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
-------------------
(Exact name of registrant as specified in charter)
ONE FRANKLIN PARKWAY, SAN MATEO, CA 94403-1906
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(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
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Date of fiscal year end: 6/30
----
Date of reporting period: 6/30/09
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ITEM 1. REPORTS TO STOCKHOLDERS.
JUNE 30, 2009
ANNUAL REPORT
AND SHAREHOLDER LETTER
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FRANKLIN - Templeton - 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)
Not part of the annual report
Contents
SHAREHOLDER LETTER .............. 1
ANNUAL REPORT
Franklin Money Fund ............. 3
Performance Summary ............. 5
Your Fund's Expenses ............ 6
Financial Highlights and
Statement of Investments ..... 8
Financial Statements ............ 10
Notes to Financial Statements ... 13
Report of Independent Registered
Public Accounting Firm ....... 17
Tax Designation ................. 18
Board Members and Officers ...... 19
The Money Market ................ 23
Portfolios Shareholder
Information .................. 40
Shareholder Letter
Dear Shareholder:
The 12-month period ended June 30, 2009, was an extraordinary and stressful time
for investors and those of us who have worked in financial markets for many
years. During much of this turbulent period, the U.S. recession deepened, the
unemployment rate surged and consumer spending fell. In the past three months,
the U.S. economy, while still in a downturn, became marginally "less worse" as
the recession seemed to loosen its grip. For most of the period, stocks suffered
major losses as investors worried about an uncertain future. After reaching
cyclical lows in March, the stock indexes began a rally as many investors
reentered the market. At the same time, U.S. Treasury yields rose as investor
risk aversion waned. Amid recent events, we think it is important to put
short-term market developments in perspective. Keep in mind that we have
navigated through past periods of high market volatility by remaining committed
to our long-term perspective and disciplined investment philosophy. During such
times, we search for bargains that we believe may be well positioned to become
eventual winners. Although conditions remain challenging, our experience gives
us ample reason to be optimistic about future market stabilization and recovery.
In the enclosed annual report for Franklin Money Fund, the portfolio manager
discusses market conditions, investment management decisions and Fund
performance during the period under review. You will also find performance data
and financial information. Please remember that all securities markets
fluctuate, as do mutual fund share prices. As always, we recommend investors
consult their financial advisors and review their portfolios to design a
long-term strategy and portfolio allocation that meet their individual needs,
goals and risk tolerance. We firmly believe that most people benefit from
professional advice, and that advice is invaluable as investors navigate current
market conditions.
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE
Not part of the annual report | 1
As a Franklin Money Fund shareholder, you continue to benefit from convenient,
easy access to your money and a high degree of credit safety. You can also enjoy
a wide range of services, including check-writing privileges and access to your
account at ATMs nationwide.(1) If you would like more information or more
frequent updates, franklintempleton.com provides daily prices, monthly
performance figures, portfolio holdings and other information. You can also
access your account, buy and sell shares, read timely articles, and find helpful
financial planning tools. We hope you will take advantage of these online
services.
We thank you for investing with Franklin Templeton, welcome your questions and
comments, and look forward to serving your investment needs in the years ahead.
Sincerely,
/s/ Charles B. Johnson
Charles B. Johnson
Chairman
Franklin Money Fund
THIS LETTER REFLECTS OUR ANALYSIS AND OPINIONS AS OF JUNE 30, 2009. THE
INFORMATION IS NOT A COMPLETE ANALYSIS OF EVERY ASPECT OF ANY MARKET, COUNTRY,
INDUSTRY, SECURITY OR FUND. STATEMENTS OF FACT ARE FROM SOURCES CONSIDERED
RELIABLE.
(1.) Check minimum of $500 ($10 charge for writing a check under $500). A
Franklin Templeton Cash Advantage Card is available for Franklin Money Fund
accounts registered to one or more individuals. It is not available to
accounts registered as UGMAs/UTMAs, certain trusts, retirement plans,
accounts that require more than one signature, accounts with non-U.S.
addresses (including U.S. territories), corporations, partnerships or other
such legal entities. The Cash Advantage Card is a Platinum MasterCard (R)
offered by Franklin Templeton Bank & Trust, F.S.B. to Fund shareholders.
Others terms apply. For more information, please call Franklin Templeton
Shareholder Services at (800) 632-2301.
2 | Not part of the annual report
Annual 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 preservation of
shareholders' capital and liquidity. 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 (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.
This annual report for Franklin Money Fund covers the fiscal year ended June 30,
2009.
PERFORMANCE OVERVIEW
Declining short-term interest rates during the period under review resulted in a
decrease in the Fund's yield. In this environment, the Fund's seven-day
effective yield fell from 2.02% on June 30, 2008, to 0.00% on June 30, 2009.
ECONOMIC AND MARKET OVERVIEW
During the 12-month period ended June 30, 2009, economic conditions
deteriorated. In February, The Conference Board's Consumer Confidence Index fell
to an all-time low since it began in 1967 as the U.S. economy faltered and as
stock markets declined. Despite far-reaching government interventions, the
nation's economic troubles worsened as manufacturing activity weakened at its
fastest pace in nearly 30 years and as home prices fell at an accelerated rate.
Jobless claims mounted and the unemployment rate rose to 9.5% by period-end.(1)
Economic growth, as measured by gross domestic product (GDP), fell throughout
the period. In 2008's third quarter, GDP was an annualized -2.7%, followed by
annualized rates of -5.4%, -6.4% and an estimated -1.0% in 2008's fourth quarter
and 2009's first and second quarters, respectively. These declines in GDP
reflected broad-based slowdowns in consumer spending, corporate profits and
export growth.
(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.
Annual Report | 3
PORTFOLIO BREAKDOWN
6/30/09
% OF TOTAL
INVESTMENTS
-----------
Repurchase Agreements 32.2%
Commercial Paper 26.7%
Certificates of Deposit 21.7%
U.S. Government &
Agency Securities 17.1%
Bank Notes 2.3%
Oil prices were volatile, rising from $140 per barrel at the beginning of the
period to a period-high $145 in July. As economic conditions deteriorated in
mid-2008, oil prices declined significantly, hitting a period-low $31 in
December 2008 before rebounding to end the period at $70. Many other commodity
prices followed similar trends; therefore, as prices fell in late 2008,
inflation remained muted, and June's inflation rate was an annualized -1.4%.(1)
Core inflation, which excludes food and energy costs, rose at a 1.7% annualized
rate, which was within the Federal Reserve Board's (Fed's) informal target range
of 1.5%-2.0%.(1) The core personal consumption expenditures price index reported
a 12-month increase of 1.5%.(2)
A slowing economy and decelerating inflation prompted policymakers to lower
interest rates and enact stimulus plans. During the period under review, the Fed
lowered the federal funds target rate from 1.5% to a range of 0% to 0.25%. The
government implemented the American Recovery and Reinvestment Act, which
included tax breaks, money for ailing state governments, aid to the poor and
unemployed, and spending on infrastructure, renewable energy, health care and
education. The Fed and U.S. Treasury Department also continued programs designed
to shore up beleaguered banks' capital, enable freer lending to businesses and
consumers, and help struggling home buyers avoid foreclosure.
Most Treasury prices declined during the period, and fixed income spreads were
generally wide relative to Treasury yields due to heightened market turbulence
and risk aversion. The spread between two-year and 10-year Treasury yields rose
to 242 basis points (100 basis points equal one percentage point) at the end of
June from 136 basis points at the beginning of the reporting period. The
two-year Treasury bill yield fell from 2.63% to 1.11% over the 12-month period,
while the 10-year Treasury note yield fell slightly from 3.99% to 3.53%.
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: Bureau of Economic Analysis.
4 | Annual Report
MANAGER'S DISCUSSION
The 12 months ended June 30, 2009, was the most volatile and challenging period
in the history of the money market. Liquidity and credit issues dominated the
headlines. The one-month London InterBank Offered Rate, which rose from 2.46% at
the beginning of the period to a high of 4.59% in October, dropped to 0.31% at
period-end.(3)
Despite these trying times, we continued to invest in high-quality money market
securities. For example, 100% of the securities purchased for the Portfolio
throughout the year 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.(4)
We appreciate your support, welcome new shareholders and look forward to serving
your investment needs in the years ahead.
PERFORMANCE SUMMARY
SYMBOL: FMFXX
6/30/09
Seven-day effective yield* 0.00%
Seven-day annualized yield 0.00%
Total annual operating
expenses** 0.62%
* The seven-day effective yield assumes compounding of daily dividends, if
any.
** Figures are as stated in the Fund's prospectus current as of the date of
this report. In periods of market volatility, assets may decline
significantly, causing total annual Fund operating expenses to become
higher than the figure shown. To avoid a negative yield, the investment
manager, fund administrator and fund distributor have voluntarily agreed to
waive or limit their respective fees, assume as their own expense certain
expenses otherwise payable by the Fund, and if necessary, make a capital
infusion into the Fund. These waivers, expense reimbursements and capital
infusions, which are not reflected in the table above, are voluntary and
may be modified or discontinued by the investment manager, fund
administrator or distributor at any time. There is no guarantee the Fund
will be able to avoid a negative yield.
Annualized and effective yields are for the seven-day period ended 6/30/09. The
Fund's average weighted maturity was 49 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 (800) 342-5236 FOR
MOST RECENT MONTH-END PERFORMANCE.
THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS
AS OF JUNE 30, 2009, 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.
(3.) Source: British Bankers Association.
(4.) These do not indicate ratings of the Fund.
Annual Report | 5
Your Fund's Expenses
As a Fund shareholder, you can incur two types of costs:
- - Transaction costs, including sales charges (loads) on Fund purchases; and
- - 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 Fund's 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 | Annual 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.
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 1/1/09 VALUE 6/30/09 PERIOD* 1/1/09-6/30/09
----------------- -------------- ----------------------
Actual $1,000 $1,000.30 $2.48
Hypothetical (5% return before expenses) $1,000 $1,022.32 $2.51
* Expenses calculated using the most recent six-month annualized expense
ratio, net of voluntary expense waivers, of 0.50%, which includes the
expenses incurred by the Portfolio, multiplied by the average account value
over the period, multiplied by 181/365 to reflect the one-half year
period.
Annual Report | 7
Franklin Money Fund
FINANCIAL HIGHLIGHTS
YEAR ENDED JUNE 30,
----------------------------------------------------------------
2009 2008 2007 2006 2005
---------- ---------- ---------- ---------- ----------
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 .................... 0.007 0.036 0.046 0.036 0.015
Less distributions from net investment
income.................................... (0.007) (0.036) (0.046) (0.036) (0.015)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year ................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========== ========== ==========
Total return(a) ............................. 0.74% 3.70% 4.72% 3.62% 1.55%
RATIOS TO AVERAGE NET ASSETS
Expenses(b) ................................. 0.55%(c) 0.60% 0.68% 0.67% 0.66%
Net investment income ....................... 0.71% 3.53% 4.64% 3.59% 1.53%
SUPPLEMENTAL DATA
Net assets, end of year (000's) ............. $2,550,023 $2,499,432 $1,959,218 $1,688,245 $1,446,027
(a) Total return does not reflect sales commissions or contingent deferred
sales charges, if applicable.
(b) The expense ratio includes the Fund's share of the Portfolio's allocated
expenses.
(c) Ratio of expenses to average net assets before waiver and payments by
affiliates was 0.60%.
The accompanying notes are an integral part of these financial statements.
8 | Annual Report
Franklin Money Fund
STATEMENT OF INVESTMENTS, JUNE 30, 2009
SHARES VALUE
------------- --------------
MUTUAL FUNDS (COST $2,558,928,082) 100.3%
(a) The Money Market Portfolio, 0.15% ....... 2,558,928,082 $2,558,928,082
OTHER ASSETS, LESS LIABILITIES (0.3)% ... (8,904,606)
--------------
NET ASSETS 100.0% ....................... $2,550,023,476
==============
(a) The rate shown is the annualized seven-day yield at period end.
The accompanying notes are an integral part of these financial statements.
Annual Report | 9
Franklin Money Fund
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2009
Assets:
Investment in Portfolio, at value and cost ... $2,558,928,082
Receivables from capital shares sold ......... 6,828,017
--------------
Total assets .............................. 2,565,756,099
--------------
Liabilities:
Payables:
Capital shares redeemed ................... 15,015,495
Affiliates ................................ 202,098
Accrued expenses and other liabilities ....... 515,030
--------------
Total liabilities ......................... 15,732,623
--------------
Net assets, at value ................... $2,550,023,476
==============
Net assets consist of paid-in capital ........... $2,550,023,476
==============
Shares outstanding .............................. 2,550,105,807
==============
Net asset value per share(a) .................... $ 1.00
==============
(a) Redemption price is equal to net asset value less contingent deferred sales
charges, if applicable.
The accompanying notes are an integral part of these financial statements.
10 | Annual Report
Franklin Money Fund
FINANCIAL STATEMENTS (CONTINUED)
STATEMENT OF OPERATIONS
for the year ended June 30, 2009
Investment income:
Dividends from Portfolio ........................... $31,890,787
-----------
Expenses:
Administrative fees (Note 3a) ...................... 8,324,286
Transfer agent fees (Note 3c) ...................... 3,350,832
Reports to shareholders ............................ 195,159
Registration and filing fees ....................... 216,504
Professional fees .................................. 85,057
Trustees' fees and expenses ........................ 75,333
Temporary Guarantee Program fee (Note 5) ........... 665,304
Other .............................................. 94,991
-----------
Total expenses .................................. 13,007,466
Expenses waived/paid by affiliates (Note 3d) .... (1,578,320)
-----------
Net expenses ................................. 11,429,146
-----------
Net investment income ..................... 20,461,641
-----------
Net increase (decrease) in net assets resulting
from operations .................................... $20,461,641
===========
The accompanying notes are an integral part of these financial statements.
Annual Report | 11
Franklin Money Fund
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED JUNE 30,
-------------------------------
2009 2008
-------------- --------------
Increase (decrease) in net assets:
Net investment income from operations ........... $ 20,461,641 $ 82,606,117
Distributions to shareholders from net investment
income ....................................... (20,461,641) (82,606,117)
Capital share transactions (Note 2) ............. 50,591,254 540,214,370
-------------- --------------
Net increase (decrease) in net assets ........ 50,591,254 540,214,370
Net assets (there is no undistributed income at
beginning or end of year):
Beginning of year ............................... 2,499,432,222 1,959,217,852
-------------- --------------
End of year ..................................... $2,550,023,476 $2,499,432,222
============== ==============
The accompanying notes are an integral part of these financial statements.
12 | Annual Report
Franklin Money Fund
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Franklin Money Fund (Fund) is registered under the Investment Company Act of
1940, as amended, (1940 Act) as an open-end investment company.
The Fund invests substantially all of its assets in the The Money Market
Portfolio (Portfolio), which is registered under the 1940 Act as an 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. At June 30, 2009, the Fund owned
30.02% of the Portfolio.
B. INCOME TAXES
No provision has been made for U.S. income taxes because it is the Fund's policy
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.
The Fund has reviewed the tax positions, taken on federal income tax returns,
for each of the three open tax years and as of June 30, 2009, and has determined
that no provision for income tax is required in the Fund's financial statements.
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 and distributed daily
and paid monthly to shareholders. 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 of America. 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.
Annual Report | 13
Franklin Money Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 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. SHARES OF BENEFICIAL INTEREST
At June 30, 2009, there were an unlimited number of shares authorized (without
par value). Transactions in the Fund's shares at $1.00 per share were as
follows:
YEAR ENDED JUNE 30,
---------------------------------
2009 2008
--------------- ---------------
Shares sold..................... $ 3,560,508,113 $ 2,997,825,651
Shares issued in reinvestment of
distributions................ 19,780,469 83,305,207
Shares redeemed................. (3,529,697,328) (2,540,916,488)
--------------- ---------------
Net increase (decrease)......... $ 50,591,254 $ 540,214,370
=============== ===============
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 Fund are also officers, directors 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
14 | Annual Report
Franklin Money Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. TRANSACTIONS WITH AFFILIATES (CONTINUED)
A. ADMINISTRATIVE FEES
The Fund pays an administrative fee to Advisers based on the Fund's average
daily net assets 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
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 year:
Contingent deferred sales charges retained ........... $ 557,840
C. TRANSFER AGENT FEES
For the year ended June 30, 2009, the Fund paid transfer agent fees of
$3,350,832, of which $2,246,008 was retained by Investor Services.
D. WAIVER AND EXPENSE REIMBURSEMENTS
Advisers has agreed in advance to limit its expenses such that the Fund does not
return a negative yield to its shareholders. Total expenses waived or paid are
not subject to reimbursement by the Fund subsequent to the Fund's fiscal year
end.
4. INCOME TAXES
The tax character of distributions paid during the years ended June 30, 2009 and
2008, was as follows:
2009 2008
----------- -----------
Distributions paid from ordinary
income....................... $20,461,641 $82,606,117
----------- -----------
At June 30, 2009, the cost of investments and undistributed ordinary income for
income tax purposes were as follows:
Cost of investments............................ $2,558,928,082
--------------
Distributable earnings - undistributed ordinary
income...................................... $ 10,035
==============
5. TEMPORARY GUARANTEE PROGRAM FOR MONEY MARKET FUNDS
On October 6, 2008, the Fund's Board of Trustees approved the participation in
the U.S. Department of the Treasury's Temporary Guarantee Program for Money
Market Funds
Annual Report | 15
Franklin Money Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. TEMPORARY GUARANTEE PROGRAM FOR MONEY MARKET FUNDS (CONTINUED)
("Program") through December 18, 2008, which was subsequently extended through
April 30, 2009. Under the Program, shares held by the Fund as of the close of
business on September 19, 2008 ("Program Date") were insured against loss in the
event the Fund liquidated its holdings during the term of the Program and the
per share value at the time of liquidation dropped below $0.995. For
participation in the initial three months of the Program, the Fund paid 0.01% of
its net assets as of the Program Date, and paid an additional 0.015% of its net
assets as of the Program Date to participate in the extension. This expense was
borne by the Fund. The fees were amortized over the term of the Program.
Although the U.S. Department of the Treasury extended the Program with a third
and final installment, through September 18, 2009, the Fund elected not to
participate in this extension. Thus, the Fund's participation in the Program
ended on April 30, 2009.
6. FAIR VALUE MEASUREMENTS
The Fund adopted Financial Accounting Standards Board (FASB) Statement No. 157,
"Fair Value Measurement" (SFAS 157), on July 1, 2008. SFAS 157 defines fair
value, establishes a framework for measuring fair value, and expands disclosures
about fair value measurements. The Fund has determined that the implementation
of SFAS 157 did not have a material impact on the Fund's financial statements.
SFAS 157 establishes a fair value hierarchy that distinguishes between market
data obtained from independent sources (observable inputs) and the Fund's own
market assumptions (unobservable inputs). These inputs are used in determining
the value of the Fund's investments and are summarized in the following fair
value hierarchy:
- Level 1 - quoted prices in active markets for identical securities
- Level 2 - other significant observable inputs (including quoted prices
for similar securities, interest rates, prepayment speed, credit risk,
etc.)
- Level 3 - significant unobservable inputs (including the Fund's own
assumptions in determining the fair value of investments)
The inputs or methodology used for valuing securities are not an indication of
the risk associated with investing in those securities.
At June 30, 2009, all of the Fund's investments in securities carried at fair
value were in Level 1 inputs.
7. SUBSEQUENT EVENTS
Management has evaluated subsequent events through August 14, 2009 and
determined that no events have occurred that require disclosure.
16 | 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, 2009, 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 audit 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 investments with the Portfolio's transfer
agent at June 30, 2009, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
San Francisco, California
August 14, 2009
Annual Report | 17
Franklin Money Fund
TAX DESIGNATION (UNAUDITED)
Under Section 871(k)(1)(C) of the Internal Revenue Code (Code), the Fund
designates the maximum amount allowable but no less than $19,882,471 as interest
related dividends for purposes of the tax imposed under Section 871(a)(1)(A) of
the Code for the fiscal year ended June 30, 2009.
18 | Annual Report
Franklin Money Fund
BOARD MEMBERS AND OFFICERS
The name, year of birth 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. Generally, each board member
serves until that person's successor is elected and qualified.
INDEPENDENT BOARD MEMBERS
NUMBER OF
PORTFOLIOS IN
FUND COMPLEX
NAME, YEAR OF BIRTH LENGTH OF OVERSEEN BY
AND ADDRESS POSITION TIME SERVED BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------- ----------- ------------- ------------- -------------------------------------
HARRIS J. ASHTON (1932) Trustee Since 1982 135 Bar-S Foods (meat packing company).
One Franklin Parkway
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 (1928) Trustee Since 1998 112 None
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Retired; and FORMERLY, Vice President, senior member and President, Board of Administration, California Public
Employees Retirement Systems (CALPERS) (1971-2008); member and Chairman of the Board, Sutter Community Hospitals;
member, Corporate Board, Blue Shield of California; and Chief Counsel, California Department of Transportation.
SAM GINN (1937) Trustee Since 2007 112 Chevron Corporation (global energy
One Franklin Parkway company) and ICO Global
San Mateo, CA 94403-1906 Communications (Holdings) Limited
(satellite company).
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Private investor; and FORMERLY, Chairman of the Board, Vodafone AirTouch, PLC (wireless company); Chairman of the
Board and Chief Executive Officer, AirTouch Communications (cellular communications) (1993-1998) and Pacific
Telesis Groups (telephone holding company) (1988-1994).
EDITH E. HOLIDAY (1952) Trustee Since 2005 135 Hess Corporation (exploration and
One Franklin Parkway refining of oil and gas), H.J. Heinz
San Mateo, CA 94403-1906 Company (processed foods and allied
products), RTI International Metals,
Inc. (manufacture and distribution
of titanium), Canadian National
Railway (railroad) and White
Mountains Insurance Group, Ltd.
(holding company).
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director or Trustee of various companies and trusts; and FORMERLY, Assistant to the President of the United
States and Secretary of the Cabinet (1990-1993); General Counsel to the United States Treasury Department
(1989-1990); and Counselor to the Secretary and Assistant Secretary for Public Affairs and Public Liaison -
United States Treasury Department (1988-1989).
Annual Report | 19
NUMBER OF
PORTFOLIOS IN
FUND COMPLEX
NAME, YEAR OF BIRTH LENGTH OF OVERSEEN BY
AND ADDRESS POSITION TIME SERVED BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------- ----------- ------------- ------------- -------------------------------------
FRANK W.T. LAHAYE (1929) Trustee Since 1975 112 Center for Creative Land Recycling
One Franklin Parkway (brownfield redevelopment).
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
General Partner, Las Olas L.P. (Asset Management); and FORMERLY, Chairman, Peregrine Venture Management Company
(venture capital).
FRANK A. OLSON (1932) Trustee Since 2007 135 Hess Corporation (exploration and
One Franklin Parkway refining of oil and gas) and Sentient
San Mateo, CA 94403-1906 Jet (private jet service).
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Chairman Emeritus, The Hertz Corporation (car rental) (since 2000) (Chairman of the Board (1980-2000) and Chief
Executive Officer (1977-1999)); and FORMERLY, Chairman of the Board, President and Chief Executive Officer, UAL
Corporation (airlines).
LARRY D. THOMPSON (1945) Trustee Since 2007 143 None
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Vice President - Government Affairs, General Counsel and Secretary, PepsiCo, Inc. (consumer products); and
FORMERLY, Director, Delta Airlines (aviation) (2003-2005) and Providian Financial Corp. (credit card provider)
(1997-2001); Senior Fellow of The Brookings Institution (2003-2004); Visiting Professor, University of Georgia
School of Law (2004); and Deputy Attorney General, U.S. Department of Justice (2001-2003).
JOHN B. WILSON (1959) Lead Trustee since 112 None
One Franklin Parkway Independent 2007 and Lead
San Mateo, CA 94403-1906 Trustee Independent
Trustee since
2008
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
President and Founder, Hyannis Port Capital, Inc. (real estate and private equity investing); serves on private
and non-profit boards; and FORMERLY, Chief Operating Officer and Executive Vice President, Gap, Inc. (retail)
(1996-2000); Chief Financial Officer and Executive Vice President - Finance and Strategy, Staples, Inc. (office
supplies) (1992-1996); Senior Vice President - Corporate Planning, Northwest Airlines, Inc. (airlines)
(1990-1992); and Vice President and Partner, Bain & Company (consulting firm) (1986-1990).
INTERESTED BOARD MEMBERS AND OFFICERS
NUMBER OF
PORTFOLIOS IN
FUND COMPLEX
NAME, YEAR OF BIRTH LENGTH OF OVERSEEN BY
AND ADDRESS POSITION TIME SERVED BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------- ----------- ------------- ------------- -------------------------------------
**CHARLES B. JOHNSON (1933) Trustee and Trustee since 135 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.; Director,
Templeton Worldwide, 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 41 of the investment companies in Franklin Templeton Investments.
20 | Annual Report
NUMBER OF PORTFOLIOS IN
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ----------------------------- --------------- ------------------ ----------------------- ------------------------
**GREGORY E. JOHNSON (1961) Trustee Since 2007 91 None
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director, President and Chief Executive Officer, Franklin Resources, Inc.; President, Templeton Worldwide, Inc.;
Director, Templeton Asset Management Ltd.; and officer and/or director or trustee, as the case may be, of some of the
other subsidiaries of Franklin Resources, Inc. and of 32 of the investment companies in Franklin Templeton Investments.
JAMES M. DAVIS (1952) Chief Chief Compliance Not Applicable Not Applicable
One Franklin Parkway Compliance Officer since 2004
San Mateo, CA 94403-1906 Officer and and Vice President
Vice President - AML Compliance
- AML since 2006
Compliance
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director, Global Compliance, Franklin Resources, Inc.; officer of some of the other subsidiaries of Franklin Resources,
Inc. and of 45 of the investment companies in Franklin Templeton Investments; and FORMERLY, Director of Compliance,
Franklin Resources, Inc. (1994-2001).
Gaston Gardey (1962) Chief Since March 2009 Not Applicable Not Applicable
One Franklin Parkway Executive
San Mateo, CA 94403-1906 Officer -
Finance and
Administration
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice President, Franklin Templeton Services, LLC; officer of 45 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).
GASTON GARDEY (1967) Treasurer, Since March 2009 Not Applicable Not Applicable
One Franklin Parkway Chief Financial
San Mateo, CA 94403-1906 Officer and
Chief
Accounting
Officer
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director, Fund Accounting, Franklin Templeton Investments; and officer of 27 of the investment companies in Franklin
Templeton Investments.
ALIYA S. GORDON (1973) Vice President Since March 2009 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Associate General Counsel, Franklin Templeton Investments; officer of 45 of the investment companies in Franklin
Templeton Investments; and FORMERLY, Litigation Associate, Steefel, Levitt & Weiss, LLP (2000-2004).
DAVID P. GOSS (1947) Vice President Since 2000 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Associate General Counsel, Franklin Templeton Investments; officer and/or director, as the case may be, of some
of the other subsidiaries of Franklin Resources, Inc.; and officer of 45 of the investment companies in Franklin
Templeton Investments.
Annual Report | 21
NUMBER OF PORTFOLIOS IN
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ----------------------------- --------------- ------------------ ----------------------- ------------------------
RUPERT H. JOHNSON, JR. (1940) President and President since Not Applicable Not Applicable
One Franklin Parkway Chief 1993 and Chief
San Mateo, CA 94403-1906 Executive Executive Officer
Officer - - Investment
Investment Management
Management since 2002
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice Chairman, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Director, Franklin Advisers,
Inc. and Templeton Worldwide, Inc.; Senior Vice President, Franklin Advisory Services, LLC; and officer and/or director
or trustee, as the case ma y be, of some of the other subsidiaries of Franklin Resources, Inc. and of 43 of the
investment companies in Franklin Templeton Investments.
KAREN L. SKIDMORE (1952) Vice President Since 2006 Not Applicable Not Applicable
One Franklin Parkway and Secretary
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Associate General Counsel, Franklin Templeton Investments; and officer of 29 of the investment companies in
Franklin Templeton Investments.
CRAIG S. TYLE (1960) Vice President Since 2005 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
General Counsel and Executive Vice President, Franklin Resources, Inc.; officer
of some of the other subsidiaries of Franklin Resources, Inc. and of 45 of the
investment companies in Franklin Templeton Investments; and FORMERLY, Partner,
Shearman & Sterling, LLP (2004-2005); and General Counsel, Investment Company
Institute (ICI) (1997-2004).
* 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 manager or
affiliated investment managers.
** Charles B. Johnson is considered to be an interested person of the Fund
under the federal securities laws due to his position as officer and
director and major shareholder of Franklin Resources, Inc. (Resources),
which is the parent company of the Fund's investment manager and
distributor. Gregory E. Johnson is considered to be an interested person of
the Fund under the federal securities laws due to his position as an
officer and director of Resources.
Note 1: Charles B. Johnson and Rupert H. Johnson, Jr. are brothers and the
father and uncle, respectively, of Gregory E. Johnson.
Note 2: Officer information is current as of the date of this report. It is
possible that after this date, information about officers may change.
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 HAS DETERMINED THAT THERE IS
AT LEAST ONE SUCH FINANCIAL EXPERT ON THE AUDIT COMMITTEE AND HAS DESIGNATED
JOHN B. WILSON AS ITS AUDIT COMMITTEE FINANCIAL EXPERT. THE BOARD BELIEVES THAT
MR. WILSON QUALIFIES AS SUCH AN EXPERT IN VIEW OF HIS EXTENSIVE BUSINESS
BACKGROUND AND EXPERIENCE, INCLUDING SERVICE AS CHIEF FINANCIAL OFFICER OF
STAPLES, INC. FROM 1992 TO 1996. MR. WILSON HAS BEEN A MEMBER AND CHAIRMAN OF
THE FUND'S AUDIT COMMITTEE SINCE 2007. AS A RESULT OF SUCH BACKGROUND AND
EXPERIENCE, THE BOARD BELIEVES THAT MR. WILSON 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. WILSON IS AN INDEPENDENT BOARD MEMBER 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 (800) DIAL BEN/(800) 342-5236 TO REQUEST THE SAI.
22 | Annual Report
The Money Market Portfolios
FINANCIAL HIGHLIGHTS
THE MONEY MARKET PORTFOLIO
YEAR ENDED JUNE 30,
------------------------------------------------------------------
2009 2008 2007 2006 2005
---------- ---------- ---------- ---------- ----------
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 ........................ 0.011 0.040 0.052 0.041 0.020
Net realized and unrealized gains (losses) ... (--)(a) -- (--)(a) -- --
---------- ---------- ---------- ---------- ----------
Less distributions from net investment income ... (0.011) (0.040) (0.052) (0.041) (0.020)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year .................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========== ========== ==========
Total return .................................... 1.14% 4.10% 5.28% 4.15% 2.06%
RATIOS TO AVERAGE NET ASSETS
Expenses(b) ..................................... 0.15% 0.16% 0.15% 0.16% 0.16%
Net investment income ........................... 1.12% 4.02% 5.17% 4.09% 2.04%
SUPPLEMENTAL DATA
Net assets, end of year (000's) ................. $8,520,392 $7,028,194 $6,580,101 $4,993,739 $5,676,479
(a) Amount rounds to less than $0.001 per share.
(b) Benefit of expense reduction rounds to less than 0.01%.
The accompanying notes are an integral part of these financial statements.
Annual Report | 23
The Money Market Portfolios
STATEMENT OF INVESTMENTS, JUNE 30, 2009
PRINCIPAL
THE MONEY MARKET PORTFOLIO AMOUNT(a) VALUE
- -------------------------- -------------- --------------
INVESTMENTS 100.6%
BANK NOTES (COST $200,000,000) 2.3%
Wells Fargo Bank NA, 0.20%, 7/07/09 ................................................ $ 200,000,000 $ 200,000,000
--------------
CERTIFICATES OF DEPOSIT 21.8%
Australia and New Zealand Banking Group Ltd., New York Branch, 0.26%, 7/08/09....... 50,000,000 50,000,097
Australia and New Zealand Banking Group Ltd., New York Branch, 0.33%, 8/17/09....... 100,000,000 100,001,305
Bank of Montreal, Chicago Branch, 0.26%, 7/13/09 ................................... 100,000,000 100,000,333
Bank of Montreal, Chicago Branch, 0.31%, 10/01/09 .................................. 50,000,000 50,000,000
Bank of Nova Scotia, Houston Branch, 0.27%, 8/11/09 ................................ 100,000,000 100,000,000
Bank of Nova Scotia, Houston Branch, 0.31% - 0.58%, 7/08/09 - 9/21/09 .............. 100,000,000 100,000,000
Banque Nationale De Paris, San Francisco Branch, 1.01%, 7/23/09 .................... 100,000,000 100,000,000
Banque Nationale De Paris, San Francisco Branch, 1.32%, 8/20/09 .................... 100,000,000 100,000,000
Calyon NY, New York Branch, 0.26% - 1.05%, 7/10/09 - 8/18/09 ....................... 200,000,000 200,000,277
Lloyds TSB Bank PLC, New York Branch, 0.27%, 7/06/09 (United Kingdom) .............. 100,000,000 100,000,000
Lloyds TSB Bank PLC, New York Branch, 0.27%, 7/13/09 (United Kingdom) .............. 100,000,000 100,000,000
National Australia Bank, New York Branch, 0.55%, 7/01/09 ........................... 100,000,000 100,000,000
National Australia Bank, New York Branch, 0.41% - 0.57%, 7/09/09 - 8/06/09 ......... 55,500,000 55,505,508
Royal Bank of Canada, New York Branch, 0.265%, 8/12/09 ............................. 200,000,000 200,001,166
Societe Generale, New York Branch, 0.28%, 7/09/09 .................................. 200,000,000 200,000,000
The Toronto-Dominion Bank, New York Branch, 0.22%, 7/09/09 ......................... 150,000,000 150,000,000
The Toronto-Dominion Bank, New York Branch, 0.95%, 9/28/09 ......................... 50,000,000 50,000,000
--------------
TOTAL CERTIFICATES OF DEPOSIT (COST $1,855,508,686) ................................ 1,855,508,686
--------------
(b) COMMERCIAL PAPER 26.9%
Australia and New Zealand Banking Group Ltd., 7/27/09 .............................. 50,000,000 49,975,444
Bank of Montreal, 9/16/09 .......................................................... 50,000,000 49,965,778
Chevron Funding Corp., 8/03/09 ..................................................... 40,000,000 39,992,667
Chevrontexaco Funding Corp., 7/16/09 ............................................... 75,000,000 74,992,500
Commonwealth Bank of Australia, 7/20/09 - 8/31/09 .................................. 220,000,000 219,890,939
Government of Canada, 11/03/09 (Canada) ............................................ 100,000,000 99,722,222
Government of Canada, 7/14/09 - 2/09/10 (Canada) ................................... 95,000,000 94,893,612
Internationale Nederlanden U.S. Funding Corp., 7/07/09 ............................. 50,000,000 49,998,083
Internationale Nederlanden U.S. Funding Corp., 7/09/09 ............................. 100,000,000 99,994,667
Johnson & Johnson, 10/26/09 - 12/17/09 ............................................. 128,135,000 127,990,941
JPMorgan Chase & Co., 7/02/09 ...................................................... 100,000,000 99,999,306
JPMorgan Chase & Co., 7/15/09 ...................................................... 100,000,000 99,990,278
National Australia Funding, 7/07/09 ................................................ 50,000,000 49,995,333
Province of British Columbia, 7/13/09 - 3/19/10 (Canada) ........................... 267,000,000 266,755,142
Province of Ontario, 9/16/09 - 9/17/09 (Canada) .................................... 75,000,000 74,959,549
Rabobank USA Finance Corp., 7/23/09 ................................................ 50,000,000 49,977,389
Rabobank USA Finance Corp., 9/14/09 ................................................ 91,000,000 90,941,229
Societe Generale North America, 7/01/09 ............................................ 100,000,000 100,000,000
Total Fina ELF Capital, 7/01/09 .................................................... 150,000,000 150,000,000
Total Fina ELF Capital, 9/09/09 .................................................... 100,000,000 99,953,333
Total Fina ELF Capital, 9/22/09 .................................................... 100,000,000 99,942,361
Westpac Banking Corp., 7/17/09 - 9/09/09 ........................................... 100,000,000 99,950,277
Westpac Banking Corp., 9/23/09 ..................................................... 100,000,000 99,923,000
--------------
TOTAL COMMERCIAL PAPER (COST $2,289,804,050) ....................................... 2,289,804,050
--------------
24 | Annual Report
The Money Market Portfolios
STATEMENT OF INVESTMENTS, JUNE 30, 2009 (CONTINUED)
PRINCIPAL
THE MONEY MARKET PORTFOLIO AMOUNT(a) VALUE
- -------------------------- -------------- --------------
INVESTMENTS (CONTINUED)
U.S. GOVERNMENT AND AGENCY SECURITIES 17.2%
(b) FHLB, 7/01/09 ...................................................................... $ 126,420,000 $ 126,420,000
FHLB, 0.56%, 6/22/10 ............................................................... 50,000,000 49,986,576
FHLMC, 1.25%, 3/18/10 .............................................................. 25,000,000 25,045,647
FHLMC, 1.25%, 3/23/10 .............................................................. 122,080,000 122,249,029
(b) FNMA, 7/22/09 ...................................................................... 50,000,000 49,985,708
(b) International Bank for Reconstruction & Development, 7/01/09 - 12/23/09
(Supranational (c)) ............................................................. 95,000,000 94,944,583
(b) U.S. Treasury Bill, 7/02/09 ........................................................ 150,000,000 149,995,396
(b) U.S. Treasury Bill, 7/30/09 - 8/06/09 .............................................. 100,000,000 99,967,091
(b) U.S. Treasury Bill, 9/15/09 ........................................................ 200,000,000 199,818,445
(b) U.S. Treasury Bill, 1/14/10 ........................................................ 100,000,000 99,751,698
(b) U.S. Treasury Bill, 4/01/10 ........................................................ 200,000,000 199,363,901
(b) U.S. Treasury Bill, 6/03/10 ........................................................ 250,000,000 248,838,286
--------------
TOTAL U.S. GOVERNMENT AND AGENCY SECURITIES (COST $1,466,366,360) .................. 1,466,366,360
--------------
TOTAL INVESTMENTS BEFORE REPURCHASE AGREEMENTS (COST $5,811,679,096) ............... 5,811,679,096
--------------
(d) REPURCHASE AGREEMENTS 32.4%
Banc of America Securities LLC, 0.01%, 7/01/09 (Maturity Value $86,735,024)
Collateralized by U.S. Treasury Notes, 0.875%, 4/15/10 - 1/31/11 ................ 86,735,000 86,735,000
Banc of America Securities LLC, 0.05%, 7/01/09 (Maturity Value $840,001,167)
Collateralized by U.S. Government Agency Securities, 0.00% - 6.21%,
8/03/09 - 6/05/36 ............................................................... 840,000,000 840,000,000
Barclays Capital Inc., 0.01%, 7/01/09 (Maturity Value $405,000,112)
Collateralized by U.S. Treasury Notes, 1.50%, 12/31/13 .......................... 405,000,000 405,000,000
Deutsche Bank Securities Inc., 0.01%, 7/01/09 (Maturity Value $ 586,105,163)
Collateralized by U.S. Treasury Notes, 0.875% - 3.125%, 4/30/10 - 9/30/13;
and (b) U.S. Treasury Bills, 9/17/09 ............................................ 586,105,000 586,105,000
HSBC Securities (USA) Inc., 0.04%, 7/01/09 (Maturity Value $ 790,000,878)
Collateralized by U.S. Government Agency Securities, 1.45% - 10.35%,
9/10/10 - 10/08/27 .............................................................. 790,000,000 790,000,000
UBS Securities LLC, 0.07%, 7/01/09 (Maturity Value $ 50,000,097)
Collateralized by U.S. Government Agency Securities, 0.85%, 12/03/10 ............ 50,000,000 50,000,000
--------------
TOTAL REPURCHASE AGREEMENTS (COST $2,757,840,000) .................................. 2,757,840,000
--------------
TOTAL INVESTMENTS (COST $8,569,519,096) 100.6% ..................................... 8,569,519,096
OTHER ASSETS, LESS LIABILITIES (0.6)% .............................................. (49,126,719)
--------------
NET ASSETS 100.0% .................................................................. $8,520,392,377
==============
See Abbreviations on page 33.
(a) The principal amount is stated in U.S. dollars unless otherwise indicated.
(b) The security is traded on a discount basis with no stated coupon rate.
(c) A supranational organization is an entity formed by two or more central
governments through international treaties.
(d) See Note 1(b) regarding repurchase agreements.
The accompanying notes are an integral part of these financial statements.
Annual Report | 25
The Money Market Portfolios
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2009
THE
MONEY MARKET
PORTFOLIO
--------------
Assets:
Investments in securities, at amortized cost................ $5,811,679,096
Repurchase agreements, at value and cost ................... 2,757,840,000
--------------
Total investments .................................... $8,569,519,096
Receivables:
Capital shares sold ..................................... 456,390
Interest receivable ..................................... 2,094,221
--------------
Total assets ......................................... 8,572,069,707
--------------
Liabilities:
Payables:
Investment securities purchased ......................... 50,000,000
Affiliates .............................................. 1,069,924
Funds advanced by custodian ................................ 454,490
Accrued expenses and other liabilities ..................... 152,916
--------------
Total liabilities .................................... 51,677,330
--------------
Net assets, at value .............................. $8,520,392,377
--------------
Net assets consist of:
Paid-in capital ............................................ $8,523,624,394
Accumulated net realized gain (loss) ....................... (3,232,017)
--------------
Net assets, at value .............................. $8,520,392,377
--------------
Shares outstanding ............................................ 8,523,624,394
--------------
Net asset value per share ..................................... $ 1.00
==============
The accompanying notes are an integral part of these financial statements.
26 | Annual Report
The Money Market Portfolios
FINANCIAL STATEMENTS (CONTINUED)
STATEMENT OF OPERATIONS
for the year ended June 30, 2009
THE
MONEY MARKET
PORTFOLIO
--------------
Investment income:
Interest ................................................... $ 109,770,988
--------------
Expenses:
Management fees (Note 3a) .................................. 12,958,059
Custodian fees (Note 4) .................................... 157,952
Reports to shareholders .................................... 7,672
Professional fees .......................................... 127,620
Other ...................................................... 132,248
--------------
Total expenses .......................................... 13,383,551
Expense reductions (Note 4) ............................. (13,198)
--------------
Net expenses ......................................... 13,370,353
--------------
Net investment income ............................. 96,400,635
--------------
Net realized gain (loss) from investments ..................... (3,212,548)
--------------
Net increase (decrease) in net assets resulting from
operations ................................................. $ 93,188,087
==============
The accompanying notes are an integral part of these financial statements.
Annual Report | 27
The Money Market Portfolios
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS
THE MONEY MARKET PORTFOLIO
-------------------------------
YEAR ENDED JUNE 30,
-------------------------------
2009 2008
-------------- --------------
Increase (decrease) in net assets:
Operations:
Net investment income ............................................ $ 96,400,635 $ 271,686,303
Net realized gain (loss) from investments ........................ (3,212,548) --
-------------- --------------
Net increase (decrease) in net assets resulting from
operations ................................................. 93,188,087 271,686,303
-------------- --------------
Distributions to shareholders from net investment income ............ (96,400,635) (271,686,303)
Capital share transactions (Note 2) ................................. 1,495,410,735 448,092,878
-------------- --------------
Net increase (decrease) in net assets ......................... 1,492,198,187 448,092,878
Net assets (there is no undistributed net investment income at
beginning or end of year):
Beginning of year ................................................... 7,028,194,190 6,580,101,312
-------------- --------------
End of year ......................................................... $8,520,392,377 $7,028,194,190
============== ==============
The accompanying notes are an integral part of these financial statements.
28 | Annual Report
The Money Market Portfolios
NOTES TO FINANCIAL STATEMENTS
THE MONEY MARKET PORTFOLIO
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Money Market Portfolios (Trust) is registered under the Investment Company
Act of 1940, as amended, (1940 Act) as an open-end investment company,
consisting of one portfolio, The Money Market Portfolio (Portfolio). The shares
of the Portfolio are issued in private placements and are exempt from
registration under the Securities Act of 1933.
The following summarizes the Portfolio's significant accounting policies.
A. 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 year end had been entered into on
June 30, 2009. Repurchase agreements are valued at cost.
C. INCOME TAXES
No provision has been made for U.S. income taxes because it is the Portfolio's
policy 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.
The Portfolio has reviewed the tax positions, taken on federal income tax
returns, for each of the three open tax years and as of June 30, 2009, and has
determined that no provision for income tax is required in the Portfolio's
financial statements.
D. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Interest income and estimated expenses are accrued daily. Amortization of
premium and accretion of discount on debt securities are included in interest
income. Dividends from net investment income are normally declared daily; these
dividends are reinvested and paid monthly. 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
Annual Report | 29
The Money Market Portfolios
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
THE MONEY MARKET PORTFOLIO
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
D. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
(CONTINUED)
in the United States of America. 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.
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, on behalf of the Portfolio, enters into contracts with
service providers that contain general indemnification clauses. The Trust's
maximum exposure under these arrangements is unknown as this would involve
future claims that may be made against the Trust that have not yet occurred.
Currently, the Trust expects the risk of loss to be remote.
2. SHARES OF BENEFICIAL INTEREST
At June 30, 2009, there were an unlimited number of shares authorized (without
par value). Transactions in the Portfolio's shares at $1.00 per share were as
follows:
YEAR ENDED JUNE 30,
----------------------------------
2009 2008
---------------- ---------------
Shares sold ..................................... $ 14,699,668,141 $ 8,390,404,437
Shares issued in reinvestment of distributions .. 96,416,354 271,685,448
Shares redeemed ................................. (13,300,673,760) (8,213,997,007)
---------------- ---------------
Net increase (decrease) ......................... $ 1,495,410,735 $ 448,092,878
================ ===============
30 | Annual Report
The Money Market Portfolios
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
THE MONEY MARKET PORTFOLIO
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, directors, and/or trustees of the
Franklin Money Fund, the Franklin Templeton Money Fund Trust, the Institutional
Fiduciary Trust, and of the following subsidiaries:
SUBSIDIARY AFFILIATION
- ---------- ------------------
Franklin Advisers, Inc. (Advisers) Investment manager
Franklin Templeton Investor Services, LLC (Investor Services) Transfer agent
A. MANAGEMENT FEES
The Portfolio pays an investment management fee to Advisers of 0.15% per year of
the average daily net assets of the Portfolio.
B. TRANSFER AGENT FEES
Investor Services, under terms of an agreement, performs shareholder servicing
for the Portfolio and is not paid by the Portfolio for the services.
C. OTHER AFFILIATED TRANSACTIONS
At June 30, 2009, the shares of the Portfolio were owned by the following
entities:
PERCENTAGE OF
SHARES OUTSTANDING SHARES
------------- ------------------
Institutional Fiduciary Trust - Money Market Portfolio .. 5,354,079,725 62.81%
Franklin Money Fund ..................................... 2,558,928,082 30.02%
Franklin Templeton Money Fund Trust -
Franklin Templeton Money Fund ........................ 462,747,495 5.43%
Institutional Fiduciary Trust - Franklin Cash
Reserves Fund ........................................ 147,869,092 1.74%
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 year ended June 30, 2009, the
custodian fees were reduced as noted in the Statement of Operations.
Annual Report | 31
The Money Market Portfolios
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
THE MONEY MARKET PORTFOLIO
5. INCOME TAXES
For tax purposes, capital losses may be carried over to offset future capital
gains, if any. At June 30, 2009, the capital loss carryforwards were as follows:
Capital loss carryforwards expiring in:
2016 ............................... $ 19,469
2017 ............................... 3,212,548
----------
$3,232,017
==========
The tax character of distributions paid during the years ended June 30, 2009 and
2008, was as follows:
2009 2008
----------- ------------
Distributions paid from ordinary income .. $96,400,635 $271,686,303
=========== ============
At June 30, 2009, the cost of investments and undistributed ordinary income for
book and income tax purposes were the same.
6. FAIR VALUE MEASUREMENTS
The Portfolio adopted Financial Accounting Standards Board (FASB) Statement No.
157, "Fair Value Measurement" (SFAS 157), on July 1, 2008. SFAS 157 defines fair
value, establishes a framework for measuring fair value, and expands disclosures
about fair value measurements. The Portfolio has determined that the
implementation of SFAS 157 did not have a material impact on the Portfolio's
financial statements.
SFAS 157 establishes a fair value hierarchy that distinguishes between market
data obtained from independent sources (observable inputs) and the Trust's own
market assumptions (unobservable inputs). These inputs are used in determining
the value of the Portfolio's investments and are summarized in the following
fair value hierarchy:
- Level 1 - quoted prices in active markets for identical securities
- Level 2 - other significant observable inputs (including quoted prices
for similar securities, interest rates, prepayment speed, credit risk,
etc.)
- Level 3 - significant unobservable inputs (including the Portfolio's
own assumptions in determining the fair value of investments)
The inputs or methodology used for valuing securities are not an indication of
the risk associated with investing in those securities. Money market securities
may be valued using amortized cost, in accordance with the 1940 Act. Generally,
amortized cost reflects the current fair value
32 | Annual Report
The Money Market Portfolios
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
THE MONEY MARKET PORTFOLIO
6. FAIR VALUE MEASUREMENTS (CONTINUED)
of a security, but since the value is not obtained from a quoted price in an
active market, such securities are reflected as a Level 2.
At June 30, 2009, all the Portfolio's investments in securities carried at fair
value were in Level 2 inputs. For detailed industry descriptions, see the
accompanying Statement of Investments.
7. SUBSEQUENT EVENTS
Management has evaluated subsequent events through August 14, 2009 and
determined that no events have occurred that require disclosure.
ABBREVIATIONS
SELECTED PORTFOLIO
FHLB - Federal Home Loan Bank
FHLMC - Federal Home Loan Mortgage Corp.
FNMA - Federal National Mortgage Association
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 PORTFOLIO
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 The Money Market Portfolio (the
"Fund") at June 30, 2009, 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 audit 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, 2009 by correspondence with the custodian and brokers, provide a reasonable
basis for our opinion.
PricewaterhouseCoopers LLP
San Francisco, California
August 14, 2009
34 | Annual Report
The Money Market Portfolios
TAX DESIGNATION (UNAUDITED)
Under Section 871(k)(1)(C) of the Internal Revenue Code (Code), the Portfolio
designates the maximum amount allowable but no less than $93,335,422 as interest
related dividends for purposes of the tax imposed under Section 871(a)(1)(A) of
the Code for the fiscal year ended June 30, 2009.
Annual Report | 35
The Money Market Portfolios
BOARD MEMBERS AND OFFICERS
The name, year of birth 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. Generally, each board member
serves until that person's successor is elected and qualified.
INDEPENDENT BOARD MEMBERS
NUMBER OF
PORTFOLIOS IN
FUND COMPLEX
NAME, YEAR OF BIRTH LENGTH OF OVERSEEN BY
AND ADDRESS POSITION TIME SERVED BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------- -------------- ---------------- -------------- ------------------------------------
HARRIS J. ASHTON (1932) Trustee Since 1992 135 Bar-S Foods (meat packing company).
One Franklin Parkway
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 (1928) Trustee Since 1998 112 None
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Retired; and FORMERLY, Vice President, senior member and President, Board of Administration, California Public Employees Retirement
Systems (CALPERS) (1971-2008); member and Chairman of the Board, Sutter Community Hospitals; member, Corporate Board, Blue Shield of
California; and Chief Counsel, California Department of Transportation.
SAM GINN (1937) Trustee Since 2007 112 Chevron Corporation (global energy
One Franklin Parkway company) and ICO Global
San Mateo, CA 94403-1906 Communications (Holdings) Limited
(satellite company).
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Private investor; and FORMERLY, Chairman of the Board, Vodafone AirTouch, PLC (wireless company); Chairman of the Board and Chief
Executive Officer, AirTouch Communications (cellular communications) (1993-1998) and Pacific Telesis Groups (telephone holding
company) (1988-1994).
EDITH E. HOLIDAY (1952) Trustee Since 2005 135 Hess Corporation (exploration and
One Franklin Parkway refining of oil and gas), H.J. Heinz
San Mateo, CA 94403-1906 Company (processed foods and allied
products), RTI International Metals,
Inc. (manufacture and distribution
of titanium), Canadian National
Railway (railroad) and White
Mountains Insurance Group, Ltd.
(holding company).
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director or Trustee of various companies and trusts; and FORMERLY, Assistant to the President of the United States and Secretary of
the Cabinet (1990-1993); General Counsel to the United States Treasury Department (1989-1990); and Counselor to the Secretary and
Assistant Secretary for Public Affairs and Public Liaison - United States Treasury Department (1988-1989).
36 | Annual Report
NUMBER OF
PORTFOLIOS IN
FUND COMPLEX
NAME, YEAR OF BIRTH LENGTH OF OVERSEEN BY
AND ADDRESS POSITION TIME SERVED BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------- -------------- ---------------- -------------- ------------------------------------
FRANK W.T. LAHAYE (1929) Trustee Since 1992 112 Center for Creative Land Recycling
One Franklin Parkway (brownfield redevelopment).
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
General Partner, Las Olas L.P. (Asset Management); and FORMERLY, Chairman, Peregrine Venture Management Company (venture capital).
FRANK A. OLSON (1932) Trustee Since 2007 135 Hess Corporation (exploration and
One Franklin Parkway refining of oil and gas) and
San Mateo, CA 94403-1906 Sentient Jet (private jet service).
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Chairman Emeritus, The Hertz Corporation (car rental) (since 2000) (Chairman of the Board (1980-2000) and Chief Executive Officer
(1977-1999)); and FORMERLY, Chairman of the Board, President and Chief Executive Officer, UAL Corporation (airlines).
LARRY D. THOMPSON (1945) Trustee Since 2007 143 None
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Vice President - Government Affairs, General Counsel and Secretary, PepsiCo, Inc. (consumer products); and FORMERLY,
Director, Delta Airlines (aviation) (2003-2005) and Providian Financial Corp. (credit card provider) (1997-2001); Senior Fellow of
The Brookings Institution (2003-2004); Visiting Professor, University of Georgia School of Law (2004); and Deputy Attorney General,
U.S. Department of Justice (2001-2003).
JOHN B. WILSON (1959) Lead Trustee since 112 None
One Franklin Parkway Independent 2007 and Lead
San Mateo, CA 94403-1906 Trustee Independent
Trustee since
2008
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
President and Founder, Hyannis Port Capital, Inc. (real estate and private equity investing); serves on private and non-profit
boards; and FORMERLY, Chief Operating Officer and Executive Vice President, Gap, Inc. (retail) (1996-2000); Chief Financial Officer
and Executive Vice President - Finance and Strategy, Staples, Inc. (office supplies) (1992-1996); Senior Vice President - Corporate
Planning, Northwest Airlines, Inc. (airlines) (1990-1992); and Vice President and Partner, Bain & Company (consulting firm)
(1986-1990).
INTERESTED BOARD MEMBERS AND OFFICERS
NUMBER OF
PORTFOLIOS IN
FUND COMPLEX
NAME, YEAR OF BIRTH LENGTH OF OVERSEEN BY
AND ADDRESS POSITION TIME SERVED BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------- -------------- ---------------- -------------- ------------------------------------
**CHARLES B. JOHNSON (1933) Trustee and Trustee since 135 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.; Director, Templeton Worldwide, 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 41
of the investment companies in Franklin Templeton Investments.
Annual Report | 37
NUMBER OF
PORTFOLIOS IN
FUND COMPLEX
NAME, YEAR OF BIRTH LENGTH OF OVERSEEN BY
AND ADDRESS POSITION TIME SERVED BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------- -------------- ---------------- -------------- ------------------------------------
**GREGORY E. JOHNSON (1961) Trustee Since 2007 91 None
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director, President and Chief Executive Officer, Franklin Resources, Inc.; President, Templeton Worldwide, Inc.; Director,
Templeton Asset Management Ltd.; and officer and/or director or trustee, as the case may be, of some of the other subsidiaries of
Franklin Resources, Inc. and of 32 of the investment companies in Franklin Templeton Investments.
JAMES M. DAVIS (1952) Chief Chief Compliance Not Applicable Not Applicable
One Franklin Parkway Compliance Officer since
San Mateo, CA 94403-1906 Officer and 2004 and Vice
Vice President President -
- AML AML Compliance
Compliance since 2006
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director, Global Compliance, Franklin Resources, Inc.; officer of some of the other subsidiaries of Franklin Resources, Inc. and of
45 of investment companies in Franklin Templeton Investments; and FORMERLY, Director of Compliance, Franklin Resources, Inc.
(1994-2001).
Gaston Gardey (1962) Chief Since March 2009 Not Applicable Not Applicable
One Franklin Parkway Executive
San Mateo, CA 94403-1906 Officer -
Finance and
Administration
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice President, Franklin Templeton Services, LLC; officer of 45 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).
GASTON GARDEY (1967) Treasurer, Since March 2009 Not Applicable Not Applicable
One Franklin Parkway Chief Financial
San Mateo, CA 94403-1906 Officer and
Chief
Accounting
Officer
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director, Fund Accounting, Franklin Templeton Investments; and officer of 27 of the investment companies in Franklin Templeton
Investments.
ALIYA S. GORDON (1973) Vice President Since March 2009 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Associate General Counsel, Franklin Templeton Investments; officer of 45 of the investment companies in Franklin Templeton
Investments; and FORMERLY, Litigation Associate, Steefel, Levitt & Weiss, LLP (2000-2004).
DAVID P. GOSS (1947) Vice President Since 2000 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Associate General Counsel, Franklin Templeton Investments; officer and/or director, as the case maybe, of some of the other
subsidiaries of Franklin Resources, Inc. and of 45 of the investment companies in Franklin Templeton Investments.
38 | Annual Report
NUMBER OF
PORTFOLIOS IN
FUND COMPLEX
NAME, YEAR OF BIRTH LENGTH OF OVERSEEN BY
AND ADDRESS POSITION TIME SERVED BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------- -------------- ---------------- -------------- ------------------------------------
RUPERT H. JOHNSON, JR. (1940) President and Since 2002 Not Applicable Not Applicable
One Franklin Parkway Chief
San Mateo, CA 94403-1906 Executive
Officer -
Investment
Management
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice Chairman, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Director, Franklin Advisers, Inc. and
Templeton Worldwide, 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 43 of the investment companies in Franklin
Templeton Investments.
KAREN L. SKIDMORE (1952) Vice President Since 2006 Not Applicable Not Applicable
One Franklin Parkway and Secretary
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Associate General Counsel, Franklin Templeton Investments; and officer of 29 of the investment companies in Franklin
Templeton Investments.
CRAIG S. TYLE (1960) Vice President Since 2005 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
General Counsel and Executive Vice President, Franklin Resources, Inc.; officer of some of the other subsidiaries of Franklin
Resources, Inc. and of 45 of the investment companies in Franklin Templeton Investments; and FORMERLY, Partner, Shearman & Sterling,
LLP (2004-2005); and General Counsel, Investment Company Institute (ICI) (1997-2004).
* 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 manager or
affiliated investment managers.
** Charles B. Johnson is considered to be an interested person of the Fund
under the federal securities laws due to his position as officer and
director and major shareholder of Franklin Resources, Inc. (Resources),
which is the parent company of the Fund's administrator and distributor.
Gregory E. Johnson is considered to be an interested person of the Fund
under the federal securities laws due to his position as an officer and
director of Resources.
Note 1: Charles B. Johnson and Rupert H. Johnson, Jr. are brothers and the
father and uncle, respectively, of Gregory E. Johnson.
Note 2: Officer information is current as of the date of this report. It is
possible that after this date, information about officers may change.
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 JOHN B. WILSON AS ITS AUDIT COMMITTEE FINANCIAL EXPERT. THE BOARD
BELIEVES THAT MR. WILSON QUALIFIES AS SUCH AN EXPERT IN VIEW OF HIS EXTENSIVE
BUSINESS BACKGROUND AND EXPERIENCE, INCLUDING SERVICE AS CHIEF FINANCIAL OFFICER
OF STAPLES, INC. FROM 1992 TO 1996. MR. WILSON HAS BEEN A MEMBER AND CHAIRMAN
OF THE FUND'S AUDIT COMMITTEE SINCE 2006. AS A RESULT OF SUCH BACKGROUND AND
EXPERIENCE, THE BOARD OF TRUSTEES BELIEVES THAT MR. WILSON 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. WILSON 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 (800) DIAL BEN/(800) 342-5236 TO REQUEST THE SAI.
Annual Report | 39
Franklin Money Fund
SHAREHOLDER INFORMATION
BOARD REVIEW OF INVESTMENT MANAGEMENT AGREEMENT
At a meeting held February 24, 2009, the Board of Directors (Board), including a
majority of non-interested or independent Directors, approved renewal of the
investment management agreement for the Fund. In reaching this decision, the
Board took into account information furnished throughout the year at regular
Board meetings, as well as information prepared specifically in connection with
the annual renewal review process. Information furnished and discussed
throughout the year included investment performance reports and related
financial information for the Fund, as well as periodic reports on shareholder
services, legal, compliance, pricing, and other services provided by the
Investment Manager (Manager) and its affiliates. Information furnished
specifically in connection with the renewal process included a report for the
Fund prepared by Lipper, Inc. (Lipper), an independent organization, as well as
additional material, including a Fund profitability analysis report prepared by
management. The Lipper report compared the Fund's investment performance and
expenses with those of other mutual funds deemed comparable to the Fund as
selected by Lipper. The Fund profitability analysis report discussed the
profitability to Franklin Templeton Investments from its overall U.S. fund
operations, as well as on an individual fund-by-fund basis. Included with such
profitability analysis report was information on a fund-by-fund basis listing
portfolio managers and other accounts they manage, as well as information on
management fees charged by the Manager and its affiliates including management's
explanation of differences where relevant and a three-year expense analysis with
an explanation for any increase in expense ratios. Additional material
accompanying such report was a memorandum prepared by management describing
project initiatives and capital investments relating to the services provided to
the Fund by the Franklin Templeton Investments organization, as well as a
memorandum relating to economies of scale and a comparative analysis concerning
transfer agent fees charged the Fund. Such material also discussed some of the
actions taken by management in coping with problems arising out of the past
year's financial upheaval.
In considering such materials, the independent Directors received assistance and
advice from and met separately with independent counsel. In approving
continuance of the investment management agreement for the Fund, the Board,
including a majority of independent Directors, determined that the existing
management fee structure was fair and reasonable and that continuance of the
investment management agreement was in the best interests of the Fund and its
shareholders. While attention was given to all information furnished, the
following discusses some primary factors relevant to the Board's decision.
NATURE, EXTENT AND QUALITY OF SERVICES. The Board was satisfied with the nature
and quality of the overall services provided by the Manager and its affiliates
to the Fund and its shareholders. In addition to investment performance and
expenses discussed later, the Board's opinion was based, in part, upon periodic
reports furnished it showing that the investment policies and restrictions for
the Fund were consistently complied with as well as other reports periodically
furnished the Board covering matters such as the compliance of portfolio
managers and other management personnel with the code of ethics adopted
throughout the Franklin Templeton fund complex, the adherence to fair value
pricing procedures established by the Board, and the accuracy
40 | Annual Report
Franklin Money Fund
SHAREHOLDER INFORMATION (CONTINUED)
BOARD REVIEW OF INVESTMENT MANAGEMENT AGREEMENT (CONTINUED)
of net asset value calculations. The Board also noted the extent of benefits
provided Fund shareholders from being part of the Franklin Templeton family of
funds, including the right to exchange investments between the same class of
funds without a sales charge, the ability to reinvest Fund dividends into other
funds and the right to combine holdings in other funds to obtain a reduced sales
charge. Favorable consideration was given to management's continuous efforts and
expenditures in establishing back-up systems and recovery procedures to function
in the event of a natural disaster, it being noted that such systems and
procedures had functioned smoothly during the Florida hurricanes and blackouts
experienced in recent years. Consideration was also given to the experience of
the Fund's portfolio management team, the number of accounts managed and general
method of compensation. In this latter respect, the Board noted that a primary
factor in management's determination of a portfolio manager's bonus compensation
was the relative investment performance of the funds he or she managed and that
a portion of such bonus was required to be invested in a predesignated list of
funds within such person's fund management area so as to be aligned with the
interests of Fund shareholders. The Board also took into account the quality of
transfer agent and shareholder services provided Fund shareholders by an
affiliate of the Manager, noting continuing expenditures by management to
increase and improve the scope of such services, periodic favorable reports on
such service conducted by third parties, and the continuous enhancements to and
high industry ranking given the Franklin Templeton website. Particular attention
was given to the overall performance and actions taken by the Manager and its
affiliates in response to problems arising out of the market turmoil and
financial crisis experienced during the past year. In this respect, the Board
noted that management's independent credit analysis and diligent risk management
procedures had minimized exposure of funds within the Franklin Templeton complex
to subprime mortgages and that its continuous monitoring of counterparty credit
risk had limited fund exposure to firms experiencing financial difficulties like
Bear Stearns and AIG. The same type of conservative approach and attention to
risk had also prevented any structured investment products or other volatile
instruments from being held in the portfolios of any of the money market funds
within the Franklin Templeton complex. The Board also took into account, among
other things, management's efforts in establishing a $725 million global credit
facility for the benefit of the funds and other accounts managed by Franklin
Templeton Investments to provide a source of cash for temporary and emergency
purposes or to meet unusual redemption requests as well as the strong financial
position of the Manager's parent company and its commitment to the mutual fund
business. The Board also noted that during the past year Franklin Templeton
Investments, like many other fund managers, had announced a hiring freeze and
implemented employee reductions, and the Board discussed with management the
nature of such reductions and steps being taken to minimize any negative impact
on the nature and quality of services being provided the Fund.
INVESTMENT PERFORMANCE. The Board placed significant emphasis on the investment
performance of the Fund in view of its importance to shareholders. While
consideration was given to performance reports and discussions with portfolio
managers at Board meetings during the year, particular attention in assessing
such performance was given to the Lipper report furnished for the agreement
renewal. The Lipper report prepared for the Fund showed its investment
performance
Annual Report | 41
Franklin Money Fund
SHAREHOLDER INFORMATION (CONTINUED)
BOARD REVIEW OF INVESTMENT MANAGEMENT AGREEMENT (CONTINUED)
for the year ended December 31, 2008, as well as the previous 10 years ended
that date in comparison to a performance universe consisting of the Fund and all
retail money market funds as selected by Lipper. The Lipper report showed that
the Fund's total return for the one-year period was in the middle quintile of
the performance universe and on an annualized basis was also in the middle
quintile for the previous three- and five-year periods, and in the
second-highest quintile of such universe for the previous 10-year period. The
Board was satisfied with such performance, noting the Fund's conservative
investment policy.
COMPARATIVE EXPENSES. Consideration was given to a comparative analysis of the
management fees and total expense ratios of the Fund compared with those of a
group of other funds selected by Lipper as its appropriate Lipper expense group.
Lipper expense data is based upon historical information taken from each fund's
most recent annual report and, as a result of the severe decline in mutual fund
industry assets during the last quarter of 2008, is based on asset levels that
are higher than the level currently existing for most funds. While recognizing
the limitations inherent in Lipper's methodology and recognizing that current
expense ratios may increase as assets decline, the Board believed that the
independent analysis conducted by Lipper remained an appropriate measure of
comparative expenses. In reviewing comparative costs, Lipper provides
information on the Fund's contractual investment management fee in comparison
with the contractual investment management fee that would have been charged by
other funds within its Lipper expense group assuming they were similar in size
to the master money market fund through which the Fund invests, as well as the
actual total expenses of the Fund in comparison with those of its Lipper expense
group. The Lipper contractual investment management fee analysis includes
administrative charges as being part of a management fee. The results of such
comparisons showed the Fund's contractual investment management fee rate was in
the middle quintile of its Lipper expense group, while its actual total expense
ratio was in the second least expensive quintile of its Lipper expense group,
although in the most expensive quintile of such group excluding 12b-1 fees. In
discussing the expense comparisons, management pointed out that this Fund is not
actively marketed and largely serves as an alternative and often temporary
investment vehicle for shareholders of the various Franklin/Templeton/Mutual
Series Fund families and provides a number of courtesy services to shareholders,
including check writing and wiring privileges. The Board found such comparative
expenses to be acceptable.
MANAGEMENT PROFITABILITY. The Board also considered the level of profits
realized by the Manager and its affiliates in connection with the operation of
the Fund. In this respect, the Board reviewed the Fund profitability analysis
that addresses the overall profitability of Franklin Templeton's U.S. fund
business, as well as its profits in providing management and other services to
the Fund during the 12-month period ended September 30, 2008, being the most
recent fiscal year end for Franklin Resources, Inc., the Manager's parent.
During such period, the assets of the Franklin Templeton U.S. fund business were
significantly higher than currently existing, and to such extent the
profitability analysis does not reflect current fund operations. While taking
this
42 | Annual Report
Franklin Money Fund
SHAREHOLDER INFORMATION (CONTINUED)
BOARD REVIEW OF INVESTMENT MANAGEMENT AGREEMENT (CONTINUED)
into account in assessing the significance of the Fund profitability analysis,
the Board recognized such analysis was made at a given point in time and that
the decline in assets and effect on profitability would be reflected in the
profitability analysis covering Franklin Resources' 2009 fiscal year period. In
reviewing the analysis, attention was given to the methodology followed in
allocating costs to the Fund, it being recognized that allocation methodologies
are inherently subjective and various allocation methodologies may each be
reasonable while producing different results. In this respect, the Board noted
that, while being continuously refined and reflecting changes in the Manager's
own cost accounting, the allocation methodology was consistent with that
followed in profitability report presentations for the Fund made in prior years
and that the Fund's independent registered public accounting firm had been
engaged by the Manager to perform certain procedures on a biennial basis,
specified and approved by the Manager and the Fund's Board solely for their
purposes and use in reference to the profitability analysis. In reviewing and
discussing such analysis, management discussed with the Board its belief that
costs incurred in establishing the infrastructure necessary for the type of
mutual fund operations conducted by the Manager and its affiliates may not be
fully reflected in the expenses allocated to the Fund in determining its
profitability, as well as the fact that the level of profits, to a certain
extent, reflected operational cost savings and efficiencies initiated by
management. The Board also took into account management's expenditures in
improving shareholder services provided the Fund, as well as the need to meet
additional regulatory and compliance requirements resulting from the
Sarbanes-Oxley Act and recent SEC and other regulatory requirements. In
addition, the Board considered a third-party study comparing the profitability
of the Manager's parent on an overall basis as compared to other publicly held
managers broken down to show profitability from management operations exclusive
of distribution expenses, as well as profitability including distribution
expenses. Based upon its consideration of all these factors, the Board
determined that the level of profits realized by the Manager and its affiliates
from providing services to the Fund was not excessive in view of the nature,
quality and extent of services provided.
ECONOMIES OF SCALE. The Board also considered whether economies of scale are
realized by the Manager as the Fund grows larger and the extent to which this is
reflected in the level of management fees charged. While recognizing that any
precise determination is inherently subjective, the Board noted that based upon
the Fund profitability analysis, it appears that as some funds get larger, at
some point economies of scale do result in the Manager realizing a larger profit
margin on management services provided such a fund. The Board also noted that
economies of scale are shared with a fund and its shareholders through
management fee breakpoints so that as a fund grows in size, its effective
management fee rate declines. Fees under the Fund's investment management
agreement consist of a flat 0.15% advisory fee component paid at the master fund
level and a separate administrative fee of 0.455% on the first $100 million of
Fund net assets; 0.330% on the next $150 million of Fund net assets; and 0.280%
on the Fund's net assets in excess of $250 million. The Fund net assets were
approximately $3.1 billion at year end. In discussing this with the Board,
management expressed its view that the 0.15% advisory fee component was low and
anticipated
Annual Report | 43
Franklin Money Fund
SHAREHOLDER INFORMATION (CONTINUED)
BOARD REVIEW OF INVESTMENT MANAGEMENT AGREEMENT (CONTINUED)
economies of scale. Management further pointed out and the Board acknowledged
that the fact this Fund's assets size exceeded the last administrative fee
breakpoint does not mean there are no benefits from economies of scale because
the growth of assets being charged at the lowest 0.280% level results in a lower
overall administrative fee rate. While intending to continuously review this
issue, the Board believed it problematic in view of the nature of this Fund
including the transitory nature of its investment role within the Franklin
Templeton Fund complex as well as the services provided that the Manager and its
affiliates realized any meaningful economies of scale in furnishing advisory and
administrative services to this Fund. The Board further noted the points raised
by management as indicating to the extent economies of scale may exist, that the
fee structure reflected some sharing of benefit with the Fund and its
shareholders.
PROXY VOTING POLICIES AND PROCEDURES
The Fund's investment manager 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 (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 (800)
SEC-0330.
44 | Annual Report
Franklin Templeton Funds
LITERATURE REQUEST. TO RECEIVE A PROSPECTUS, PLEASE CALL US AT (800) DIAL
BEN/(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.
VALUE
Franklin All Cap Value Fund
Franklin Balance Sheet Investment Fund
Franklin Large Cap Value Fund
Franklin MicroCap Value Fund(1)
Franklin MidCap Value Fund
Franklin Small Cap Value Fund
Mutual Beacon Fund
Mutual Quest Fund
Mutual Recovery Fund(2)
Mutual Shares Fund
BLEND
Franklin Focused Core Equity Fund
Franklin Large Cap Equity Fund
Franklin Rising Dividends Fund
GROWTH
Franklin Flex Cap Growth Fund
Franklin Growth Fund
Franklin Growth Opportunities Fund
Franklin Small Cap Growth Fund
Franklin Small-Mid Cap Growth Fund
SECTOR
Franklin Biotechnology Discovery Fund
Franklin DynaTech Fund
Franklin Global Real Estate Fund
Franklin Gold & Precious Metals Fund
Franklin Natural Resources Fund
Franklin Real Estate Securities Fund
Franklin Utilities Fund
Mutual Financial Services Fund
GLOBAL
Mutual Global Discovery Fund
Templeton Global Long-Short Fund
Templeton Global Opportunities Trust
Templeton Global Smaller Companies Fund
Templeton Growth Fund
Templeton World Fund
INTERNATIONAL
Franklin India Growth Fund
Franklin International Growth Fund
Franklin International Small Cap Growth Fund
Mutual European Fund
Mutual International 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 Frontier Markets Fund
HYBRID
Franklin Balanced Fund
Franklin Convertible Securities Fund
Franklin Equity Income Fund
Franklin Income Fund
Templeton Income Fund
ASSET ALLOCATION
Franklin Templeton Corefolio(R) AllocatioN Fund
Franklin Templeton Founding Funds Allocation Fund
Franklin Templeton Perspectives Allocation Fund
Franklin Templeton Conservative Target Fund
Franklin Templeton Growth Target Fund
Franklin Templeton Moderate Target Fund
Franklin Templeton 2015 Retirement Target Fund
Franklin Templeton 2025 Retirement Target Fund
Franklin Templeton 2035 Retirement Target Fund
Franklin Templeton 2045 Retirement Target Fund
FIXED INCOME
Franklin Adjustable U.S. Government Securities Fund(3)
Franklin Floating Rate Daily Access Fund
Franklin High Income Fund
Franklin Limited Maturity U.S. Government Securities Fund(3)
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(3)
Templeton Global Bond Fund
Templeton Global Total Return Fund
Templeton International Bond Fund
TAX-FREE INCOME(4)
NATIONAL
Double Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund(5)
LIMITED-/INTERMEDIATE-TERM
California Intermediate-Term Tax-Free Income Fund
Federal Intermediate-Term Tax-Free Income Fund
Federal Limited-Term Tax-Free Income Fund
New York Intermediate-Term Tax-Free Income Fund
STATE-SPECIFIC
Alabama
Arizona
California(6)
Colorado
Connecticut
Florida
Georgia
Kentucky
Louisiana
Maryland
Massachusetts(7)
Michigan(7)
Minnesota(7)
Missouri
New Jersey
New York(6)
North Carolina
Ohio(7)
Oregon
Pennsylvania
Tennessee
Virginia
INSURANCE FUNDS
Franklin Templeton Variable Insurance
Products Trust(8)
(1). The fund is closed to new investors. Existing shareholders and select
retirement plans can continue adding to their accounts.
(2). 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.
(3). An investment in the fund is neither insured nor guaranteed by the U.S.
government or by any other entity or institution.
(4). For investors subject to the alternative minimum tax, a small portion of
fund dividends may be taxable. Distributions of capital gains are generally
taxable.
(5). The fund invests primarily in insured municipal securities.
(6). These funds are available in four or more variations, including long-term
portfolios, intermediate-term portfolios, portfolios of insured securities,
a high-yield portfolio (CA only) and money market portfolios.
(7). The Board of Trustees approved the elimination of the non-fundamental
policy requiring the fund to invest at least 80% of net assets in insured
municipal securities and the removal of the word "Insured" from the fund
name. The changes became effective 2/17/09.
(8). The funds of the Franklin Templeton Variable Insurance Products Trust are
generally available only through insurance company variable contracts.
04/09 Not part of the annual report
(FRANKLIN TEMPLETON INVESTMENTS(R) LOGO) One Franklin Parkway
San Mateo, CA 94403-1906
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ANNUAL REPORT AND SHAREHOLDER LETTER
FRANKLIN MONEY FUND
INVESTMENT MANAGER
Franklin Advisers, Inc.
DISTRIBUTOR
Franklin Templeton Distributors, Inc.
(800) DIAL BEN(R)
franklintempleton.com
SHAREHOLDER SERVICES
(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 A2009 08/09
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 John B. Wilson 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 $47,155 for the fiscal year ended June 30, 2009 and $36,798 for the fiscal
year ended June 30, 2008.
(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 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.
The aggregate 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 were $6,000 for the fiscal year ended
June 30, 2009 and $0 for the fiscal year ended June 30, 2008. The services for
which these fees were paid included tax compliance and advice.
(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 $0 for the fiscal year ended June 30, 2009 and
$1,893 for the fiscal year ended June 30, 2008. The services for which these
fees were paid include 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 other than
services reported in paragraphs (a)-(c) of Item 4 were $0 for the fiscal year
ended June 30, 2009 and $282,184 for the fiscal year ended June 30, 2008. The
services for which these fees were paid include review of materials provided to
the fund Board in connection with the investment management contract renewal
process.
(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
registrant 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 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 $6,000 for the fiscal year ended June 30, 2009 and $284,077 for
the fiscal year ended June 30, 2008.
(h) The registrant's audit committee of the board has considered whether the
provision of non-audit services that were rendered to the registrant's
investment adviser (not including any sub-adviser whose role is primarily
portfolio management and is subcontracted with or overseen by another investment
adviser), and any entity controlling, controlled by, or under common control
with the investment adviser that provides ongoing services to the registrant
that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of
Regulation S-X is compatible with maintaining the principal accountant's
independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. N/A
ITEM 6. SCHEDULE OF INVESTMENTS. N/A
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES. N/A
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. N/A
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS. N/A
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no changes to the procedures by which shareholders may recommend
nominees to the Registrant's Board of Trustees that would require disclosure
herein.
ITEM 11. CONTROLS AND PROCEDURES.
(A) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. The Registrant maintains
disclosure controls and procedures that are designed to ensure that information
required to be disclosed in the Registrant's filings under the Securities
Exchange Act of 1934 and the Investment Company Act of 1940 is recorded,
processed, summarized and reported within the periods specified in the rules and
forms of the Securities and Exchange Commission. Such information is accumulated
and communicated to the Registrant's management, including its principal
executive officer and principal financial officer, as appropriate, to allow
timely decisions regarding required disclosure. The Registrant's management,
including the principal executive officer and the principal financial officer,
recognizes that any set of controls and procedures, no matter how well designed
and operated, can provide only reasonable assurance of achieving the desired
control objectives.
Within 90 days prior to the filing date of this Shareholder Report on Form
N-CSR, the Registrant had carried out an evaluation, under the supervision and
with the participation of the Registrant's management, including the
Registrant's principal executive officer and the Registrant's principal
financial officer, of the effectiveness of the design and operation of the
Registrant's disclosure controls and procedures. Based on such evaluation, the
Registrant's principal executive officer and principal financial officer
concluded that the Registrant's disclosure controls and procedures are
effective.
(B) CHANGES IN INTERNAL CONTROLS. There have been no significant changes in the
Registrant's internal controls or in other factors that could significantly
affect the internal controls subsequent to the date of their evaluation in
connection with the preparation of this Shareholder Report on Form N-CSR.
ITEM 12. EXHIBITS.
(a)(1) Code of Ethics
(a)(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
of Laura F. Fergerson, Chief Executive Officer - Finance and Administration, and
Gaston Gardey, Chief Financial Officer and Chief Accounting Officer
(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of
Laura F. Fergerson, Chief Executive Officer - Finance and Administration,
and Gaston Gardey, Chief Financial Officer and Chief Accounting Officer
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
FRANKLIN MONEY FUND
By /s/LAURA F. FERGERSON
-------------------------
Laura F. Fergerson
Chief Executive Officer - Finance and Administration
Date August 27, 2009
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/LAURA F. FERGERSON
-------------------------
Laura F. Fergerson
Chief Executive Officer - Finance and Administration
Date August 27, 2009
By /s/GASTON GARDEY
------------------------
Gaston Gardey
Chief Financial Officer and Chief Accounting Officer
Date August 27, 2009