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 811-3052
Franklin Federal Money Fund
(Exact name of registrant as specified in charter)
One Franklin Parkway, San Mateo, CA 94403-1906
(Address of principal executive offices) (Zip code)
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: 6/30
----
Date of reporting period: 6/30/03
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Item 1. Reports to Stockholders.
June 30, 2003
[GRAPHIC OMITTED]
ANNUAL REPORT AND SHAREHOLDER LETTER INCOME
Franklin
Federal Money Fund
Want to receive this document FASTER via email?
Eligible shareholders can sign up for eDelivery
at franklintempleton.com.
See inside for details.
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FRANKLIN(R) TEMPLETON(R)
INVESTMENTS
Franklin o Templeton o Mutual Series
Franklin Templeton Investments
GAIN FROM OUR PERSPECTIVE
Franklin Templeton's distinct multi-manager structure combines the specialized
expertise of three world-class investment management groups--Franklin, Templeton
and Mutual Series.
SPECIALIZED EXPERTISE
Each of our portfolio management groups operates autonomously, relying on its
own research and staying true to the unique investment disciplines that underlie
its success.
FRANKLIN. Founded in 1947, Franklin is a leader in tax-free investing and a
driving force in fixed income investing around the globe. They also bring
expertise in growth- and value-style U.S. equity investing.
TEMPLETON. Founded in 1940, Templeton pioneered international investing and, in
1954, launched what has become the industry's oldest global fund. Today, with
research offices in over 25 countries, they offer investors the broadest global
reach in the industry.
MUTUAL SERIES. Established in 1949, Mutual Series is dedicated to a unique style
of value investing, searching aggressively for opportunity among undervalued
stocks, arbitrage situations and distressed companies.
TRUE DIVERSIFICATION
Because our management groups work independently and adhere to distinctly
different investment approaches, Franklin, Templeton and Mutual Series funds
typically have a low overlap of securities. That's why our funds can be used to
build truly diversified portfolios covering every major asset class.
RELIABILITY YOU CAN TRUST
At Franklin Templeton Investments, we seek to consistently provide investors
with exceptional risk-adjusted returns over the long term, as well as the
reliable account services that have helped us become one of the most trusted
names in financial services.
MUTUAL FUNDS | RETIREMENT PLANS | 529 COLLEGE SAVINGS PLANS | SEPARATE ACCOUNTS
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Not part of the annual report
Contents
SHAREHOLDER LETTER ........................................... 1
ANNUAL REPORT
Franklin Federal Money Fund .................................. 3
Performance Summary .......................................... 4
Financial Highlights &
Statement of Investments ..................................... 5
Financial Statements ......................................... 7
Notes to Financial Statements ................................ 10
Independent Auditors' Report ................................. 13
Board Members and Officers ................................... 14
- --------------------------------------------------------------------------------
Annual Report
Franklin Federal Money Fund
YOUR FUND'S GOAL AND PRIMARY INVESTMENTS: Franklin Federal Money Fund seeks to
provide a high level of current income, consistent with liquidity and
preservation of capital. The Fund invests all of its assets in the shares of The
U.S. Government Securities Money Market Portfolio (the Portfolio), which has the
same investment goal. At present, the Portfolio's policy is to limit investments
to U.S. Treasury bills, notes and bonds, and to repurchase agreements
collateralized by such securities. The Fund attempts to maintain a stable $1.00
share price.1
This annual report for Franklin Federal Money Fund covers the year ended June
30, 2003. Modest economic growth, accommodative short-term interest rates and
continued volatility characterized U.S. financial conditions during the 12-month
reporting period. Many of the themes we saw in 2002 prevailed into the first six
months of 2003. The U.S. continued to experience sluggish economic growth,
declining inflation and increasing unemployment. Heightened geopolitical
tensions in the Middle East and war in Iraq had a significant impact on fuel
commodity prices and stock market activity. On the economic front, U.S. gross
domestic product growth for the first quarter of 2003 was 1.4% annualized, the
same level as the prior quarter. This sub-optimal growth was not entirely
unexpected, given armed conflict in Iraq. Inflation continued to be muted as
energy prices came down in 2003's second quarter and pricing power remained
elusive, while unemployment crept higher toward period-end.
American consumers endured a confluence of negative events over the past few
years, including heavy stock market and job losses, a spate of corporate
scandals, terror attacks and the ensuing U.S.-led war on terrorism. Despite
these setbacks, consumer spending remained positive. As further incentive to
consumer spending, the federal government recently passed more tax cuts geared
toward income and investment.
1. An investment in the Fund is not insured or guaranteed by the U.S. government
or any other entity 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.
THE DOLLAR VALUE, NUMBER OF SHARES OR PRINCIPAL AMOUNT, AND COMPLETE LEGAL
TITLES OF ALL PORTFOLIO HOLDINGS ARE LISTED IN THE FUND'S STATEMENT OF
INVESTMENTS (SOI). THE SOI BEGINS ON PAGE 6.
Annual Report | 3
PERFORMANCE SUMMARY
6/30/03
Seven-day effective yield* 0.21%
Seven-day annualized yield 0.21%
*Seven-day effective yield assumes compounding of daily dividends.
Annualized and effective yields are for the seven-day period ended 6/30/03. The
Fund's average weighted maturity was 48 days. Yield reflects Fund expenses and
fluctuations in interest rates on portfolio investments.
Franklin Advisers, Inc., the Fund's administrator and manager of the Fund's
underlying Portfolio, has agreed in advance to waive a portion of its fees. If
the manager had not taken this action, the Portfolio's annualized and effective
yields for the period would have been lower. The fee waiver may be discontinued
at any time upon notice to the Fund's Board of Trustees.
Past performance does not guarantee future results.
The Federal Reserve Board (the Fed) expressed the opinion that the small threat
of deflation outweighed the risk of rising prices, and lowered the federal funds
target rate by a quarter-percentage point to a 45-year low of 1.00% in its June
meeting. This, the Fed's second rate cut of the reporting period, allowed
consumers to further lower their debt service costs.
This tied in nicely with one of the brightest spots in the economy, the housing
market. Existing home sales remained near record levels, new home sales set new
records, and low mortgage rates encouraged this trend while simultaneously
setting off a record wave of mortgage refinancing activity among existing
homeowners. The strong housing market helped alleviate some of the effects of
prolonged stock market weakness, and continued to play an important role in
maintaining consumption growth at period-end.
The federal funds target rate fell from 1.75% at the beginning of the reporting
period to 1.00% on June 30, 2003. Reflecting the declining interest rate
environment, the Fund's seven-day effective yield also fell, from 1.11% on June
30, 2002, to 0.21% on June 30, 2003. We continued to invest the Portfolio's
assets only in U.S. Treasury obligations and repurchase agreements backed by
U.S. Treasury securities.
We appreciate your support, welcome new shareholders and look forward to serving
your investment needs in the years ahead.
THIS DISCUSSION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS AS OF
JUNE 30, 2003, THE END OF THE REPORTING PERIOD. OUR STRATEGIES AND THE FUND'S
PORTFOLIO COMPOSITION WILL CHANGE DEPENDING ON MARKET AND ECONOMIC CONDITIONS.
THESE OPINIONS MAY NOT BE RELIED UPON AS INVESTMENT ADVICE OR AN OFFER FOR A
PARTICULAR SECURITY. THE INFORMATION IS NOT A COMPLETE ANALYSIS OF EVERY ASPECT
OF ANY MARKET, COUNTRY, INDUSTRY, SECURITY OR THE FUND. STATEMENTS OF FACT ARE
FROM SOURCES CONSIDERED RELIABLE, BUT THE ADVISOR MAKES NO REPRESENTATION OR
WARRANTY AS TO THEIR COMPLETENESS OR ACCURACY. ALTHOUGH HISTORICAL PERFORMANCE
IS NO GUARANTEE OF FUTURE RESULTS, THESE INSIGHTS MAY HELP YOU UNDERSTAND OUR
INVESTMENT MANAGEMENT PHILOSOPHY.
4 | Annual Report
Franklin Federal Money Fund
FINANCIAL HIGHLIGHTS
------------------------------------------------------------
YEAR ENDED JUNE 30,
2003 2002 2001 2000 1999
------------------------------------------------------------
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 net investment operations - net investment income ..... .007 .018 .050 .048 .042
Less distributions from net investment income ..................... (.007) (.018) (.050) (.048) (.042)
------------------------------------------------------------
Net asset value, end of year ...................................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------------------------------------------------------------
Total return a .................................................... 0.70% 1.79% 5.08% 4.87% 4.32%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) ................................... $ 125,130 $ 141,058 $ 132,916 $147,938 $ 144,387
Ratios to average net assets:
Expenses b ..................................................... .80% .77% .79% .76% .78%
Expenses excluding waiver and payments by affiliate b .......... .81% .78% .80% .77% .78%
Net investment income .......................................... .70% 1.74% 5.01% 4.74% 4.23%
aTotal return is not annualized for periods less than one year.
bThe expense ratio includes the Fund's share of the Portfolio's allocated
expenses.
Annual Report | See notes to financial statements. | 5
Franklin Federal Money Fund
STATEMENT OF INVESTMENTS, JUNE 30, 2003
- -------------------------------------------------------------------------------------------------------------------
SHARES VALUE
- -------------------------------------------------------------------------------------------------------------------
MUTUAL FUNDS (COST $125,651,937) 100.4%
The U.S. Government Securities Money Market Portfolio (Note 1) ................... 125,651,937 $ 125,651,937
OTHER ASSETS, LESS LIABILITIES (0.4)% ............................................ (521,573)
--------------
NET ASSETS 100.0% ................................................................ $ 125,130,364
==============
6 | See notes to financial statements. | Annual Report
Franklin Federal Money Fund
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2003
Assets:
Investments in securities, at value and cost ................................. $ 125,651,937
Receivables from capital shares sold ......................................... 175,399
----------------
Total assets ............................................................ 125,827,336
----------------
Liabilities:
Payables:
Capital shares redeemed .................................................... 420,038
Affiliates ................................................................. 73,038
Shareholders . ............................................................. 179,950
Other liabilities ............................................................ 23,946
----------------
Total liabilities ....................................................... 696,972
----------------
Net assets, at value ......................................................... $ 125,130,364
----------------
Shares outstanding ........................................................... 125,130,364
----------------
Net asset value per share a .................................................. $1.00
----------------
aRedemption price is equal to net asset value less any applicable contingent
deferred sales charge.
Annual Report | See notes to financial statements. | 7
Franklin Federal Money Fund
FINANCIAL STATEMENTS (CONTINUED)
STATEMENT OF OPERATIONS
for the year ended June 30, 2003
Investment income:
Dividends ........................................................ $1,870,694
----------
Expenses:
Administrative fees (Note 3) ..................................... 586,963
Transfer agent fees (Note 3) ..................................... 191,547
Reports to shareholders .......................................... 22,240
Registration and filing fees ..................................... 63,432
Professional fees ................................................ 18,903
Directors' fees and expenses ..................................... 7,020
Other ............................................................ 8,894
----------
Total expenses ................................................. 898,999
----------
Net investment income ....................................... 971,695
----------
Net increase (decrease) in net assets resulting from operations ..... $ 971,695
----------
8 | See notes to financial statements. | Annual Report
Franklin Federal Money Fund
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS
for the years ended June 30, 2003 and 2002
2003 2002
-------------------------------
Increase (decrease) in net assets:
Operations:
Net investment income ................................................................. $ 971,695 $ 2,523,218
Distributions to shareholders from net investment income ................................ (971,695) (2,523,218)
Capital share transactions (Note 2) ..................................................... (15,927,674) 8,141,764
-------------------------------
Net increase (decrease) in net assets .............................................. (15,927,674) 8,141,764
Net assets (there is no undistributed net investment income at beginning or end of year):
Beginning of year ....................................................................... 141,058,038 132,916,274
-------------------------------
End of year ............................................................................. $ 125,130,364 $ 141,058,038
-------------------------------
Annual Report | See notes to financial statements. | 9
Franklin Federal Money Fund
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Franklin Federal Money Fund (the Fund) is registered under the Investment
Company Act of 1940 as a diversified, open-end investment company. The Fund
seeks high current income consistent with preservation of capital and liquidity.
The Fund invests substantially all of its assets in The U.S. Government
Securities Money Market Portfolio (the Portfolio), which is registered under the
Investment Company Act of 1940 as a diversified, open-end investment company
having the same investment objectives as the Fund. The financial statements of
the Portfolio, including the Statement of Investments, are included elsewhere in
this report and should be read in conjunction with the Fund's financial
statements.
The following summarizes the Fund's significant accounting policies.
A. SECURITY VALUATION
The Fund holds Portfolio shares that are valued at its proportionate interest in
the net asset value of the Portfolio. As of June 30, 2003, the Fund owns 62.28%
of the Portfolio.
B. INCOME TAXES
No provision has been made for income taxes because the Fund's policy is to
qualify as a regulated investment company under the Internal Revenue Code and to
distribute substantially all of its taxable income.
C. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Income and estimated expenses are accrued daily. Dividends from net investment
income and capital gains or losses are normally declared daily. Such
distributions are reinvested in additional shares of the Fund.
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 expense during the reporting period. Actual results could differ from those
estimates.
10 | Annual Report
Franklin Federal Money Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
E. GUARANTEES AND INDEMNIFICATIONS
Under the Funds' organizational documents, its officers and directors are
indemnified against certain liability arising out of the performance of their
duties to the Funds. Additionally, in the normal course of business the Fund
enters into contracts with service providers that contain general
indemnification clauses. The Fund's maximum exposure under these arrangements is
unknown as this would involve future claims that may be made against the Fund
that have not yet occurred. However, based on experience, the Fund expects the
risk of loss to be remote.
2. CAPITAL STOCK
At June 30, 2003, there were 5 billion shares authorized (no par value).
Transactions in the Fund's shares were as follows:
Year Ended June 30,
--------------------------------
2003 2002
--------------------------------
Shares sold .......................................... $ 186,971,407 $ 289,143,451
Shares issued in reinvestment of distributions ....... 990,139 2,516,083
Shares redeemed ...................................... (203,889,220) (283,517,770)
--------------------------------
Net increase (decrease) .............................. $ (15,927,674) $ 8,141,764
--------------------------------
3. TRANSACTIONS WITH AFFILIATES
Certain officers and directors of the Fund are also officers and/or directors of
Franklin Advisers, Inc. (Advisers), Franklin/Templeton Distributors, Inc.
(Distributors), and Franklin/Templeton Investor Services, LLC (Investor
Services), the Fund's administrative manager, principal underwriter and transfer
agent, respectively, and of the Portfolio.
The Fund pays an administrative fee to Advisers based on the average net assets
of the Fund as follows:
- --------------------------------------------------------------------------------
Annualized Fee Rate Daily Net Assets
- --------------------------------------------------------------------------------
.455% First $100 million
.330% Over $100 million, up to and including $250 million
.280% In excess of $250 million
Distributors received contingent deferred sales charges for the year of $10,425.
The Fund paid transfer agent fees of $191,547 of which $141,807 was paid to
Investor Services.
Annual Report | 11
Franklin Federal Money Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. INCOME TAXES
The tax character of distributions paid during the years ended June 30, 2003 and
2002, was as follows:
------------------------
2003 2002
------------------------
Distributions paid from:
Ordinary income ............................ $ 971,695 $ 2,523,218
------------------------
At June 30, 2003, the cost of investments and undistributed ordinary income for
book and income tax purposes were the same.
12 | Annual Report
Franklin Federal Money Fund
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF FRANKLIN FEDERAL 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 Federal Money Fund (the
"Fund") at June 30, 2003, 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 periods presented, 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 auditing standards generally accepted in The United States of America,
which 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, 2003 by correspondence with the
custodian, provide a reasonable basis for our opinion expressed above.
PricewaterhouseCoopers LLP
San Francisco, California
August 5, 2003
Annual Report | 13
Board Members and Officers
FRANKLIN FEDERAL MONEY FUND
The name, age and address of the officers and board members, as well as their
affiliations, positions held with the Fund, principal occupations during the
past five years and number of portfolios overseen in the Franklin Templeton
Investments fund complex are shown below. Each board member will serve until
that person's successor is elected and qualified.
INDEPENDENT BOARD MEMBERS
- ----------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
LENGTH OF FUND COMPLEX OVERSEEN
NAME, AGE AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ----------------------------------------------------------------------------------------------------------------------------
FRANK H. ABBOTT, III (82) Director Since 1980 105 None
One Franklin Parkway
San Mateo, CA 94403-1906
- ----------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
President and Director, Abbott Corporation (an investment company); and FORMERLY, Director, MotherLode Gold Mines
Consolidated (gold mining) (until 1996) and Vacu-Dry Co. (food processing) (until 1996).
- ----------------------------------------------------------------------------------------------------------------------------
HARRIS J. ASHTON (71) Director Since 1982 132 Director, Bar-S Foods (meat packing
One Franklin Parkway 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 (75) Director Since 1998 46 None
One Franklin Parkway
San Mateo, CA 94403-1906
- ----------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice President 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 (70) Director Since 1989 133 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 (74) Director Since 1980 105 Director, The California Center for
One Franklin Parkway 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).
- ----------------------------------------------------------------------------------------------------------------------------
14 | 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 (75) Director Since 1992 132 Director, White Mountains
One Franklin Parkway Insurance Group, Ltd. (holding
San Mateo, CA 94403-1906 company); Martek Biosciences
Corporation; MedImmune, Inc.
(biotechnology); Overstock.com
(Internet services); and Spacehab,
Inc. (aerospace services); and
FORMERLY, Director, MCI
Communication Corporation
(subsequently known as MCI
WorldCom, Inc. and WorldCom, Inc.)
(communications services)
(1988-2002).
- --------------------------------------------------------------------------------------------------------------------------
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 (70) Director and Director since 132 None
One Franklin Parkway Chairman of 1980 and
San Mateo, CA 94403-1906 the Board Chairman of the
Board since 1993
- --------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Chairman of the Board, Chief Executive Officer, 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 45 of the investment companies
in Franklin Templeton Investments.
- --------------------------------------------------------------------------------------------------------------------------
**RUPERT H. JOHNSON, JR. (62) Director and Director since 115 None
One Franklin Parkway President and 1980, President
San Mateo, CA 94403-1906 Chief since 1993 and
Executive Chief 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.; 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 48 of the investment companies in Franklin
Templeton Investments.
- --------------------------------------------------------------------------------------------------------------------------
Annual Report | 15
- ---------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
LENGTH OF FUND COMPLEX OVERSEEN
NAME, AGE AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ---------------------------------------------------------------------------------------------------------------------------
**WILLIAM J. LIPPMAN (78) Director Since 1994 17 None
One Parker Plaza, 9th Floor
Fort Lee, NJ 07024
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Vice President, Franklin Resources, Inc. and Franklin Private Client Group, Inc.; 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 seven of the investment companies in Franklin Templeton Investments.
- ---------------------------------------------------------------------------------------------------------------------------
HARMON E. BURNS (58) Vice President Since 1986 Not Applicable None
One Franklin Parkway
San Mateo, CA 94403-1906
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice Chairman, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Vice President and Director,
Franklin Templeton Distributors, Inc.; Executive Vice President, Franklin Advisers, Inc.; Director, Franklin Investment
Advisory Services, Inc.; and officer and/or director or trustee, as the case may be, of some of the other subsidiaries
of Franklin Resources, Inc. and of 48 of the investment companies in Franklin Templeton Investments.
- ---------------------------------------------------------------------------------------------------------------------------
MARTIN L. FLANAGAN (43) Vice President Since 1995 Not Applicable None
One Franklin Parkway
San Mateo, CA 94403-1906
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
President, 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 of some of the other subsidiaries of Franklin Resources, Inc. and of 49 of the investment companies in Franklin
Templeton Investments.
- ---------------------------------------------------------------------------------------------------------------------------
JIMMY D. GAMBILL (55) 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.
- ---------------------------------------------------------------------------------------------------------------------------
DAVID P. GOSS (56) 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).
- ---------------------------------------------------------------------------------------------------------------------------
16 | Annual Report
- ---------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
LENGTH OF FUND COMPLEX OVERSEEN
NAME, AGE AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ---------------------------------------------------------------------------------------------------------------------------
BARBARA J. GREEN (55) Vice President Since 2000 Not Applicable None
One Franklin Parkway
San Mateo, CA 94403-1906
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice President and Deputy General Counsel, Franklin Resources, Inc.; Senior Vice President, Templeton Worldwide, Inc.;
officer of one 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 (66) Vice President Since 2002 Not Applicable Director, FTI Banque, Arch
600 Fifth Avenue -AML Chemicals, Inc. and Lingnan
Rockefeller Center Compliance Foundation.
New York, NY 10048-0772
- --------------------------------------------------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------------------------------------------------
KIMBERLEY H. MONASTERIO (39) Treasurer and Treasurer since Not Applicable None
One Franklin Parkway Chief Financial 2000 and Chief
San Mateo, CA 94403-1906 Officer Financial Officer
since 2002
- --------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Vice President, Franklin Templeton Services, LLC; and officer of 51 of
the investment companies in Franklin Templeton Investments.
- --------------------------------------------------------------------------------------------------------------------------
MURRAY L. SIMPSON (66) 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).
- --------------------------------------------------------------------------------------------------------------------------
*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 interested
persons of the Fund under the federal securities laws due to their positions as
officers and directors and major shareholders of Franklin Resources Inc.
(Resources), which is the parent company of the Fund's adviser and distributor.
William J. Lippman is considered an interested person of the Fund under the
federal securities laws due to his position as an officer of Resources, which
is the parent company of the Fund's adviser and distributor.
Note: Charles B. Johnson and Rupert H. Johnson, Jr. are brothers.
THE STATEMENT OF ADDITIONAL INFORMATION (SAI) INCLUDES ADDITIONAL INFORMATION
ABOUT THE BOARD MEMBERS AND IS AVAILABLE, WITHOUT CHARGE, UPON REQUEST.
SHAREHOLDERS MAY CALL 1-800/DIAL BEN (1-800/342-5236) TO REQUEST THE SAI.
Annual Report | 17
The Money Market Portfolios
FINANCIAL HIGHLIGHTS
THE MONEY MARKET PORTFOLIO
-------------------------------------------------------------------
YEAR ENDED JUNE 30,
-------------------------------------------------------------------
2003 2002 2001 2000 1999
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 ................................................ .014 .026 .059 .056 .051
Less distributions from net investment income .......... (.014) (.026) (.059) (.056) (.051)
-------------------------------------------------------------------
Net asset value, end of year ........................... $1.00 $1.00 $1.00 $1.00 $1.00
-------------------------------------------------------------------
Total return a ......................................... 1.41% 2.63% 6.08% 5.75% 5.18%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) ........................ $5,331,200 $4,734,196 $4,490,919 $4,144,043 $3,672,404
Ratios to average net assets:
Expenses .............................................. .15% .15% .15% .15% .15%
Expenses excluding waiver by affiliate ................ .15% .16% .16% .16% .15%
Net investment income ................................. 1.39% 2.56% 5.91% 5.65% 5.04%
a Total return is not annualized for periods less than one year.
18 | See notes to financial statements. | Annual Report
The Money Market Portfolios
STATEMENT OF INVESTMENTS, JUNE 30, 2003
- ---------------------------------------------------------------------------------------------------------------------
THE MONEY MARKET PORTFOLIO PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT 34.3%
Bank of America NT & SA, Charlotte Branch, 1.24%, 10/20/03 - 10/21/03 .......... $ 100,000,000 $ 100,000,000
Bank of Nova Scotia, Portland Branch, 1.03% - 1.22%, 7/14/03 - 9/24/03 ......... 150,000,000 150,000,000
Banque Nationale De Paris, New York Branch, 1.02% - 1.35%, 9/26/03 - 4/13/04 ... 125,000,000 125,000,603
Barclays Bank PLC, New York Branch, 1.24%, 8/04/03 - 10/31/03 .................. 125,000,000 125,001,872
Bayerische Landesbank Girozen, New York Branch, 1.21% - 1.30%, 7/16/03 - 7/18/03 130,000,000 130,001,056
Credit Agricole, New York Branch, .98% - 1.34%, 9/02/03 - 10/07/03 ............. 150,000,000 150,002,221
Danske Bank AS, New York Branch, 1.22%, 7/11/03 ................................ 50,000,000 50,000,139
Dexia Bank, New York Branch, .905% - 1.20%, 7/22/03 - 8/12/03 .................. 100,000,000 100,000,728
Landesbank Hessen Thueringen Giro., New York Branch, 1.205%, 11/17/03 .......... 50,000,000 50,006,570
Lloyds Bank PLC, New York Branch, .90% - 1.19%, 9/04/03 - 9/23/03 .............. 75,000,000 75,000,450
Rabobank Nederland NV, New York Branch, 1.09%, 9/05/03 ......................... 75,000,000 75,001,371
Societe Generale North America, New York Branch, 1.24%, 7/16/03 ................ 50,000,000 49,999,988
State Street Corp., Boston Branch, 1.14%, 10/02/03 - 10/03/03 .................. 100,000,000 100,000,000
Svenska Handelsbanken, New York Branch, 1.25% - 1.29%, 7/15/03 - 7/21/03 ....... 125,000,000 125,001,353
Toronto Dominion Bank, New York Branch, 1.21%, 7/25/03 ......................... 75,000,000 75,000,499
UBS AG, Chicago Branch, .92% - 1.305%, 9/26/03 - 4/16/04 ....................... 150,000,000 150,001,205
Wells Fargo Bank, NA, San Francisco Branch, 1.03% - 1.21%, 7/23/03 - 8/29/03 ... 200,000,000 200,000,000
---------------
TOTAL CERTIFICATES OF DEPOSIT (COST $1,830,018,055) ............................ 1,830,018,055
---------------
Commercial Paper 34.8%
a American International Group I, .96% - 1.20%, 7/01/03 - 8/26/03 ................ 31,000,000 30,977,600
a ANZ (Delaware) Inc., .99% - 1.24%, 7/07/03 - 8/18/03 ........................... 125,000,000 124,918,500
a Bank of Montreal, 1.20%, 7/10/03 - 7/11/03 ..................................... 100,000,000 99,969,167
a Barclays U.S. Funding Corp., 1.04%, 8/25/03 .................................... 11,150,000 11,132,284
a Commonwealth Bank of Australia, 1.21% - 1.22%, 7/08/03 - 7/14/03 ............... 125,000,000 124,963,778
a Danske Corp., .92%, 9/19/03 .................................................... 25,000,000 24,948,889
a Den Danske Corp. Inc., 1.12% - 1.21%, 7/08/03 - 9/08/03 ........................ 75,000,000 74,933,729
a Dupont De Nemours Inc., .95% - 1.18%, 7/21/03 - 9/08/03 ........................ 113,650,000 113,512,041
a General Electric Capital Corp., .91% - 1.26%, 7/23/03 - 9/30/03 ................ 165,100,000 164,776,900
a Hbos Treasury Services, .97% - 1.22%, 7/17/03 - 9/19/03 ........................ 175,000,000 174,705,306
a Internationale Ned. U.S. Funding, 1.02% - 1.23%, 7/28/03 - 9/25/03 ............. 150,000,000 149,807,847
a Merck & Co Inc., .95%, 8/20/03 ................................................. 50,000,000 49,934,028
a Novartis Finance Corp., 1.19%, 7/30/03 ......................................... 50,000,000 49,952,069
a Province of British Columbia, 1.18%, 8/13/03 ................................... 23,000,000 22,967,583
a Societe Generale NA Inc., .97% - 1.24%, 8/01/03 - 9/16/03 ...................... 110,211,000 110,058,940
a Toronto Dominion Holdings, 1.05%, 8/11/03 ...................................... 50,000,000 49,940,208
a Total Fina Elf Capital, 1.30%, 7/01/03 ......................................... 200,000,000 200,000,000
a Toyota Motor Credit Corp., .91% - 1.20%, 7/10/03 - 7/23/03 ..................... 128,297,000 128,235,395
a Westdeutsche Landesbank, .90% - 1.19%, 8/08/03 - 9/12/03 ....................... 50,000,000 49,922,972
a Westpac Capital Corp., 1.21%, 10/09/03 - 10/10/03 .............................. 100,000,000 99,662,208
---------------
Total Commercial Paper (Cost $1,855,319,444) ................................... 1,855,319,444
---------------
U.S. Government Agency Securities 21.5%
Federal Home Loan Bank, .95% - 1.165%, 7/01/03 - 8/27/03 ....................... 50,355,000 50,313,319
Federal Home Loan Mortgage Corp., 1.04% - 1.39%, 7/28/03 - 12/31/03 ............ 485,000,000 483,806,960
Federal National Mortgage Association, 1.08% - 1.26%, 7/01/03 - 10/08/03 ....... 610,778,000 609,915,681
---------------
TOTAL U.S. GOVERNMENT AGENCY SECURITIES
(COST $1,144,035,960) .......................................................... 1,144,035,960
---------------
TOTAL INVESTMENTS BEFORE REPURCHASE AGREEMENTS
(COST $4,829,373,459) .......................................................... 4,829,373,459
---------------
Annual Report | 19
The Money Market Portfolios
STATEMENT OF INVESTMENTS, JUNE 30, 2003 (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------------
THE MONEY MARKET PORTFOLIO PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS 10.3%
b ABN AMRO Bank, NV, New York Branch, 1.30%, 7/01/03
(Maturity Value $180,006,500) ...................................................... $180,000,000 $ 180,000,000
Collateralized by U.S. Government Agency Coupons
b Deutsche Bank Securities Inc., 1.07%, 7/01/03 (Maturity Value
$93,917,791) ....................................................................... 93,915,000 93,915,000
Collateralized by U.S. Treasury Notes
b Morgan Stanley & Co. Inc., 1.03%, 7/01/03 (Maturity Value
$93,917,687) ....................................................................... 93,915,000 93,915,000
Collateralized by U.S. Treasury Notes
b UBS Securities LLC, 1.25%, 7/01/03 (Maturity Value $180,006,250) ................... 180,000,000 180,000,000
Collateralized by U.S. Government Agency Coupons
----------------
TOTAL REPURCHASE AGREEMENTS (COST $547,830,000) .................................... 547,830,000
----------------
TOTAL INVESTMENTS (COST $5,377,203,459) 100.9% ..................................... 5,377,203,459
OTHER ASSETS, LESS LIABILITIES (.9)% ............................................... (46,003,746)
----------------
NET ASSETS 100.0% .................................................................. $ 5,331,199,713
----------------
aSecurities are traded on a discount basis; the rates shown are the discount
rates at the time of purchase by the Portfolio.
bSee Note 1(b) regarding repurchase agreements.
20 | 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,
2003 2002 2001 2000 1999
--------------------------------------------------------
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 ........ .013 .024 .056 .054 .049
Less distributions from net investment income .................... (.013) (.024) (.056) (.054) (.049)
--------------------------------------------------------
Net asset value, end of year ..................................... $1.00 $1.00 $1.00 $1.00 $1.00
--------------------------------------------------------
Total return a ................................................... 1.34% 2.43% 5.75% 5.48% 4.97%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) .................................. $201,758 $226,676 $186,718 $221,993 $258,458
Ratios to average net assets:
Expenses ........................................................ .15% .15% .15% .15% .15%
Expenses excluding waiver by affiliate .......................... .16% .16% .16% .16% .15%
Net investment income ........................................... 1.34% 2.33% 5.63% 5.36% 4.84%
aTotal return is not annualized for periods less than one year.
Annual Report | See notes to financial statements. | 21
The Money Market Portfolios
STATEMENT OF INVESTMENTS, JUNE 30, 2003
- --------------------------------------------------------------------------------------------------------------------------
THE U.S. GOVERNMENT SECURITIES MONEY MARKET PORTFOLIO PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------------
GOVERNMENT SECURITIES 48.5%
U.S. Treasury Bill, 7/03/03 ....................................................... $ 5,000,000 $ 4,999,707
U.S. Treasury Bill, 7/10/03 ....................................................... 5,000,000 4,998,469
U.S. Treasury Bill, 7/31/03 ....................................................... 5,000,000 4,995,146
U.S. Treasury Bill, 8/21/03 ....................................................... 5,000,000 4,992,775
U.S. Treasury Bill, 8/28/03 ....................................................... 5,000,000 4,991,139
U.S. Treasury Bill, 9/04/03 ....................................................... 10,000,000 9,980,410
U.S. Treasury Bill, 9/11/03 ....................................................... 10,000,000 9,981,600
U.S. Treasury Bill, 10/09/03 ...................................................... 10,000,000 9,968,056
U.S. Treasury Bill, 10/16/03 ...................................................... 5,000,000 4,987,517
U.S. Treasury Bill, 11/20/03 ...................................................... 5,000,000 4,979,883
U.S. Treasury Bill, 12/04/03 ...................................................... 10,000,000 9,959,592
U.S. Treasury Bill, 12/18/03 ...................................................... 5,000,000 4,978,750
U.S. Treasury Bill, 1/02/04 ....................................................... 5,000,000 4,976,363
U.S. Treasury Note, 2.75%, 9/30/03 ................................................ 5,000,000 5,016,645
U.S. Treasury Note, 3.25%, 12/31/03 ............................................... 5,000,000 5,049,707
U.S. Treasury Note, 3.38%, 4/30/04 ................................................ 3,000,000 3,052,187
---------------
Total Government Securities (Cost $97,907,946)..................................... 97,907,946
---------------
REPURCHASE AGREEMENTS 56.4%
a ABN AMRO Bank, N.V., New York Branch, 1.08%, 7/01/03
(Maturity Value $10,000,300) ...................................................... 10,000,000 10,000,000
Collateralized by U.S. Treasury Notes
a Banc of America Securities LLC, .97%, 7/01/03 (Maturity Value
$7,000,189) ....................................................................... 7,000,000 7,000,000
Collateralized by U.S. Treasury Notes
a Barclays Capital Inc., 1.08%, 7/01/03 (Maturity Value $7,000,210) ................. 7,000,000 7,000,000
Collateralized by U.S. Treasury Notes
a Bear, Stearns & Co. Inc., 1.08%, 7/01/03 (Maturity Value $7,000,210) .............. 7,000,000 7,000,000
Collateralized by U.S. Treasury Notes
a Deutsche Bank Securities Inc., 1.07%, 7/01/03 (Maturity Value
$29,395,874)....................................................................... 29,395,000 29,395,000
Collateralized by U.S. Treasury Notes
a Dresdner Kleinwort Wasserstein Securities LLC, 1.00%, 7/01/03
(Maturity Value $7,000,194) ....................................................... 7,000,000 7,000,000
Collateralized by U.S. Treasury Bonds
a Goldman, Sachs, & Co., 1.07%, 7/01/03 (Maturity Value $7,000,208) ................ 7,000,000 7,000,000
Collateralized by U.S. Treasury Bonds
a Morgan Stanley & Co. Inc., 1.03%, 7/01/03 (Maturity Value
$29,390,841) ..................................................................... 29,390,000 29,390,000
Collateralized by U.S. Treasury Notes
a UBS Securities LLC, 1.08%, 7/01/03 (Maturity Value $10,000,300) .................. 10,000,000 10,000,000
Collateralized by U.S. Treasury Bills
---------------
TOTAL REPURCHASE AGREEMENTS (COST $113,785,000) ................................... 113,785,000
---------------
TOTAL INVESTMENTS (COST $211,692,946) 104.9% ...................................... 211,692,946
OTHER ASSETS, LESS LIABILITIES (4.9%) ............................................ (9,934,917)
---------------
NET ASSETS 100.0% ................................................................. $ 201,758,029
---------------
aSee Note 1(b) regarding repurchase agreements.
22 | See notes to financial statements. | Annual Report
The Money Market Portfolios
FINANCIAL STATEMENTS
STATEMENTS OF ASSETS AND LIABILITIES
June 30, 2003
----------------------------------
THE U.S.
GOVERNMENT
THE SECURITIES
MONEY MARKET MONEY MARKET
PORTFOLIO PORTFOLIO
----------------------------------
Assets:
Investments in securities, at value and cost ....................................... $ 4,829,373,459 $ 97,907,946
Repurchase agreements, at value and cost ........................................... 547,830,000 113,785,000
Cash ............................................................................... -- 5,321
Interest receivable 3,422,596 55,391
----------------------------------
Total assets 5,380,626,055 211,753,658
Liabilities:
Payables:
Investment securities purchased ................................................... -- 9,956,213
Affiliates ........................................................................ 649,120 20,470
Funds advanced by custodian ........................................................ 48,717,550 --
Other liabilities .................................................................. 59,672 18,946
----------------------------------
Total liabilities ............................................................. 49,426,342 9,995,629
----------------------------------
Net assets, at value ................................................................ $ 5,331,199,713 $201,758,029
----------------------------------
Shares outstanding .................................................................. 5,331,199,713 201,758,029
----------------------------------
Net asset value per share ........................................................... $1.00 $1.00
----------------------------------
Annual Report | See notes to financial statements. | 23
The Money Market Portfolios
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF OPERATIONS
for the year ended June 30, 2003
------------------------------
THE U.S.
GOVERNMENT
THE SECURITIES
MONEY MARKET MONEY MARKET
PORTFOLIO PORTFOLIO
------------------------------
Investment income:
Interest ............................................................................. $ 81,056,516 $ 3,206,342
------------------------------
Expenses:
Management fees (Note 3) ............................................................. 7,877,475 322,526
Custodian fees ....................................................................... 51,156 2,206
Professional fees .................................................................... 53,677 19,963
Other ................................................................................ 83,273 3,266
------------------------------
Total expenses .................................................................. 8,065,581 347,961
Expenses waived by affiliate (Note 3) ........................................... (185,571) (25,474)
------------------------------
Net expenses ................................................................... 7,880,010 322,487
------------------------------
Net investment income ......................................................... 73,176,506 2,883,855
------------------------------
Net realized gain (loss) from investments ............................................. 19,063 --
------------------------------
Net increase (decrease) in net assets resulting from operations ....................... $ 73,195,569 $ 2,883,855
------------------------------
24 | 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, 2003 and 2002
---------------------------------------------------------------------
THE U.S. GOVERNMENT SECURITIES
THE MONEY MARKET PORTFOLIO MONEY MARKET PORTFOLIO
2003 2002 2003 2002
---------------------------------------------------------------------
Increase (decrease) in net assets:
Operations:
Net investment income ........................... $ 73,176,506 $ 125,672,808 $ 2,883,855 $ 5,015,722
Net realized gain (loss) from investments........ 19,063 83,083 -- --
---------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations .................. 73,195,569 125,755,891 2,883,855 5,015,722
Distributions to shareholders from net investment
income .......................................... (73,195,569) a (125,755,891) b (2,883,855) (5,015,722)
Capital share transactions (Note 2) .............. 597,003,871 243,276,615 (24,918,467) 39,958,367
---------------------------------------------------------------------
Net increase (decrease) in net assets........ 597,003,871 243,276,615 (24,918,467) 39,958,367
Net assets (there is no undistributed net investment
income at beginning or end of year):
Beginning of year ............................... 4,734,195,842 4,490,919,227 226,676,496 186,718,129
---------------------------------------------------------------------
End of year ..................................... $ 5,331,199,713 $4,734,195,842 $201,758,029 $ 226,676,496
---------------------------------------------------------------------
aDistributions were increased by a net realized gain from investments of
$19,063.
bDistributions were increased by a net realized gain from investments of
$83,083.
Annual Report | See notes to financial statements. | 25
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, 2003, 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.
26 | Annual Report
The Money Market Portfolios
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
E. ACCOUNTING ESTIMATES
The preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the amounts of income
and expenses during the reporting period. Actual results could differ from those
estimates.
F. GUARANTEES AND INDEMNIFICATIONS
Under the Portfolios' organizational documents, its officers and trustees are
indemnified against certain liability arising out of the performance of their
duties to the Portfolios. Additionally, in the normal course of business, the
Portfolios enter into contracts with service providers that contain general
indemnification clauses. The Portfolios' maximum exposure under these
arrangements is unknown as this would involve future claims that may be made
against the Portfolios that have not yet occurred. However, based on experience,
the Portfolios expect the risk of loss to be remote.
2. SHARES OF BENEFICIAL INTEREST
At June 30, 2003, there were an unlimited number of shares authorized ($.01 par
value). Transactions in the Portfolios' shares were as follows:
------------------------------------------
THE U.S.
GOVERNMENT
THE SECURITIES
MONEY MARKET MONEY MARKET
PORTFOLIO PORTFOLIO
------------------------------------------
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)
------------------------------------------
Year ended June 30, 2002
Shares sold ................................................... $ 7,836,706,875 $ 356,762,722
Shares issued in reinvestment of distributions ................ 125,757,515 5,017,250
Shares redeemed ............................................... (7,719,187,775) (321,821,605)
------------------------------------------
Net increase (decrease) ....................................... $ 243,276,615 $ 39,958,367
------------------------------------------
Annual Report | 27
The Money Market Portfolios
Notes to Financial Statements (continued)
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
waive management fees as noted in the Statement of Operations.
At June 30, 2003, the shares of The Money Market Portfolio were owned by the
following funds:
-----------------------------------
PERCENTAGE OF
SHARES OUTSTANDING SHARES
-----------------------------------
Institutional Fiduciary Trust - Money Market Portfolio ........... 2,998,841,506 56.25%
Franklin Money Fund .............................................. 1,959,838,113 36.76%
Institutional Fiduciary Trust - Franklin Cash Reserves Fund ...... 231,177,015 4.34%
Franklin Templeton Money Fund Trust - Franklin Templeton
Money Fund ...................................................... 141,343,079 2.65%
At June 30, 2003, the shares of The U.S. Government Securities Money Market
Portfolio were owned by the following funds:
-----------------------------------
PERCENTAGE OF
SHARES OUTSTANDING SHARES
-----------------------------------
Franklin Federal Money Fund ...................................... 125,651,937 62.28%
Institutional Fiduciary Trust - Franklin
U.S. Government Securities
Money Market Portfolio .......................................... 76,106,092 37.72%
28 | Annual Report
The Money Market Portfolios
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. INCOME TAXES
THE TAX CHARACTER OF DISTRIBUTIONS PAID DURING THE YEARS ENDED JUNE 30, 2003 AND
2002, WAS AS FOLLOWS:
---------------------------------------------------------------
THE U.S.
GOVERNMENT
THE SECURITIES
MONEY MARKET MONEY MARKET
PORTFOLIO PORTFOLIO
2003 2002 2003 2002
---------------------------------------------------------------
Distributions paid from ordinary income ........... $73,195,569 $125,755,891 $2,883,855 $5,015,722
---------------------------------------------------------------
At June 30, 2003, the cost of investments and undistributed ordinary income for
income tax purposes were as follows:
---------------------------------
THE U.S.
GOVERNMENT
THE SECURITIES
MONEY MARKET MONEY MARKET
PORTFOLIO PORTFOLIO
---------------------------------
Cost of investments ............................................... $ 5,377,203,459 $ 211,692,946
---------------------------------
Undistributed ordinary income ..................................... $ 6,843 $ --
---------------------------------
Annual Report | 29
The Money Market Portfolios
INDEPENDENT AUDITORS' REPORT
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, 2003, 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 periods presented, 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 auditing standards generally accepted in the
United States of America, which 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, 2003 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PricewaterhouseCoopers LLP
San Francisco, California
August 5, 2003
30 | Annual Report
BOARD MEMBERS AND OFFICERS
THE MONEY MARKET PORTFOLIOS
The name, age and address of the officers and board members, as well as their
affiliations, positions held with the Trust, principal occupations during the
past five years and number of portfolios overseen in the Franklin Templeton
Investments fund complex are shown below. Each board member will serve until
that person's successor is elected and qualified.
INDEPENDENT BOARD MEMBERS
- ---------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
LENGTH OF FUND COMPLEX OVERSEEN
NAME, AGE AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- --------------------------------------------------------------------------------------------------------------------------
FRANK H. ABBOTT, III (82) Trustee Since 1992 105 None
One Franklin Parkway
San Mateo, CA 94403-1906
- --------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
President and Director, Abbott Corporation (an investment company); and
FORMERLY, Director, MotherLode Gold Mines Consolidated (gold mining) (until
1996) and Vacu-Dry Co. (food processing) (until 1996).
- --------------------------------------------------------------------------------------------------------------------------
HARRIS J. ASHTON (71) Trustee Since 1992 132 Director, Bar-S Foods (meat
One Franklin Parkway packing company).
San Mateo, CA 94403-1906
- --------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director of various companies; and FORMERLY, Director, RBC Holdings, Inc. (bank
holding company) (until 2002); and President, Chief Executive Officer and
Chairman of the Board, General Host Corporation (nursery and craft centers)
(until 1998).
- --------------------------------------------------------------------------------------------------------------------------
ROBERT F. CARLSON (75) Trustee Since 1998 46 None
One Franklin Parkway
San Mateo, CA 94403-1906
- --------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice President 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 (70) Trustee Since 1992 133 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 (74) Trustee Since 1992 105 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).
- --------------------------------------------------------------------------------------------------------------------------
Annual Report | 31
- --------------------------------------------------------------------------------------------------------------------------------
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 (75) Trustee Since 1992 132 Director, White Mountains Insurance
One Franklin Parkway Group, Ltd. (holding company);
San Mateo, CA 94403-1906 Martek Biosciences Corporation;
MedImmune, Inc. (biotechnology);
Overstock.com (Internet services);
and Spacehab, Inc. (aerospace
services); and FORMERLY, Director,
MCI Communication Corporation
(subsequently known as MCI WorldCom,
Inc. and WorldCom, Inc.)
(communications services) (1988-2002).
- --------------------------------------------------------------------------------------------------------------------------------
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 (70) Trustee and Trustee since 132 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, Chief Executive Officer, 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 45 of the investment companies
in Franklin Templeton Investments.
- --------------------------------------------------------------------------------------------------------------------------
**RUPERT H. JOHNSON, JR. (62) Trustee and Trustee since 115 None
One Franklin Parkway President and 1992 and
San Mateo, CA 94403-1906 Chief President and
Executive Chief 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.; 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 48 of the investment companies in Franklin
Templeton Investments.
- --------------------------------------------------------------------------------------------------------------------------
32 | Annual Report
- ---------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
LENGTH OF FUND COMPLEX OVERSEEN
NAME, AGE AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ---------------------------------------------------------------------------------------------------------------------------
HARMON E. BURNS (58) 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 48 of the investment companies in Franklin Templeton Investments.
- --------------------------------------------------------------------------------------------------------------------------
MARTIN L. FLANAGAN (43) Vice President Since 1995 Not Applicable None
One Franklin Parkway
San Mateo, CA 94403-1906
- --------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
President, 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 of some
of the other subsidiaries of Franklin Resources, Inc. and of 49 of the
investment companies in Franklin Templeton Investments.
- --------------------------------------------------------------------------------------------------------------------------
JIMMY D. GAMBILL (55) Senior Vice Since 2002 Not Applicable None
500 East Broward Blvd. President and
Suite 2100 Chief
Fort Lauderdale, FL 33394-3091 Executive
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.
- --------------------------------------------------------------------------------------------------------------------------
DAVID P. GOSS (56) 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 (55) Vice President Since 2000 Not Applicable None
One Franklin Parkway
San Mateo, CA 94403-1906
- --------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice President and Deputy General Counsel, Franklin Resources, Inc.; Senior Vice President, Templeton Worldwide, Inc.;
officer of one 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).
- --------------------------------------------------------------------------------------------------------------------------
Annual Report | 33
- ---------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
LENGTH OF FUND COMPLEX OVERSEEN
NAME, AGE AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ---------------------------------------------------------------------------------------------------------------------------
MICHAEL O. MAGDOL (66) Vice President Since 2002 Not Applicable Director, FTI Banque, Arch
600 Fifth Avenue -AML Chemicals, Inc. and Lingnan
Rockefeller Center Compliance Foundation.
New York, NY 10048-0772
- --------------------------------------------------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------------------------------------------------
KIMBERLEY H. MONASTERIO (39) Treasurer and Treasurer since Not Applicable None
One Franklin Parkway Chief Financial 2000 and Chief
San Mateo, CA 94403-1906 Officer Financial Officer
since 2002
- --------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Vice President, Franklin Templeton Services, LLC; and officer of 51 of
the investment companies in Franklin Templeton Investments.
- --------------------------------------------------------------------------------------------------------------------------
MURRAY L. SIMPSON (66) 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).
- --------------------------------------------------------------------------------------------------------------------------
*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 interested
persons of the Fund under the federal securities laws due to their positions as
officers and directors and major shareholders of Franklin Resources Inc., which
is the parent company of the Fund's adviser and distributor.
Note: Charles B. Johnson and Rupert H. Johnson, Jr. are brothers.
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.
34 | Annual Report
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Literature Request
For a brochure and prospectus, which contains more complete information,
including charges and expenses, call Franklin Templeton Investments at
1-800/DIAL BEN(R) (1-800/342-5236). Please read the prospectus carefully before
investing or sending money. To ensure the highest quality of service, telephone
calls to or from our service departments may be monitored, recorded and
accessed. These calls can be determined by the presence of a regular beeping
tone.
FRANKLIN TEMPLETON INVESTMENTS
INTERNATIONAL
Mutual European Fund
Templeton Developing Markets Trust
Templeton Foreign Fund
Templeton Foreign Smaller Companies Fund
Templeton International (Ex EM) Fund
GLOBAL
Franklin Global Aggressive Growth Fund
Franklin Global Growth Fund
Mutual Discovery Fund
Templeton Capital Accumulator Fund
Templeton Global Long-Short Fund
Templeton Global Opportunities Trust
Templeton Global Smaller Companies Fund
Templeton Growth Fund Templeton World Fund
GROWTH
Franklin Aggressive Growth Fund
Franklin Capital Growth Fund
Franklin Flex Cap Growth Fund 1
Franklin Small-Mid Cap Growth Fund
Franklin Small Cap Growth Fund II 2
VALUE
Franklin Balance Sheet Investment Fund 3
Franklin Equity Income Fund
Franklin Large Cap Value Fund
Franklin MicroCap Value Fund 4
Franklin Small Cap Value Fund
Mutual Beacon Fund
Mutual Qualified Fund
Mutual Shares Fund
BLEND
Franklin Blue Chip Fund
Franklin Convertible Securities Fund
Franklin Growth Fund
Franklin Rising Dividends Fund
Franklin U.S. Long-Short Fund 5
SECTOR
Franklin Biotechnology Discovery Fund
Franklin DynaTech Fund
Franklin Global Communications Fund
Franklin Global Health Care Fund
Franklin Gold and Precious Metals Fund
Franklin Natural Resources Fund
Franklin Real Estate Securities Fund
Franklin Utilities Fund
Franklin Technology Fund
Mutual Financial Services Fund
ASSET ALLOCATION
Franklin Templeton Conservative Target Fund
Franklin Templeton Growth Target Fund
Franklin Templeton Moderate Target Fund
INCOME
Franklin Adjustable U.S. Government Securities Fund 6
Franklin's AGE High Income Fund
Franklin Federal Money Fund 6, 7
Franklin Floating Rate Daily Access Fund
Franklin Floating Rate Trust 8
Franklin Income Fund
Franklin Money Fund 6, 7
Franklin Short-Intermediate U.S. Government Securities Fund 6
Franklin Strategic Income Fund
Franklin Strategic Mortgage Portfolio
Franklin Templeton Hard Currency Fund
Franklin Total Return Fund
Franklin U.S. Government Securities Fund 6
Templeton Global Bond Fund
TAX-FREE INCOME 9
Double Tax-Free Income Fund
Federal Intermediate-Term Tax-Free
Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund 10
Tax-Exempt Money Fund 6, 7
STATE-SPECIFIC TAX-FREE INCOME 9
Alabama
Arizona
California 11
Colorado
Connecticut
Florida 11
Georgia
Kentucky
Louisiana
Maryland
Massachusetts 10
Michigan 10
Minnesota 10
Missouri
New Jersey
New York 11
North Carolina
Ohio 10
Oregon
Pennsylvania
Tennessee
Virginia
VARIABLE INSURANCE PRODUCTS FUNDS
Franklin Templeton Variable Insurance
Products Trust 12
1. Formerly Franklin California Growth Fund. Effective 9/1/02, the fund's name
changed and its investment criteria was modified. The fund's investment goal
remained the same.
2. The fund is closed to new investors. Existing shareholders can continue
adding to their accounts.
3. The fund is only open to existing shareholders as well as select retirement
plans.
4. Effective June 30, 2003, the fund reopened to all new investors.
5. Upon reaching approximately $350 million in assets, the fund will close to
all investors.
6. An investment in the fund is neither insured nor guaranteed by the U.S.
government or by any other entity or institution.
7. No assurance exists that the fund's $1.00 per share price will be maintained.
It is possible to lose money by investing in the fund.
8. 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.
9. For investors subject to the alternative minimum tax, a small portion of
these dividends may be taxable. Distributions of capital gains are generally
taxable.
10. Portfolio of insured municipal securities.
11. These funds are available in two or more variations, including long-term
portfolios, portfolios of insured securities, a high-yield portfolio (CA) and
intermediate-term and money market portfolios (CA and NY).
12. The funds of the Franklin Templeton Variable Insurance Products Trust are
generally available only through insurance company variable contracts.
06/03
Not part of the annual report
[LOGO OMITTED]
FRANKLIN(R) TEMPLETON(R)
INVESTMENTS
One Franklin Parkway
San Mateo, CA 94403-1906
WANT TO RECEIVE THIS DOCUMENT FASTER VIA EMAIL?
Eligible shareholders can sign up for eDelivery at franklintempleton.com. See
inside for details.
ANNUAL REPORT AND SHAREHOLDER LETTER
Franklin Federal
Money Fund
INVESTMENT MANAGER
Franklin Advisers, Inc.
DISTRIBUTOR
Franklin Templeton Distributors, Inc.
1-800/DIAL BEN(R)
franklintempleton.com
SHAREHOLDER SERVICES
1-800/632-2301
This report must be preceded or accompanied by the current Franklin Templeton
Money Fund Trust prospectus, which contains more complete information including
charges and expenses.
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.
113 A2003 08/03
Item 2. Code of Ethics. N/A
Item 3. Audit Committee Financial Expert. N/A
Item 4. Principal Accountant Fees and Services. N/A
Item 5. Audit Committee of Listed Registrants. N/A
Item 7. Disclosure of Proxy Voting Policies and Procedures for
Closed-End Management Investment Companies. N/A
Item 9. 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 10. Exhibits.
(a) N/A
(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 Kimberley H.
Monasterio, 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 Kimberley H.
Monasterio, Chief Financial Officer
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934 and the Investment Company Act of 1940, the registrant has
duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
FRANKLIN FEDERAL MONEY FUND
By /s/Jimmy D. Gambill
Chief Executive Officer - Finance and Administration
Date August 30, 2003
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 30, 2003
By /s/Kimberley H. Monasterio
Chief Financial Officer
Date August 30, 2003