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 811-07038
---------
THE MONEY MARKET PROTFOLIOS
---------------------------
(Exact name of registrant as specified in charter)
ONE FRANKLIN PARKWAY, SAN MATEO, CA 94403-1906
(Address of principal executive offices) (Zip code)
MURRAY L. SIMPSON, ONE FRANKLIN PARKWAY, SAN MATEO, CA 94403-1906
-----------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: 650 312-2000
------------
Date of fiscal year end: 06/30
-----
Date of reporting period: 06/30/04
--------
ITEM 1. REPORTS TO STOCKHOLDERS.
THE MONEY MARKET PORTFOLIOS
FINANCIAL HIGHLIGHTS
THE MONEY MARKET PORTFOLIO
----------------------------------------------------------------------
YEAR ENDED JUNE 30,
2004 2003 2002 2001 2000
----------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ...................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
----------------------------------------------------------------------
Income from investment operations - net investment income .009 .014 .026 .059 .056
Less distributions from net investment income ........... (.009) (.014) (.026) (.059) (.056)
----------------------------------------------------------------------
Net asset value, end of year ............................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======================================================================
Total return(a) ......................................... .94% 1.41% 2.63% 6.08% 5.75%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) ......................... $5,505,394 $5,331,200 $4,734,196 $4,490,919 $4,144,043
Ratios to average net assets:
Expenses ............................................... .15% .15% .15% .15% .15%
Expenses excluding waiver and payments by affiliate .... .16% .15% .16% .16% .16%
Net investment income .................................. .93% 1.39% 2.56% 5.91% 5.65%
(a) Total return is not annualized for periods less than one year.
22 | See notes to financial statements. | Annual Report
THE MONEY MARKET PORTFOLIOS
STATEMENT OF INVESTMENTS, JUNE 30, 2004
- ------------------------------------------------------------------------------------------------------------------------------------
THE MONEY MARKET PORTFOLIO PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT 45.0%
Abbey National North America, Stamford Branch, 1.09% - 1.11%, 7/21/04 - 7/27/04 ........ $ 150,000,000 $ 150,001,227
Bank of Montreal, Chicago Branch, 1.063% - 1.200%, 7/21/04 - 9/07/04 ................... 225,000,000 225,001,627
Bank of Nova Scotia, Portland Branch, 1.22% - 1.25%, 8/24/04 - 8/30/04 ................. 150,000,000 150,002,369
Banque Nationale De Paris, New York Branch, 1.080% - 1.085%, 7/16/04 - 7/28/04 ......... 125,000,000 125,000,141
Barclays Bank PLC, New York Branch, 1.05%, 8/02/04 ..................................... 75,000,000 75,000,000
Bayerische Landesbank Girozen, New York Branch, 1.02%, 7/14/04 ......................... 50,000,000 50,000,179
Credit Agricole, New York Branch, 1.07% - 1.43%, 7/30/04 - 10/22/04 .................... 150,000,000 150,000,774
Danske Bank AS, New York Branch, 1.08%, 8/05/04 ........................................ 50,000,000 50,001,444
Dexia Bank, New York Branch, 1.080% - 1.508%, 8/25/04 - 12/07/04 ....................... 150,000,000 150,004,012
Landesbank Hessen Thueringen Giro., New York Branch, 1.095%, 9/08/04 ................... 75,000,000 75,000,715
Lloyds Bank PLC, New York Branch, 1.31%, 8/23/04 - 8/30/04 ............................. 150,000,000 150,002,321
National Australia Bank, New York Branch, 1.15%, 8/13/04 ............................... 75,000,000 75,000,000
Rabobank Nederland NV, New York Branch, 1.000% - 1.115%, 7/01/04 - 10/06/04 ............ 100,000,000 100,000,670
Royal Bank of Canada, New York Branch, 1.42%, 10/22/04 ................................. 25,000,000 25,000,774
Royal Bank of Scotland NY, New York Branch, 1.07%, 7/29/04 - 7/30/04 ................... 100,000,000 100,000,788
Societe Generale North America Inc., New York Branch, 1.33%, 8/26/04 ................... 75,000,000 75,000,000
State Street Corp., Boston Branch, 1.05%, 8/09/04 - 8/10/04 ............................ 150,000,000 150,000,000
Svenska Handelsbanken, New York Branch, 1.06% - 1.10%, 7/15/04 - 8/12/04 ............... 150,000,000 149,998,850
Toronto Dominion Bank, New York Branch, 1.105% - 1.340%, 7/26/04 - 8/25/04 ............. 150,000,000 150,000,000
UBS AG, Stamford Branch, 1.060% - 1.065%, 7/23/04 - 7/28/04 ............................ 150,000,000 150,001,247
Wells Fargo Bank, San Francisco Branch, 1.05%, 7/12/04 ................................. 75,000,000 75,000,000
Westdeutsche Landesbank, New York Branch, 1.15%, 10/12/04 .............................. 75,000,000 75,002,131
--------------
TOTAL CERTIFICATES OF DEPOSIT (COST $2,475,019,269) .................................... 2,475,019,269
--------------
BANK NOTES (COST $150,003,056) 2.7%
Bank of America NA, 1.06%, 7/19/04 - 7/20/04 ........................................... 150,000,000 150,003,056
--------------
COMMERCIAL PAPER 39.5%
(a) ANZ (Delaware) Inc., 1.034% - 1.153%, 7/08/04 - 8/12/04 ................................ 150,000,000 149,881,389
(a) American International Group I, 1.013% - 1.042%, 7/01/04 - 7/16/04 ..................... 150,000,000 149,966,903
(a) Barclays U.S. Funding Corp., 1.023%, 7/08/04 ........................................... 25,000,000 24,995,042
(a) Canadian Wheat Board, 1.004%, 8/04/04 .................................................. 25,000,000 24,976,389
(a) Citigroup Global Markets Holdings, 1.153%, 8/04/04 - 8/11/04 ........................... 150,000,000 149,826,701
(a) Coca-Cola Co., 1.213%, 8/23/04 - 8/27/04 ............................................... 100,000,000 99,818,500
(a) Commonwealth Bank of Australia, 1.043%, 7/06/04 - 7/13/04 .............................. 100,000,000 99,970,389
(a) Danske Corp., 1.066% - 1.201%, 7/26/04 - 8/26/04 ....................................... 100,000,000 99,897,042
(a) Dupont De Nemours Inc., 1.242%, 8/12/04 - 8/20/04 ...................................... 150,000,000 149,759,750
(a) General Electric Capital Corp., 1.043% - 1.173%, 7/07/04 - 8/18/04 ..................... 150,000,000 149,836,958
(a) Goldman Sachs Group Inc., 1.30%, 7/02/04 ............................................... 150,000,000 149,994,583
(a) HBOS Treasury Services, 1.038% - 1.080%, 7/06/04 - 8/19/04 ............................. 101,000,000 100,951,176
(a) Internationale Ned. U.S. Funding Corp., 1.034% - 1.333%, 7/07/04 - 8/23/04 ............. 150,000,000 149,843,382
(a) National Australia Funding, 1.211%, 7/13/04 - 7/15/04 .................................. 75,000,000 74,967,229
(a) Nestle Capital Corp., 1.133%, 8/17/04 - 8/18/04 ........................................ 50,000,000 49,925,451
(a) Pfizer Inc., 1.025% - 1.055%, 8/19/04 - 9/07/04 ........................................ 150,000,000 149,763,103
(a) Procter & Gamble Co., 1.042% - 1.231%, 7/19/04 - 7/29/04 ............................... 150,000,000 149,903,861
(a) Royal Bank of Canada, 1.029% - 1.053%, 7/09/04 - 7/29/04 ............................... 125,000,000 124,917,015
(a) Shell Finance UK PLC, 1.011%, 7/02/04 .................................................. 50,000,000 49,998,597
(a) Westdeutsche Landesbank, 1.094%, 8/16/04 ............................................... 75,000,000 74,895,542
--------------
TOTAL COMMERCIAL PAPER (COST $2,174,089,002) ............................................. 2,174,089,002
--------------
Annual Report | 23
THE MONEY MARKET PORTFOLIOS
STATEMENT OF INVESTMENTS, JUNE 30, 2004 (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------
THE MONEY MARKET PORTFOLIO PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY SECURITIES 1.6%
(a) Federal Home Loan Bank, 1.25%, 7/01/04 ...................................................... $ 13,595,000 $ 13,595,000
(a) Freddie Mac, 1.077%, 8/31/04 ................................................................ 75,000,000 74,864,021
--------------
TOTAL U.S. GOVERNMENT AGENCY SECURITIES (COST $88,459,021) .................................. 88,459,021
--------------
TOTAL INVESTMENTS BEFORE REPURCHASE AGREEMENTS (COST $4,887,570,348) ........................ 4,887,570,348
--------------
REPURCHASE AGREEMENTS 11.1%
(b) Deutsche Bank Securities Inc., 1.25%, 7/01/04 (Maturity Value $121,229,209) ................. 121,225,000 121,225,000
Collateralized by U.S. Treasury Bills, 8/19/04 - 11/26/04
(b) Morgan Stanley & Co. Inc., 1.22%, 7/01/04 (Maturity Value $121,224,108) ..................... 121,220,000 121,220,000
Collateralized by U.S. Treasury Notes, 3.875%, 1/15/09
(b) UBS Securities LLC, 1.40%, 7/01/04 (Maturity Value $370,014,389) ............................ 370,000,000 370,000,000
Collateralized by U.S. Government Agency Securities, 2.125% - 5.500%, 8/13/04 - 6/02/06
--------------
TOTAL REPURCHASE AGREEMENTS (COST $612,445,000) ............................................. 612,445,000
--------------
TOTAL INVESTMENTS (COST $5,500,015,348) 99.9% ............................................... 5,500,015,348
OTHER ASSETS, LESS LIABILITIES .1% .......................................................... 5,378,816
--------------
NET ASSETS 100.0% ........................................................................... $5,505,394,164
==============
(a) Security is traded on a discount basis; the rate shown is the effective
yield at the time of purchase by the fund.
(b) See Note 1(b) regarding repurchase agreements.
24 | See notes to financial statements. | Annual Report
THE MONEY MARKET PORTFOLIOS
FINANCIAL HIGHLIGHTS
THE U.S. GOVERNMENT SECURITIES MONEY MARKET PORTFOLIO
----------------------------------------------------------------
YEAR ENDED JUNE 30,
2004 2003 2002 2001 2000
----------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ........................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
----------------------------------------------------------------
Income from investment operations - net investment income .... .009 .013 .024 .056 .054
Less distributions from net investment income ................ (.009) (.013) (.024) (.056) (.054)
----------------------------------------------------------------
Net asset value, end of year ................................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
================================================================
Total return(a) .............................................. .87% 1.34% 2.43% 5.75% 5.48%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) .............................. $117,815 $201,758 $226,676 $186,718 $221,993
Ratios to average net assets:
Expenses .................................................... .15% .15% .15% .15% .15%
Expenses excluding waiver and payments by affiliate ......... .16% .16% .16% .16% .16%
Net investment income ....................................... .87% 1.34% 2.33% 5.63% 5.36%
(a) Total return is not annualized for periods less than one year.
Annual Report | See notes to financial statements. | 25
THE MONEY MARKET PORTFOLIOS
STATEMENT OF INVESTMENTS, JUNE 30, 2004
- -----------------------------------------------------------------------------------------------------------------------------
THE U.S. GOVERNMENT SECURITIES MONEY MARKET PORTFOLIO PRINCIPAL AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------------
GOVERNMENT SECURITIES 29.7%
(a) U.S. Treasury Bill, 1.00%, 7/08/04 .................................................. $ 10,000,000 $ 9,998,065
(a) U.S. Treasury Bill, 1.00% - 1.005%, 7/29/04 ......................................... 10,000,000 9,992,241
(a) U.S. Treasury Bill, 1.532%, 12/09/04 ................................................ 5,000,000 4,966,011
(a) U.S. Treasury Note, 1.875%, 9/30/04 ................................................. 5,000,000 5,007,934
(a) U.S. Treasury Note, 1.75%, 12/31/04 ................................................. 5,000,000 5,015,122
------------
TOTAL GOVERNMENT SECURITIES (COST $34,979,373) ...................................... 34,979,373
------------
REPURCHASE AGREEMENTS 70.3%
(b) ABN AMRO Bank, N.V., New York Branch, 1.25%, 7/01/04 (Maturity Value $5,000,174) .... 5,000,000 5,000,000
Collateralized by U.S. Treasury Notes, 1.75%, 12/31/04
(b) Banc of America Securities LLC, 1.10%, 7/01/04 (Maturity Value $5,000,153) .......... 5,000,000 5,000,000
Collateralized by U.S. Treasury Notes, 2.00%, 8/31/05
(b) Barclays Capital Inc., 1.20%, 7/01/04 (Maturity Value $5,000,167) ................... 5,000,000 5,000,000
Collateralized by U.S. Treasury Bills, 1.485%, 11/18/04
(b) Bear, Stearns & Co. Inc., 1.22%, 7/01/04 (Maturity Value $5,000,169) ................ 5,000,000 5,000,000
Collateralized by U.S. Treasury Notes, 1.625%, 4/30/05
(b) Deutsche Bank Securities Inc., 1.25%, 7/01/04 (Maturity Value $23,920,831) .......... 23,920,000 23,920,000
Collateralized by U.S. Treasury Notes, 6.75%, 5/15/05
(b) Goldman, Sachs & Co., 1.24%, 7/01/04 (Maturity Value $5,000,172) .................... 5,000,000 5,000,000
Collateralized by U.S. Treasury Notes, 5.625%, 5/15/08
(b) Greenwich Capital Markets Inc., 1.25%, 7/01/04 (Maturity Value $5,000,174) .......... 5,000,000 5,000,000
Collateralized by U.S. Treasury Notes, 7.00%, 7/15/06
(b) Morgan Stanley & Co. Inc., 1.22%, 7/01/04 (Maturity Value $23,915,810) .............. 23,915,000 23,915,000
Collateralized by U.S. Treasury Bonds, 3.875%, 1/15/09
(b) UBS Securities LLC, 1.25%, 7/01/04 (Maturity Value $5,000,174) ...................... 5,000,000 5,000,000
Collateralized by U.S. Treasury Bonds, 9.375%, 2/15/06
------------
TOTAL REPURCHASE AGREEMENTS (COST $82,835,000) ...................................... 82,835,000
------------
TOTAL INVESTMENTS (COST $117,814,373) 100.0% ........................................ 117,814,373
OTHER ASSETS, LESS LIABILITIES ...................................................... 181
------------
NET ASSETS 100.0% ................................................................... $117,814,554
============
(a) Security is traded on a discount basis; the rate shown is the effective
yield at the time of purchase by the fund.
(b) See Note 1(b) regarding repurchase agreements.
26 | See notes to financial statements. | Annual Report
THE MONEY MARKET PORTFOLIOS
FINANCIAL STATEMENTS
STATEMENTS OF ASSETS AND LIABILITIES
June 30, 2004
---------------------------------
THE U.S.
GOVERNMENT
THE SECURITIES
MONEY MARKET MONEY MARKET
PORTFOLIO PORTFOLIO
---------------------------------
Assets:
Investments in securities, at amortized cost (Note 1) ....................... $4,887,570,348 $ 34,979,373
Repurchase agreements, at value and cost .................................... 612,445,000 82,835,000
Cash ........................................................................ 1,207 4,307
Interest receivable ......................................................... 6,123,964 26,626
---------------------------------
Total assets ........................................................... 5,506,140,519 117,845,306
---------------------------------
Liabilities:
Payables:
Professional fees .......................................................... 22,900 10,375
Affiliates ................................................................. 666,516 14,549
Distributions to shareholders ............................................... 12,407 841
Other liabilities ........................................................... 44,532 4,987
---------------------------------
Total liabilities ...................................................... 746,355 30,752
---------------------------------
Net assets, at value ......................................................... $5,505,394,164 $ 117,814,554
=================================
Shares outstanding ........................................................... 5,505,394,164 117,814,554
=================================
Net asset value per share .................................................... $ 1.00 $ 1.00
=================================
Annual Report | See notes to financial statements. | 27
THE MONEY MARKET PORTFOLIOS
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF OPERATIONS
for the year ended June 30, 2004
------------------------------
THE U.S.
GOVERNMENT
THE SECURITIES
MONEY MARKET MONEY MARKET
PORTFOLIO PORTFOLIO
------------------------------
Investment income:
Interest .......................................................................... $ 57,433,188 $ 1,769,549
------------------------------
Expenses:
Management fees (Note 3) .......................................................... 7,933,008 261,993
Custodian fees (Note 4) ........................................................... 103,758 3,729
Professional fees ................................................................. 43,830 10,929
Other ............................................................................. 136,099 6,491
------------------------------
Total expenses ............................................................... 8,216,695 283,142
Expense reductions (Note 4) .................................................. (33) (287)
Expenses waived/paid by affiliate (Note 3) ................................... (209,614) (21,976)
------------------------------
Net expenses ................................................................ 8,007,048 260,879
------------------------------
Net investment income ...................................................... 49,426,140 1,508,957
------------------------------
Net realized gain (loss) from investments .......................................... 3,825 5,742
------------------------------
Net increase (decrease) in net assets resulting from operations .................... $ 49,429,965 $ 1,514,699
==============================
28 | See notes to financial statements. | Annual Report
THE MONEY MARKET PORTFOLIOS
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS
for the years ended June 30, 2004 and 2003
-------------------------------------------------------------------------
The U.S. Government Securities
The Money Market Portfolio Money Market Portfolio
-------------------------------------------------------------------------
2004 2003 2004 2003
-------------------------------------------------------------------------
Increase (decrease) in net assets:
Operations:
Net investment income ............................ $ 49,426,140 $ 73,176,506 $ 1,508,957 $ 2,883,855
Net realized gain (loss) from investments ........ 3,825 19,063 5,742 --
-------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations .................. 49,429,965 73,195,569 1,514,699 2,883,855
Distributions to shareholders from net
investment income ................................ (49,429,965)(a) (73,195,569)(b) (1,514,699)(c) (2,883,855)
Capital share transactions (Note 2) ............... 174,194,451 597,003,871 (83,943,475) (24,918,467)
-------------------------------------------------------------------------
Net increase (decrease) in net assets ........ 174,194,451 597,003,871 (83,943,475) (24,918,467)
Net assets (there is no undistributed net
investment income at beginning or end of year):
Beginning of year ................................ 5,331,199,713 4,734,195,842 201,758,029 226,676,496
-------------------------------------------------------------------------
End of year ...................................... $5,505,394,164 $5,331,199,713 $117,814,554 $201,758,029
=========================================================================
(a) Distributions were increased by a net realized gain from investments of
$3,825.
(b) Distributions were increased by a net realized gain from investments of
$19,063.
(c) Distributions were increased by a net realized gain from investments of
$5,742.
Annual Report | See notes to financial statements. | 29
THE MONEY MARKET PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Money Market Portfolios (the Trust) is registered under the Investment
Company Act of 1940 as a diversified, open-end investment company, consisting of
two separate portfolios (the Portfolios). The shares of the Trust are issued in
private placements and are exempt from registration under the Securities Act of
1933. The Portfolios seek to provide high current income consistent with
preservation of capital and liquidity.
The following summarizes the Portfolios' significant accounting policies.
A. SECURITY VALUATION
Securities are valued at amortized cost which approximates value.
B. REPURCHASE AGREEMENTS
The Portfolios may enter into repurchase agreements, which are accounted for as
a loan by the Portfolios to the seller, collateralized by securities which are
delivered to the Portfolios' custodian. The market value, including accrued
interest, of the initial collateralization is required to be at least 102% of
the dollar amount invested by the Portfolios, with the value of the underlying
securities marked to market daily to maintain coverage of at least 100%. At June
30, 2004, all repurchase agreements held by the Portfolios had been entered into
on that date.
C. INCOME TAXES
No provision has been made for income taxes because each portfolio's policy is
to qualify as a regulated investment company under the Internal Revenue Code and
to distribute substantially all of its taxable income.
D. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Interest income and estimated expenses are accrued daily. Discounts and premiums
on securities purchased are amortized over the lives of the respective
securities. Dividends from net investment income and capital gains or losses are
normally declared daily. Such distributions are reinvested in additional shares
of the Portfolios.
Common expenses incurred by the Trust are allocated among the Portfolios based
on the ratio of net assets of each portfolio to the combined net assets. Other
expenses are charged to each portfolio on a specific identification basis.
E. ACCOUNTING ESTIMATES
The preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the amounts of income
and expenses during the reporting period. Actual results could differ from those
estimates.
30 | Annual Report
THE MONEY MARKET PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
F. GUARANTEES AND INDEMNIFICATIONS
Under the Trust's organizational documents, its officers and trustees are
indemnified against certain liability arising out of the performance of their
duties to the Trust. Additionally, in the normal course of business, the Trust
enters into contracts with service providers that contain general
indemnification clauses. The Trust's maximum exposure under these arrangements
is unknown as this would involve future claims that may be made against the
Trust that have not yet occurred. However, based on experience, the Trust
expects the risk of loss to be remote.
2. SHARES OF BENEFICIAL INTEREST
At June 30, 2004, there were an unlimited number of shares authorized ($.01 par
value). Transactions in the Portfolios' shares at $1.00 per share were as
follows:
----------------------------------------
THE U.S.
GOVERNMENT
THE SECURITIES
MONEY MARKET MONEY MARKET
PORTFOLIO PORTFOLIO
----------------------------------------
Year ended June 30, 2004
Shares sold ........................................................... $ 5,413,860,590 $ 145,540,988
Shares issued in reinvestment of distributions ........................ 49,424,401 1,513,783
Shares redeemed ....................................................... (5,289,090,540) (230,998,246)
----------------------------------------
Net increase (decrease) ............................................... $ 174,194,451 $ (83,943,475)
========================================
Year ended June 30, 2003
Shares sold ........................................................... $ 6,279,565,500 $ 309,427,987
Shares issued in reinvestment of distributions ........................ 73,193,516 2,884,175
Shares redeemed ....................................................... (5,755,755,145) (337,230,629)
----------------------------------------
Net increase (decrease) ............................................... $ 597,003,871 $ (24,918,467)
========================================
3. TRANSACTIONS WITH AFFILIATES
Certain officers and trustees of the Trust are also officers and/or directors of
Franklin Advisers Inc. (Advisers) and Franklin/Templeton Investor Services LLC
(Investor Services), the Portfolios' investment manager and transfer agent,
respectively, and of the Franklin Money Fund, the Institutional Fiduciary Trust,
the Franklin Templeton Money Fund Trust, and the Franklin Federal Money Fund.
The Portfolios pay an investment management fee to Advisers of .15% per year of
the average daily net assets of each portfolio. Advisers agreed in advance to
voluntarily waive a portion of management fees as noted in the Statements of
Operations. Total expenses waived by Advisers are not subject to reimbursement
by the Portfolios. Effective June 1, 2004, the waiver was discontinued for the
Money Market Portfolio.
Annual Report | 31
THE MONEY MARKET PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. TRANSACTIONS WITH AFFILIATES (CONTINUED)
At June 30, 2004, the shares of The Money Market Portfolio were owned by the
following fund:
-----------------------------------------
PERCENTAGE OF
SHARES OUTSTANDING SHARES
-----------------------------------------
Institutional Fiduciary Trust - Money Market Portfolio .................. 3,528,183,535 64.09%
Franklin Money Fund ..................................................... 1,623,968,530 29.50%
Institutional Fiduciary Trust - Franklin Cash Reserves Fund ............. 197,177,281 3.58%
Franklin Templeton Money Fund Trust - Franklin Templeton
Money Fund ............................................................. 156,064,818 2.83%
At June 30, 2004, the shares of The U.S. Government Securities Money Market
Portfolio were owned by the following fund:
-----------------------------------------
PERCENTAGE OF
SHARES OUTSTANDING SHARES
-----------------------------------------
Franklin Federal Money Fund ............................................. 117,814,554 100%
On April 30, 2004, the Institutional Fiduciary Trust-Franklin U.S. Government
Securities Money Market Portfolio liquidated all of its holdings in the U.S.
Government Securities Money Market Portfolio.
4. EXPENSE OFFSET ARRANGEMENTS
The Portfolios have entered into an arrangement with their custodian whereby
credits realized as a result of uninvested cash balances are used to reduce a
portion of the Portfolios' custodian expenses. During the period ended June 30,
2004, the custodian fees were reduced as noted in the Statements of Operations.
5. INCOME TAXES
The tax character of distributions paid during the years ended June 30, 2004 and
2003, was as follows:
----------------------------------------------------------
THE U.S. GOVERNMENT
THE MONEY MARKET SECURITIES
PORTFOLIO MONEY MARKET PORTFOLIO
----------------------------------------------------------
2004 2003 2004 2003
----------------------------------------------------------
Distributions paid from ordinary income ................ $49,429,965 $73,195,569 $ 1,514,699 $ 2,883,855
==========================================================
At June 30, 2004, the cost of investments and undistributed ordinary income for
income tax purposes were as follows:
----------------------------------------
THE U.S. GOVERNMENT
THE MONEY MARKET SECURITIES
PORTFOLIO MONEY MARKET PORTFOLIO
----------------------------------------
Cost of investments ..................................................... $5,500,015,348 $ 117,814,373
===================================
Undistributed ordinary income ........................................... $ 12,407 $ 841
===================================
32 | Annual Report
THE MONEY MARKET PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. REGULATORY MATTERS
MASSACHUSETTS ADMINISTRATIVE PROCEEDING
On February 4, 2004, the Securities Division of the Office of the Secretary of
the Commonwealth of Massachusetts filed an administrative complaint against
Franklin Resources, Inc. and certain of its subsidiaries (the "Company")
claiming violations of the Massachusetts Uniform Securities Act ("Massachusetts
Act") with respect to an alleged arrangement to permit market timing (the "Mass.
Proceeding"). On February 17, 2004, the Company filed an answer denying all
violations of the Massachusetts Act.
U.S. SECURITIES AND EXCHANGE COMMISSION (SEC) SETTLEMENT
On August 2, 2004, the Company announced that an agreement had been reached by
the Portfolios' investment manager with the SEC that resolved the issues
resulting from the SEC's investigation of market timing activity. The SEC issued
an "order instituting administrative and cease-and-desist proceedings pursuant
to sections 203(e) and 203(k) of the Investment Advisers Act of 1940 and
sections 9(b) and 9(f) of the Investment Company Act of 1940, making findings
and imposing remedial sanctions and a cease and desist order" (the "Order"). The
SEC's Order concerns the activities of a limited number of third parties that
ended in 2000 and those that are the subject of the Mass. Proceeding described
above.
Under the terms of the SEC's Order, pursuant to which the Portfolios' investment
manager neither admits nor denies any wrongdoing, the Portfolios' investment
manager has agreed to pay $50 million, of which $20 million is a civil penalty,
to be distributed to certain fund shareholders in accordance with a plan to be
developed by an Independent Distribution Consultant. At this time, it is unclear
whether shareholders of all funds will receive distributions or whether all
shareholders of any particular fund will receive distributions. The SEC Order
also requires the Portfolios' investment manager to, among other things, enhance
and periodically review compliance policies and procedures.
OTHER GOVERNMENTAL INVESTIGATIONS
As part of ongoing investigations by the SEC, the U.S. Attorney for the Northern
District of California, the New York Attorney General, the California Attorney
General, the U.S. Attorney for the District of Massachusetts, the Florida
Department of Financial Services and the Commissioner of Securities, the West
Virginia Attorney General, the Vermont Department of Banking, Insurance,
Securities, and Health Care Administration and the National Association of
Securities Dealers, relating to certain practices in the mutual fund industry,
including late trading, market timing and payments to securities dealers who
sell fund shares, the Company and its subsidiaries, as well as certain current
or former executives and employees of the Company, have received requests for
information and/or subpoenas to testify or produce documents. The Company has
been providing documents and information in response to these requests and
subpoenas. In addition, the Company has responded to requests for similar kinds
of information from regulatory authorities in some of the foreign countries
where the Company conducts its global asset management business.
Annual Report | 33
THE MONEY MARKET PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. REGULATORY MATTERS (CONTINUED)
OTHER GOVERNMENTAL INVESTIGATIONS (CONTINUED)
The Staff of the SEC has also informed the Company that it is considering
recommending a civil action or proceeding against the Portfolios' investment
manager and the Portfolios' principal underwriter concerning payments to
securities dealers who sell fund shares (commonly referred to as "revenue
sharing"). The staff of the California Attorney General's Office (CAGO) also has
advised the Company that it is authorized to bring a civil action against
Franklin Resources, Inc. and the Portfolios' principal underwriter arising from
the same events. Even though the Company currently believes that the charges the
SEC staff and CAGO staff are contemplating are unwarranted, it also believes
that it is in the best interest of the Company and fund shareholders to resolve
these issues voluntarily, to the extent the Company can reasonably do so.
OTHER LEGAL PROCEEDINGS
The Company, in addition to other entities within Franklin Templeton
Investments, including certain of its subsidiaries, other funds, and current and
former officers, employees, and directors have been named in multiple lawsuits
in different federal courts in Nevada, California, Illinois, New York and
Florida, alleging violations of various federal securities laws and seeking,
among other things, monetary damages and costs. Specifically, the lawsuits claim
breach of duty with respect to alleged arrangements to permit market timing
and/or late trading activity, or breach of duty with respect to the valuation of
the portfolio securities of certain funds managed by Company subsidiaries,
resulting in alleged market timing activity. The majority of these lawsuits
duplicate, in whole or in part, the allegations asserted in the Mass. Proceeding
detailed above. The lawsuits are styled as class actions or derivative actions
on behalf of either the named funds or the Company.
In addition, the Company and its subsidiaries, as well as certain current and
former officers, employees, and directors have been named in multiple lawsuits
alleging violations of various securities laws and pendent state law claims
relating to the disclosure of directed brokerage payments and/or payment of
allegedly excessive commissions and advisory fees. These lawsuits are styled as
class actions and derivative actions.
The Company's management strongly believes that the claims made in each of these
lawsuits are without merit and intends to vigorously defend against them.
The Company cannot predict with certainty the eventual outcome of the foregoing
Mass. Proceeding, other governmental investigations or other legal proceedings.
The impact, if any, of these matters on the Trust is uncertain at this time. If
the Company determines that it bears responsibility for any unlawful or
inappropriate conduct that caused losses to the Trust, it is committed to making
the Trust or its shareholders whole, as appropriate.
34 | Annual Report
THE MONEY MARKET PORTFOLIOS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF THE MONEY MARKET PORTFOLIOS
In our opinion, the accompanying statements of assets and liabilities, including
the statements of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of each of the portfolios constituting
The Money Market Portfolios (hereafter referred to as the "Portfolios") at June
30, 2004, the results of each of their operations for the year then ended, the
changes in each of their net assets for each of the two years in the period then
ended and the financial highlights for each of the five years in the period then
ended, in conformity with accounting principles generally accepted in the United
States of America. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Portfolios' management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included confirmation
of securities at June 30, 2004 by correspondence with the custodian, provide a
reasonable basis for our opinion.
PricewaterhouseCoopers LLP
San Francisco, California
August 11, 2004
Annual Report | 35
BOARD MEMBERS AND OFFICERS
THE MONEY MARKET PORTFOLIOS
The name, age and address of the officers and board members, as well as their
affiliations, positions held with the Trust, principal occupations during the
past five years and number of portfolios overseen in the Franklin Templeton
Investments fund complex are shown below. Each board member will serve until
that person's successor is elected and qualified.
INDEPENDENT BOARD MEMBERS
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
LENGTH OF FUND COMPLEX OVERSEEN
NAME, AGE AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------------------------------------------------------------------------------------
FRANK H. ABBOTT, III (83) Trustee Since 1992 112 None
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
President and Director, Abbott Corporation (an investment company).
- ------------------------------------------------------------------------------------------------------------------------------------
HARRIS J. ASHTON (72) Trustee Since 1992 141 Director, Bar-S Foods
One Franklin Parkway (meat packing company).
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director of various companies; and FORMERLY, Director, RBC Holdings, Inc. (bank holding company) (until 2002); and President, Chief
Executive Officer and Chairman of the Board, General Host Corporation (nursery and craft centers) (until 1998).
- -----------------------------------------------------------------------------------------------------------------------------------
ROBERT F. CARLSON (76) Trustee Since 1998 51 None
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Member and past President, Board of Administration, California Public Employees Retirement Systems (CALPERS); and FORMERLY,
member and Chairman of the Board, Sutter Community Hospitals; member, Corporate Board, Blue Shield of California; and Chief Counsel,
California Department of Transportation.
- ------------------------------------------------------------------------------------------------------------------------------------
S. JOSEPH FORTUNATO (71) Trustee Since 1992 142 None
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Attorney; and FORMERLY, member of the law firm of Pitney, Hardin, Kipp & Szuch.
- ------------------------------------------------------------------------------------------------------------------------------------
FRANK W.T. LAHAYE (75) Trustee Since 1992 114 Director, The California Center
One Franklin Parkway for Land Recycling (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).
- ------------------------------------------------------------------------------------------------------------------------------------
36 | Annual Report
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
LENGTH OF FUND COMPLEX OVERSEEN
NAME, AGE AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------------------------------------------------------------------------------------
GORDON S. MACKLIN (76) Trustee Since 1992 141 Director, White Mountains Insurance
One Franklin Parkway Group, Ltd. (holding company);
San Mateo, CA 94403-1906 Martek Biosciences Corporation;
MedImmune, Inc. (biotechnology);
and Overstock.com (Internet
services); and FORMERLY, Director,
MCI Communication Corporation
(subsequently known as MCI
WorldCom, Inc. and WorldCom, Inc.)
(communications services)
(1988-2002) and Spacehab, Inc.
(aerospace services) (1994-2003).
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Deputy Chairman, White Mountains Insurance Group, Ltd. (holding company); and FORMERLY, Chairman, White River Corporation (financial
services) (1993-1998) and Hambrecht & Quist Group (investment banking) (1987-1992); and President, National Association of
Securities Dealers, Inc. (1970-1987).
- ------------------------------------------------------------------------------------------------------------------------------------
INTERESTED BOARD MEMBERS AND OFFICERS
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
LENGTH OF FUND COMPLEX OVERSEEN
NAME, AGE AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------------------------------------------------------------------------------------
**CHARLES B. JOHNSON (71) Trustee and Trustee since 141 None
One Franklin Parkway Chairman of 1992 and Chairman
San Mateo, CA 94403-1906 the Board of the Board since
1993
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Chairman of the Board, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Vice President, Franklin Templeton
Distributors, Inc.; Director, Fiduciary Trust Company International; and officer and/or director or trustee, as the case may be, of
some of the other subsidiaries of Franklin Resources, Inc. and of 46 of the investment companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
**RUPERT H. JOHNSON, JR. (63) Trustee and Trustee since 124 None
One Franklin Parkway President and 1992 and
San Mateo, CA 94403-1906 Chief Executive President and
Officer - Chief Executive
Investment Officer -
Management Investment
Management since
2002
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice Chairman, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Vice President and Director, Franklin
Templeton Distributors, Inc.; Director, Franklin Advisers, Inc. and Franklin Investment Advisory Services, Inc.; Senior Vice
President, Franklin Advisory Services, LLC; and officer and/or director or trustee, as the case may be, of some of the other
subsidiaries of Franklin Resources, Inc. and of 49 of the investment companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
Annual Report | 37
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
LENGTH OF FUND COMPLEX OVERSEEN
NAME, AGE AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------------------------------------------------------------------------------------
HARMON E. BURNS (59) Vice President Since 1992 Not Applicable None
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice Chairman, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Vice President and Director, Franklin
Templeton Distributors, Inc.; Executive Vice President, Franklin Advisers, Inc.; Director, Franklin Investment Advisory Services,
Inc.; and officer and/or director or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and
of 49 of the investment companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
JAMES M. DAVIS (52) Chief Since July 2004 Not Applicable None
One Franklin Parkway Compliance
San Mateo, CA 94403-1906 Officer
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Officer of 51 of the investment companies in Franklin Templeton Investments; Director, Global Compliance, Franklin Resources, Inc.,
and FORMERLY, Director of Compliance, Franklin Resources, Inc. (1994-2001).
- ------------------------------------------------------------------------------------------------------------------------------------
LAURA FERGERSON (42) Treasurer Since July 2004 Not Applicable None
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Officer of 34 of the investment companies in Franklin Templeton Investments; and FORMERLY, Director and member of Audit and
Valuation Committees, Runkel Funds, Inc. (2003-2004); Assistant Treasurer of most of the investment companies in Franklin Templeton
Investments (1997-2003); and Vice President, Franklin Templeton Services, LLC (1997-2003).
- ------------------------------------------------------------------------------------------------------------------------------------
MARTIN L. FLANAGAN (44) Vice President Since 1995 Not Applicable None
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Co-President and Chief Executive Officer, Franklin Resources, Inc.; Senior Vice President and Chief Financial Officer, Franklin
Mutual Advisers, LLC; Executive Vice President, Chief Financial Officer and Director, Templeton Worldwide, Inc.; Executive Vice
President and Chief Operating Officer, Templeton Investment Counsel, LLC; President and Director, Franklin Advisers, Inc.; Executive
Vice President, Franklin Investment Advisory Services, Inc. and Franklin Templeton Investor Services, LLC; Chief Financial Officer,
Franklin Advisory Services, LLC; Chairman, Franklin Templeton Services, LLC; and officer and/or director or trustee, as the case may
be, of some of the other subsidiaries of Franklin Resources, Inc. and of 49 of the investment companies in Franklin Templeton
Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
JIMMY D. GAMBILL (56) Senior Vice Since 2002 Not Applicable None
500 East Broward Blvd. President and
Suite 2100 Chief Executive
Fort Lauderdale, FL 33394-3091 Officer -
Finance and
Administration
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
President, Franklin Templeton Services, LLC; Senior Vice President, Templeton Worldwide, Inc.; and officer of 51 of the investment
companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
38 | Annual Report
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
LENGTH OF FUND COMPLEX OVERSEEN
NAME, AGE AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------------------------------------------------------------------------------------
DAVID P. GOSS (57) Vice President Since 2000 Not Applicable None
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Associate General Counsel, Franklin Resources, Inc.; officer and director of one of the subsidiaries of Franklin Resources, Inc.;
officer of 51 of the investment companies in Franklin Templeton Investments; and FORMERLY, President, Chief Executive Officer and
Director, Property Resources Equity Trust (until 1999) and Franklin Select Realty Trust (until 2000).
- ------------------------------------------------------------------------------------------------------------------------------------
BARBARA J. GREEN (56) Vice President Since 2000 Not Applicable None
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice President, Deputy General Counsel and Secretary, Franklin Resources, Inc.; Secretary and Senior Vice President, Templeton
Worldwide, Inc.; Secretary, Franklin Advisers, Inc., Franklin Advisory Services, LLC, Franklin Investment Advisory Services, Inc.,
Franklin Mutual Advisers, LLC, Franklin Templeton Alternative Strategies, Inc., Franklin Templeton Investor Services, LLC, Franklin
Templeton Services, LLC, Franklin Templeton Distributors, Inc., Templeton Investment Counsel, LLC, and Templeton/Franklin Investment
Services, Inc.; and officer of some of the other subsidiaries of Franklin Resources, Inc. and of 51 of the investment companies in
Franklin Templeton Investments; and FORMERLY, Deputy Director, Division of Investment Management, Executive Assistant and Senior
Advisor to the Chairman, Counselor to the Chairman, Special Counsel and Attorney Fellow, U.S. Securities and Exchange Commission
(1986-1995); Attorney, Rogers & Wells (until 1986); and Judicial Clerk, U.S. District Court (District of Massachusetts) (until
1979).
- ------------------------------------------------------------------------------------------------------------------------------------
MICHAEL O. MAGDOL (67) Vice President - Since 2002 Not Applicable Director, FTI Banque, Arch
600 Fifth Avenue AML Compliance Chemicals, Inc. and Lingnan
Rockefeller Center Foundation.
New York, NY 10020-2302
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice Chairman, Chief Banking Officer and Director, Fiduciary Trust Company International; and officer and/or director, as the case
may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 48 of the investment companies in Franklin Templeton
Investments.
- -----------------------------------------------------------------------------------------------------------------------------------
Annual Report | 39
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
LENGTH OF FUND COMPLEX OVERSEEN
NAME, AGE AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------------------------------------------------------------------------------------
Murray L. Simpson (67) Vice President Since 2000 Not Applicable None
One Franklin Parkway and Secretary
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Executive Vice President and General Counsel, Franklin Resources, Inc.; officer and/or director, as the case may be, of some of the
subsidiaries of Franklin Resources, Inc. and of 51 of the investment companies in Franklin Templeton Investments; and formerly,
Chief Executive Officer and Managing Director, Templeton Franklin Investment Services (Asia) Limited (until 2000); and Director,
Templeton Asset Management Ltd. (until 1999).
- ------------------------------------------------------------------------------------------------------------------------------------
GALEN G. VETTER (52) Chief Financial Since May 2004 Not Applicable None
500 East Broward Blvd. Officer
Suite 2100
Fort Lauderdale, FL 33394-3091
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Officer of 51 of the investment companies in Franklin Templeton Investments; Senior Vice President, Franklin Templeton Services,
LLC; and FORMERLY, Managing Director of RSM McGladrey, Inc.; and Partner of McGladrey & Pullen, LLP.
- ------------------------------------------------------------------------------------------------------------------------------------
* We base the number of portfolios on each separate series of the U.S.
registered investment companies within the Franklin Templeton Investments
fund complex. These portfolios have a common investment adviser or
affiliated investment advisers.
** Charles B. Johnson and Rupert H. Johnson, Jr. are considered to be
interested persons of the Trust under the federal securities laws due to
their positions as officers and directors and major shareholders of
Franklin Resources, Inc., which is the parent company of the Trust's
adviser and distributor. Note: Charles B. Johnson and Rupert H. Johnson,
Jr. are brothers.
THE SARBANES-OXLEY ACT OF 2002 AND RULES ADOPTED BY THE SECURITIES AND EXCHANGE
COMMISSION REQUIRE THE FUND TO DISCLOSE WHETHER THE FUND'S AUDIT COMMITTEE
INCLUDES AT LEAST ONE MEMBER WHO IS AN AUDIT COMMITTEE FINANCIAL EXPERT WITHIN
THE MEANING OF SUCH ACT AND RULES. THE FUND'S BOARD OF TRUSTEES HAS DETERMINED
THAT THERE IS AT LEAST ONE SUCH FINANCIAL EXPERT ON THE AUDIT COMMITTEE AND HAS
DESIGNATED FRANK W.T. LAHAYE AS ITS AUDIT COMMITTEE FINANCIAL EXPERT. THE BOARD
BELIEVES THAT MR. LAHAYE QUALIFIES AS SUCH AN EXPERT IN VIEW OF HIS EXTENSIVE
BUSINESS BACKGROUND AND EXPERIENCE, INCLUDING SERVICE AS PRESIDENT AND DIRECTOR
OF MCCORMICK SELPH ASSOCIATES FROM 1954 THROUGH 1965; DIRECTOR AND CHAIRMAN OF
TELEDYNE CANADA LTD. FROM 1966 THROUGH 1971; DIRECTOR AND CHAIRMAN OF
QUARTERDECK CORPORATION FROM 1982 THROUGH 1998; AND SERVICES AS A DIRECTOR OF
VARIOUS OTHER PUBLIC COMPANIES INCLUDING U.S. TELEPHONE INC. (1981-1984), FISHER
IMAGING INC. (1991-1998) AND DIGITAL TRANSMISSIONS SYSTEMS (1995-1999). IN
ADDITION, MR. LAHAYE SERVED FROM 1981 TO 2000 AS A DIRECTOR AND CHAIRMAN OF
PEREGRINE VENTURE MANAGEMENT CO., A VENTURE CAPITAL FIRM, AND HAS BEEN A MEMBER
AND CHAIRMAN OF THE FUND'S AUDIT COMMITTEE SINCE ITS INCEPTION. AS A RESULT OF
SUCH BACKGROUND AND EXPERIENCE, THE BOARD OF TRUSTEES BELIEVES THAT MR. LAHAYE
HAS ACQUIRED AN UNDERSTANDING OF GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AND
FINANCIAL STATEMENTS, THE GENERAL APPLICATION OF SUCH PRINCIPLES IN CONNECTION
WITH THE ACCOUNTING ESTIMATES, ACCRUALS AND RESERVES, AND ANALYZING AND
EVALUATING FINANCIAL STATEMENTS THAT PRESENT A BREADTH AND LEVEL OF COMPLEXITY
OF ACCOUNTING ISSUES GENERALLY COMPARABLE TO THOSE OF THE FUND, AS WELL AS AN
UNDERSTANDING OF INTERNAL CONTROLS AND PROCEDURES FOR FINANCIAL REPORTING AND AN
UNDERSTANDING OF AUDIT COMMITTEE FUNCTIONS. MR. LAHAYE IS AN INDEPENDENT TRUSTEE
AS THAT TERM IS DEFINED UNDER THE RELEVANT SECURITIES AND EXCHANGE COMMISSION
RULES AND RELEASES.
THE STATEMENT OF ADDITIONAL INFORMATION (SAI) INCLUDES ADDITIONAL INFORMATION
ABOUT THE BOARD MEMBERS AND IS AVAILABLE, WITHOUT CHARGE, UPON REQUEST.
SHAREHOLDERS MAY CALL 1-800/DIAL BEN (1-800/342-5236) TO REQUEST THE SAI.
40 | Annual Report
ITEM 2. CODE OF ETHICS.
(a) The Registrant has adopted a code of ethics that applies to its principal
executive officers and principal financial and accounting officer.
(c) N/A
(d) N/A
(f) Pursuant to Item 11(A), the Registrant is attaching as an exhibit a copy of
its code of ethics that applies to its principal executive officers and
principal financial and accounting officer.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
(a)(1) The Registrant has an audit committee financial expert serving on its
audit committee.
(2) The audit committee financial expert is Frank W. T. LaHaye and he is
"independent" as defined under the relevant Securities and Exchange Commission
Rules and Releases.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees
The aggregate fees paid to the principal accountant for professional services
rendered by the principal accountant for the audit of the registrant's annual
financial statements or for services that are normally provided by the
principal accountant in connection with statutory and regulatory filings or
engagements were $78,970 for the fiscal year ended June 30, 2004 and $43,480
for the fiscal year ended June 30, 2003.
(b) Audit-Related Fees
There were no fees paid to the principal accountant for assurance and related
services rendered by the principal accountant to the registrant that are
reasonably related to the performance of the audit of the registrant's
financial statements and are not reported under paragraph (a) of Item 4.
There were no fees paid to the principal accountant for assurance and related
services rendered by the principal accountant to the registrant's investment
adviser and any entity controlling, controlled by or under common control
with the investment adviser that provides ongoing services to the registrant
that are reasonably related to the performance of the audit of the their
financial statements.
(c) Tax Fees
There were no fees paid to the principal accountant for professional services
rendered by the principal accountant to the registrant for tax compliance,
tax advice and tax planning.
There were no fees paid to the principal accountant for professional services
rendered by the principal accountant to the registrant's investment adviser
and any entity controlling, controlled by or under common control with the
investment adviser that provides ongoing services to the registrant for tax
compliance, tax advice and tax planning.
(d) All Other Fees
The aggregate fees paid to the principal accountant for products and services
rendered by the principal accountant to the registrant not reported in
paragraphs (a)-(c) of Item 4 were $2,567 for the fiscal year ended June 30,
2004 and $0 for the fiscal year ended June 30, 2003. The services for which
these fees were paid included review of materials provided to the fund Board
in connection with the investment management contract renewal process.
The aggregate fees paid to the principal accountant for products and services
rendered by the principal accountant to the registrant's investment adviser
and any entity controlling, controlled by or under common control with the
investment adviser that provides ongoing services to the registrant not
reported in paragraphs (a)-(c) of Item 4 were $0 for the fiscal year ended
June 30, 2004 and $12,000 for the fiscal year ended June 30, 2003. The
services for which these fees were paid included a review of an ICI transfer
agent survey.
(e) (1) The registrant's audit committee is directly responsible for
approving the services to be provided by the auditors, including:
(i) pre-approval of all audit and audit related services;
(ii) pre-approval of all non-audit related services to be provided to
the Fund by the auditors;
(iii)pre-approval of all non-audit related services to be provided to
the registrant by the auditors to the registrant's investment adviser or to
any entity that controls, is controlled by or is under common control with
the registrant's investment adviser and that provides ongoing services to the
reistrant where the non-audit services relate directly to the operations or
financial reporting of the registrant; and
(iv) establishment by the audit committee, if deemed necessary or
appropriate, as an alternative to committee pre-approval of services to be
provided by the auditors, as required by paragraphs (ii) and (iii) above, of
policies and procedures to permit such services to be pre-approved by other
means, such as through establishment of guidelines or by action of a
designated member or members of the committee; provided the policies and
procedures are detailed as to the particular service and the committee is
informed of each service and such policies and procedures do not include
delegation of audit committee responsibilities, as contemplated under the
Securities Exchange Act of 1934, to management; subject, in the case of (ii)
through (iv), to any waivers, exceptions or exemptions that may be available
under applicable law or rules.
(e) (2) None of the services provided to the registrant described in
paragraphs (b)-(d) of Item 4 were pre-approved by the audit committee
pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of regulation S-X.
(f) No disclosures are required by this Item 4(f).
(g) The aggregate non-audit fees paid to the principal accountant for
services rendered by the principal accountant to the registrant and the
registrant's investment adviser and any entity controlling, controlled by or
under common control with the investment adviser that provides ongoing
services to the registrant were $2,567 for the fiscal year ended June 30,
2004 and $12,000 for the fiscal year ended June 30, 2003.
(h) No disclosures are required by this Item 4(h).
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. N/A
ITEM 6. SCHEDULE OF INVESTMENTS. N/A
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR
CLOSED-END MANAGEMENT INVESTMENT COMPANIES. N/A
ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT
INVESTMENT COMPANY AND AFFILIATED PURCHASERS. N/A
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. There have
been no changes to the procedures by which shareholders may recommend nominees
to the Registrant's Board of Trustees that would require disclosure herein.
ITEM 10. CONTROLS AND PROCEDURES.
(A) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. The Registrant maintains
disclosure controls and procedures that are designed to ensure that information
required to be disclosed in the Registrant's filings under the Securities
Exchange Act of 1934 and the Investment Company Act of 1940 is recorded,
processed, summarized and reported within the periods specified in the rules and
forms of the Securities and Exchange Commission. Such information is accumulated
and communicated to the Registrant's management, including its principal
executive officer and principal financial officer, as appropriate, to allow
timely decisions regarding required disclosure. The Registrant's management,
including the principal executive officer and the principal financial officer,
recognizes that any set of controls and procedures, no matter how well designed
and operated, can provide only reasonable assurance of achieving the desired
control objectives.
Within 90 days prior to the filing date of this Shareholder Report on Form
N-CSR, the Registrant had carried out an evaluation, under the supervision and
with the participation of the Registrant's management, including the
Registrant's principal executive officer and the Registrant's principal
financial officer, of the effectiveness of the design and operation of the
Registrant's disclosure controls and procedures. Based on such evaluation, the
Registrant's principal executive officer and principal financial officer
concluded that the Registrant's disclosure controls and procedures are
effective.
(B) CHANGES IN INTERNAL CONTROLS. There have been no significant changes in the
Registrant's internal controls or in other factors that could significantly
affect the internal controls subsequent to the date of their evaluation in
connection with the preparation of this Shareholder Report on Form N-CSR.
ITEM 11. EXHIBITS.
(A) Code of Ethics
(B) (1) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
of Jimmy D. Gambill, Chief Executive Officer - Finance and Administration, and
Galen G. Vetter, Chief Financial Officer
(B) (2) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
of Jimmy D. Gambill, Chief Executive Officer - Finance and Administration, and
Galen G. Vetter, Chief Financial Officer
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
THE MONEY MARKET PORTFOLIOS
By /S/Jimmy D. Gambill
Chief Executive Officer - Finance and Administration
Date August 31, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By /S/Jimmy D. Gambill
Chief Executive Officer - Finance and Administration
Date August 31, 2004
By /S/Galen G. Vetter
Chief Financial Officer
Date August 31, 2004