UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-02605
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FRANKLIN MONEY FUND
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(Exact name of registrant as specified in charter)
ONE FRANKLIN PARKWAY, SAN MATEO, CA 94403-1906
(Address of principal executive offices) (Zip code)
MURRAY L. SIMPSON, ONE FRANKLIN PARKWAY, SAN MATEO, CA 94403-1906
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(Name and address of agent for service)
Registrant's telephone number, including area code: 650 312-2000
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Date of fiscal year end: 06/30
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Date of reporting period: 06/30/04
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ITEM 1. REPORTS TO STOCKHOLDERS.
[GRAPHIC OMITTED]
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JUNE 30, 2004
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ANNUAL REPORT AND SHAREHOLDER LETTER INCOME
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WANT TO RECEIVE
THIS DOCUMENT
FASTER VIA EMAIL?
FRANKLIN MONEY FUND Eligible shareholders can
sign up for eDelivery at
franklintempleton.com.
See inside for details.
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[LOGO]
FRANKLIN(R) TEMPLETON(R)
INVESTMENTS
Franklin o Templeton o Mutual Series
FRANKLIN TEMPLETON INVESTMENTS
GAIN FROM OUR PERSPECTIVE
Franklin Templeton's distinct multi-manager
structure combines the specialized expertise of
three world-class investment management groups--
Franklin, Templeton and Mutual Series.
SPECIALIZED EXPERTISE Each of our portfolio management groups operates
autonomously, relying on its own research and
staying true to the unique investment disciplines
that underlie its success.
FRANKLIN. Founded in 1947, Franklin is a leader in
tax-free investing and a driving force in fixed
income investing around the globe. They also bring
expertise in growth- and value-style U.S. equity
investing.
TEMPLETON. Founded in 1940, Templeton pioneered
international investing and, in 1954, launched what
has become the industry's oldest global fund. Today,
with research offices in over 25 countries, they
offer investors the broadest global reach in the
industry.
MUTUAL SERIES. Founded in 1949, Mutual Series is
dedicated to a unique style of value investing,
searching aggressively for opportunity among
undervalued stocks, arbitrage situations and
distressed companies.
TRUE DIVERSIFICATION Because our management groups work independently and
adhere to distinctly different investment
approaches, Franklin, Templeton and Mutual Series
funds typically have a low overlap of securities.
That's why our funds can be used to build truly
diversified portfolios covering every major asset
class.
RELIABILITY YOU CAN TRUST At Franklin Templeton Investments, we seek to
consistently provide investors with exceptional
risk-adjusted returns over the long term, as well as
the reliable account services that have helped us
become one of the most trusted names in financial
services.
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MUTUAL FUNDS | RETIREMENT PLANS | 529 COLLEGE SAVINGS PLANS | SEPARATE ACCOUNTS
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Not part of the annual report
CONTENTS
SHAREHOLDER LETTER ........................................................ 1
ANNUAL REPORT
Franklin Money Fund ....................................................... 3
Performance Summary ....................................................... 5
Financial Highlights and Statement of Investments ......................... 6
Financial Statements ...................................................... 8
Notes to Financial Statements ............................................. 11
Report of Independent Registered Public Accounting Firm ................... 15
Board Members and Officers ................................................ 16
Proxy Voting Policies and Procedures ...................................... 40
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ANNUAL REPORT
FRANKLIN MONEY FUND
YOUR FUND'S GOAL AND MAIN INVESTMENTS: 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 shares of The Money Market
Portfolio (the Portfolio), which has the same investment goal. The Portfolio, in
turn, mainly invests in high quality, short-term U.S. dollar denominated money
market securities of domestic and foreign issuers. The Fund attempts to maintain
a stable $1.00 share price.
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PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. INVESTMENT RETURNS WILL FLUCTUATE. CURRENT
PERFORMANCE MAY DIFFER FROM FIGURES SHOWN. PLEASE VISIT
FRANKLINTEMPLETON.COM OR CALL 1-800/342-5236 FOR MOST RECENT MONTH-END
PERFORMANCE.
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AN INVESTMENT IN THE FUND IS NOT INSURED OR GUARANTEED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY OR
INSTITUTION. ALTHOUGH THE FUND SEEKS TO PRESERVE THE VALUE OF YOUR
INVESTMENT AT $1.00 PER SHARE, IT IS POSSIBLE TO LOSE MONEY BY INVESTING IN
THE FUND.
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This annual report for Franklin Money Fund covers the fiscal year ended June 30,
2004.
PERFORMANCE OVERVIEW
Relatively steady, low interest rates resulted in moderate changes for the
Fund's yields. In this environment, the Fund's seven-day effective yield fell
from 0.48% on June 30, 2003, to 0.43% on June 30, 2004.
ECONOMIC AND MARKET OVERVIEW
Over the 12-month reporting period, an improving employment picture helped the
economy gain a strong foothold, as businesses added more than 1.5 million jobs
since September 2003.(1) This important factor was one of many that supported an
interest rate rise during the period. Although higher interest rates led to
increasing mortgage rates and declining housing affordability, the housing
market remained historically robust. Rising home prices and strong new and
existing home sales contributed to greater consumer spending.
Increases in business spending also contributed to economic growth. Growing
consumer demand helped many companies improve their profits. At the same time,
many businesses took advantage of the past 12 months' historically low interest
rates to refinance old debt at more attractive levels, which improved their
balance sheets. Productivity also continued to rise, which helped businesses
generate more goods and services without substantially raising inflation.
(1.) Source: Bureau of Labor Statistics.
THE DOLLAR VALUE, NUMBER OF SHARES OR PRINCIPAL AMOUNT, AND NAMES OF ALL
PORTFOLIO HOLDINGS ARE LISTED IN THE FUND'S STATEMENT OF INVESTMENTS (SOI). THE
SOI BEGINS ON PAGE 7.
Annual Report | 3
Many market participants consider the core Consumer Price Index, which excludes
food and energy, as a proxy for overall inflation. This index rose 1.9% for the
12 months ended June 30, 2004. Although inflation increased recently, it was
still historically low. In fact, when the Federal Reserve Board (Fed) raised the
federal funds target rate to 1.25% on June 30, they noted that, "Although
incoming inflation data are somewhat elevated, a portion of the increase in
recent months appears to have been due to transitory factors."(2)
Largely in anticipation of the Fed's move at the end of June, longer-maturity
Treasury yields shifted upward throughout the period. The benchmark 10-year
Treasury yield rose from 3.54% at the beginning of the reporting period to 4.62%
on June 30, 2004. The market expected the federal funds target rate to exceed
2.0% by the end of 2004, according to the Fed Funds Futures Contract Table.
Despite the removal of some of the stimulus provided by lower interest rates,
many sources of economic stimuli remained, including an improved jobs picture
and higher corporate profits.
INVESTMENT STRATEGY
Consistent with our strategy, we invest, through the Portfolio, mainly in
high-quality, short-term U.S. dollar denominated money market securities of
domestic and foreign issuers, including bank obligations, commercial paper,
repurchase agreements and U.S. government securities. We maintain a
dollar-weighted average portfolio maturity of 90 days or less. We seek to
provide shareholders with a high-quality, conservative investment vehicle; thus,
we do not invest the Fund's cash in derivatives or other relatively volatile
securities that we believe involve undue risk.
(2.) Source: Federal Reserve Board Press Release, 6/30/04.
4 | Annual Report
MANAGER'S DISCUSSION
We continued to invest the Portfolio's assets in high-quality money market
securities. For example, on June 30, 2004, more than 89% of the securities
purchased for the Portfolio carried AA or higher long-term credit ratings by
independent credit rating agencies Standard & Poor's and Moody's Investors
Service, with the balance rated A.(3)
We appreciate your support, welcome new shareholders and look forward to serving
your investment needs in the years ahead.
(3.) These do not indicate ratings of the Fund.
THIS DISCUSSION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS AS OF
JUNE 30, 2004, THE END OF THE REPORTING PERIOD. THE WAY WE IMPLEMENT OUR MAIN
INVESTMENT STRATEGIES AND THE RESULTING PORTFOLIO HOLDINGS MAY CHANGE DEPENDING
ON FACTORS SUCH AS MARKET AND ECONOMIC CONDITIONS. THESE OPINIONS MAY NOT BE
RELIED UPON AS INVESTMENT ADVICE OR AN OFFER FOR A PARTICULAR SECURITY. THE
INFORMATION IS NOT A COMPLETE ANALYSIS OF EVERY ASPECT OF ANY MARKET, COUNTRY,
INDUSTRY, SECURITY OR THE FUND. STATEMENTS OF FACT ARE FROM SOURCES CONSIDERED
RELIABLE, BUT THE ADVISOR MAKES NO REPRESENTATION OR WARRANTY AS TO THEIR
COMPLETENESS OR ACCURACY. ALTHOUGH HISTORICAL PERFORMANCE IS NO GUARANTEE OF
FUTURE RESULTS, THESE INSIGHTS MAY HELP YOU UNDERSTAND OUR INVESTMENT MANAGEMENT
PHILOSOPHY.
PERFORMANCE SUMMARY
6/30/04
Seven-day effective yield* 0.43%
Seven-day annualized yield 0.43%
* Seven-day effective yield assumes compounding of daily dividends.
Annualized and effective yields are for the seven-day period ended 6/30/04. The
Fund's average weighted maturity was 33 days. Yield reflects Fund expenses and
fluctuations in interest rates on portfolio investments.
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT GUARANTEE
FUTURE RESULTS. INVESTMENT RETURNS WILL FLUCTUATE. CURRENT PERFORMANCE MAY
DIFFER FROM FIGURES SHOWN. PLEASE VISIT FRANKLINTEMPLETON.COM OR CALL
1-800/342-5236 FOR MOST RECENT MONTH-END PERFORMANCE.
Annual Report | 5
FRANKLIN MONEY FUND
FINANCIAL HIGHLIGHTS
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YEAR ENDED JUNE 30,
2004 2003 2002 2001 2000
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PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year .......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
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Income from investment operations - net investment
income ................................................... .004 .010 .021 .054 .052
Less distributions from net investment income ............... (.004) (.010) (.021) (.054) (.052)
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Net asset value, end of year ................................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
==============================================================
Total return(a) ............................................. .44% .93% 2.16% 5.59% 5.29%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) ............................. $1,615,830 $1,956,924 $2,095,945 $2,255,111 $2,437,183
Ratios to average net assets:
Expenses(b) .............................................. .65% .62% .61% .62% .61%
Expenses excluding waiver and payments by affiliate(b) ... .66% .62% .62% .63% .62%
Net investment income .................................... .44% .93% 2.16% 5.51% 5.17%
(a) The total return does not reflect the contingent deferred sales charge, and
is not annualized for periods less than one year.
(b) The expense ratio includes the Fund's share of the Portfolio's allocated
expenses.
6 | See notes to financial statements. | Annual Report
FRANKLIN MONEY FUND
STATEMENT OF INVESTMENTS, JUNE 30, 2004
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SHARES VALUE
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MUTUAL FUNDS (COST $1,623,968,530) 100.5%
The Money Market Portfolio (Note1) ........... 1,623,968,530 $1,623,968,530
OTHER ASSETS, LESS LIABILITIES (.5)% ......... (8,138,169)
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NET ASSETS 100.0% ............................ $1,615,830,361
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Annual Report | See notes to financial statements. | 7
FRANKLIN MONEY FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2004
Assets:
Investment in Portfolio, at value and cost (Note 1) ......... $1,623,968,530
Receivables from capital shares sold ........................ 5,068,647
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Total assets ............................................ 1,629,037,177
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Liabilities:
Payables:
Capital shares redeemed ................................... 12,216,916
Affiliates ................................................ 621,564
Distributions to shareholders ............................... 13,435
Other liabilities ........................................... 354,901
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Total liabilities ....................................... 13,206,816
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Net assets, at value .......................................... $1,615,830,361
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Shares outstanding ............................................ 1,615,830,361
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Net asset value per share(a) .................................. $ 1.00
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(a) Redemption price is equal to net asset value less any applicable contingent
deferred sales charge.
8 | See notes to financial statements. | Annual Report
FRANKLIN MONEY FUND
FINANCIAL STATEMENTS (CONTINUED)
STATEMENT OF OPERATIONS
for the year ended June 30, 2004
Investment income:
Dividends from Portfolio (Note 1) ............................. $16,451,321
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Expenses:
Administrative fees (Note 3) .................................. 5,190,039
Transfer agent fees (Note 3) .................................. 3,069,704
Reports to shareholders ....................................... 201,966
Registration and filing fees .................................. 94,514
Professional fees ............................................. 32,340
Directors' fees and expenses .................................. 84,961
Other ......................................................... 75,789
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Total expenses ............................................. 8,749,313
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Net investment income ................................... 7,702,008
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Net increase (decrease) in net assets resulting from
operations .................................................... $ 7,702,008
===========
Annual Report | See notes to financial statements. | 9
FRANKLIN MONEY FUND
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS
for the years ended June 30, 2004 and 2003
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2004 2003
-------------------------------
Increase (decrease) in net assets:
Net investment income from operations ........................ $ 7,702,008 $ 19,611,141
Distributions to shareholders from net investment income ..... (7,702,008) (19,611,141)
Capital share transactions (Note 2) .......................... (341,093,804) (139,020,642)
-------------------------------
Net increase (decrease) in net assets ..................... (341,093,804) (139,020,642)
Net assets (there is no undistributed net investment income at
beginning or end of year):
Beginning of year ............................................ 1,956,924,165 2,095,944,807
-------------------------------
End of year .................................................. $1,615,830,361 $1,956,924,165
===============================
10 | See notes to financial statements. | Annual Report
FRANKLIN MONEY FUND
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Franklin Money Fund (the Fund) is registered under the Investment Company Act of
1940 as a diversified, open-end investment company. The Fund seeks high current
income consistent with the preservation of capital and liquidity.
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 accounting policies of the Portfolio, including the Portfolio's
security valuation policies, will directly affect the recorded value of the
Fund's investment in the Portfolio. 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
the net asset value of the Portfolio. As of June 30, 2004, the Fund owns 29.50%
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 substantially 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 or distributed
monthly.
D. 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.
E. GUARANTEES AND INDEMNIFICATIONS
Under the Fund's organizational documents, its officers and directors are
indemnified against certain liability arising out of the performance of their
duties to the Fund. Additionally, in the normal course of business, the Fund
enters into contracts with service providers that contain general
indemnification clauses. The Fund's maximum exposure under these arrangements is
unknown as this would involve future claims that may be made against the Fund
that have not yet occurred. However, based on experience, the Fund expects the
risk of loss to be remote.
Annual Report | 11
FRANKLIN MONEY FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. CAPITAL STOCK
At June 30, 2004, there were an unlimited number of shares authorized ($0.01 par
value). Transactions in the Fund's shares at $1.00 per share were as follows:
---------------------------------
Year Ended June 30,
2004 2003
---------------------------------
Shares sold ...................................... $ 2,021,070,845 $ 2,856,367,616
Shares issued in reinvestment of distributions ... 7,687,133 19,802,711
Shares redeemed .................................. (2,369,851,782) (3,015,190,969)
---------------------------------
Net increase (decrease) .......................... $ (341,093,804) $ (139,020,642)
=================================
3. TRANSACTIONS WITH AFFILIATES
Certain officers and directors of the Fund are also officers and/or directors of
Franklin Advisers Inc. (Advisers), Franklin/Templeton Distributors Inc.
(Distributors), and Franklin/Templeton Investor Services LLC (Investor
Services), the Fund's administrative manager, principal underwriter, and
transfer agent, respectively, and of the Portfolio.
The Fund pays an administrative fee to Advisers based on the average daily net
assets of the Fund as follows:
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ANNUALIZED FEE RATE NET ASSETS
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.455% First $100 million
.330% Over $100 million, up to and including $250 million
.280% Over $250 million
Distributors has advised the Fund of the following commission transactions
related to the sale of the Fund's shares for the year:
Contingent deferred sales charges retained .......................... $303,020
The Fund paid transfer agent fees of $3,069,704, of which $2,257,234 was paid to
Investor Services.
4. INCOME TAXES
Tax character of distributions paid during the years ended June 30, 2004 and
2003, was as follows:
------------------------
2004 2003
------------------------
Distributions paid from ordinary income ............. $7,702,008 $19,611,141
========================
At June 30, 2004, the cost of investments and undistributed ordinary income for
income tax purposes were as follows:
Cost of investments ........................................... $1,623,968,530
==============
Undistributed ordinary income ................................. $ 47,575
==============
12 | Annual Report
FRANKLIN MONEY FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. REGULATORY MATTERS
MASSACHUSETTS ADMINISTRATIVE PROCEEDING
On February 4, 2004, the Securities Division of the Office of the Secretary of
the Commonwealth of Massachusetts filed an administrative complaint against
Franklin Resources, Inc. and certain of its subsidiaries (the "Company")
claiming violations of the Massachusetts Uniform Securities Act ("Massachusetts
Act") with respect to an alleged arrangement to permit market timing (the "Mass.
Proceeding"). On February 17, 2004, the Company filed an answer denying all
violations of the Massachusetts Act.
U.S. SECURITIES AND EXCHANGE COMMISSION (SEC) SETTLEMENT
On August 2, 2004, the Company announced that an agreement had been reached by
the Fund's administrative manager with the SEC that resolved the issues
resulting from the SEC's investigation of market timing activity. The SEC issued
an "order instituting administrative and cease-and-desist proceedings pursuant
to sections 203(e) and 203(k) of the Investment Advisers Act of 1940 and
sections 9(b) and 9(f) of the Investment Company Act of 1940, making findings
and imposing remedial sanctions and a cease and desist order" (the "Order"). The
SEC's Order concerns the activities of a limited number of third parties that
ended in 2000 and those that are the subject of the Mass. Proceeding
described above.
Under the terms of the SEC's Order, pursuant to which the Fund's administrative
manager neither admits nor denies any wrongdoing, the Fund's administrative
manager has agreed to pay $50 million, of which $20 million is a civil penalty,
to be distributed to certain fund shareholders in accordance with a plan to be
developed by an Independent Distribution Consultant. At this time, it is unclear
whether shareholders of all funds will receive distributions or whether all
shareholders of any particular fund will receive distributions. The SEC Order
also requires the Fund's administrative manager to, among other things, enhance
and periodically review compliance policies and procedures.
OTHER GOVERNMENTAL INVESTIGATIONS
As part of ongoing investigations by the SEC, the U.S. Attorney for the Northern
District of California, the New York Attorney General, the California Attorney
General, the U.S. Attorney for the District of Massachusetts, the Florida
Department of Financial Services and the Commissioner of Securities, the West
Virginia Attorney General, the Vermont Department of Banking, Insurance,
Securities, and Health Care Administration and the National Association of
Securities Dealers, relating to certain practices in the mutual fund industry,
including late trading, market timing and payments to securities dealers who
sell fund shares, the Company and its subsidiaries, as well as certain current
or former executives and employees of the Company, have received requests for
information and/or subpoenas to testify or produce documents. The Company has
been providing documents and information in response to these requests and
subpoenas. In addition, the Company has responded to requests for similar kinds
of information from regulatory authorities in some of the foreign countries
where the Company conducts its global asset management business.
Annual Report | 13
FRANKLIN MONEY FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. REGULATORY MATTERS (CONTINUED)
OTHER GOVERNMENTAL INVESTIGATIONS (CONTINUED)
The Staff of the SEC has also informed the Company that it is considering
recommending a civil action or proceeding against the Fund's administrative
manager and the Fund's principal underwriter concerning payments to securities
dealers who sell fund shares (commonly referred to as "revenue sharing"). The
staff of the California Attorney General's Office (CAGO) also has advised the
Company that it is authorized to bring a civil action against Franklin
Resources, Inc. and the Fund's principal underwriter arising from the same
events. Even though the Company currently believes that the charges the SEC
staff and CAGO staff are contemplating are unwarranted, it also believes that it
is in the best interest of the Company and fund shareholders to resolve these
issues voluntarily, to the extent the Company can reasonably do so.
OTHER LEGAL PROCEEDINGS
The Fund, in addition to other entities within Franklin Templeton Investments,
including the Company and certain of its subsidiaries, other funds, and current
and former officers, employees, and directors have been named in multiple
lawsuits in different federal courts in Nevada, California, Illinois, New York
and Florida, alleging violations of various federal securities laws and seeking,
among other things, monetary damages and costs. Specifically, the lawsuits claim
breach of duty with respect to alleged arrangements to permit market timing
and/or late trading activity, or breach of duty with respect to the valuation of
the portfolio securities of certain funds managed by Company subsidiaries,
resulting in alleged market timing activity. The majority of these lawsuits
duplicate, in whole or in part, the allegations asserted in the Mass. Proceeding
detailed above. The lawsuits are styled as class actions or derivative actions
on behalf of either the named funds or the Company.
In addition, the Company and its subsidiaries, as well as certain current and
former officers, employees, and directors have been named in multiple lawsuits
alleging violations of various securities laws and pendent state law claims
relating to the disclosure of directed brokerage payments and/or payment of
allegedly excessive commissions and advisory fees. These lawsuits are styled as
class actions and derivative actions.
The Company's management strongly believes that the claims made in each of these
lawsuits are without merit and intends to vigorously defend against them.
The Company cannot predict with certainty the eventual outcome of the foregoing
Mass. Proceeding, other governmental investigations or other legal proceedings.
The impact, if any, of these matters on the Fund is uncertain at this time. If
the Company determines that it bears responsibility for any unlawful or
inappropriate conduct that caused losses to the Fund, it is committed to making
the Fund or its shareholders whole, as appropriate.
14 | Annual Report
FRANKLIN MONEY FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF FRANKLIN MONEY FUND
In our opinion, the accompanying statement of assets and liabilities, including
the statement of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Franklin Money Fund (the "Fund") at
June 30, 2004, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period then ended and
the financial highlights for each of the five years in the period then ended, in
conformity with accounting principles generally accepted in the United States of
America. These financial statements and financial highlights (hereafter referred
to as "financial statements") are the responsibility of the Fund's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
San Francisco, California
August 11, 2004
Annual Report | 15
BOARD MEMBERS AND OFFICERS
FRANKLIN MONEY FUND
The name, age and address of the officers and board members, as well as their
affiliations, positions held with the Fund, principal occupations during the
past five years and number of portfolios overseen in the Franklin Templeton
Investments fund complex are shown below. Each board member will serve until
that person's successor is elected and qualified.
INDEPENDENT BOARD MEMBERS
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
LENGTH OF FUND COMPLEX OVERSEEN
NAME, AGE AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------------------------------------------------------------------------------------
FRANK H. ABBOTT, III (83) Director Since 1975 112 None
One Franklin Parkway
San Mateo, CA 94403-1906
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PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
President and Director, Abbott Corporation (an investment company); and FORMERLY, Director, MotherLode Gold Mines Consolidated (gold
mining) (until 1996) and Vacu-Dry Co. (food processing) (until 1996).
- ------------------------------------------------------------------------------------------------------------------------------------
HARRIS J. ASHTON (72) Director Since 1982 141 Director, Bar-S Foods (meat
One Franklin Parkway packing company).
San Mateo, CA 94403-1906
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PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director of various companies; and FORMERLY, Director, RBC Holdings, Inc. (bank holding company) (until 2002); and President, Chief
Executive Officer and Chairman of the Board, General Host Corporation (nursery and craft centers) (until 1998).
- ------------------------------------------------------------------------------------------------------------------------------------
ROBERT F. CARLSON (76) Director Since 1998 51 None
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Member and past President, Board of Administration, California Public Employees Retirement Systems (CALPERS); and FORMERLY,
member and Chairman of the Board, Sutter Community Hospitals; member, Corporate Board, Blue Shield of California; and Chief Counsel,
California Department of Transportation.
- ------------------------------------------------------------------------------------------------------------------------------------
S. JOSEPH FORTUNATO (71) Director Since 1989 142 None
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Attorney; and FORMERLY, member of the law firm of Pitney, Hardin, Kipp & Szuch.
- ------------------------------------------------------------------------------------------------------------------------------------
FRANK W.T. LAHAYE (75) Director Since 1975 105 Director, The California Center
One Franklin Parkway for Land Recycling
San Mateo, CA 94403-1906 (redevelopment).
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
General Partner, Las Olas L.P. (Asset Management); and FORMERLY, Chairman, Peregrine Venture Management Company (venture capital).
- ------------------------------------------------------------------------------------------------------------------------------------
16 | Annual Report
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
LENGTH OF FUND COMPLEX OVERSEEN
NAME, AGE AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------------------------------------------------------------------------------------
Gordon S. Macklin (76) Director Since 1994 141 Director, White Mountains
One Franklin Parkway Insurance Group, Ltd. (holding
San Mateo, CA 94403-1906 company); Martek Biosciences
Corporation; MedImmune, Inc.
(biotechnology); and
Overstock.com (Internet
services); and FORMERLY,
Director, MCI Communication
Corporation (subsequently known
as MCI WorldCom, Inc. and
WorldCom, Inc.) (communications
services) (1988-2002) and
Spacehab, Inc. (aerospace
services) (1994-2003).
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Deputy Chairman, White Mountains Insurance Group, Ltd. (holding company); and FORMERLY, Chairman, White River Corporation (financial
services) (1993-1998) and Hambrecht & Quist Group (investment banking) (1987-1992); and President, National Association of
Securities Dealers, Inc. (1970-1987).
- ------------------------------------------------------------------------------------------------------------------------------------
INTERESTED BOARD MEMBERS AND OFFICERS
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
LENGTH OF FUND COMPLEX OVERSEEN
NAME, AGE AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------------------------------------------------------------------------------------
**CHARLES B. JOHNSON (71) Director and Director since 141 None
One Franklin Parkway Chairman of 1975 and
San Mateo, CA 94403-1906 the Board Chairman of the
Board since 1993
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Chairman of the Board, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Vice President, Franklin Templeton
Distributors, Inc.; Director, Fiduciary Trust Company International; and officer and/or director or trustee, as the case may be, of
some of the other subsidiaries of Franklin Resources, Inc. and of 46 of the investment companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
**RUPERT H. JOHNSON, JR. (63) Director and Director since 124 None
One Franklin Parkway President and 1975, President
San Mateo, CA 94403-1906 Chief Executive since 1993 and
Officer - Chief Executive
Investment Officer -
Management Investment
Management
since 2002
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice Chairman, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Vice President and Director, Franklin
Templeton Distributors, Inc.; Director, Franklin Advisers, Inc. and Franklin Investment Advisory Services, Inc.; Senior Vice
President, Franklin Advisory Services, LLC; and officer and/or director or trustee, as the case may be, of some of the other
subsidiaries of Franklin Resources, Inc. and of 49 of the investment companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
Annual Report | 17
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
LENGTH OF FUND COMPLEX OVERSEEN
NAME, AGE AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------------------------------------------------------------------------------------
HARMON E. BURNS (59) Vice President Since 1986 Not Applicable None
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice Chairman, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Vice President and Director, Franklin
Templeton Distributors, Inc.; Executive Vice President, Franklin Advisers, Inc.; Director, Franklin Investment Advisory Services,
Inc.; and officer and/or director or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and
of 49 of the investment companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
JAMES M. DAVIS (52) Chief Since July 2004 Not Applicable None
One Franklin Parkway Compliance
San Mateo, CA 94403-1906 Officer
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Officer of 51 of the investment companies in Franklin Templeton Investments; Director, Global Compliance, Franklin Resources, Inc.,
and FORMERLY, Director of Compliance, Franklin Resources, Inc. (1994-2001).
- ------------------------------------------------------------------------------------------------------------------------------------
LAURA FERGERSON (42) Treasurer Since July 2004 Not Applicable None
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Officer of 34 of the investment companies in Franklin Templeton Investments; and FORMERLY, Director and member of Audit and
Valuation Committees, Runkel Funds, Inc. (2003-2004); Assistant Treasurer of most of the investment companies in Franklin Templeton
Investments (1997-2003); and Vice President, Franklin Templeton Services, LLC (1997-2003).
- ------------------------------------------------------------------------------------------------------------------------------------
MARTIN L. FLANAGAN (44) Vice President Since 1995 Not Applicable None
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Co-President and Chief Executive Officer, Franklin Resources, Inc.; Senior Vice President and Chief Financial Officer, Franklin
Mutual Advisers, LLC; Executive Vice President, Chief Financial Officer and Director, Templeton Worldwide, Inc.; Executive Vice
President and Chief Operating Officer, Templeton Investment Counsel, LLC; President and Director, Franklin Advisers, Inc.; Executive
Vice President, Franklin Investment Advisory Services, Inc. and Franklin Templeton Investor Services, LLC; Chief Financial Officer,
Franklin Advisory Services, LLC; Chairman, Franklin Templeton Services, LLC; and officer and/or director or trustee, as the case may
be, of some of the other subsidiaries of Franklin Resources, Inc. and of 49 of the investment companies in Franklin Templeton
Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
JIMMY D. GAMBILL (56) Senior Vice Since 2002 Not Applicable None
500 East Broward Blvd. President and
Suite 2100 Chief Executive
Fort Lauderdale, FL 33394-3091 Officer -
Finance and
Administration
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
President, Franklin Templeton Services, LLC; Senior Vice President, Templeton Worldwide, Inc.; and officer of 51 of the investment
companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
18 | Annual Report
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
LENGTH OF FUND COMPLEX OVERSEEN
NAME, AGE AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------------------------------------------------------------------------------------
DAVID P. GOSS (57) Vice President Since 2000 Not Applicable None
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Associate General Counsel, Franklin Resources, Inc.; officer and director of one of the
subsidiaries of Franklin Resources, Inc.; officer of 51 of the investment companies in Franklin Templeton Investments; and FORMERLY,
President, Chief Executive Officer and Director, Property Resources Equity Trust (until 1999) and Franklin Select Realty Trust
(until 2000).
- ------------------------------------------------------------------------------------------------------------------------------------
BARBARA J. GREEN (56) Vice President Since 2000 Not Applicable None
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice President, Deputy General Counsel and Secretary, Franklin Resources, Inc.; Secretary and Senior Vice President, Templeton
Worldwide, Inc.; Secretary, Franklin Advisers, Inc., Franklin Advisory Services, LLC, Franklin Investment Advisory Services, Inc.,
Franklin Mutual Advisers, LLC, Franklin Templeton Alternative Strategies, Inc., Franklin Templeton Investor Services, LLC, Franklin
Templeton Services, LLC, Franklin Templeton Distributors, Inc., Templeton Investment Counsel, LLC, and Templeton/Franklin Investment
Services, Inc.; and officer of some of the other subsidiaries of Franklin Resources, Inc. and of 51 of the investment companies in
Franklin Templeton Investments; and FORMERLY, Deputy Director, Division of Investment Management, Executive Assistant and Senior
Advisor to the Chairman, Counselor to the Chairman, Special Counsel and Attorney Fellow, U.S. Securities and Exchange Commission
(1986-1995); Attorney, Rogers & Wells (until 1986); and Judicial Clerk, U.S. District Court (District of Massachusetts) (until
1979).
- ------------------------------------------------------------------------------------------------------------------------------------
MICHAEL O. MAGDOL (67) Vice President Since 2002 Not Applicable Director, FTI Banque, Arch
600 Fifth Avenue - AML Chemicals, Inc. and Lingnan
Rockefeller Center Compliance Foundation.
New York, NY 10020-2302
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice Chairman, Chief Banking Officer and Director, Fiduciary Trust Company International; and officer and/or director, as the case
may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 48 of the investment companies in Franklin Templeton
Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
Annual Report | 19
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
LENGTH OF FUND COMPLEX OVERSEEN
NAME, AGE AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------------------------------------------------------------------------------------
MURRAY L. SIMPSON (67) Vice President Since 2000 Not Applicable None
One Franklin Parkway and Secretary
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Executive Vice President and General Counsel, Franklin Resources, Inc.; officer and/or director, as the case may be, of some of the
subsidiaries of Franklin Resources, Inc. and of 51 of the investment companies in Franklin Templeton Investments; and FORMERLY,
Chief Executive Officer and Managing Director, Templeton Franklin Investment Services (Asia) Limited (until 2000); and Director,
Templeton Asset Management Ltd. (until 1999).
- ------------------------------------------------------------------------------------------------------------------------------------
GALEN G. VETTER (52) Chief Financial Since May 2004 Not Applicable None
500 East Broward Blvd. Officer
Suite 2100
Fort Lauderdale, FL 33394-3091
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Officer of 51 of the investment companies in Franklin Templeton Investments; Senior Vice President, Franklin Templeton Services,
LLC; and FORMERLY, Managing Director of RSM McGladrey, Inc.; and Partner of McGladrey & Pullen, LLP.
- ------------------------------------------------------------------------------------------------------------------------------------
* We base the number of portfolios on each separate series of the U.S.
registered investment companies within the Franklin Templeton Investments
fund complex. These portfolios have a common investment adviser or
affiliated investment advisers.
** Charles B. Johnson and Rupert H. Johnson, Jr. are considered to be
interested persons of the Fund under the federal securities laws due to
their positions as officers and directors and major shareholders of
Franklin Resources, Inc., which is the parent company of the Fund's
administrator and distributor.
Note: Charles B. Johnson and Rupert H. Johnson, Jr. are brothers.
THE SARBANES-OXLEY ACT OF 2002 AND RULES ADOPTED BY THE SECURITIES AND EXCHANGE
COMMISSION REQUIRE THE FUND TO DISCLOSE WHETHER THE FUND'S AUDIT COMMITTEE
INCLUDES AT LEAST ONE MEMBER WHO IS AN AUDIT COMMITTEE FINANCIAL EXPERT WITHIN
THE MEANING OF SUCH ACT AND RULES. THE FUND'S BOARD OF DIRECTORS HAS DETERMINED
THAT THERE IS AT LEAST ONE SUCH FINANCIAL EXPERT ON THE AUDIT COMMITTEE AND HAS
DESIGNATED FRANK W.T. LAHAYE AS ITS AUDIT COMMITTEE FINANCIAL EXPERT. THE BOARD
BELIEVES THAT MR. LAHAYE QUALIFIES AS SUCH AN EXPERT IN VIEW OF HIS EXTENSIVE
BUSINESS BACKGROUND AND EXPERIENCE, INCLUDING SERVICE AS PRESIDENT AND DIRECTOR
OF MCCORMICK SELPH ASSOCIATES FROM 1954 THROUGH 1965; DIRECTOR AND CHAIRMAN OF
TELEDYNE CANADA LTD. FROM 1966 THROUGH 1971; DIRECTOR AND CHAIRMAN OF
QUARTERDECK CORPORATION FROM 1982 THROUGH 1998; AND SERVICES AS A DIRECTOR OF
VARIOUS OTHER PUBLIC COMPANIES INCLUDING U.S. TELEPHONE INC. (1981-1984), FISHER
IMAGING INC. (1991-1998) AND DIGITAL TRANSMISSIONS SYSTEMS (1995-1999). IN
ADDITION, MR. LAHAYE SERVED FROM 1981 TO 2000 AS A DIRECTOR AND CHAIRMAN OF
PEREGRINE VENTURE MANAGEMENT CO., A VENTURE CAPITAL FIRM, AND HAS BEEN A MEMBER
AND CHAIRMAN OF THE FUND'S AUDIT COMMITTEE SINCE ITS INCEPTION. AS A RESULT OF
SUCH BACKGROUND AND EXPERIENCE, THE BOARD OF DIRECTORS BELIEVES THAT MR. LAHAYE
HAS ACQUIRED AN UNDERSTANDING OF GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AND
FINANCIAL STATEMENTS, THE GENERAL APPLICATION OF SUCH PRINCIPLES IN CONNECTION
WITH THE ACCOUNTING ESTIMATES, ACCRUALS AND RESERVES, AND ANALYZING AND
EVALUATING FINANCIAL STATEMENTS THAT PRESENT A BREADTH AND LEVEL OF COMPLEXITY
OF ACCOUNTING ISSUES GENERALLY COMPARABLE TO THOSE OF THE FUND, AS WELL AS AN
UNDERSTANDING OF INTERNAL CONTROLS AND PROCEDURES FOR FINANCIAL REPORTING AND AN
UNDERSTANDING OF AUDIT COMMITTEE FUNCTIONS. MR. LAHAYE IS AN INDEPENDENT
DIRECTOR AS THAT TERM IS DEFINED UNDER THE RELEVANT SECURITIES AND EXCHANGE
COMMISSION RULES AND RELEASES.
THE STATEMENT OF ADDITIONAL INFORMATION (SAI) INCLUDES ADDITIONAL INFORMATION
ABOUT THE BOARD MEMBERS AND IS AVAILABLE, WITHOUT CHARGE, UPON REQUEST.
SHAREHOLDERS MAY CALL 1-800/DIAL BEN (1-800/342-5236) TO REQUEST THE SAI.
20 | Annual Report
THE MONEY MARKET PORTFOLIOS
FINANCIAL HIGHLIGHTS
THE MONEY MARKET PORTFOLIO
-------------------------------------------------------------
YEAR ENDED JUNE 30,
2004 2003 2002 2001 2000
-------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ....................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------------------------------------------------------------
Income from investment operations - net investment
income ................................................ .009 .014 .026 .059 .056
Less distributions from net investment income ............ (.009) (.014) (.026) (.059) (.056)
-------------------------------------------------------------
Net asset value, end of year ............................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
=============================================================
Total return(a) .......................................... .94% 1.41% 2.63% 6.08% 5.75%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) .......................... $5,505,394 $5,331,200 $4,734,196 $4,490,91 $4,144,043
Ratios to average net assets:
Expenses .............................................. .15% .15% .15% .15% .15%
Expenses excluding waiver and payments by affiliate ... .16% .15% .16% .16% .16%
Net investment income ................................. .93% 1.39% 2.56% 5.91% 5.65%
(a) Total return is not annualized for periods less than one year.
Annual Report | See notes to financial statements. | 21
THE MONEY MARKET PORTFOLIOS
STATEMENT OF INVESTMENTS, JUNE 30, 2004
- ---------------------------------------------------------------------------------------------------------------------------
THE MONEY MARKET PORTFOLIO PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT 45.0%
Abbey National North America, Stamford Branch, 1.09% - 1.11%, 7/21/04 - 7/27/04 ... $150,000,000 $ 150,001,227
Bank of Montreal, Chicago Branch, 1.063% - 1.200%, 7/21/04 - 9/07/04 .............. 225,000,000 225,001,627
Bank of Nova Scotia, Portland Branch, 1.22% - 1.25%, 8/24/04 - 8/30/04 ............ 150,000,000 150,002,369
Banque Nationale De Paris, New York Branch, 1.080% - 1.085%, 7/16/04 - 7/28/04 .... 125,000,000 125,000,141
Barclays Bank PLC, New York Branch, 1.05%, 8/02/04 ................................ 75,000,000 75,000,000
Bayerische Landesbank Girozen, New York Branch, 1.02%, 7/14/04 .................... 50,000,000 50,000,179
Credit Agricole, New York Branch, 1.07% - 1.43%, 7/30/04 - 10/22/04 ............... 150,000,000 150,000,774
Danske Bank AS, New York Branch, 1.08%, 8/05/04 ................................... 50,000,000 50,001,444
Dexia Bank, New York Branch, 1.080% - 1.508%, 8/25/04 - 12/07/04 .................. 150,000,000 150,004,012
Landesbank Hessen Thueringen Giro., New York Branch, 1.095%, 9/08/04 .............. 75,000,000 75,000,715
Lloyds Bank PLC, New York Branch, 1.31%, 8/23/04 - 8/30/04 ........................ 150,000,000 150,002,321
National Australia Bank, New York Branch, 1.15%, 8/13/04 .......................... 75,000,000 75,000,000
Rabobank Nederland NV, New York Branch, 1.000% - 1.115%, 7/01/04 - 10/06/04 ....... 100,000,000 100,000,670
Royal Bank of Canada, New York Branch, 1.42%, 10/22/04 ............................ 25,000,000 25,000,774
Royal Bank of Scotland NY, New York Branch, 1.07%, 7/29/04 - 7/30/04 .............. 100,000,000 100,000,788
Societe Generale North America Inc., New York Branch, 1.33%, 8/26/04 .............. 75,000,000 75,000,000
State Street Corp., Boston Branch, 1.05%, 8/09/04 - 8/10/04 ....................... 150,000,000 150,000,000
Svenska Handelsbanken, New York Branch, 1.06% - 1.10%, 7/15/04 - 8/12/04 .......... 150,000,000 149,998,850
Toronto Dominion Bank, New York Branch, 1.105% - 1.340%, 7/26/04 - 8/25/04 ........ 150,000,000 150,000,000
UBS AG, Stamford Branch, 1.060% - 1.065%, 7/23/04 - 7/28/04 ....................... 150,000,000 150,001,247
Wells Fargo Bank, San Francisco Branch, 1.05%, 7/12/04 ............................ 75,000,000 75,000,000
Westdeutsche Landesbank, New York Branch, 1.15%, 10/12/04 ......................... 75,000,000 75,002,131
--------------
TOTAL CERTIFICATES OF DEPOSIT (COST $2,475,019,269) ............................... 2,475,019,269
--------------
BANK NOTES (COST $150,003,056) 2.7%
Bank of America NA, 1.06%, 7/19/04 - 7/20/04 ...................................... 150,000,000 150,003,056
--------------
COMMERCIAL PAPER 39.5%
(a) ANZ (Delaware) Inc., 1.034% - 1.153%, 7/08/04 - 8/12/04 ........................... 150,000,000 149,881,389
(a) American International Group I, 1.013% - 1.042%, 7/01/04 - 7/16/04 ................ 150,000,000 149,966,903
(a) Barclays U.S. Funding Corp., 1.023%, 7/08/04 ...................................... 25,000,000 24,995,042
(a) Canadian Wheat Board, 1.004%, 8/04/04 ............................................. 25,000,000 24,976,389
(a) Citigroup Global Markets Holdings, 1.153%, 8/04/04 - 8/11/04 ...................... 150,000,000 149,826,701
(a) Coca-Cola Co., 1.213%, 8/23/04 - 8/27/04 .......................................... 100,000,000 99,818,500
(a) Commonwealth Bank of Australia, 1.043%, 7/06/04 - 7/13/04 ......................... 100,000,000 99,970,389
(a) Danske Corp., 1.066% - 1.201%, 7/26/04 - 8/26/04 .................................. 100,000,000 99,897,042
(a) Dupont De Nemours Inc., 1.242%, 8/12/04 - 8/20/04 ................................. 150,000,000 149,759,750
(a) General Electric Capital Corp., 1.043% - 1.173%, 7/07/04 - 8/18/04 ................ 150,000,000 149,836,958
(a) Goldman Sachs Group Inc., 1.30%, 7/02/04 .......................................... 150,000,000 149,994,583
(a) HBOS Treasury Services, 1.038%- 1.080%, 7/06/04 - 8/19/04 ......................... 101,000,000 100,951,176
(a) Internationale Ned. U.S. Funding Corp., 1.034% - 1.333%, 7/07/04 - 8/23/04 ........ 150,000,000 149,843,382
(a) National Australia Funding, 1.211%, 7/13/04 - 7/15/04 ............................. 75,000,000 74,967,229
(a) Nestle Capital Corp., 1.133%, 8/17/04 - 8/18/04 ................................... 50,000,000 49,925,451
(a) Pfizer Inc., 1.025%- 1.055%, 8/19/04 - 9/07/04 .................................... 150,000,000 149,763,103
(a) Procter & Gamble Co., 1.042% - 1.231%, 7/19/04 - 7/29/04 .......................... 150,000,000 149,903,861
(a) Royal Bank of Canada, 1.029% - 1.053%, 7/09/04 - 7/29/04 .......................... 125,000,000 124,917,015
(a) Shell Finance UK PLC, 1.011%, 7/02/04 ............................................. 50,000,000 49,998,597
(a) Westdeutsche Landesbank, 1.094%, 8/16/04 .......................................... 75,000,000 74,895,542
--------------
TOTAL COMMERCIAL PAPER (COST $2,174,089,002) ....................................... 2,174,089,002
--------------
22 | Annual Report
THE MONEY MARKET PORTFOLIOS
STATEMENT OF INVESTMENTS, JUNE 30, 2004 (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------------------
THE MONEY MARKET PORTFOLIO PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY SECURITIES 1.6%
(a) Federal Home Loan Bank, 1.25%, 7/01/04 .................................................... $ 13,595,000 $ 13,595,000
(a) Freddie Mac, 1.077%, 8/31/04 .............................................................. 75,000,000 74,864,021
--------------
TOTAL U.S. GOVERNMENT AGENCY SECURITIES (COST $88,459,021) ................................ 88,459,021
--------------
TOTAL INVESTMENTS BEFORE REPURCHASE AGREEMENTS (COST $4,887,570,348) ...................... 4,887,570,348
--------------
REPURCHASE AGREEMENTS 11.1%
(b) Deutsche Bank Securities Inc., 1.25%, 7/01/04 (Maturity Value $121,229,209) ............... 121,225,000 121,225,000
Collateralized by U.S. Treasury Bills, 8/19/04 - 11/26/04
(b) Morgan Stanley & Co. Inc., 1.22%, 7/01/04 (Maturity Value $121,224,108) ................... 121,220,000 121,220,000
Collateralized by U.S. Treasury Notes, 3.875%, 1/15/09
(b) UBS Securities LLC, 1.40%, 7/01/04 (Maturity Value $370,014,389) .......................... 370,000,000 370,000,000
Collateralized by U.S. Government Agency Securities, 2.125% - 5.500%, 8/13/04 - 6/02/06 --------------
TOTAL REPURCHASE AGREEMENTS (COST $612,445,000) ........................................... 612,445,000
--------------
TOTAL INVESTMENTS (COST $5,500,015,348) 99.9% ............................................. 5,500,015,348
OTHER ASSETS, LESS LIABILITIES .1% ........................................................ 5,378,816
--------------
NET ASSETS 100.0% ......................................................................... $5,505,394,164
==============
(a) Security is traded on a discount basis; the rate shown is the effective
yield at the time of purchase by the fund.
(b) See Note 1(b) regarding repurchase agreements.
Annual Report | See notes to financial statements. | 23
THE MONEY MARKET PORTFOLIOS
FINANCIAL HIGHLIGHTS
THE U.S. GOVERNMENT SECURITIES MONEY MARKET PORTFOLIO
----------------------------------------------------
YEAR ENDED JUNE 30,
2004 2003 2002 2001 2000
----------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year .......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
----------------------------------------------------
Income from investment operations - net investment income ... .009 .013 .024 .056 .054
Less distributions from net investment income ............... (.009) (.013) (.024) (.056) (.054)
----------------------------------------------------
Net asset value, end of year ................................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====================================================
Total return(a) ............................................. .87% 1.34% 2.43% 5.75% 5.48%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) ............................. $117,815 $201,758 $226,676 $186,718 $221,993
Ratios to average net assets:
Expenses ................................................. .15% .15% .15% .15% .15%
Expenses excluding waiver and payments by affiliate ...... .16% .16% .16% .16% .16%
Net investment income .................................... .87% 1.34% 2.33% 5.63% 5.36%
(a) Total return is not annualized for periods less than one year.
24 | See notes to financial statements. | Annual Report
THE MONEY MARKET PORTFOLIOS
STATEMENT OF INVESTMENTS, JUNE 30, 2004
- -----------------------------------------------------------------------------------------------------------------------
THE U.S. GOVERNMENT SECURITIES MONEY MARKET PORTFOLIO PRINCIPAL AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------
GOVERNMENT SECURITIES 29.7%
(a) U.S. Treasury Bill, 1.00%, 7/08/04 .............................................. $10,000,000 $ 9,998,065
(a) U.S. Treasury Bill, 1.00% - 1.005%, 7/29/04 ..................................... 10,000,000 9,992,241
(a) U.S. Treasury Bill, 1.532%, 12/09/04 ............................................ 5,000,000 4,966,011
(a) U.S. Treasury Note, 1.875%, 9/30/04 ............................................. 5,000,000 5,007,934
(a) U.S. Treasury Note, 1.75%, 12/31/04 ............................................. 5,000,000 5,015,122
------------
TOTAL GOVERNMENT SECURITIES (COST $34,979,373) .................................. 34,979,373
------------
REPURCHASE AGREEMENTS 70.3%
(b) ABN AMRO Bank, N.V., New York Branch, 1.25%, 7/01/04 (Maturity Value ............ 5,000,000 5,000,000
$5,000,174) Collateralized by U.S. Treasury Notes, 1.75%, 12/31/04
(b) Banc of America Securities LLC, 1.10%, 7/01/04 (Maturity Value .................. 5,000,000 5,000,000
$5,000,153) Collateralized by U.S. Treasury Notes, 2.00%, 8/31/05
(b) Barclays Capital Inc., 1.20%, 7/01/04 (Maturity Value $5,000,167) ............... 5,000,000 5,000,000
Collateralized by U.S. Treasury Bills, 1.485%, 11/18/04
(b) Bear, Stearns & Co. Inc., 1.22%, 7/01/04 (Maturity Value $5,000,169) ............ 5,000,000 5,000,000
Collateralized by U.S. Treasury Notes, 1.625%, 4/30/05
(b) Deutsche Bank Securities Inc., 1.25%, 7/01/04 (Maturity Value ................... 23,920,000 23,920,000
$23,920,831) Collateralized by U.S. Treasury Notes, 6.75%, 5/15/05
(b) Goldman, Sachs & Co., 1.24%, 7/01/04 (Maturity Value $5,000,172) ................ 5,000,000 5,000,000
Collateralized by U.S. Treasury Notes, 5.625%, 5/15/08
(b) Greenwich Capital Markets Inc., 1.25%, 7/01/04 (Maturity Value .................. 5,000,000 5,000,000
$5,000,174) Collateralized by U.S. Treasury Notes, 7.00%, 7/15/06
(b) Morgan Stanley & Co. Inc., 1.22%, 7/01/04 (Maturity Value $23,915,810) .......... 23,915,000 23,915,000
Collateralized by U.S. Treasury Bonds, 3.875%, 1/15/09
(b) UBS Securities LLC, 1.25%, 7/01/04 (Maturity Value $5,000,174) .................. 5,000,000 5,000,000
Collateralized by U.S. Treasury Bonds, 9.375%, 2/15/06
------------
TOTAL REPURCHASE AGREEMENTS (COST $82,835,000) .................................. 82,835,000
------------
TOTAL INVESTMENTS (COST $117,814,373) 100.0% .................................... 117,814,373
OTHER ASSETS, LESS LIABILITIES .................................................. 181
------------
NET ASSETS 100.0% ............................................................... $117,814,554
============
(a) Security is traded on a discount basis; the rate shown is the effective
yield at the time of purchase by the fund.
(b) See Note 1(b) regarding repurchase agreements.
Annual Report | See notes to financial statements. | 25
THE MONEY MARKET PORTFOLIOS
FINANCIAL STATEMENTS
STATEMENTS OF ASSETS AND LIABILITIES
June 30, 2004
-----------------------------
THE U.S.
GOVERNMENT
THE SECURITIES
MONEY MARKET MONEY MARKET
PORTFOLIO PORTFOLIO
-----------------------------
Assets:
Investments in securities, at amortized cost (Note 1) ... $4,887,570,348 $ 34,979,373
Repurchase agreements, at value and cost ................ 612,445,000 82,835,000
Cash .................................................... 1,207 4,307
Interest receivable ..................................... 6,123,964 26,626
-----------------------------
Total assets ...................................... 5,506,140,519 117,845,306
-----------------------------
Liabilities:
Payables:
Professional fees .................................... 22,900 10,375
Affiliates ........................................... 666,516 14,549
Distributions to shareholders ........................... 12,407 841
Other liabilities ....................................... 44,532 4,987
-----------------------------
Total liabilities ................................. 746,355 30,752
-----------------------------
Net assets, at value ....................................... $5,505,394,164 $117,814,554
=============================
Shares outstanding ......................................... 5,505,394,164 117,814,554
=============================
Net asset value per share .................................. $ 1.00 $ 1.00
=============================
26 | See notes to financial statements. | Annual Report
THE MONEY MARKET PORTFOLIOS
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF OPERATIONS
for the year ended June 30, 2004
---------------------------
THE U.S.
GOVERNMENT
THE SECURITIES
MONEY MARKET MONEY MARKET
PORTFOLIO PORTFOLIO
---------------------------
Investment income:
Interest ................................................... $57,433,188 $1,769,549
--------------------------
Expenses:
Management fees (Note 3) ................................... 7,933,008 261,993
Custodian fees (Note 4) .................................... 103,758 3,729
Professional fees .......................................... 43,830 10,929
Other ...................................................... 136,099 6,491
--------------------------
Total expenses .......................................... 8,216,695 283,142
Expense reductions (Note 4) ............................. (33) (287)
Expenses waived/paid by affiliate (Note 3) .............. (209,614) (21,976)
--------------------------
Net expenses ......................................... 8,007,048 260,879
--------------------------
Net investment income ............................. 49,426,140 1,508,957
--------------------------
Net realized gain (loss) from investments ..................... 3,825 5,742
--------------------------
Net increase (decrease) in net assets resulting from
operations ................................................. $49,429,965 $1,514,699
==========================
Annual Report | See notes to financial statements. | 27
THE MONEY MARKET PORTFOLIOS
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS
for the years ended June 30, 2004 and 2003
----------------------------------------------------------------------
THE U.S. GOVERNMENT SECURITIES
THE MONEY MARKET PORTFOLIO MONEY MARKET PORTFOLIO
----------------------------------------------------------------------
2004 2003 2004 2003
----------------------------------------------------------------------
Increase (decrease) in net assets:
Operations:
Net investment income ....................... $ 49,426,140 $ 73,176,506 $ 1,508,957 $ 2,883,855
Net realized gain (loss) from investments ... 3,825 19,063 5,742 --
----------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations ............. 49,429,965 73,195,569 1,514,699 2,883,855
Distributions to shareholders from net
investment income ........................... (49,429,965)(a) (73,195,569)(b) (1,514,699)(c) (2,883,855)
Capital share transactions (Note 2) ............ 174,194,451 597,003,871 (83,943,475) (24,918,467)
----------------------------------------------------------------------
Net increase (decrease) in net assets .... 174,194,451 597,003,871 (83,943,475) (24,918,467)
Net assets (there is no undistributed net
investment income at beginning or end of year):
Beginning of year ........................... 5,331,199,713 4,734,195,842 201,758,029 226,676,496
----------------------------------------------------------------------
End of year ................................. $5,505,394,164 $5,331,199,713 $117,814,554 $201,758,029
======================================================================
(a) Distributions were increased by a net realized gain from investments of
$3,825.
(b) Distributions were increased by a net realized gain from investments of
$19,063.
(c) Distributions were increased by a net realized gain from investments of
$5,742.
28 | See notes to financial statements. | Annual Report
THE MONEY MARKET PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS
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 Portfolios seek to provide high current income consistent with
preservation of capital and liquidity.
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 June
30, 2004, all 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 substantially 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. Discounts and premiums
on securities purchased are amortized over the lives of the respective
securities. 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 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.
Annual Report | 29
THE MONEY MARKET PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
F. GUARANTEES AND INDEMNIFICATIONS
Under the Trust's organizational documents, its officers and trustees are
indemnified against certain liability 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 June 30, 2004, there were an unlimited number of shares authorized ($.01 par
value). Transactions in the Portfolios' shares at $1.00 per share were as
follows:
-------------------------------
THE U.S.
GOVERNMENT
THE SECURITIES
MONEY MARKET MONEY MARKET
PORTFOLIO PORTFOLIO
-------------------------------
Year ended June 30, 2004
Shares sold ...................................... $ 5,413,860,590 $ 145,540,988
Shares issued in reinvestment of distributions ... 49,424,401 1,513,783
Shares redeemed .................................. (5,289,090,540) (230,998,246)
-------------------------------
Net increase (decrease) .......................... $ 174,194,451 $ (83,943,475)
===============================
Year ended June 30, 2003
Shares sold ...................................... $ 6,279,565,500 $ 309,427,987
Shares issued in reinvestment of distributions ... 73,193,516 2,884,175
Shares redeemed .................................. (5,755,755,145) (337,230,629)
-------------------------------
Net increase (decrease) .......................... $ 597,003,871 $ (24,918,467)
===============================
3. TRANSACTIONS WITH AFFILIATES
Certain officers and trustees of the Trust are also officers and/or directors of
Franklin Advisers Inc. (Advisers) and Franklin/Templeton Investor Services LLC
(Investor Services), the Portfolios' investment manager and transfer agent,
respectively, and of the Franklin Money Fund, the Institutional Fiduciary Trust,
the Franklin Templeton Money Fund Trust, and the 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
voluntarily waive a portion of management fees as noted in the Statements of
Operations. Total expenses waived by Advisers are not subject to reimbursement
by the Portfolios. Effective June 1, 2004, the waiver was discontinued for the
Money Market Portfolio.
30 | Annual Report
THE MONEY MARKET PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. TRANSACTIONS WITH AFFILIATES (CONTINUED)
At June 30, 2004, the shares of The Money Market Portfolio were owned by the
following fund:
----------------------------------
PERCENTAGE OF
SHARES OUTSTANDING SHARES
----------------------------------
Institutional Fiduciary Trust - Money Market Portfolio ............. 3,528,183,535 64.09%
Franklin Money Fund ................................................ 1,623,968,530 29.50%
Institutional Fiduciary Trust - Franklin Cash Reserves Fund ........ 197,177,281 3.58%
Franklin Templeton Money Fund Trust - Franklin Templeton
Money Fund ...................................................... 156,064,818 2.83%
At June 30, 2004, 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 ........................................ 117,814,554 100%
On April 30, 2004, the Institutional Fiduciary Trust-Franklin U.S. Government
Securities Money Market Portfolio liquidated all of its holdings in the U.S.
Government Securities Money Market Portfolio.
4. EXPENSE OFFSET ARRANGEMENTS
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 June 30,
2004, the custodian fees were reduced as noted in the Statements of Operations.
5. INCOME TAXES
The tax character of distributions paid during the years ended June 30, 2004 and
2003, was as follows:
---------------------------------------------------
THE U.S. GOVERNMENT
THE MONEY MARKET SECURITIES
PORTFOLIO MONEY MARKET PORTFOLIO
---------------------------------------------------
2004 2003 2004 2003
---------------------------------------------------
Distributions paid from ordinary income .......... $49,429,965 $73,195,569 $1,514,699 $2,883,855
===================================================
At June 30, 2004, the cost of investments and undistributed ordinary income for
income tax purposes were as follows:
-----------------------------------------
THE U.S. GOVERNMENT
THE MONEY MARKET SECURITIES
PORTFOLIO MONEY MARKET PORTFOLIO
-----------------------------------------
Cost of investments ................................... $5,500,015,348 $117,814,373
=====================================
Undistributed ordinary income ......................... $ 12,407 $ 841
=====================================
Annual Report | 31
THE MONEY MARKET PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. REGULATORY MATTERS
MASSACHUSETTS ADMINISTRATIVE PROCEEDING
On February 4, 2004, the Securities Division of the Office of the Secretary of
the Commonwealth of Massachusetts filed an administrative complaint against
Franklin Resources, Inc. and certain of its subsidiaries (the "Company")
claiming violations of the Massachusetts Uniform Securities Act ("Massachusetts
Act") with respect to an alleged arrangement to permit market timing (the "Mass.
Proceeding"). On February 17, 2004, the Company filed an answer denying all
violations of the Massachusetts Act.
U.S. SECURITIES AND EXCHANGE COMMISSION (SEC) SETTLEMENT
On August 2, 2004, the Company announced that an agreement had been reached by
the Portfolios' investment manager with the SEC that resolved the issues
resulting from the SEC's investigation of market timing activity. The SEC issued
an "order instituting administrative and cease-and-desist proceedings pursuant
to sections 203(e) and 203(k) of the Investment Advisers Act of 1940 and
sections 9(b) and 9(f) of the Investment Company Act of 1940, making findings
and imposing remedial sanctions and a cease and desist order" (the "Order"). The
SEC's Order concerns the activities of a limited number of third parties that
ended in 2000 and those that are the subject of the Mass. Proceeding described
above.
Under the terms of the SEC's Order, pursuant to which the Portfolios' investment
manager neither admits nor denies any wrongdoing, the Portfolios' investment
manager has agreed to pay $50 million, of which $20 million is a civil penalty,
to be distributed to certain fund shareholders in accordance with a plan to be
developed by an Independent Distribution Consultant. At this time, it is unclear
whether shareholders of all funds will receive distributions or whether all
shareholders of any particular fund will receive distributions. The SEC Order
also requires the Portfolios' investment manager to, among other things, enhance
and periodically review compliance policies and procedures.
OTHER GOVERNMENTAL INVESTIGATIONS
As part of ongoing investigations by the SEC, the U.S. Attorney for the Northern
District of California, the New York Attorney General, the California Attorney
General, the U.S. Attorney for the District of Massachusetts, the Florida
Department of Financial Services and the Commissioner of Securities, the West
Virginia Attorney General, the Vermont Department of Banking, Insurance,
Securities, and Health Care Administration and the National Association of
Securities Dealers, relating to certain practices in the mutual fund industry,
including late trading, market timing and payments to securities dealers who
sell fund shares, the Company and its subsidiaries, as well as certain current
or former executives and employees of the Company, have received requests for
information and/or subpoenas to testify or produce documents. The Company has
been providing documents and information in response to these requests and
subpoenas. In addition, the Company has responded to requests for similar kinds
of information from regulatory authorities in some of the foreign countries
where the Company conducts its global asset management business.
32 | Annual Report
THE MONEY MARKET PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. REGULATORY MATTERS (CONTINUED)
OTHER GOVERNMENTAL INVESTIGATIONS (CONTINUED)
The Staff of the SEC has also informed the Company that it is considering
recommending a civil action or proceeding against the Portfolios' investment
manager and the Portfolios' principal underwriter concerning payments to
securities dealers who sell fund shares (commonly referred to as "revenue
sharing"). The staff of the California Attorney General's Office (CAGO) also has
advised the Company that it is authorized to bring a civil action against
Franklin Resources, Inc. and the Portfolios' principal underwriter arising from
the same events. Even though the Company currently believes that the charges the
SEC staff and CAGO staff are contemplating are unwarranted, it also believes
that it is in the best interest of the Company and fund shareholders to resolve
these issues voluntarily, to the extent the Company can reasonably do so.
OTHER LEGAL PROCEEDINGS
The Company, in addition to other entities within Franklin Templeton
Investments, including certain of its subsidiaries, other funds, and current and
former officers, employees, and directors have been named in multiple lawsuits
in different federal courts in Nevada, California, Illinois, New York and
Florida, alleging violations of various federal securities laws and seeking,
among other things, monetary damages and costs. Specifically, the lawsuits claim
breach of duty with respect to alleged arrangements to permit market timing
and/or late trading activity, or breach of duty with respect to the valuation of
the portfolio securities of certain funds managed by Company subsidiaries,
resulting in alleged market timing activity. The majority of these lawsuits
duplicate, in whole or in part, the allegations asserted in the Mass. Proceeding
detailed above. The lawsuits are styled as class actions or derivative actions
on behalf of either the named funds or the Company.
In addition, the Company and its subsidiaries, as well as certain current and
former officers, employees, and directors have been named in multiple lawsuits
alleging violations of various securities laws and pendent state law claims
relating to the disclosure of directed brokerage payments and/or payment of
allegedly excessive commissions and advisory fees. These lawsuits are styled as
class actions and derivative actions.
The Company's management strongly believes that the claims made in each of these
lawsuits are without merit and intends to vigorously defend against them.
The Company cannot predict with certainty the eventual outcome of the foregoing
Mass. Proceeding, other governmental investigations or other legal proceedings.
The impact, if any, of these matters on the Trust is uncertain at this time. If
the Company determines that it 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.
Annual Report | 33
THE MONEY MARKET PORTFOLIOS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF THE MONEY MARKET PORTFOLIOS
In our opinion, the accompanying statements of assets and liabilities, including
the statements of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of each of the portfolios constituting
The Money Market Portfolios (hereafter referred to as the "Portfolios") at June
30, 2004, the results of each of their operations for the year then ended, the
changes in each of their net assets for each of the two years in the period then
ended and the financial highlights for each of the five years in the period then
ended, in conformity with accounting principles generally accepted in the United
States of America. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Portfolios' management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included confirmation
of securities at June 30, 2004 by correspondence with the custodian, provide a
reasonable basis for our opinion.
PricewaterhouseCoopers LLP
San Francisco, California
August 11, 2004
34 | Annual Report
BOARD MEMBERS AND OFFICERS
THE MONEY MARKET PORTFOLIOS
The name, age and address of the officers and board members, as well as their
affiliations, positions held with the Trust, principal occupations during the
past five years and number of portfolios overseen in the Franklin Templeton
Investments fund complex are shown below. Each board member will serve until
that person's successor is elected and qualified.
INDEPENDENT BOARD MEMBERS
- -----------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
LENGTH OF FUND COMPLEX OVERSEEN
NAME, AGE AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- -----------------------------------------------------------------------------------------------------------------------------------
FRANK H. ABBOTT, III (83) Trustee Since 1992 112 None
One Franklin Parkway
San Mateo, CA 94403-1906
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
President and Director, Abbott Corporation (an investment company).
- -----------------------------------------------------------------------------------------------------------------------------------
HARRIS J. ASHTON (72) Trustee Since 1992 141 Director, Bar-S Foods (meat
One Franklin Parkway packing company).
San Mateo, CA 94403-1906
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director of various companies; and FORMERLY, Director, RBC Holdings, Inc. (bank holding company) (until 2002); and President, Chief
Executive Officer and Chairman of the Board, General Host Corporation (nursery and craft centers) (until 1998).
- -----------------------------------------------------------------------------------------------------------------------------------
ROBERT F. CARLSON (76) Trustee Since 1998 51 None
One Franklin Parkway
San Mateo, CA 94403-1906
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Member and past President, Board of Administration, California Public Employees Retirement Systems (CALPERS); and FORMERLY,
member and Chairman of the Board, Sutter Community Hospitals; member, Corporate Board, Blue Shield of California; and Chief Counsel,
California Department of Transportation.
- -----------------------------------------------------------------------------------------------------------------------------------
S. JOSEPH FORTUNATO (71) Trustee Since 1992 142 None
One Franklin Parkway
San Mateo, CA 94403-1906
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Attorney; and FORMERLY, member of the law firm of Pitney, Hardin, Kipp & Szuch.
- -----------------------------------------------------------------------------------------------------------------------------------
FRANK W.T. LAHAYE (75) Trustee Since 1992 114 Director, The California Center
One Franklin Parkway for Land Recycling
San Mateo, CA 94403-1906 (redevelopment).
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
General Partner, Las Olas L.P. (Asset Management); and FORMERLY, Chairman, Peregrine Venture Management Company (venture capital).
- -----------------------------------------------------------------------------------------------------------------------------------
Annual Report | 35
- -----------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
LENGTH OF FUND COMPLEX OVERSEEN
NAME, AGE AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- -----------------------------------------------------------------------------------------------------------------------------------
GORDON S. MACKLIN (76) Trustee Since 1992 141 Director, White Mountains
One Franklin Parkway Insurance Group, Ltd. (holding
San Mateo, CA 94403-1906 company); Martek Biosciences
Corporation; MedImmune, Inc.
(biotechnology); and
Overstock.com (Internet
services); and FORMERLY,
Director, MCI Communication
Corporation (subsequently known
as MCI WorldCom, Inc. and
WorldCom, Inc.) (communications
services) (1988-2002) and
Spacehab, Inc. (aerospace
services) (1994-2003).
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Deputy Chairman, White Mountains Insurance Group, Ltd. (holding company); and FORMERLY, Chairman, White River Corporation (financial
services) (1993-1998) and Hambrecht & Quist Group (investment banking) (1987-1992); and President, National Association of
Securities Dealers, Inc. (1970-1987).
- -----------------------------------------------------------------------------------------------------------------------------------
INTERESTED BOARD MEMBERS AND OFFICERS
- -----------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
LENGTH OF FUND COMPLEX OVERSEEN
NAME, AGE AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- -----------------------------------------------------------------------------------------------------------------------------------
**CHARLES B. JOHNSON (71) Trustee and Trustee since 141 None
One Franklin Parkway Chairman of 1992 and
San Mateo, CA 94403-1906 the Board Chairman of the
Board since 1993
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Chairman of the Board, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Vice President, Franklin Templeton
Distributors, Inc.; Director, Fiduciary Trust Company International; and officer and/or director or trustee, as the case may be, of
some of the other subsidiaries of Franklin Resources, Inc. and of 46 of the investment companies in Franklin Templeton Investments.
- -----------------------------------------------------------------------------------------------------------------------------------
**RUPERT H. JOHNSON, JR. (63) Trustee and Trustee since 124 None
One Franklin Parkway President and 1992 and
San Mateo, CA 94403-1906 Chief Executive President and
Officer - Chief Executive
Investment Officer -
Management Investment
Management since
2002
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice Chairman, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Vice President and Director, Franklin
Templeton Distributors, Inc.; Director, Franklin Advisers, Inc. and Franklin Investment Advisory Services, Inc.; Senior Vice
President, Franklin Advisory Services, LLC; and officer and/or director or trustee, as the case may be, of some of the other
subsidiaries of Franklin Resources, Inc. and of 49 of the investment companies in Franklin Templeton Investments.
- -----------------------------------------------------------------------------------------------------------------------------------
36 | Annual Report
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
LENGTH OF FUND COMPLEX OVERSEEN
NAME, AGE AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------------------------------------------------------------------------------------
HARMON E. BURNS (59) Vice President Since 1992 Not Applicable None
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice Chairman, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Vice President and Director, Franklin
Templeton Distributors, Inc.; Executive Vice President, Franklin Advisers, Inc.; Director, Franklin Investment Advisory Services,
Inc.; and officer and/or director or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and
of 49 of the investment companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
JAMES M. DAVIS (52) Chief Since July 2004 Not Applicable None
One Franklin Parkway Compliance
San Mateo, CA 94403-1906 Officer
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Officer of 51 of the investment companies in Franklin Templeton Investments; Director, Global Compliance, Franklin Resources, Inc.,
and FORMERLY, Director of Compliance, Franklin Resources, Inc. (1994-2001).
- ------------------------------------------------------------------------------------------------------------------------------------
LAURA FERGERSON (42) Treasurer Since July 2004 Not Applicable None
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Officer of 34 of the investment companies in Franklin Templeton Investments; and FORMERLY, Director and member of Audit and
Valuation Committees, Runkel Funds, Inc. (2003-2004); Assistant Treasurer of most of the investment companies in Franklin Templeton
Investments (1997-2003); and Vice President, Franklin Templeton Services, LLC (1997-2003).
- ------------------------------------------------------------------------------------------------------------------------------------
MARTIN L. FLANAGAN (44) Vice President Since 1995 Not Applicable None
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Co-President and Chief Executive Officer, Franklin Resources, Inc.; Senior Vice President and Chief Financial Officer, Franklin
Mutual Advisers, LLC; Executive Vice President, Chief Financial Officer and Director, Templeton Worldwide, Inc.; Executive Vice
President and Chief Operating Officer, Templeton Investment Counsel, LLC; President and Director, Franklin Advisers, Inc.; Executive
Vice President, Franklin Investment Advisory Services, Inc. and Franklin Templeton Investor Services, LLC; Chief Financial Officer,
Franklin Advisory Services, LLC; Chairman, Franklin Templeton Services, LLC; and officer and/or director or trustee, as the case may
be, of some of the other subsidiaries of Franklin Resources, Inc. and of 49 of the investment companies in Franklin Templeton
Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
JIMMY D. GAMBILL (56) Senior Vice Since 2002 Not Applicable None
500 East Broward Blvd. President and
Suite 2100 Chief Executive
Fort Lauderdale, FL 33394-3091 Officer-
Finance and
Administration
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
President, Franklin Templeton Services, LLC; Senior Vice President, Templeton Worldwide, Inc.; and officer of 51 of the investment
companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
Annual Report | 37
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
LENGTH OF FUND COMPLEX OVERSEEN
NAME, AGE AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------------------------------------------------------------------------------------
DAVID P. GOSS (57) Vice President Since 2000 Not Applicable None
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Associate General Counsel, Franklin Resources, Inc.; officer and director of one of the subsidiaries of Franklin Resources, Inc.;
officer of 51 of the investment companies in Franklin Templeton Investments; and FORMERLY, President, Chief Executive Officer and
Director, Property Resources Equity Trust (until 1999) and Franklin Select Realty Trust (until 2000).
- ------------------------------------------------------------------------------------------------------------------------------------
BARBARA J. GREEN (56) Vice President Since 2000 Not Applicable None
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice President, Deputy General Counsel and Secretary, Franklin Resources, Inc.; Secretary and Senior Vice President, Templeton
Worldwide, Inc.; Secretary, Franklin Advisers, Inc., Franklin Advisory Services, LLC, Franklin Investment Advisory Services, Inc.,
Franklin Mutual Advisers, LLC, Franklin Templeton Alternative Strategies, Inc., Franklin Templeton Investor Services, LLC, Franklin
Templeton Services, LLC, Franklin Templeton Distributors, Inc., Templeton Investment Counsel, LLC, and Templeton/Franklin Investment
Services, Inc.; and officer of some of the other subsidiaries of Franklin Resources, Inc. and of 51 of the investment companies in
Franklin Templeton Investments; and FORMERLY, Deputy Director, Division of Investment Management, Executive Assistant and Senior
Advisor to the Chairman, Counselor to the Chairman, Special Counsel and Attorney Fellow, U.S. Securities and Exchange Commission
(1986-1995); Attorney, Rogers & Wells (until 1986); and Judicial Clerk, U.S. District Court (District of Massachusetts) (until
1979).
- ------------------------------------------------------------------------------------------------------------------------------------
MICHAEL O. MAGDOL (67) Vice President Since 2002 Not Applicable Director, FTI Banque, Arch
600 Fifth Avenue - AML Chemicals, Inc. and Lingnan
Rockefeller Center Compliance Foundation.
New York, NY 10020-2302
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice Chairman, Chief Banking Officer and Director, Fiduciary Trust Company International; and officer and/or director, as the case
may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 48 of the investment companies in Franklin Templeton
Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
38 | Annual Report
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
LENGTH OF FUND COMPLEX OVERSEEN
NAME, AGE AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------------------------------------------------------------------------------------
MURRAY L. SIMPSON (67) Vice President Since 2000 Not Applicable None
One Franklin Parkway and Secretary
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Executive Vice President and General Counsel, Franklin Resources, Inc.; officer and/or director, as the case may be, of some of the
subsidiaries of Franklin Resources, Inc. and of 51 of the investment companies in Franklin Templeton Investments; and FORMERLY,
Chief Executive Officer and Managing Director, Templeton Franklin Investment Services (Asia) Limited (until 2000); and Director,
Templeton Asset Management Ltd. (until 1999).
- ------------------------------------------------------------------------------------------------------------------------------------
GALEN G. VETTER (52) Chief Financial Since May 2004 Not Applicable None
500 East Broward Blvd. Officer
Suite 2100
Fort Lauderdale, FL 33394-3091
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Officer of 51 of the investment companies in Franklin Templeton Investments; Senior Vice President, Franklin Templeton Services,
LLC; and FORMERLY, Managing Director of RSM McGladrey, Inc.; and Partner of McGladrey & Pullen, LLP.
- ------------------------------------------------------------------------------------------------------------------------------------
* We base the number of portfolios on each separate series of the U.S.
registered investment companies within the Franklin Templeton Investments
fund complex. These portfolios have a common investment adviser or
affiliated investment advisers.
** Charles B. Johnson and Rupert H. Johnson, Jr. are considered to be
interested persons of the Trust under the federal securities laws due to
their positions as officers and directors and major shareholders of
Franklin Resources, Inc., which is the parent company of the Trust's
adviser and distributor.
Note: Charles B. Johnson and Rupert H. Johnson, Jr. are brothers.
THE SARBANES-OXLEY ACT OF 2002 AND RULES ADOPTED BY THE SECURITIES AND EXCHANGE
COMMISSION REQUIRE THE FUND TO DISCLOSE WHETHER THE FUND'S AUDIT COMMITTEE
INCLUDES AT LEAST ONE MEMBER WHO IS AN AUDIT COMMITTEE FINANCIAL EXPERT WITHIN
THE MEANING OF SUCH ACT AND RULES. THE FUND'S BOARD OF TRUSTEES HAS DETERMINED
THAT THERE IS AT LEAST ONE SUCH FINANCIAL EXPERT ON THE AUDIT COMMITTEE AND HAS
DESIGNATED FRANK W.T. LAHAYE AS ITS AUDIT COMMITTEE FINANCIAL EXPERT. THE BOARD
BELIEVES THAT MR. LAHAYE QUALIFIES AS SUCH AN EXPERT IN VIEW OF HIS EXTENSIVE
BUSINESS BACKGROUND AND EXPERIENCE, INCLUDING SERVICE AS PRESIDENT AND DIRECTOR
OF MCCORMICK SELPH ASSOCIATES FROM 1954 THROUGH 1965; DIRECTOR AND CHAIRMAN OF
TELEDYNE CANADA LTD. FROM 1966 THROUGH 1971; DIRECTOR AND CHAIRMAN OF
QUARTERDECK CORPORATION FROM 1982 THROUGH 1998; AND SERVICES AS A DIRECTOR OF
VARIOUS OTHER PUBLIC COMPANIES INCLUDING U.S. TELEPHONE INC. (1981-1984), FISHER
IMAGING INC. (1991-1998) AND DIGITAL TRANSMISSIONS SYSTEMS (1995-1999). IN
ADDITION, MR. LAHAYE SERVED FROM 1981 TO 2000 AS A DIRECTOR AND CHAIRMAN OF
PEREGRINE VENTURE MANAGEMENT CO., A VENTURE CAPITAL FIRM, AND HAS BEEN A MEMBER
AND CHAIRMAN OF THE FUND'S AUDIT COMMITTEE SINCE ITS INCEPTION. AS A RESULT OF
SUCH BACKGROUND AND EXPERIENCE, THE BOARD OF TRUSTEES BELIEVES THAT MR. LAHAYE
HAS ACQUIRED AN UNDERSTANDING OF GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AND
FINANCIAL STATEMENTS, THE GENERAL APPLICATION OF SUCH PRINCIPLES IN CONNECTION
WITH THE ACCOUNTING ESTIMATES, ACCRUALS AND RESERVES, AND ANALYZING AND
EVALUATING FINANCIAL STATEMENTS THAT PRESENT A BREADTH AND LEVEL OF COMPLEXITY
OF ACCOUNTING ISSUES GENERALLY COMPARABLE TO THOSE OF THE FUND, AS WELL AS AN
UNDERSTANDING OF INTERNAL CONTROLS AND PROCEDURES FOR FINANCIAL REPORTING AND AN
UNDERSTANDING OF AUDIT COMMITTEE FUNCTIONS. MR. LAHAYE IS AN INDEPENDENT TRUSTEE
AS THAT TERM IS DEFINED UNDER THE RELEVANT SECURITIES AND EXCHANGE COMMISSION
RULES AND RELEASES.
THE STATEMENT OF ADDITIONAL INFORMATION (SAI) INCLUDES ADDITIONAL INFORMATION
ABOUT THE BOARD MEMBERS AND IS AVAILABLE, WITHOUT CHARGE, UPON REQUEST.
SHAREHOLDERS MAY CALL 1-800/DIAL BEN (1-800/342-5236) TO REQUEST THE SAI.
Annual Report | 39
FRANKLIN MONEY FUND
PROXY VOTING POLICIES AND PROCEDURES
The Fund has established Proxy Voting Policies and Procedures ("Policies") that
the Fund uses to determine how to vote proxies relating to portfolio securities.
Shareholders may view the Fund'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 Fund's proxy voting records are also made available online
at franklintempleton.com and posted on the Securities and Exchange Commission's
website at http://www.sec.gov and reflect the 12-month period beginning July 1,
2003, and ending June 30, 2004.
40 | Annual Report
LITERATURE REQUEST
For a brochure and prospectus, which contains more complete information,
including charges, expenses and risks, call Franklin Templeton Investments at
1-800/DIAL BEN(R) (1-800/342-5236). Please read the prospectus carefully before
investing or sending money. To ensure the highest quality of service, we may
monitor, record and access telephone calls to or from our service departments.
These calls can be identified by the presence of a regular beeping tone.
FRANKLIN TEMPLETON INVESTMENTS
INTERNATIONAL
Mutual European Fund
Templeton China World Fund
Templeton Developing Markets Trust
Templeton Foreign Fund
Templeton Foreign Smaller Companies Fund
Templeton International (Ex EM) Fund
GLOBAL
Franklin Global Aggressive Growth Fund
Franklin Global Growth Fund
Mutual Discovery Fund
Templeton Capital Accumulator Fund
Templeton Global Long-Short Fund
Templeton Global Opportunities Trust
Templeton Global Smaller Companies Fund
Templeton Growth Fund
Templeton World Fund
GROWTH
Franklin Aggressive Growth Fund
Franklin Capital Growth Fund
Franklin Flex Cap Growth Fund
Franklin Small-Mid Cap Growth Fund
Franklin Small Cap Growth Fund II(1)
VALUE
Franklin Balance Sheet Investment Fund(2)
Franklin Equity Income Fund
Franklin Large Cap Value Fund
Franklin MicroCap Value Fund(2)
Franklin Small Cap Value Fund
Mutual Beacon Fund
Mutual Qualified Fund
Mutual Recovery Fund(3)
Mutual Shares Fund
BLEND
Franklin Blue Chip Fund
Franklin Convertible Securities Fund
Franklin Growth Fund
Franklin Rising Dividends Fund
Franklin U.S. Long-Short Fund(4)
SECTOR
Franklin Biotechnology Discovery Fund
Franklin DynaTech Fund
Franklin Global Communications Fund
Franklin Global Health Care Fund
Franklin Gold and Precious Metals Fund
Franklin Natural Resources Fund
Franklin Real Estate Securities Fund
Franklin Utilities Fund
Franklin Technology Fund
Mutual Financial Services Fund
ASSET ALLOCATION
Franklin Templeton Corefolio Allocation Fund
Franklin Templeton Founding Funds Allocation Fund
TARGET FUNDS
Franklin Templeton Conservative Target Fund
Franklin Templeton Growth Target Fund
Franklin Templeton Moderate Target Fund
INCOME
Franklin Adjustable U.S. Government Securities Fund(5)
Franklin's AGE High Income Fund
Franklin Federal Money Fund(5), (6)
Franklin Floating Rate Daily Access Fund
Franklin Floating Rate Trust(3)
Franklin Income Fund
Franklin Money Fund(5), (6)
Franklin Short-Intermediate U.S. Government Securities Fund(5)
Franklin Strategic Income Fund
Franklin Strategic Mortgage Portfolio
Franklin Templeton Hard Currency Fund
Franklin Total Return Fund
Franklin U.S. Government Securities Fund(5)
Templeton Global Bond Fund
TAX-FREE INCOME(7)
NATIONAL FUNDS
Double Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund(8)
Tax-Exempt Money Fund(5), (6)
LIMITED-TERM FUNDS
California Limited-Term Tax-Free Income Fund
Federal Limited-Term Tax-Free Income Fund
New York Limited-Term Tax-Free Income Fund
INTERMEDIATE-TERM FUNDS
California Intermediate-Term Tax-Free Income Fund
Federal Intermediate-Term Tax-Free Income Fund
New York Intermediate-Term Tax-Free Income Fund
STATE-SPECIFIC(7)
Alabama
Arizona
California(9)
Colorado
Connecticut
Florida(9)
Georgia
Kentucky
Louisiana
Maryland
Massachusetts(8)
Michigan(8)
Minnesota(8)
Missouri
New Jersey
New York(9)
North Carolina
Ohio(8)
Oregon
Pennsylvania
Tennessee
Virginia
INSURANCE FUNDS
Franklin Templeton Variable Insurance
Products Trust(10)
(1.) The fund is closed to new investors. Existing shareholders can continue
adding to their accounts.
(2.) The fund is only open to existing shareholders as well as select retirement
plans.
(3.) The fund is a continuously offered, closed-end fund. Shares may be
purchased daily; there is no daily redemption. However, each quarter,
pending board approval, the fund will authorize the repurchase of 5%-25% of
the outstanding number of shares. Investors may tender all or a portion of
their shares during the tender period.
(4.) Upon reaching approximately $350 million in assets, the fund intends to
close to all investors.
(5.) An investment in the fund is neither insured nor guaranteed by the U.S.
government or by any other entity or institution.
(6.) No assurance exists that the fund's $1.00 per share price will be
maintained. It is possible to lose money by investing in the fund.
(7.) For investors subject to the alternative minimum tax, a small portion of
fund dividends may be taxable. Distributions of capital gains are generally
taxable.
(8.) Portfolio of insured municipal securities.
(9.) These funds are available in two or more variations, including long-term
portfolios, portfolios of insured securities, a high-yield portfolio (CA)
and limited-term, intermediate-term and money market portfolios (CA and
NY).
(10.) The funds of the Franklin Templeton Variable Insurance Products Trust are
generally available only through insurance company variable contracts.
02/04 Not part of the annual report
[LOGO](R)
FRANKLIN(R) TEMPLETON(R) One Franklin Parkway
INVESTMENTS San Mateo, CA 94403-1906
o WANT TO RECEIVE THIS DOCUMENT FASTER VIA EMAIL?
Eligible shareholders can sign up for eDelivery at franklintempleton.com.
See inside for details.
ANNUAL REPORT AND SHAREHOLDER LETTER
FRANKLIN MONEY FUND
INVESTMENT MANAGER
Franklin Advisers, Inc.
DISTRIBUTOR
Franklin Templeton Distributors, Inc.
1-800/DIAL BEN(R)
franklintempleton.com
SHAREHOLDER SERVICES
1-800/632-2301
Authorized for distribution only when accompanied or preceded by a prospectus.
Investors should carefully consider a fund's investment goals, risks, charges
and expenses before investing. The prospectus contains this and other
information; please read it carefully before investing.
To ensure the highest quality of service, telephone calls to or from our service
departments may be monitored, recorded and accessed. These calls can be
identified by the presence of a regular beeping tone.
111 A2004 08/04
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 11(A), 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.
(a) Audit Fees
The aggregate fees paid to the principal accountant for professional services
rendered by the principal accountant for the audit of the registrant's annual
financial statements or for services that are normally provided by the
principal accountant in connection with statutory and regulatory filings or
engagements were $37,308 for the fiscal year ended June 30, 2004 and $25,230
for the fiscal year ended June 30, 2003.
(b) Audit-Related Fees
There were no fees paid to the principal accountant for assurance and related
services rendered by the principal accountant to the registrant that are
reasonably related to the performance of the audit of the registrant's
financial statements and are not reported under paragraph (a) of Item 4.
There were no fees paid to the principal accountant for assurance and related
services rendered by the principal accountant to the registrant's investment
adviser and any entity controlling, controlled by or under common control
with the investment adviser that provides ongoing services to the registrant
that are reasonably related to the performance of the audit of the their
financial statements.
(c) Tax Fees
There were no fees paid to the principal accountant for professional services
rendered by the principal accountant to the registrant for tax compliance,
tax advice and tax planning.
There were no fees paid to the principal accountant for professional services
rendered by the principal accountant to the registrant's investment adviser
and any entity controlling, controlled by or under common control with the
investment adviser that provides ongoing services to the registrant for tax
compliance, tax advice and tax planning.
(d) All Other Fees
The aggregate fees paid to the principal accountant for products and services
rendered by the principal accountant to the registrant not reported in
paragraphs (a)-(c) of Item 4 were $931 for the fiscal year ended June 30,
2004 and $0 for the fiscal year ended June 30, 2003. The services for which
these fees were paid included review of materials provided to the fund Board
in connection with the investment management contract renewal process.
The aggregate fees paid to the principal accountant for products and services
rendered by the principal accountant to the registrant's investment adviser
and any entity controlling, controlled by or under common control with the
investment adviser that provides ongoing services to the registrant not
reported in paragraphs (a)-(c) of Item 4 were $0 for the fiscal year ended
June 30, 2004 and $12,963 for the fiscal year ended June 30, 2003. The
services for which these fees were paid included subscription fees and a
review of an ICI transfer agent survey.
(e) (1) The registrant's audit committee is directly responsible for
approving the services to be provided by the auditors, including:
(i) pre-approval of all audit and audit related services;
(ii) pre-approval of all non-audit related services to be provided to
the Fund by the auditors;
(iii)pre-approval of all non-audit related services to be provided to
the registrant by the auditors to the registrant's investment adviser or to
any entity that controls, is controlled by or is under common control with
the registrant's investment adviser and that provides ongoing services to the
reistrant where the non-audit services relate directly to the operations or
financial reporting of the registrant; and
(iv) establishment by the audit committee, if deemed necessary or
appropriate, as an alternative to committee pre-approval of services to be
provided by the auditors, as required by paragraphs (ii) and (iii) above, of
policies and procedures to permit such services to be pre-approved by other
means, such as through establishment of guidelines or by action of a
designated member or members of the committee; provided the policies and
procedures are detailed as to the particular service and the committee is
informed of each service and such policies and procedures do not include
delegation of audit committee responsibilities, as contemplated under the
Securities Exchange Act of 1934, to management; subject, in the case of (ii)
through (iv), to any waivers, exceptions or exemptions that may be available
under applicable law or rules.
(e) (2) None of the services provided to the registrant described in
paragraphs (b)-(d) of Item 4 were pre-approved by the audit committee
pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of regulation S-X.
(f) No disclosures are required by this Item 4(f).
(g) The aggregate non-audit fees paid to the principal accountant for
services rendered by the principal accountant to the registrant and the
registrant's investment adviser and any entity controlling, controlled by or
under common control with the investment adviser that provides ongoing
services to the registrant were $931 for the fiscal year ended June 30, 2004
and $12,963 for the fiscal year ended June 30, 2003.
(h) No disclosures are required by this Item 4(h).
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. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT
INVESTMENT COMPANY AND AFFILIATED PURCHASERS. N/A
ITEM 9. 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 10. 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 11. EXHIBITS.
(A) Code of Ethics
(B) (1) 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) (2) 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.
FRANKLIN MONEY FUND
By /s/Jimmy D. Gambill
Chief Executive Officer - Finance and Administration
Date August 31, 2004
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
Chief Executive Officer - Finance and Administration
Date August 31, 2004
By /s/Galen G. Vetter
Chief Financial Officer
Date August 31, 2004