75,000,197
Dexia Credit Local, New York Branch, 4.385%, 2/21/06 - 2/22/06 ............ 200,000,000 200,000,000
HBOS Treasury Services, New York Branch, 4.24%, 1/31/06 (United Kingdom) .. 175,000,000 175,001,447
Rabobank Nederland N.V., New York Branch, 4.21%, 1/04/06 - 1/05/06 ........ 200,000,000 200,000,000
Societe Generale North America, New York Branch, 4.28%, 1/24/06 - 1/27/06 . 200,000,000 200,000,000
Svenska Handelsbanken, New York Branch, 4.24% - 4.40%, 1/17/06 - 2/27/06 .. 200,000,000 200,002,014
Toronto Dominion Bank, New York Branch, 4.28%, 1/19/06 - 1/20/06 .......... 200,000,000 200,000,000
UBS AG, Stamford Branch, 4.29%, 1/26/06 ................................... 100,000,000 100,000,346
Wells Fargo Bank NA, San Francisco Branch, 4.23% - 4.30%, 1/09/06 - 1/18/06 200,000,000 200,000,000
--------------
TOTAL CERTIFICATES OF DEPOSIT (COST $2,850,009,282) ....................... 2,850,009,282
--------------
(a)COMMERCIAL PAPER 39.5%
Bank of Ireland, 1/06/06 .................................................. 200,000,000 199,883,333
Commonwealth Bank of Australia, 1/03/06 - 1/25/06 ......................... 175,000,000 174,767,028
Concentrate Manufacturing Co., 1/05/06 - 2/08/06 .......................... 189,000,000 188,324,428
DEPFA Bank PLC, 1/04/06 - 1/20/06 ......................................... 125,000,000 124,902,629
General Electric Capital Corp., 1/05/06 - 1/06/06 ......................... 200,000,000 199,892,500
Goldman Sachs Group Inc., 1/04/06 - 1/17/06 ............................... 200,000,000 199,744,126
International Nederlanden U.S., 1/23/06 - 1/26/06 ......................... 180,370,000 179,865,304
Merrill Lynch & Co Inc., 1/03/06 .......................................... 200,000,000 199,953,444
Morgan Stanley Group Inc., 1/04/06 ........................................ 59,450,000 59,429,093
National Australia Funding, 1/09/06 - 1/12/06 ............................. 200,000,000 199,775,166
Toyota Motor Credit Corp., 2/06/06 - 2/07/06 .............................. 200,000,000 199,128,056
UBS AG Finance Delaware LLC, 1/13/06 ...................................... 100,000,000 99,860,000
Westpac Banking Corp., 1/23/06 ............................................ 200,000,000 199,475,667
--------------
TOTAL COMMERCIAL PAPER (COST $2,225,000,774) .............................. 2,225,000,774
--------------
(a)U.S. GOVERNMENT AND AGENCY SECURITIES (COST $90,692,073) 1.6%
Federal Home Loan Bank, 1/03/06 ........................................... 90,709,000 90,692,073
--------------
TOTAL INVESTMENTS BEFORE REPURCHASE AGREEMENTS (COST $5,365,702,930) ...... 5,365,702,930
--------------
Semiannual Report | 21
THE MONEY MARKET PORTFOLIOS
STATEMENT OF INVESTMENTS, DECEMBER 31, 2005 (UNAUDITED) (CONTINUED)
- -----------------------------------------------------------------------------------------------------------------------
PRINCIPAL
THE MONEY MARKET PORTFOLIO AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------
(b)REPURCHASE AGREEMENTS 11.6%
ABN AMRO Bank, N.V., New York Branch, 4.00%, 1/03/06 (Maturity Value $295,131,111)
Collateralized by U.S. Government Agency Securities, 4.25% - 4.625%,
1/15/08 - 8/15/10 ............................................................. $295,000,000 $ 295,000,000
Deutsche Bank Securities Inc., 3.39%, 1/03/06 (Maturity Value $32,367,187)
Collateralized by aU.S. Treasury Bills, 6/08/06 ................................ 32,355,000 32,355,000
Morgan Stanley & Co. Inc., 3.40%, 1/03/06 (Maturity Value $32,372,225)
Collateralized by U.S. Treasury Notes, 3.50% - 4.00%, 2/15/10 - 4/15/10 ........ 32,360,000 32,360,000
UBS Securities LLC, 4.00%, 1/03/06 (Maturity Value $295,131,111)
Collateralized by U.S. Government Agency Securities, 7.25%, 1/15/10 ............ 295,000,000 295,000,000
----------------
TOTAL REPURCHASE AGREEMENTS (COST $654,715,000) .................................. 654,715,000
----------------
TOTAL INVESTMENTS (COST $6,020,417,930) 107.0% ................................... 6,020,417,930
OTHER ASSETS, LESS LIABILITIES (7.0)% ............................................ (394,295,419)
----------------
NET ASSETS 100.0% ................................................................ $ 5,626,122,511
================
(a) A portion or all of the security is traded on a discount basis with no
stated coupon rate.
(b) See Note 1(b) regarding repurchase agreements.
22 | See notes to financial statements. | Semiannual Report
THE MONEY MARKET PORTFOLIOS
FINANCIAL HIGHLIGHTS
THE U.S. GOVERNMENT SECURITIES MONEY MARKET PORTFOLIO
--------------------------------------------------------------------------------
SIX MONTHS
ENDED
DECEMBER 31,
2005 YEAR ENDED JUNE 30,
(UNAUDITED) 2005 2004 2003 2002 2001
--------------------------------------------------------------------------------
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 ............................ 0.018 0.020 0.009 0.013 0.024 0.056
Less distributions from net investment income . (0.018) (0.020) (0.009) (0.013) (0.024) (0.056)
-----------------------------------------------------------------------------
Net asset value, end of period ................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
=============================================================================
Total return(a) ............................... 1.77% 1.99% 0.87% 1.34% 2.43% 5.75%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ............. $ 97,936 $110,761 $117,815 $201,758 $226,676 $186,718
Ratios to average net assets:
Expenses ..................................... 0.17%(b) 0.17% 0.16% 0.16% 0.16% 0.16%
Expenses net of waiver and payments
by affiliate ................................ 0.15%(b) 0.15% 0.15% 0.15% 0.15% 0.15%
Net investment income ........................ 3.48%(b) 1.97% 0.87% 1.34% 2.33% 5.63%
(a) Total return is not annualized for periods less than one year.
(b) Annualized.
Semiannual Report | See notes to financial statements. | 23
THE MONEY MARKET PORTFOLIOS
STATEMENT OF INVESTMENTS, DECEMBER 31, 2005 (UNAUDITED)
- -------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
THE U.S. GOVERNMENT SECURITIES MONEY MARKET PORTFOLIO AMOUNT VALUE
- -------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AND AGENCY SECURITIES 6.6%
(a)U.S. Treasury Bill, 4/27/06 .............................................................. $ 2,000,000 $ 1,973,707
(a)U.S. Treasury Bill, 5/04/06 .............................................................. 2,000,000 1,971,881
U.S. Treasury Note, 2.50%, 5/31/06 ....................................................... 2,500,000 2,489,346
-----------
TOTAL U.S. GOVERNMENT AND AGENCY SECURITIES (COST $6,434,934) ............................ 6,434,934
-----------
(b)REPURCHASE AGREEMENTS 93.4%
ABN AMRO Bank, N.V., New York Branch, 3.30%, 1/03/06 (Maturity Value $5,001,833)
Collateralized by aU.S. Treasury Bills, 4/27/06 ........................................ 5,000,000 5,000,000
Banc of America Securities LLC, 3.30%, 1/03/06 (Maturity Value $5,001,833)
Collateralized by U.S. Treasury Notes, 2.50%, 9/30/06 .................................. 5,000,000 5,000,000
Barclays Capital Inc., 3.30%, 1/03/06 (Maturity Value $5,001,833)
Collateralized by U.S. Treasury Notes, 3.25%, 8/15/07 .................................. 5,000,000 5,000,000
Bear, Stearns & Co. Inc., 3.10%, 1/03/06 (Maturity Value $5,001,722)
Collateralized by U.S. Treasury Notes, 4.625%, 5/15/06 ................................. 5,000,000 5,000,000
Deutsche Bank Securities Inc., 3.39%, 1/03/06 (Maturity Value $20,752,814)
Collateralized by aU.S. Treasury Bills, 4/13/06 ........................................ 20,745,000 20,745,000
Dresdner Kleinwort Wasserstein Securities LLC, 3.50%, 1/03/06 (Maturity Value $10,003,889)
Collateralized by U.S. Treasury Notes, 4.00%, 6/15/09 .................................. 10,000,000 10,000,000
Greenwich Capital Markets Inc., 3.35%, 1/03/06 (Maturity Value $10,003,722)
Collateralized by U.S. Treasury Notes, 1.625%, 2/28/06 ................................. 10,000,000 10,000,000
Merrill Lynch Government Securities Inc., 3.38%, 1/03/06 (Maturity Value $5,001,878)
Collateralized by U.S. Treasury Notes, 2.50%, 9/30/06 .................................. 5,000,000 5,000,000
Morgan Stanley & Co. Inc., 3.40%, 1/03/06 (Maturity Value $20,752,837)
Collateralized by U.S. Treasury Notes, 3.875% - 4.00%, 4/15/10 - 7/15/10 ............... 20,745,000 20,745,000
UBS Securities LLC, 3.50%, 1/03/06 (Maturity Value $5,001,944)
Collateralized by U.S. Treasury Notes, 3.875%, 5/15/09 ................................. 5,000,000 5,000,000
-----------
TOTAL REPURCHASE AGREEMENTS (COST $91,490,000) ........................................... 91,490,000
-----------
TOTAL INVESTMENTS (COST $97,924,934) 100.0% .............................................. 97,924,934
OTHER ASSETS, LESS LIABILITIES 0.0%(c) ................................................... 11,259
-----------
NET ASSETS 100.0% ........................................................................ $97,936,193
===========
(a) A portion or all of the security is traded on a discount basis with no
stated coupon rate.
(b) See Note 1(b) regarding repurchase agreements.
(c) Rounds to less than 0.05% of net assets.
24 | See notes to financial statements. | Semiannual Report
THE MONEY MARKET PORTFOLIOS
FINANCIAL STATEMENTS
STATEMENTS OF ASSETS AND LIABILITIES
December 31, 2005 (unaudited)
-------------------------------
THE U.S.
GOVERNMENT
THE SECURITIES
MONEY MARKET MONEY MARKET
PORTFOLIO PORTFOLIO
-------------------------------
Assets:
Investments in securities, at amortized cost .. $5,365,702,930 $ 6,434,934
Repurchase agreements, at value and cost ...... 654,715,000 91,490,000
-------------------------------
Total investments ...................... 6,020,417,930 97,924,934
Cash .......................................... 4,780 4,871
Interest receivable ........................... 6,442,459 22,648
-------------------------------
Total assets ........................... 6,026,865,169 97,952,453
-------------------------------
Liabilities:
Payables:
Investment securities purchased .............. 400,000,858 --
Affiliates ................................... 716,288 10,676
Distributions to shareholders ................ 8,950 32
Accrued expenses and other liabilities ........ 16,562 5,552
-------------------------------
Total liabilities ...................... 400,742,658 16,260
-------------------------------
Net assets, at value ................. $5,626,122,511 $ 97,936,193
===============================
Net assets consist of paid-in capital .......... $5,626,122,511 $ 97,936,193
===============================
Shares outstanding ............................. 5,626,122,511 97,936,193
===============================
Net asset value per share ...................... $ 1.00 $ 1.00
===============================
Semiannual Report | See notes to financial statements. | 25
THE MONEY MARKET PORTFOLIOS
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF OPERATIONS
for the six months ended December 31, 2005 (unaudited)
-------------------------------
THE U.S.
GOVERNMENT
THE SECURITIES
MONEY MARKET MONEY MARKET
PORTFOLIO PORTFOLIO
-------------------------------
Investment income:
Interest ..................................................... $ 105,684,459 $ 1,807,759
-------------------------------
Expenses:
Management fees (Note 3a) .................................... 4,253,003 74,807
Custodian fees (Note 4) ...................................... 55,374 779
Reports to shareholders ...................................... 4,981 1,317
Professional fees ............................................ 25,268 6,114
Other ........................................................ 84,938 1,474
-------------------------------
Total expenses ........................................ 4,423,564 84,491
Expense reductions (Note 4) ........................... (24,817) (890)
Expenses waived/paid by affiliates (Note 3c) .......... -- (8,893)
-------------------------------
Net expenses ........................................ 4,398,747 74,708
-------------------------------
Net investment income .............................. 101,285,712 1,733,051
-------------------------------
Net increase (decrease) in net assets resulting from operations $ 101,285,712 $ 1,733,051
===============================
26 | See notes to financial statements. | Semiannual Report
THE MONEY MARKET PORTFOLIOS
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS
-----------------------------------------------------------------------------
THE U.S. GOVERNMENT SECURITIES
THE MONEY MARKET PORTFOLIO MONEY MARKET PORTFOLIO
-----------------------------------------------------------------------------
SIX MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, 2005 YEAR ENDED DECEMBER 31, 2005 YEAR ENDED
(UNAUDITED) JUNE 30, 2005 (UNAUDITED) JUNE 30, 2005
-----------------------------------------------------------------------------
Increase (decrease) in net assets:
Operations:
Net investment income .................... $ 101,285,712 $ 119,375,531 $ 1,733,051 $ 2,239,743
Net realized gain (loss) from
investments ............................ -- -- -- 190
---------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations ......... 101,285,712 119,375,531 1,733,051 2,239,933
Distributions to shareholders from net
investment income ........................ (101,285,712) (119,375,531) (1,733,051) (2,239,933)(a)
Capital share transactions (Note 2) ....... (50,356,907) 171,085,254 (12,825,205) (7,053,156)
---------------------------------------------------------------------------
Net increase (decrease) in
net assets ....................... (50,356,907) 171,085,254 (12,825,205) (7,053,156)
Net assets (there is no undistributed net
investment income at beginning or end
of period):
Beginning of period ...................... 5,676,479,418 5,505,394,164 $ 110,761,398 117,814,554
---------------------------------------------------------------------------
End of period ............................ $ 5,626,122,511 $ 5,676,479,418 $ 97,936,193 $ 110,761,398
===========================================================================
(a) Distributions were increased by a net gain from investments of $190.
Semiannual Report | See notes to financial statements. | 27
THE MONEY MARKET PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Money Market Portfolios (the Trust) is registered under the Investment
Company Act of 1940 as a diversified, open-end investment company, consisting of
two separate portfolios (the Portfolios). The shares of the Trust are issued in
private placements and are exempt from registration under the Securities Act of
1933.
The following summarizes the Portfolios' significant accounting policies.
A. SECURITY VALUATION
Securities are valued at amortized cost which approximates market value. This
method involves valuing an instrument at its cost and thereafter assuming a
constant amortization to maturity of any discount or premium. All security
valuation procedures are approved by the Portfolios' Board of Trustees.
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%.
Repurchase agreements are valued at cost. At December 31, 2005, all repurchase
agreements held by the Portfolios had been entered into on December 30, 2005.
C. INCOME TAXES
No provision has been made for U.S. income taxes because each Portfolio's policy
is to continue to qualify as a regulated investment company under the Internal
Revenue Code and to distribute to shareholders substantially all of its taxable
income and net realized gains.
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 and
distributed monthly. Such distributions are reinvested in additional shares of
the Portfolios. Distributions to shareholders are determined according to income
tax regulations (tax basis). Distributable earnings determined on a tax basis
may differ from earnings recorded in accordance with generally accepted
accounting principles. 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.
28 | Semiannual Report
THE MONEY MARKET PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
D. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
(CONTINUED)
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 of the
Trust. Portfolio specific expenses are charged directly to the Portfolio that
incurred the expense.
E. ACCOUNTING ESTIMATES
The preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America 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 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. However, based on experience, the
Trust expects the risk of loss to be remote.
2. SHARES OF BENEFICIAL INTEREST
At December 31, 2005, there were an unlimited number of shares authorized ($0.01
par value). Transactions in the Portfolios' shares at $1.00 per share were as
follows:
--------------------------------------
THE
THE U.S. GOVERNMENT
MONEY MARKET SECURITIES MONEY
PORTFOLIO MARKET PORTFOLIO
--------------------------------------
Period ended December 31, 2005
Shares sold .................................. $ 3,139,751,857 $ 18,500,886
Shares issued in reinvestment of distributions 101,283,995 1,733,081
Shares redeemed .............................. (3,291,392,759) (33,059,172)
--------------------------------------
Net increase (decrease) ...................... $ (50,356,907) $ (12,825,205)
======================================
Period ended June 30, 2005
Shares sold .................................. $ 5,623,149,272 $ 52,184,664
Shares issued in reinvestment of distributions 119,380,707 2,240,711
Shares redeemed .............................. (5,571,444,725) (61,478,531)
--------------------------------------
Net increase (decrease) ...................... $ 171,085,254 $ (7,053,156)
======================================
Semiannual Report | 29
THE MONEY MARKET PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
3. TRANSACTIONS WITH AFFILIATES
Franklin Resources, Inc. is the holding company for various subsidiaries that
together are referred to as Franklin Templeton Investments. Certain officers and
trustees of the Portfolios are also officers and/or directors of the Franklin
Money Fund, the Institutional Fiduciary Trust, the Franklin Templeton Money Fund
Trust and the Franklin Federal Money Fund, 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 Portfolios pay an investment management fee to Advisers of 0.15% per year of
the average daily net assets of each Portfolio.
B. TRANSFER AGENT FEES
Investor Services, under terms of an agreement, performs shareholder servicing
for the Portfolios and is not paid by the Portfolios for the services.
C. VOLUNTARY WAIVER AND EXPENSE REIMBURSEMENTS
Advisers agreed in advance to voluntarily waive a portion of management fees for
The U.S. Government Securities Money Market Portfolio, as noted in the Statement
of Operations. Total expenses waived by Advisers are not subject to
reimbursement by the Portfolio subsequent to the Portfolio's fiscal year end.
D. OTHER AFFILIATED TRANSACTIONS
At December 31, 2005, the shares of The Money Market Portfolio were owned by the
following funds:
----------------------------------
PERCENTAGE OF
SHARES OUTSTANDING SHARES
----------------------------------
Institutional Fiduciary Trust - Money Market Portfolio .... 3,829,069,311 68.06%
Franklin Money Fund ....................................... 1,559,471,151 27.72%
Institutional Fiduciary Trust - Franklin Cash Reserves Fund 144,730,938 2.57%
Franklin Templeton Money Fund Trust - Franklin Templeton
Money Fund ............................................... 92,851,111 1.65%
At December 31, 2005, the shares of The U.S. Government Securities Money Market
Portfolio were owned by the following fund:
----------------------------------
PERCENTAGE OF
SHARES OUTSTANDING SHARES
----------------------------------
Franklin Federal Money Fund ............................... 97,936,193 100.00%
30 | Semiannual Report
THE MONEY MARKET PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
4. EXPENSE OFFSET ARRANGEMENT
The Portfolios have entered into an arrangement with their custodian whereby
credits realized as a result of uninvested cash balances are used to reduce a
portion of the Portfolios' custodian expenses. During the period ended December
31, 2005, the custodian fees were reduced as noted in the Statements of
Operations.
5. INCOME TAXES
At December 31, 2005, the cost of investments for book and income tax purposes
was the same.
6. REGULATORY MATTERS
As part of various investigations by a number of federal, state, and foreign
regulators and governmental entities, relating to certain practices in the
mutual fund industry, including late trading, market timing and marketing
support payments to securities dealers who sell fund shares, Franklin Resources,
Inc. and certain of its subsidiaries (collectively, the "Company"), entered into
settlements with certain of those regulators.
Specifically, the Company entered into settlements with the Securities and
Exchange Commission ("SEC") concerning market timing (the "August 2, 2004 SEC
Order") and marketing support payments to securities dealers who sell fund
shares (the "December 13, 2004 SEC Order") and with the California Attorney
General's Office ("CAGO") concerning marketing support payments to securities
dealers who sell fund shares (the "CAGO Settlement"). Under the terms of the
settlements with the SEC and the CAGO, the Company retained an Independent
Distribution Consultant ("IDC") to develop a plan for distribution of the
respective settlement monies. The CAGO approved the distribution plan under the
CAGO Settlement and, in accordance with the terms and conditions of that
settlement, the monies were disbursed to the relevant funds. The Trust did not
participate in the CAGO Settlement. The SEC has not yet approved the
distribution plan pertaining to the December 13, 2004 SEC Order. When approved,
disbursements of settlement monies will be made promptly to the relevant funds,
in accordance with the terms and conditions of that order. The IDC continues to
develop the plan of distribution under the August 2, 2004 SEC Order that
resolved the SEC's market timing investigation.
In addition, the Company, as well as most of the mutual funds within Franklin
Templeton Investments and certain current or former officers, directors, and/or
employees, have been named in private lawsuits (styled as shareholder class
actions, or as derivative actions on behalf of either the named funds or
Franklin Resources, Inc.) relating to the industry practices referenced above,
as well as to allegedly excessive advisory fees, commissions, and/or 12b-1 fees.
The lawsuits were filed in different courts throughout the country. Many of
those suits are now pending in a multi-district litigation in the United States
District Court for the District of Maryland.
Semiannual Report | 31
THE MONEY MARKET PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
6. REGULATORY MATTERS (CONTINUED)
The Company and fund management strongly believe that the claims made in each of
the private lawsuits referenced above are without merit and intend to defend
against them vigorously. The Company cannot predict with certainty the eventual
outcome of these lawsuits, nor whether they will have a material negative impact
on the Company. If it is determined that the Company bears responsibility for
any unlawful or inappropriate conduct that caused losses to the Trust, it is
committed to making the Trust or its shareholders whole, as appropriate.
32 | Semiannual Report
SHAREHOLDER INFORMATION
PROXY VOTING POLICIES AND PROCEDURES
The Trust has established Proxy Voting Policies and Procedures ("Policies") that
the Trust uses to determine how to vote proxies relating to portfolio
securities. Shareholders may view the Trust's complete Policies online at
franklintempleton.com. Alternatively, shareholders may request copies of the
Policies free of charge by calling the Proxy Group collect at 1-954/847-2268 or
by sending a written request to: Franklin Templeton Companies, LLC, 500 East
Broward Boulevard, Suite 1500, Fort Lauderdale, FL 33394, Attention: Proxy
Group. Copies of the Trust's proxy voting records are also made available online
at franklintempleton.com and posted on the U.S. Securities and Exchange
Commission's website at sec.gov and reflect the most recent 12-month period
ended June 30.
QUARTERLY STATEMENT OF INVESTMENTS
The Trust files a complete statement of investments with the U.S. Securities and
Exchange Commission for the first and third quarters for each fiscal year on
Form N-Q. Shareholders may view the filed Form N-Q by visiting the Commission's
website at sec.gov. The filed form may also be viewed and copied at the
Commission's Public Reference Room in Washington, DC. Information regarding the
operations of the Public Reference Room may be obtained by calling
1-800/SEC-0330.
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 12(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 Frank W. T. LaHaye and he 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 for
Closed-End Management Investment Companies. N/A
Item 8. Portfolio Managers of Closed-End Management Investment
Companies. N/A
Item 9. Purchases of Equity Securities by Closed-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 ensure that information
required to be disclosed in the Registrant's filings under the Securities
Exchange Act of 1934 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 Form
N-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 significant changes in the
Registrant's internal controls or in other factors that could significantly
affect the internal controls subsequent to the date of their evaluation in
connection with the preparation of this Shareholder Report on Form N-CSR.
Item 12. Exhibits.
(a) (1) Code of Ethics
(a) (2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
of Jimmy D. Gambill, Chief Executive Officer - Finance and Administration, and
Galen G. Vetter, Chief Financial Officer
(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of
Jimmy D. Gambill, Chief Executive Officer - Finance and Administration, and
Galen G. Vetter, Chief Financial 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/ JIMMY D. GAMBILL
Jimmy D. Gambill
Chief Executive Officer - Finance and Administration
Date February 21, 2006
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/ JIMMY D. GAMBILL
Jimmy D. Gambill
Chief Executive Officer - Finance and Administration
Date February 21, 2006
By /S/ GALEN G. VETTER
Galen G. Vetter
Chief Financial Officer
Date February 21, 2006