UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSRS
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-02605
---------
FRANKLIN MONEY FUND
-------------------
(Exact name of registrant as specified in charter)
ONE FRANKLIN PARKWAY, SAN MATEO, CA 94403-1906
-----------------------------------------------
(Address of principal executive offices) (Zip code)
CRAIG S. TYLE, ONE FRANKLIN PARKWAY, SAN MATEO, CA 94403-1906
-------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: (650) 312-2000
--------------
Date of fiscal year end: 06/30
-----
Date of reporting period: 12/31/06
--------
ITEM 1. REPORTS TO STOCKHOLDERS.
[GRAPHIC OMITTED]
- --------------------------------------------------------------------------------
DECEMBER 31, 2006
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SEMIANNUAL REPORT AND SHAREHOLDER LETTER | INCOME
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
[LOGO](R)
FRANKLIN TEMPLETON
INVESTMENTS
FRANKLIN o Templeton o Mutual Series
Franklin Templeton Investments
GAIN FROM OUR PERSPECTIVE(R)
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 recognized
leader in fixed income investing and also brings
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 offices in over 25 countries, Templeton
offers investors a truly global perspective.
MUTUAL SERIES. Founded in 1949, Mutual Series is
dedicated to a unique style of value investing,
searching aggressively for opportunity among what
it believes are undervalued stocks, as well as
arbitrage situations and distressed securities.
TRUE DIVERSIFICATION Because our management groups work independently
and adhere to different investment approaches,
Franklin, Templeton and Mutual Series funds
typically have distinct portfolios. That's why our
funds can be used to build truly diversified
allocation plans 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, accurate and personal service that
has helped us become one of the most trusted names
in financial services.
- -------------------------------------------------------------------------------
MUTUAL FUNDS | RETIREMENT PLANS | 529 COLLEGE SAVINGS PLANS | SEPARATE ACCOUNTS
- -------------------------------------------------------------------------------
[GRAPHIC OMITTED]
Semiannual Report
Franklin Money Fund
YOUR FUND'S GOAL AND MAIN INVESTMENTS: Franklin Money Fund seeks to provide as
high a level of current income as is consistent with liquidity and preservation
of capital. The Fund invests all of its assets in the shares of The Money Market
Portfolio (the Portfolio), which has the same investment goal and policies. 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.
- --------------------------------------------------------------------------------
PERFORMANCE DATA REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE
RESULTS. INVESTMENT RETURN 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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
We are pleased to bring you Franklin Money Fund's semiannual report for the
period ended December 31, 2006.
PERFORMANCE OVERVIEW
Rising short-term interest rates during the period under review resulted in an
increase in the Fund's yield. In this environment, the Fund's seven-day
effective yield rose from 4.62% on June 30, 2006, to 4.78% on December 31, 2006.
ECONOMIC AND MARKET OVERVIEW
U.S. economic growth slowed in the second and third quarters of 2006 and picked
up somewhat in the fourth. Overall, several factors contributed to real growth.
An improved labor market and higher personal incomes helped support consumer
spending. Although a slowing housing market and moderate profit growth dampened
economic expansion, a decline in imports and increases in exports and government
spending contributed to growth in the fourth quarter.
Oil prices reached a historical high during the reporting period, which
contributed to a rise in headline, or overall, inflation. However, oil prices
fell in the latter part of the reporting period, partly due to ample supply and
easing demand. Many retail goods prices, and thus inflation, also declined. Core
inflation, which excludes food and energy costs, experienced some upward
pressure during the third quarter, but began to dip at the outset of the fourth
quarter. December's headline Consumer Price Index (CPI) reported a 12-month rise
of 2.5%, while core CPI increased 2.6%. 1
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 9.
Semiannual Report | 3
PORTFOLIO BREAKDOWN
12/31/06
- --------------------------------------------------------------------------------
% OF TOTAL
INVESTMENTS
- --------------------------------------------------------------------------------
Certificates of Deposit 47.9%
- --------------------------------------------------------------------------------
Commercial Paper 42.2%
- --------------------------------------------------------------------------------
Repurchase Agreements 5.0%
- --------------------------------------------------------------------------------
Bank Notes 3.2%
- --------------------------------------------------------------------------------
U.S. Government Agency Securities 1.7%
- --------------------------------------------------------------------------------
PERFORMANCE SUMMARY
SYMBOL: FMFXX
12/31/06
- --------------------------------------------------------------------------------
Seven-day effective yield* 4.78%
- --------------------------------------------------------------------------------
Seven-day annualized yield 4.67%
- --------------------------------------------------------------------------------
* The seven-day effective yield assumes compounding of daily dividends.
Annualized and effective yields are for the seven-day period ended 12/31/06. The
Fund's average weighted maturity was 25 days. Yield reflects Fund expenses and
fluctuations in interest rates on Portfolio investments.
PERFORMANCE DATA REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE
RESULTS. INVESTMENT RETURN 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.
Several times during the period the Federal Reserve Board (Fed) acknowledged the
economy's strength as well as the potential inflationary pressure from high
energy prices. The Fed raised the federal funds target rate incrementally to
5.25%, and then kept the rate steady from June 30 through the end of the year.
The Fed indicated its future decisions would be highly dependent on forthcoming
economic data. The 10-year Treasury note yield rose from 5.15% at the beginning
of the period to a high of 5.23% on July 5 and then fell to 4.71% on December
31, 2006. Typically, the intermediate portion of the yield curve is largely
reflective of the markets' future inflation expectations. Lower oil prices, in
conjunction with relatively stable inflation as well as some concerns about the
slowing housing market and its potential effect on the economy, contributed to
this decline in interest rates.
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.
MANAGER'S DISCUSSION
We continued to invest the Portfolio's assets in high-quality money market
securities. For example, on December 31, 2006, 100% of the securities purchased
for the Portfolio carried short-term credit ratings of A-1 or P-1, or higher, by
independent credit rating agency Standard & Poor's or Moody's Investors Service.
2
2. These do not indicate ratings of the Fund.
4 | Semiannual Report
We appreciate your support, welcome new shareholders and look forward to serving
your investment needs in the years ahead.
THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS
AS OF DECEMBER 31, 2006, 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 INVESTMENT MANAGER 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.
Semiannual Report | 5
Your Fund's Expenses
As a Fund shareholder, you can incur two types of costs:
o Transaction costs, including sales charges (loads) on Fund purchases and
redemption fees; and
o Ongoing Fund costs, including management fees, distribution and service
(12b-1) fees, and other Fund expenses. All mutual funds have ongoing
costs, sometimes referred to as operating expenses.
The following table shows ongoing costs of investing in the Fund and can help
you understand these costs and compare them with those of other mutual funds.
The table assumes a $1,000 investment held for the six months indicated.
ACTUAL FUND EXPENSES
The first line (Actual) of the table provides actual account values and
expenses. The "Ending Account Value" is derived from the Fund's actual return,
which includes the effect of Fund expenses.
You can estimate the expenses you paid during the period by following these
steps. OF COURSE, YOUR ACCOUNT VALUE AND EXPENSES WILL DIFFER FROM THOSE IN THIS
ILLUSTRATION:
1. Divide your account value by $1,000.
IF AN ACCOUNT HAD AN $8,600 VALUE, THEN $8,600 / $1,000 = 8.6.
2. Multiply the result by the number under the heading "Expenses Paid During
Period."
IF EXPENSES PAID DURING PERIOD WERE $7.50, THEN 8.6 X $7.50 = $64.50.
In this illustration, the estimated expenses paid this period are $64.50.
HYPOTHETICAL EXAMPLE FOR COMPARISON WITH OTHER FUNDS
Information in the second line (Hypothetical) of the table can help you compare
ongoing costs of investing in the Fund with those of other mutual funds. This
information may not be used to estimate the actual ending account balance or
expenses you paid during the period. The hypothetical "Ending Account Value" is
based on the Fund's actual expense ratio and an assumed 5% annual rate of return
before expenses, which does not represent the Fund's actual return. The figure
under the heading "Expenses Paid During Period" shows the hypothetical expenses
your account would have incurred under this scenario. You can compare this
figure with the 5% hypothetical examples that appear in shareholder reports of
other funds.
6 | Semiannual Report
Your Fund's Expenses (CONTINUED)
PLEASE NOTE THAT EXPENSES SHOWN IN THE TABLE ARE MEANT TO HIGHLIGHT ONGOING
COSTS AND DO NOT REFLECT ANY TRANSACTION COSTS, SUCH AS SALES CHARGES OR
REDEMPTION FEES. Therefore, the second line of the table is useful in comparing
ongoing costs only, and will not help you compare total costs of owning
different funds. In addition, if transaction costs were included, your total
costs would have been higher. Please refer to the Fund prospectus for additional
information on operating expenses.
- -------------------------------------------------------------------------------------------------------
BEGINNING ACCOUNT ENDING ACCOUNT EXPENSES PAID DURING
VALUE 7/1/06 VALUE 12/31/06 PERIOD* 7/1/06-12/31/06
- -------------------------------------------------------------------------------------------------------
Actual $1,000 $1,023.50 $3.37
- -------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,021.88 $3.36
- -------------------------------------------------------------------------------------------------------
* Expenses are equal to the annualized expense ratio of 0.66%, which
includes the expenses incurred by the Portfolio, multiplied by the average
account value over the period, multiplied by 184/365 to reflect the
one-half year period.
Semiannual Report | 7
Franklin Money Fund
FINANCIAL HIGHLIGHTS
---------------------------------------------------------------------------------------
SIX MONTHS ENDED
DECEMBER 31, 2006 YEAR ENDED JUNE 30,
(UNAUDITED) 2006 2005 2004 2003 2002
---------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout
the period)
Net asset value, beginning of period ..... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------------------------------------------------------------------------------------
Income from investment operations -
net investment income .................. 0.023 0.036 0.015 0.004 0.010 0.021
Less distributions from net investment
income ................................. (0.023) (0.036) (0.015) (0.004) (0.010) (0.021)
---------------------------------------------------------------------------------------
Net asset value, end of period ........... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
=======================================================================================
Total return a ........................... 2.35% 3.62% 1.55% 0.44% 0.93% 2.16%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ........ $1,841,977 $1,688,245 $1,446,027 $1,615,830 $1,956,924 $2,095,945
Ratios to average net assets:
Expenses before waiver and payments
by affiliates b ...................... 0.66% c 0.67% 0.66% 0.66% 0.62% 0.62%
Expenses net of waiver and payments
by affiliates b ...................... 0.66% c 0.67% 0.66% 0.65% 0.62% 0.61%
Net investment income .................. 4.67% c 3.59% 1.53% 0.44% 0.93% 2.16%
a Total return does not reflect sales commissions or contingent deferred
sales charges, if applicable, 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.
c Annualized.
8 | The accompanying notes are an integral part of these financial statements.
| Semiannual Report
Franklin Money Fund
STATEMENT OF INVESTMENTS, DECEMBER 31, 2006 (UNAUDITED)
- -------------------------------------------------------------------------------------------------------
SHARES VALUE
- -------------------------------------------------------------------------------------------------------
MUTUAL FUND (COST $1,852,575,655) 100.6%
a The Money Market Portfolio, 5.17% ......................... 1,852,575,655 $ 1,852,575,655
-----------------
OTHER ASSETS, LESS LIABILITIES (0.6)% ..................... (10,599,131)
-----------------
NET ASSETS 100.0% ......................................... $ 1,841,976,524
=================
a The rate shown is the annualized seven-day yield at period end.
Semiannual Report |
The accompanying notes are an integral part of these financial statements. | 9
Franklin Money Fund
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2006 (unaudited)
Assets:
Investments in Portfolio, at value and cost ................ $ 1,852,575,655
Receivables from capital shares sold ....................... 7,717,588
----------------
Total assets .......................................... 1,860,293,243
----------------
Liabilities:
Payables:
Capital shares redeemed ................................... 16,556,035
Affiliates ................................................ 932,838
Distributions to shareholders ............................. 704,486
Accrued expenses and other liabilities ..................... 123,360
----------------
Total liabilities ..................................... 18,316,719
----------------
Net assets, at value ................................. $ 1,841,976,524
----------------
Net assets consist of:
Paid-in capital ............................................ $ 1,841,999,477
Distributions in excess of net investment income ........... (22,953)
----------------
Net assets, at value ................................. $ 1,841,976,524
================
Shares outstanding .......................................... 1,842,056,201
================
Net asset value per share a ................................. $ 1.00
================
a Redemption price is equal to net asset value less contingent deferred
sales charges, if applicable.
10 | The accompanying notes are an integral part of these financial statements.
| Semiannual Report
Franklin Money Fund
FINANCIAL STATEMENTS (CONTINUED)
STATEMENT OF OPERATIONS
for the six months ended December 31, 2006 (unaudited)
Investment income:
Dividends from Portfolio ................................... $ 46,562,515
----------------
Expenses:
Administrative fees (Note 3a) .............................. 2,649,628
Transfer agent fees (Note 3c) .............................. 1,525,922
Reports to shareholders .................................... 130,595
Registration and filing fees ............................... 59,812
Professional fees .......................................... 23,280
Directors' fees and expenses ............................... 39,903
Other ...................................................... 61,801
----------------
Total expenses ........................................ 4,490,941
----------------
Net investment income ................................ 42,071,574
----------------
Net increase (decrease) in net assets resulting from
operations ................................................ $ 42,071,574
================
Semiannual Report |
The accompanying notes are an integral part of these financial statements. | 11
Franklin Money Fund
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS
------------------------------------
SIX MONTHS ENDED
DECEMBER 31, 2006 YEAR ENDED
(UNAUDITED) JUNE 30, 2006
------------------------------------
Increase (decrease) in net assets:
Net investment income from operations .......................................... $ 42,071,574 $ 54,897,605
------------------------------------
Distributions to shareholders from net investment income ....................... (42,094,527) (54,954,329)
Capital share transactions (Note 2) ............................................ 153,754,793 242,274,791
------------------------------------
Net increase (decrease) in net assets ..................................... 153,731,840 242,218,067
Net assets:
Beginning of period ............................................................ 1,688,244,684 1,446,026,617
------------------------------------
End of period .................................................................. $ 1,841,976,524 $ 1,688,244,684
------------------------------------
Distributions in excess of net investment income included in net assets:
End of period .................................................................. $ (22,953) $ --
====================================
12 | The accompanying notes are an integral part of these financial statements.
| Semiannual 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 amended, (the 1940 Act) as a diversified, open-end investment company.
The Fund invests substantially all of its assets in The Money Market Portfolio
(the Portfolio), which is registered under the 1940 Act as a diversified,
open-end investment company. 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 closing net asset value of the Portfolio. As of December 31, 2006, the Fund
owns 30.53% of the Portfolio.
B. INCOME TAXES
No provision has been made for U.S. income taxes because the Fund intends to
qualify as a regulated investment company under the Internal Revenue Code and to
distribute to shareholders substantially all of its taxable income and net
realized gains.
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 received from the Portfolio are normally declared daily. Such
distributions are reinvested in additional shares of the Fund. Distributions to
shareholders are determined according to income tax regulations (tax basis).
Distributable earnings determined on a tax basis may differ from earnings
recorded in accordance with accounting principles generally accepted in the
United States. These differences may be permanent or temporary. Permanent
differences are reclassified among capital accounts to reflect their tax
character. These reclassifications have no impact on net assets or the results
of operations. Temporary differences are not reclassified, as they may reverse
in subsequent periods.
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.
Semiannual Report | 13
Franklin Money Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
E. GUARANTEES AND INDEMNIFICATIONS
Under the Fund's organizational documents, its officers and directors are
indemnified by the Fund against certain liabilities 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. Currently, the Fund expects the
risk of loss to be remote.
2. CAPITAL STOCK
At December 31, 2006, there were five billion shares authorized ($0.01 par
value). Transactions in the Fund's shares at $1.00 per share were as follows:
-------------------------------------
SIX MONTHS ENDED YEAR ENDED
DECEMBER 31, 2006 JUNE 30, 2006
-------------------------------------
Shares sold .............................................. $ 928,745,567 $ 1,825,036,838
Shares issued in reinvestment of distributions ........... 41,510,881 54,779,534
Shares issued on merger (Note 5) ......................... 83,564,029 --
Shares redeemed .......................................... (900,065,684) (1,637,541,581)
-------------------------------------
Net increase (decrease) .................................. $ 153,754,793 $ 242,274,791
=====================================
3. TRANSACTIONS WITH AFFILIATES
Franklin Resources, Inc. is the holding company for various subsidiaries that
together are referred to as Franklin Templeton Investments. Certain officers and
directors of the Fund are also officers and/or trustees of the Portfolio and of
the following subsidiaries:
- -----------------------------------------------------------------------------------------
SUBSIDIARY AFFILIATION
- -----------------------------------------------------------------------------------------
Franklin Advisers, Inc. (Advisers) Administrative manager
Franklin Templeton Distributors, Inc. (Distributors) Principal underwriter
Franklin Templeton Investor Services, LLC (Investor Services) Transfer agent
A. ADMINISTRATIVE FEES
The Fund pays an administrative fee to Advisers based on the average daily net
assets of the Fund as follows:
- --------------------------------------------------------------------------------
ANNUALIZED FEE RATE NET ASSETS
- --------------------------------------------------------------------------------
0.455% Up to and including $100 million
0.330% Over $100 million, up to and including $250 million
0.280% In excess of $250 million
14 | Semiannual Report
Franklin Money Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. TRANSACTIONS WITH AFFILIATES (CONTINUED)
B. SALES CHARGES/UNDERWRITING AGREEMENTS
Distributors has advised the Fund of the following commission transactions
related to the sales and redemptions of the Fund's shares for the period:
Contingent deferred sales charges retained ................... $46,637
C. TRANSFER AGENT FEES
The Fund paid transfer agent fees of $1,525,922, of which $996,878 was retained
by Investor Services.
4. INCOME TAXES
At December 31, 2006, the cost of investments for book and income tax purposes
was the same.
5. MERGER
On August 31, 2006, the Fund acquired all of the net assets of the Franklin
Federal Money Fund pursuant to an agreement of merger. The merger was
accomplished by a taxable exchange, and accounted for as a purchase.
The selected financial information and shares outstanding immediately before and
after the acquisition were as follows:
- --------------------------------------------------------------------------------
FUND NAME SHARES AT $1.00 PER SHARE
- --------------------------------------------------------------------------------
Franklin Federal Money Fund ...................... $ 83,564,029
Franklin Money Fund .............................. $1,720,884,199
Franklin Money Fund - post merger ................ $1,804,448,228
6. REGULATORY MATTERS
As part of various investigations by a number of federal, state, and foreign
regulators and governmental entities, including the Securities and Exchange
Commission ("SEC"), relating to certain practices in the mutual fund industry,
including late trading, market timing and marketing support payments to
securities dealers who sell fund shares ("marketing support"), Franklin
Resources, Inc. and certain of its subsidiaries (collectively, the "Company"),
entered into settlements with certain of those regulators. Specifically, the
Company entered into settlements with the SEC, among others, concerning market
timing and marketing support.
Semiannual Report | 15
Franklin Money Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. REGULATORY MATTERS (CONTINUED)
On June 23, 2006, the SEC approved the proposed plan of distribution for the
marketing support settlement, and disbursement of the settlement monies to the
designated funds, in accordance with the terms and conditions of that settlement
and plan, was completed in September 2006. The Fund did not participate in that
Settlement.
The plan of distribution for the market timing settlement is currently under
review by the SEC staff. After publication of notice of the plan and a 30-day
comment period, the proposed plan of distribution will be submitted to the SEC
for approval. Following the SEC's approval of the plan of distribution, with
modifications as appropriate, distribution of the settlement monies will begin
in accordance with the terms and conditions of the settlement and plan.
In addition, the Company, as well as most of the mutual funds within Franklin
Templeton Investments and certain current or former officers, Company directors,
fund directors, and employees, have been named in private lawsuits (styled as
shareholder class actions, or as derivative actions on behalf of either the
named funds or Franklin Resources, Inc.). The lawsuits relate to the industry
practices referenced above, as well as to allegedly excessive commissions and
advisory and distribution fees.
The Company and fund management believe that the claims made in each of the
private lawsuits referenced above are without merit and intend to defend against
them vigorously. The Company cannot predict with certainty the eventual outcome
of these lawsuits, nor whether they will have a material negative impact on the
Company. If it is determined that the Company bears responsibility for any
unlawful or inappropriate conduct that caused losses to the Fund, it is
committed to making the Fund or its shareholders whole, as appropriate.
16 | Semiannual Report
Franklin Money Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. NEW ACCOUNTING PRONOUNCEMENTS
In July 2006, the Financial Accounting Standards Board (FASB) issued FASB
Interpretation No. 48, "Accounting for Uncertainty in Income Taxes - an
Interpretation of FASB Statement No. 109" ("FIN 48"), which clarifies the
accounting for uncertainty in tax positions taken or expected to be taken in a
tax return. FIN 48 provides guidance on the measurement, recognition,
classification and disclosure of tax positions, along with accounting for the
related interest and penalties. FIN 48 is effective for fiscal years beginning
after December 15, 2006, and is to be applied to all open tax years as of the
date of effectiveness. On December 22, 2006, the Securities and Exchange
Commission extended the implementation date to no later than the last net asset
value calculation in the first semi-annual reporting period in 2007. The Fund is
currently evaluating the impact, if any, of applying the various provisions of
FIN 48.
In September 2006, FASB issued FASB Statement No. 157, "Fair Value Measurement"
("SFAS 157"), which defines fair value, establishes a framework for measuring
fair value, and expands disclosures about fair value measurements. SFAS 157 is
effective for fiscal years beginning after November 15, 2007, and interim
periods within those fiscal years. The Trust believes the adoption of SFAS 157
will have no material impact on its financial statements.
Semiannual Report | 17
The Money Market Portfolios
FINANCIAL HIGHLIGHTS
THE MONEY MARKET PORTFOLIO
------------------------------------------------------------------------------------------
SIX MONTHS ENDED
DECEMBER 31, 2006 YEAR ENDED JUNE 30,
(UNAUDITED) 2006 2005 2004 2003 2002
------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout
the period)
Net asset value, beginning of period . $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------------------------------------------------------------------------------------------
Income from investment operations -
net investment income ............... 0.026 0.041 0.020 0.009 0.014 0.026
Less distributions from net investment
income .............................. (0.026) (0.041) (0.020) (0.009) (0.014) (0.026)
------------------------------------------------------------------------------------------
Net asset value, end of period ....... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
==========================================================================================
Total return a ....................... 2.63% 4.15% 2.06% 0.94% 1.41% 2.63%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) .... $6,068,863 $4,993,739 $5,676,479 $5,505,394 $5,331,200 $4,734,196
Ratios to average net assets:
Expenses before waiver and payments
by affiliates ...................... 0.16% b 0.16% 0.16% 0.16% 0.15% 0.16%
Expenses net of waiver and payments
by affiliates ...................... 0.16% b,c 0.16% c 0.16% c 0.15% c 0.15% 0.15%
Net investment income ............... 5.16% b 4.09% 2.04% 0.93% 1.39% 2.56%
a Total return is not annualized for periods less than one year.
b Annualized.
c Benefit of expense reduction rounds to less than 0.01%.
18 | The accompanying notes are an integral part of these financial statements.
| Semiannual Report
The Money Market Portfolios
STATEMENT OF INVESTMENTS, DECEMBER 31, 2006 (UNAUDITED)
- ---------------------------------------------------------------------------------------------------------------------------
THE MONEY MARKET PORTFOLIO PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------------
SHORT TERM INVESTMENTS 102.8%
BANK NOTES (COST $200,000,850) 3.3%
Bank of America North America, 5.32%, 2/01/07 ...................................... $ 200,000,000 $ 200,000,850
----------------
CERTIFICATES OF DEPOSIT 49.3%
Abbey National Treasury Services PLC, Stamford Branch, 5.285%, 1/18/07 ............. 200,000,000 200,000,470
Australia & New Zealand Banking Group Ltd., New York Branch, 5.28%, 1/29/07 ........ 200,000,000 200,000,772
Bank of Nova Scotia, Portland Branch, 5.29%, 1/09/07 ............................... 200,000,000 200,000,000
Banque Nationale de Paris, New York Branch, 5.275%, 2/05/07 ........................ 200,000,000 200,000,964
Barclays Bank PLC, New York Branch, 5.32%, 2/08/07 ................................. 100,000,000 100,000,000
Barclays Bank PLC, New York Branch, 4.97%, 2/09/07 ................................. 99,500,000 99,501,026
Calyon North America Inc., New York Branch, 5.06%, 3/02/07 ......................... 100,000,000 100,000,000
Dexia Credit Local, New York Branch, 4.875%, 2/01/07 ............................... 50,000,000 50,000,000
Dexia Credit Local, New York Branch, 5.285%, 2/15/07 ............................... 150,000,000 150,000,000
HBOS Treasury Services, New York Branch, 5.32%, 3/20/07 ............................ 200,000,000 200,000,000
Lloyds Bank PLC, New York Branch, 5.29%, 1/30/07 ................................... 200,000,000 200,000,796
Rabobank Nederland NV, New York Branch, 5.275%, 1/17/07 ............................ 200,000,000 200,000,443
Royal Bank of Scotland, New York Branch, 5.28%, 1/10/07 ............................ 200,000,000 200,000,249
Societe Generale, New York Branch, 5.28%, 1/05/07 .................................. 200,000,000 200,000,000
Svenska Handelsbanken, New York Branch, 5.305%, 2/02/07 ............................ 200,000,000 200,000,857
UBS AG, Stamford Branch, 5.30%, 1/22/07 ............................................ 200,000,000 200,000,577
Wells Fargo Bank North America, San Francisco Branch, 4.79%, 1/18/07 ............... 93,000,000 92,966,495
Westpac Banking Corp., New York Branch, 5.32%, 1/24/07 ............................. 200,000,000 200,001,261
----------------
TOTAL CERTIFICATES OF DEPOSIT (COST $2,992,473,910) ................................ 2,992,473,910
----------------
a COMMERCIAL PAPER 43.4%
BP Capital Markets PLC, 1/02/07 .................................................... 141,800,000 141,779,203
Colgate-Palmolive Co., 1/19/07 ..................................................... 50,000,000 49,869,000
Commonwealth Bank of Australia, 2/07/07 ............................................ 200,000,000 198,923,917
Concentrate Manufacturing Co. of Ireland, 1/04/07 .................................. 63,000,000 62,972,700
Concentrate Manufacturing Co. of Ireland, 1/11/07 .................................. 63,900,000 63,807,700
Concentrate Manufacturing Co. of Ireland, 1/12/07 - 1/17/07 ........................ 75,000,000 74,862,777
Depfa Bank PLC, 1/31/07 ............................................................ 200,000,000 199,126,667
Internationale Nederlanden U.S. Funding Corp., 1/19/07 ............................. 200,000,000 199,476,000
Johnson & Johnson, 1/08/07 ......................................................... 150,000,000 149,848,333
Johnson & Johnson, 1/12/07 ......................................................... 50,000,000 49,920,250
Morgan Stanley Group Inc., 1/16/07 ................................................. 200,000,000 199,560,833
National Australia Funding, 1/22/07 ................................................ 200,000,000 199,382,833
Nestle Capital Corp., 1/11/07 ...................................................... 200,000,000 199,710,000
Procter & Gamble Co., 1/04/07 ...................................................... 100,000,000 99,956,417
Procter & Gamble Co., 1/09/07 ...................................................... 100,000,000 99,883,778
Siemens Capital Corp., 1/19/07 ..................................................... 174,000,000 173,541,510
Societe Generale North America Inc., 1/05/07 ....................................... 50,000,000 49,970,861
Toyota Motor Credit Corp., 1/23/07 ................................................. 200,000,000 199,359,556
UBS AG Finance Delaware Inc., 1/05/07 .............................................. 23,708,000 23,694,170
U.S. Central Credit Union, 1/25/07 ................................................. 200,000,000 199,297,333
----------------
TOTAL COMMERCIAL PAPER (COST $2,634,943,838) ....................................... 2,634,943,838
----------------
Semiannual Report | 19
The Money Market Portfolios
STATEMENT OF INVESTMENTS, DECEMBER 31, 2006 (UNAUDITED) (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------------
THE MONEY MARKET PORTFOLIO PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AND AGENCY SECURITIES 1.7%
a FHLB, 1/02/07 ...................................................................... $ 100,790,000 $ 100,776,561
a FHLB, 1/03/07 ...................................................................... 200,000 199,943
a FHLB, 1/05/07 ...................................................................... 210,000 209,880
a FHLB, 1/19/07 ...................................................................... 1,320,000 1,316,581
a U.S. Treasury Bill, 1/04/07 ........................................................ 2,500,000 2,498,943
----------------
TOTAL U.S. GOVERNMENT AND AGENCY SECURITIES (COST $105,001,908) .................... 105,001,908
----------------
TOTAL INVESTMENTS BEFORE REPURCHASE AGREEMENTS (COST $5,932,420,506) ............... 5,932,420,506
----------------
b REPURCHASE AGREEMENTS 5.1%
ABN AMRO Bank NV, 5.27%, 1/02/07 (Maturity Value $80,046,844) Collateralized
by U.S. Government Agency Securities, 4.50% - 5.25%,
8/03/07 - 8/04/08 .............................................................. 80,000,000 80,000,000
Deutsche Morgan Grenfell, 4.85%, 1/02/07 (Maturity Value $114,641,746)
Collateralized by U.S. Treasury Note, 4.25%, 1/15/10 ............................. 114,580,000 114,580,000
Morgan Stanley & Co. Inc., 4.80%, 1/02/07 (Maturity Value $114,641,109)
Collateralized by U.S. Treasury Notes, 3.625% - 3.875%, 1/15/08 - 1/15/09 ........ 114,580,000 114,580,000
----------------
TOTAL REPURCHASE AGREEMENTS (COST $309,160,000) .................................... 309,160,000
----------------
TOTAL SHORT TERM INVESTMENTS (COST $6,241,580,506) 102.8% .......................... 6,241,580,506
OTHER ASSETS, LESS LIABILITIES (2.8)% .............................................. (172,717,824)
----------------
NET ASSETS 100.0% .................................................................. $ 6,068,862,682
================
SELECTED PORTFOLIO ABBREVIATIONS
FHLB - Federal Home Loan Bank
a The security is traded on a discount basis with no stated coupon rate.
b See Note 1(b) regarding repurchase agreements.
20 | The accompanying notes are an integral part of these financial statements.
| Semiannual Report
The Money Market Portfolios
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2006 (unaudited)
-----------------
THE
MONEY MARKET
PORTFOLIO
-----------------
Assets:
Investments in securities, at amortized cost ............. $ 5,932,420,506
Repurchase agreements, at value and cost ................. 309,160,000
-----------------
Total investments ................................... $ 6,241,580,506
Cash ..................................................... 2,393
Interest receivable ...................................... 28,067,699
-----------------
Total assets ........................................ 6,269,650,598
-----------------
Liabilities:
Payables:
Investment securities purchased ......................... 200,000,857
Affiliates .............................................. 755,862
Distributions to shareholders ........................... 6,924
Accrued expenses and other liabilities ................... 24,273
-----------------
Total liabilities ................................... 200,787,916
-----------------
Net assets, at value ............................... $ 6,068,862,682
=================
Net assets consist of paid-in capital ..................... $ 6,068,862,682
=================
Shares outstanding ........................................ 6,068,862,682
=================
Net asset value per share ................................. $ 1.00
=================
Semiannual Report |
The accompanying notes are an integral part of these financial statements. | 21
The Money Market Portfolios
FINANCIAL STATEMENTS (CONTINUED)
STATEMENT OF OPERATIONS
for the six months ended December 31, 2006 (unaudited)
-----------------
THE
MONEY MARKET
PORTFOLIO
-----------------
Investment income:
Interest ................................................. $ 154,020,740
-----------------
Expenses:
Management fees (Note 3a) ................................ 4,335,253
Custodian fees (Note 4) .................................. 64,170
Reports to shareholders .................................. 6,088
Professional fees ........................................ 23,745
Other .................................................... 56,144
-----------------
Total expenses ...................................... 4,485,400
Expense reductions (Note 4) ......................... (464)
-----------------
Net expenses ....................................... 4,484,936
-----------------
Net investment income ............................. 149,535,804
-----------------
Net increase (decrease) in net assets resulting
from operations ......................................... $ 149,535,804
=================
22 | The accompanying notes are an integral part of these financial statements.
| Semiannual Report
The Money Market Portfolios
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS
-----------------------------------
THE MONEY MARKET PORTFOLIO
-----------------------------------
SIX MONTHS ENDED
DECEMBER 31, 2006 YEAR ENDED
(UNAUDITED) JUNE 30, 2006
-----------------------------------
Increase (decrease) in net assets:
Net investment income from operations .................................................... $ 149,535,804 $ 235,463,389
Distributions to shareholders from net investment income ................................. (149,535,804) (235,463,389)
Capital share transactions: (Note 2) ..................................................... 1,075,123,662 (682,740,398)
-----------------------------------
Net increase (decrease) in net assets ............................................... 1,075,123,662 (682,740,398)
Net assets (there is no undistributed net investment income at beginning or end of period):
Beginning of period ...................................................................... 4,993,739,020 5,676,479,418
===================================
End of period ............................................................................ $ 6,068,862,682 $ 4,993,739,020
===================================
Semiannual Report |
The accompanying notes are an integral part of these financial statements. | 23
The Money Market Portfolios
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Money Market Portfolios (the Trust) is registered under the Investment
Company Act of 1940, as amended, (the 1940 Act) as a diversified, open-end
investment company, consisting of one Portfolio, the The Money Market Portfolio
(the Portfolio). The shares of the Trust are issued in private placements and
are exempt from registration under the Securities Act of 1933.
The following summarizes the Portfolio's significant accounting policies.
A. SECURITY VALUATION
Securities are valued at amortized cost which approximates market value. This
method involves valuing an instrument at its cost and thereafter assuming a
constant amortization to maturity of any discount or premium. All security
valuation procedures are approved by the Trust's Board of Trustees.
B. REPURCHASE AGREEMENTS
The Portfolio may enter into repurchase agreements, which are accounted for as a
loan by the Portfolio to the seller, collateralized by securities which are
delivered to the Portfolio's custodian. The market value, including accrued
interest, of the initial collateralization is required to be at least 102% of
the dollar amount invested by the Portfolio, with the value of the underlying
securities marked to market daily to maintain coverage of at least 100%. All
repurchase agreements held by the Portfolio at period end had been entered into
on December 29, 2006. Repurchase agreements are valued at cost.
C. INCOME TAXES
No provision has been made for U.S. income taxes because the Portfolio intends
to qualify as a regulated investment company under the Internal Revenue Code and
to distribute to shareholders substantially all of its taxable income and net
realized gains.
D. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Interest income and estimated expenses are accrued daily. Amortization of
premium and accretion of discount on debt securities are included in interest
income. Dividends from net investment income are normally declared daily. Such
distributions are reinvested in additional shares of the Portfolio.
Distributions to shareholders are determined according to income tax regulations
(tax basis). Distributable earnings determined on a tax basis may differ from
earnings recorded in accordance with accounting principles generally accepted in
the United States. These differences may be permanent or temporary. Permanent
differences are reclassified among capital accounts to reflect their tax
character. These reclassifications have no impact on net assets or the results
of operations. Temporary differences are not reclassified, as they may reverse
in subsequent periods.
24 | Semiannual Report
The Money Market Portfolios
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
E. ACCOUNTING ESTIMATES
The preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the amounts of income
and expenses during the reporting period. Actual results could differ from those
estimates.
F. GUARANTEES AND INDEMNIFICATIONS
Under the Trust's organizational documents, its officers and trustees are
indemnified by the Trust against certain liabilities arising out of the
performance of their duties to the Trust. Additionally, in the normal course of
business, the Trust enters into contracts with service providers that contain
general indemnification clauses. The Trust's maximum exposure under these
arrangements is unknown as this would involve future claims that may be made
against the Trust that have not yet occurred. Currently, the Trust expects the
risk of loss to be remote.
2. SHARES OF BENEFICIAL INTEREST
At December 31, 2006, there were an unlimited number of shares authorized ($0.01
par value). Transactions in the Portfolio's shares at $1.00 per share were as
follows:
-------------------------------------
SIX MONTHS ENDED YEAR ENDED
DECEMBER 31, 2006 JUNE 30, 2006
-------------------------------------
Shares sold ....................................... $ 4,495,976,470 $ 5,987,924,802
Shares issued on merger (Note 6) .................. 84,125,474 --
Shares issued in reinvestment of distributions .... 149,529,134 235,470,437
Shares redeemed ................................... $ (3,654,507,416) (6,906,135,637)
-------------------------------------
Net increase (decrease) ........................... $ 1,075,123,662 $ (682,740,398)
-====================================
3. TRANSACTIONS WITH AFFILIATES
Franklin Resources, Inc. is the holding company for various subsidiaries that
together are referred to as Franklin Templeton Investments. Certain officers and
trustees of the Trust are also officers and/or directors of the Franklin Money
Fund, the Institutional Fiduciary Trust, and the Franklin Templeton Money Fund
Trust, and of the following subsidiaries:
- ------------------------------------------------------------------------------------
SUBSIDIARY AFFILIATION
- ------------------------------------------------------------------------------------
Franklin Advisers, Inc. (Advisers) Investment manager
Franklin Templeton Investor Services, LLC (Investor Services) Transfer agent
Semiannual Report | 25
The Money Market Portfolios
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
3. TRANSACTIONS WITH AFFILIATES (CONTINUED)
A. MANAGEMENT FEES
The Portfolio pays an investment management fee to Advisers of 0.15% per year of
the average daily net assets of the Portfolio.
B. TRANSFER AGENT FEES
Investor Services, under terms of an agreement, performs shareholder servicing
for the Portfolio and is not paid by the Portfolio for the services.
C. OTHER AFFILIATED TRANSACTIONS
At December 31, 2006, the shares of the Portfolio were owned by the following
funds:
---------------------------------
PERCENTAGE OF
SHARES OUTSTANDING SHARES
---------------------------------
Institutional Fiduciary Trust - Money Market Portfolio ............... 3,981,217,812 65.60%
Franklin Money Fund .................................................. 1,852,575,655 30.53%
Institutional Fiduciary Trust - Franklin Cash Reserves Fund .......... 135,488,285 2.23%
Franklin Templeton Money Fund Trust - Franklin Templeton Money Fund .. 99,580,930 1.64%
4. EXPENSE OFFSET ARRANGEMENT
The Portfolio has entered into an arrangement with its custodian whereby credits
realized as a result of uninvested cash balances are used to reduce a portion of
the Portfolio's custodian expenses. During the period ended December 31, 2006,
the custodian fees were reduced as noted in the Statement of Operations.
5. INCOME TAXES
At December 31, 2006, the cost of investments for book and income tax purposes
was the same.
6. MERGER
On August 31, 2006, the Franklin Money Fund acquired all of the assets, subject
to liabilities, of the Franklin Federal Money Fund pursuant to an agreement of
merger. The merger was accomplished by a taxable exchange and accounted for as a
purchase, and resulted in the Money Fund owning shares of the U.S. Government
Securities Money Market Portfolio. The Money Fund then used the shares of the
U.S. Government Securities Money Market Portfolio to purchase in-kind additional
shares of the Portfolio. The U.S. Government Securities Money Market Portfolio
then liquidated and transferred its portfolio securities to the Portfolio.
26 | Semiannual Report
The Money Market Portfolios
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
6. MERGER (CONTINUED)
The selected financial information and shares outstanding immediately before and
after the acquisition were as follows:
- ---------------------------------------------------------------------------------------
FUND NAME SHARES AT $1.00 PER SHARE
- ---------------------------------------------------------------------------------------
The U.S. Government Securities Money Market Portfolio ... $ 84,125,474
The Money Market Portfolio .............................. $ 5,604,232,120
The Money Market Portfolio - post merger ................ $ 5,688,357,594
7. REGULATORY MATTERS
As part of various investigations by a number of federal, state, and foreign
regulators and governmental entities, including the Securities and Exchange
Commission ("SEC"), relating to certain practices in the mutual fund industry,
including late trading, market timing and marketing support payments to
securities dealers who sell fund shares ("marketing support"), Franklin
Resources, Inc. and certain of its subsidiaries (collectively, the "Company"),
entered into settlements with certain of those regulators. Specifically, the
Company entered into settlements with the SEC, among others, concerning market
timing and marketing support.
On June 23, 2006, the SEC approved the proposed plan of distribution for the
marketing support settlement, and disbursement of the settlement monies to the
designated funds, in accordance with the terms and conditions of that settlement
and plan, was completed in September 2006. The Trust did not participate in that
Settlement.
The plan of distribution for the market timing settlement is currently under
review by the SEC staff. After publication of notice of the plan and a 30-day
comment period, the proposed plan of distribution will be submitted to the SEC
for approval. Following the SEC's approval of the plan of distribution, with
modifications as appropriate, distribution of the settlement monies will begin
in accordance with the terms and conditions of the settlement and plan.
In addition, the Company, as well as most of the mutual funds within Franklin
Templeton Investments and certain current or former officers, Company directors,
fund directors, and employees, have been named in private lawsuits (styled as
shareholder class actions, or as derivative actions on behalf of either the
named funds or Franklin Resources, Inc.). The lawsuits relate to the industry
practices referenced above, as well as to allegedly excessive commissions and
advisory and distribution fees.
The Company and fund management believe that the claims made in each of the
private lawsuits referenced above are without merit and intend to defend against
them vigorously. The Company cannot predict with certainty the eventual outcome
of these lawsuits, nor whether they will have a material negative impact on the
Company. If it is determined that the Company bears responsibility for any
unlawful or inappropriate conduct that caused losses to the Trust, it is
committed to making the Trust or its shareholders whole, as appropriate.
Semiannual Report | 27
The Money Market Portfolios
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
8. NEW ACCOUNTING PRONOUNCEMENTS
In July 2006, the Financial Accounting Standards Board (FASB) issued FASB
Interpretation No. 48, "Accounting for Uncertainty in Income Taxes - an
Interpretation of FASB Statement No. 109" ("FIN 48"), which clarifies the
accounting for uncertainty in tax positions taken or expected to be taken in a
tax return. FIN 48 provides guidance on the measurement, recognition,
classification and disclosure of tax positions, along with accounting for the
related interest and penalties. FIN 48 is effective for fiscal years beginning
after December 15, 2006, and is to be applied to all open tax years as of the
date of effectiveness. On December 22, 2006, the Securities and Exchange
Commission extended the implementation date to no later than the last net asset
value calculation in the first semi-annual reporting period in 2007. The Trust
is currently evaluating the impact, if any, of applying the various provisions
of FIN 48.
In September 2006, FASB issued FASB Statement No. 157, "Fair Value Measurement"
("SFAS 157"), which defines fair value, establishes a framework for measuring
fair value, and expands disclosures about fair value measurements. SFAS 157 is
effective for fiscal years beginning after November 15, 2007, and interim
periods within those fiscal years. The Trust believes the adoption of SFAS 157
will have no material impact on its financial statements.
28 | Semiannual Report
Franklin Money Fund
SHAREHOLDER INFORMATION
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 1-954/527-7678 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 U.S. Securities and Exchange
Commission's website at sec.gov and reflect the most recent 12-month period
ended June 30.
QUARTERLY STATEMENT OF INVESTMENTS
The Fund files a complete statement of investments with the U.S. Securities and
Exchange Commission for the first and third quarters for each fiscal year on
Form N-Q. Shareholders may view the filed Form N-Q by visiting the Commission's
website at sec.gov. The filed form may also be viewed and copied at the
Commission's Public Reference Room in Washington, DC. Information regarding the
operations of the Public Reference Room may be obtained by calling
1-800/SEC-0330.
Semiannual Report | 29
This page intentionally left blank.
This page intentionally left blank.
This page intentionally left blank.
Literature Request
LITERATURE REQUEST. TO RECEIVE A BROCHURE AND PROSPECTUS, PLEASE CALL US AT
1-800/DIAL BEN (R) (1-800/342-5236) OR VISIT FRANKLINTEMPLETON.COM. INVESTORS
SHOULD CAREFULLY CONSIDER A FUND'S INVESTMENT GOALS, RISKS, CHARGES AND EXPENSES
BEFORE INVESTING. THE PROSPECTUS CONTAINS THIS AND OTHER INFORMATION. PLEASE
CAREFULLY READ THE PROSPECTUS BEFORE INVESTING. 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 BRIC Fund
Templeton China World Fund
Templeton Developing Markets Trust
Templeton Emerging Markets Small Cap Fund
Templeton Foreign Fund
Templeton Foreign Smaller Companies Fund
Templeton International (Ex EM) Fund 1
GLOBAL
Mutual Discovery 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 MidCap Value Fund
Franklin Small Cap Value Fund
Mutual Beacon Fund
Mutual Qualified Fund
Mutual Recovery Fund 3
Mutual Shares Fund
BLEND
Franklin Balanced Fund
Franklin Blue Chip Fund 1
Franklin Convertible Securities Fund
Franklin Growth Fund
Franklin Rising Dividends Fund
Franklin U.S. Long-Short Fund
SECTOR
Franklin Biotechnology Discovery Fund
Franklin DynaTech Fund
Franklin Global Communications Fund
Franklin Global Health Care Fund
Franklin Global Real Estate Fund
Franklin Gold and Precious Metals Fund
Franklin Natural Resources Fund
Franklin Real Estate Securities Fund
Franklin Technology Fund
Franklin Utilities Fund
Mutual Financial Services Fund
ASSET ALLOCATION
Franklin Templeton Corefolio Allocation Fund
Franklin Templeton Founding Funds Allocation Fund
Franklin Templeton Perspectives Allocation Fund
TARGET FUNDS
Franklin Templeton Conservative Target Fund
Franklin Templeton Growth Target Fund
Franklin Templeton Moderate Target Fund
RETIREMENT TARGET FUNDS
Franklin Templeton 2015 Retirement Target Fund
Franklin Templeton 2025 Retirement Target Fund
Franklin Templeton 2035 Retirement Target Fund
Franklin Templeton 2045 Retirement Target Fund
INCOME
Franklin Adjustable U.S. Government
Securities Fund 4
Franklin Floating Rate Daily Access Fund
Franklin High Income Fund 5
Franklin Income Fund
Franklin Limited Maturity
U.S. Government Securities Fund 4
Franklin Low Duration Total Return Fund
Franklin Real Return Fund
Franklin Strategic Income Fund
Franklin Strategic Mortgage Portfolio
Franklin Templeton Hard Currency Fund
Franklin Total Return Fund
Franklin U.S. Government Securities Fund 4
Templeton Global Bond Fund
Templeton Income Fund
TAX-FREE INCOME 6
NATIONAL FUNDS
Double Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund 7
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
Alabama
Arizona
California 8
Colorado
Connecticut
Florida 8
Georgia
Kentucky
Louisiana
Maryland
Massachusetts 7
Michigan 7
Minnesota 7
Missouri
New Jersey
New York 8
North Carolina
Ohio 7
Oregon
Pennsylvania
Tennessee
Virginia
INSURANCE FUNDS
Franklin Templeton Variable Insurance Products Trust 9
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 and 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. An investment in the fund is neither insured nor guaranteed by the U.S.
government or by any other entity or institution.
5. Effective 10/1/06, Franklin's AGE High Income Fund changed its name to
Franklin High Income Fund. The fund's investment goal and strategy
remained the same.
6. For investors subject to the alternative minimum tax, a small portion of
fund dividends may be taxable. Distributions of capital gains are
generally taxable.
7. Portfolio of insured municipal securities.
8. 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).
9. The funds of the Franklin Templeton Variable Insurance Products Trust are
generally available only through insurance company variable contracts.
01/07 Not part of the semiannual report
[LOGO](R)
FRANKLIN TEMPLETON 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.
SEMIANNUAL 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 S2006 02/07
ITEM 2. CODE OF ETHICS.
(a) The Registrant has adopted a code of ethics that applies to its principal
executive officers and principal financial and accounting officer.
(c) N/A
(d) N/A
(f) Pursuant to Item 12(a)(1), the Registrant is attaching as an exhibit a copy
of its code of ethics that applies to its principal executive officers and
principal financial and accounting officer.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
(a)(1) The Registrant has an audit committee financial expert serving on its
audit committee.
(2) The audit committee financial expert is Frank W.T. LaHaye, and he is
"independent" as defined under the relevant Securities and Exchange Commission
Rules and Releases.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. N/A
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. N/A
ITEM 6. SCHEDULE OF INVESTMENTS. N/A
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-
END MANAGEMENT INVESTMENT COMPANIES. N/A
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT
COMPANIES. N/A
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT
INVESTMENT COMPANY AND AFFILIATED PURCHASERS. N/A
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. There
have been no changes to the procedures by which shareholders may recommend
nominees to the Registrant's Board of Directors that would require disclosure
herein.
ITEM 11. CONTROLS AND PROCEDURES.
(a) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. The Registrant maintains
disclosure controls and procedures that are designed to ensure that information
required to be disclosed in the Registrant's filings under the Securities
Exchange Act of 1934 and the Investment Company Act of 1940 is recorded,
processed, summarized and reported within the periods specified in the rules and
forms of the Securities and Exchange Commission. Such information is accumulated
and communicated to the Registrant's management, including its principal
executive officer and principal financial officer, as appropriate, to allow
timely decisions regarding required disclosure. The Registrant's management,
including the principal executive officer and the principal financial officer,
recognizes that any set of controls and procedures, no matter how well designed
and operated, can provide only reasonable assurance of achieving the desired
control objectives.
Within 90 days prior to the filing date of this Shareholder Report on Form
N-CSR, the Registrant had carried out an evaluation, under the supervision and
with the participation of the Registrant's management, including the
Registrant's principal executive officer and the Registrant's principal
financial officer, of the effectiveness of the design and operation of the
Registrant's disclosure controls and procedures. Based on such evaluation, the
Registrant's principal executive officer and principal financial officer
concluded that the Registrant's disclosure controls and procedures are
effective.
(B) CHANGES IN INTERNAL CONTROLS. There have been no significant changes in the
Registrant's internal controls or in other factors that could significantly
affect the internal controls subsequent to the date of their evaluation in
connection with the preparation of this Shareholder Report on Form N-CSR.
ITEM 12. EXHIBITS.
(a)(1) Code of Ethics
(a)(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
of Jimmy D. Gambill, Chief Executive Officer - Finance and Administration, and
Galen G. Vetter, Chief Financial Officer
(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of
Jimmy D. Gambill, Chief Executive Officer - Finance and Administration, and
Galen G. Vetter, Chief Financial Officer
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
FRANKLIN MONEY FUND
By /S/JIMMY D. GAMBILL
-------------------
Jimmy D. Gambill
Chief Executive Officer - Finance and Administration
Date February 27, 2007
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By /S/JIMMY D. GAMBILL
-------------------
Jimmy D. Gambill
Chief Executive Officer - Finance and Administration
Date February 27, 2007
By /S/GALEN G. VETTER
------------------
Galen G. Vetter
Chief Financial Officer
Date February 27, 2007