UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSRS
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-02605
---------
FRANKLIN MONEY FUND
-------------------
(Exact name of registrant as specified in charter)
ONE FRANKLIN PARKWAY, SAN MATEO, CA 94403-1906
(Address of principal executive offices) (Zip code)
CRAIG S. TYLE, ONE FRANKLIN PARKWAY, SAN MATEO, CA 94403-1906
-------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: (650) 312-2000
--------------
Date of fiscal year end: 06/30
-----
Date of reporting period: 12/31/05
--------
ITEM 1. REPORTS TO STOCKHOLDERS.
[GRAPHIC OMITTED]
- --------------------------------------------------------------------------------
DECEMBER 31, 2005
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SEMIANNUAL REPORT AND SHAREHOLDER LETTER INCOME
- --------------------------------------------------------------------------------
WANT TO RECEIVE
THIS DOCUMENT
FASTER VIA EMAIL?
FRANKLIN MONEY FUND
Eligible shareholders can
sign up for eDelivery at
franklintempleton.com.
See inside for details.
- --------------------------------------------------------------------------------
[LOGO](R)
FRANKLIN TEMPLETON
INVESTMENTS
FRANKLIN o Templeton o Mutual Series
FRANKLIN TEMPLETON INVESTMENTS
GAIN FROM OUR PERSPECTIVE(R)
Franklin Templeton's distinct multi-manager
structure combines the specialized expertise of
three world-class investment management groups--
Franklin, Templeton and Mutual Series.
SPECIALIZED EXPERTISE Each of our portfolio management groups operates
autonomously, relying on its own research and
staying true to the unique investment disciplines
that underlie its success.
FRANKLIN. Founded in 1947, Franklin is a recognized
leader in fixed income investing and also brings
expertise in growth- and value-style U.S. equity
investing.
TEMPLETON. Founded in 1940, Templeton pioneered
international investing and, in 1954, launched what
has become the industry's oldest global fund.
Today, with offices in over 25 countries, Templeton
offers investors a truly global perspective.
MUTUAL SERIES. Founded in 1949, Mutual Series is
dedicated to a unique style of value investing,
searching aggressively for opportunity among what
it believes are undervalued stocks, as well as
arbitrage situations and distressed securities.
TRUE DIVERSIFICATION Because our management groups work independently
and adhere to different investment approaches,
Franklin, Templeton and Mutual Series funds
typically have distinct portfolios. That's why our
funds can be used to build truly diversified
allocation plans covering every major asset class.
RELIABILITY YOU CAN TRUST At Franklin Templeton Investments, we seek to
consistently provide investors with exceptional
risk-adjusted returns over the long term, as well
as the reliable, accurate and personal service that
has helped us become one of the most trusted names
in financial services.
- --------------------------------------------------------------------------------
MUTUAL FUNDS - RETIREMENT PLANS - 529 COLLEGE SAVINGS PLANS - SEPARATE ACCOUNTS
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
Not part of the semiannual report
CONTENTS
SHAREHOLDER LETTER ........................................................ 1
SEMIANNUAL REPORT
Franklin Money Fund ....................................................... 3
Performance Summary ....................................................... 5
Your Fund's Expenses ...................................................... 6
Financial Highlights and
Statement of Investments .................................................. 8
Financial Statements ...................................................... 10
Notes to Financial Statements ............................................. 13
The Money Market Portfolios ............................................... 17
Shareholder Information ................................................... 30
- --------------------------------------------------------------------------------
SEMIANNUAL REPORT
FRANKLIN MONEY FUND
YOUR FUND'S GOAL AND MAIN INVESTMENTS: Franklin Money Fund seeks to provide as
high a level of current income as is consistent with liquidity and preservation
of capital. The Fund invests all of its assets in the shares of The Money Market
Portfolio (the Portfolio), which has the same investment goal. The Portfolio, in
turn, mainly invests in high-quality, short-term U.S. dollar denominated money
market securities of domestic and foreign issuers. The Fund attempts to maintain
a stable $1.00 share price.
- --------------------------------------------------------------------------------
PERFORMANCE DATA REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE
RESULTS. INVESTMENT RETURN WILL FLUCTUATE. CURRENT PERFORMANCE MAY DIFFER FROM
FIGURES SHOWN. PLEASE VISIT FRANKLINTEMPLETON.COM OR CALL 1-800/342-5236 FOR
MOST RECENT MONTH-END PERFORMANCE.
- --------------------------------------------------------------------------------
We are pleased to bring you Franklin Money Fund's semiannual report for the
period ended December 31, 2005.
PERFORMANCE OVERVIEW
Rising short-term interest rates during the six months under review resulted in
an increase in the Fund's yield. In this environment, the Fund's seven-day
effective yield rose from 2.47% on June 30, 2005, to 3.71% on December 31, 2005.
- --------------------------------------------------------------------------------
AN INVESTMENT IN THE FUND IS NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY OR INSTITUTION. ALTHOUGH
THE FUND SEEKS TO PRESERVE THE VALUE OF YOUR INVESTMENT AT $1.00 PER SHARE, IT
IS POSSIBLE TO LOSE MONEY BY INVESTING IN THE FUND.
- --------------------------------------------------------------------------------
ECONOMIC AND MARKET OVERVIEW
The economy continued to grow at a healthy pace during the six months under
review. Over the reporting period, nonfarm payroll data, as well as other
indexes, showed growing employment. This along with other factors helped
consumer spending increase 6.25% (not adjusted for inflation) in December 2005
compared with the same month a year earlier, which supported U.S. economic
growth.(1)
Business spending also rose during the reporting period, contributing to
economic growth. Historically low interest rates continued to allow many
companies easy access to capital, and ample cash also helped some companies to
support their spending plans.
(1) Source: Bureau of Economic Analysis.
THE DOLLAR VALUE, NUMBER OF SHARES OR PRINCIPAL AMOUNT, AND NAMES OF ALL
PORTFOLIO HOLDINGS ARE LISTED IN THE FUND'S STATEMENT OF INVESTMENTS (SOI). THE
SOI BEGINS ON PAGE 9.
Semiannual Report | 3
PORTFOLIO BREAKDOWN
12/31/05
- --------------------------------------------------------------------------------
% OF TOTAL
INVESTMENTS
- --------------------------------------------------------------------------------
Certificates of Deposit 47.3%
- --------------------------------------------------------------------------------
Commercial Paper 37.0%
- --------------------------------------------------------------------------------
Repurchase Agreements 10.9%
- --------------------------------------------------------------------------------
Bank Notes 3.3%
- --------------------------------------------------------------------------------
U.S. Government Agency Securities 1.5%
- --------------------------------------------------------------------------------
Oil prices remained high during the period amid concerns about potential
long-term supply limitations in the face of expected strong growth in global
demand, especially from China and India. Despite high commodity prices,
inflation remained relatively contained for the 12 months ended December 31,
2005, as measured by the 2.2% rise for the core Consumer Price Index (CPI),
which was the same as the core CPI's 10-year average.(2) The Federal Reserve
Board (Fed) noted some economic effects due to the recent hurricanes. However,
acknowledging the economy's strength as well as potential inflationary pressure
from high energy prices, the Fed raised the federal funds target rate to 4.25%
from 3.25% during the six-month period.
The 10-year Treasury note fluctuated considerably over the six months, but
overall its yield rose from 3.94% at the beginning of the period to 4.39% on
December 31, 2005. Although core inflationary pressures appeared relatively well
contained, the U.S. economy's resilience caused some concern about future
pricing pressures. Some market participants also pointed to the upcoming change
in the Fed chairman as another possible catalyst for the 10-year Treasury's
rise, as there is some market perception that Ben Bernanke, the next Fed
chairman, may tolerate higher inflation risk. However, Mr. Bernanke is reported
to share many of retiring chairman Alan Greenspan's economic philosophies.
Furthermore, it is likely to take some time before his approach to dealing with
inflation is apparent.
INVESTMENT STRATEGY
Consistent with our strategy, we invest, through the Portfolio, mainly in
high-quality, short-term U.S. dollar denominated money market securities of
domestic and foreign issuers, including bank obligations, commercial paper,
repurchase agreements and U.S. government securities. We maintain a
dollar-weighted average portfolio maturity of 90 days or less. We seek to
provide shareholders with a high-quality, conservative investment vehicle; thus,
we do not invest the Fund's cash in derivatives or other relatively volatile
securities that we believe involve undue risk.
(2) Source: Bureau of Labor Statistics. Core CPI excludes food and energy
costs.
4 | Semiannual Report
MANAGER'S DISCUSSION
We continued to invest the Portfolio's assets in high-quality money market
securities. For example, on December 31, 2005, 79.3% of the securities purchased
for the Portfolio carried long-term credit ratings of AA or higher by
independent credit rating agencies Standard & Poor's and Moody's Investors
Service, with the balance rated A.(3)
We appreciate your support, welcome new shareholders and look forward to serving
your investment needs in the years ahead.
(3) These do not indicate ratings of the Fund.
THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS
AS OF DECEMBER 31, 2005, THE END OF THE REPORTING PERIOD. THE WAY WE IMPLEMENT
OUR MAIN INVESTMENT STRATEGIES AND THE RESULTING PORTFOLIO HOLDINGS MAY CHANGE
DEPENDING ON FACTORS SUCH AS MARKET AND ECONOMIC CONDITIONS. THESE OPINIONS MAY
NOT BE RELIED UPON AS INVESTMENT ADVICE OR AN OFFER FOR A PARTICULAR SECURITY.
THE INFORMATION IS NOT A COMPLETE ANALYSIS OF EVERY ASPECT OF ANY MARKET,
COUNTRY, INDUSTRY, SECURITY OR THE FUND. STATEMENTS OF FACT ARE FROM SOURCES
CONSIDERED RELIABLE, BUT THE ADVISER MAKES NO REPRESENTATION OR WARRANTY AS TO
THEIR COMPLETENESS OR ACCURACY. ALTHOUGH HISTORICAL PERFORMANCE IS NO GUARANTEE
OF FUTURE RESULTS, THESE INSIGHTS MAY HELP YOU UNDERSTAND OUR INVESTMENT
MANAGEMENT PHILOSOPHY.
PERFORMANCE SUMMARY
SYMBOL: FMFXX
12/31/05
- --------------------------------------------------------------------------------
Seven-day effective yield* 3.71%
- --------------------------------------------------------------------------------
Seven-day annualized yield 3.64%
- --------------------------------------------------------------------------------
* The seven-day effective yield assumes compounding of daily dividends.
Annualized and effective yields are for the seven-day period ended 12/31/05. The
Fund's average weighted maturity was 23 days. Yield reflects Fund expenses and
fluctuations in interest rates on Portfolio investments.
PERFORMANCE DATA REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE
RESULTS. INVESTMENT RETURN WILL FLUCTUATE. CURRENT PERFORMANCE MAY DIFFER FROM
FIGURES SHOWN. PLEASE VISIT FRANKLINTEMPLETON.COM OR CALL 1-800/342-5236 FOR
MOST RECENT MONTH-END PERFORMANCE.
Semiannual Report | 5
YOUR FUND'S EXPENSES
As a Fund shareholder, you can incur two types of costs:
o Transaction costs, including sales charges (loads) on Fund purchases and
redemption fees; and
o Ongoing Fund costs, including management fees, distribution and service
(12b-1) fees, and other Fund expenses. All mutual funds have ongoing
costs, sometimes referred to as operating expenses.
The following table shows ongoing costs of investing in the Fund and can help
you understand these costs and compare them with those of other mutual funds.
The table assumes a $1,000 investment held for the six months indicated.
ACTUAL FUND EXPENSES
The first line (Actual) of the table below provides actual account values and
expenses. The "Ending Account Value" is derived from the Fund's actual return,
which includes the effect of Fund expenses.
You can estimate the expenses you paid during the period, by following these
steps. OF COURSE, YOUR ACCOUNT VALUE AND EXPENSES WILL DIFFER FROM THOSE IN THIS
ILLUSTRATION:
1. Divide your account value by $1,000.
IF AN ACCOUNT HAD AN $8,600 VALUE, THEN $8,600 / $1,000 = 8.6.
2. Multiply the result by the number under the heading "Expenses Paid During
Period."
IF EXPENSES PAID DURING PERIOD WERE $7.50, THEN 8.6 X $7.50 = $64.50.
In this illustration, the estimated expenses paid this period are $64.50.
HYPOTHETICAL EXAMPLE FOR COMPARISON WITH OTHER FUNDS
Information in the second line (Hypothetical) of the table can help you compare
ongoing costs of investing in the Fund with those of other mutual funds. This
information may not be used to estimate the actual ending account balance or
expenses you paid during the period. The hypothetical "Ending Account Value" is
based on the Fund's actual expense ratio and an assumed 5% annual rate of return
before expenses, which does not represent the Fund's actual return. The figure
under the heading "Expenses Paid During Period" shows the hypothetical expenses
your account would have incurred under this scenario. You can compare this
figure with the 5% hypothetical examples that appear in shareholder reports of
other funds.
6 | Semiannual Report
YOUR FUND'S EXPENSES (CONTINUED)
PLEASE NOTE THAT EXPENSES SHOWN IN THE TABLE ARE MEANT TO HIGHLIGHT ONGOING
COSTS AND DO NOT REFLECT ANY TRANSACTION COSTS, SUCH AS SALES CHARGES OR
REDEMPTION FEES. Therefore, the second line of the table is useful in comparing
ongoing costs only, and will not help you compare total costs of owning
different funds. In addition, if transaction costs were included, your total
costs would have been higher. Please refer to the Fund prospectus for additional
information on operating expenses.
- ------------------------------------------------------------------------------------------------------------------
BEGINNING ACCOUNT ENDING ACCOUNT EXPENSES PAID DURING
VALUE 7/1/05 VALUE 12/31/05 PERIOD* 7/1/05-12/31/05
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,015.20 $3.50
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,021.73 $3.52
- ------------------------------------------------------------------------------------------------------------------
* Expenses are equal to the annualized expense ratio of 0.69%, which
includes the expenses incurred by the Portfolio, multiplied by the average
account value over the period, multiplied by 184/365 to reflect the
one-half year period.
Semiannual Report | 7
FRANKLIN MONEY FUND
FINANCIAL HIGHLIGHTS
-----------------------------------------------------------------------------------------
SIX MONTHS ENDED
DECEMBER 31, 2005 YEAR ENDED JUNE 30,
(UNAUDITED) 2005 2004 2003 2002 2001
-----------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout
the period)
Net asset value, beginning of period .... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------------------------------------------------------------------------------------
Income from investment operations -
net investment income .................. 0.015 0.015 0.004 0.010 0.021 0.054
Less distributions from net investment
income ................................. (0.015) (0.015) (0.004) (0.010) (0.021) (0.054)
--------------------------------------------------------------------------------------
Net asset value, end of period .......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======================================================================================
Total return(a) ......................... 1.52% 1.55% 0.44% 0.93% 2.16% 5.59%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ....... $1,557,181 $1,446,027 $1,615,830 $1,956,924 $2,095,945 $2,255,111
Ratios to average net assets:
Expenses(b) ............................ 0.69%(c) 0.66% 0.66% 0.62% 0.62% 0.63%
Expenses net of waiver and payments
by affiliate(b) ....................... 0.69%(c) 0.66% 0.65% 0.62% 0.61% 0.62%
Net investment income .................. 3.04%(c) 1.53% 0.44% 0.93% 2.16% 5.51%
(a) Total return does not reflect the contingent deferred sales charge, and is
not annualized for periods less than one year.
(b) The expense ratio includes the Fund's share of the Portfolio's allocated
expenses.
(c) Annualized.
8 | See notes to financial statements. | Semiannual Report
FRANKLIN MONEY FUND
STATEMENT OF INVESTMENTS, DECEMBER 31, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
SHARES VALUE
- --------------------------------------------------------------------------------
MUTUAL FUND (COST $1,559,471,151) 100.1%
The Money Market Portfolio (Note 1) ...... 1,559,471,151 1,559,471,151
OTHER ASSETS, LESS LIABILITIES (0.1)% .... (2,290,366)
---------------
NET ASSETS 100.0% ........................ $1,557,180,785
===============
Semiannual Report | See notes to financial statements. | 9
FRANKLIN MONEY FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2005 (unaudited)
Assets:
Investments in Portfolio, at value and cost (Note 1) ....... $1,559,471,151
Receivables from capital shares sold ....................... 8,382,365
--------------
Total assets ........................................ 1,567,853,516
--------------
Liabilities:
Payables:
Capital shares redeemed ................................... 9,481,200
Affiliates ................................................ 890,934
Distributions to shareholders ............................. 240,319
Accrued expenses and other liabilities ..................... 60,278
--------------
Total liabilities ................................... 10,672,731
--------------
Net assets, at value .............................. $1,557,180,785
--------------
Net assets consist of paid-in capital ....................... $1,557,180,785
==============
Shares outstanding .......................................... 1,557,214,925
==============
Net asset value per share(a) ................................ $ 1.00
==============
(a) Redemption price is equal to net asset value less contingent deferred
sales charges, if applicable.
10 | See notes to financial statements. | Semiannual Report
FRANKLIN MONEY FUND
FINANCIAL STATEMENTS (CONTINUED)
STATEMENT OF OPERATIONS
for the six months ended December 31, 2005 (unaudited)
Investment income:
Dividends from Portfolio ........................................ $26,975,160
-----------
Expenses:
Administrative fees (Note 3a) ................................... 2,221,271
Transfer agent fees (Note 3c) ................................... 1,635,648
Reports to shareholders ......................................... 69,035
Registration and filing fees .................................... 49,979
Professional fees ............................................... 12,497
Directors' fees and expenses .................................... 38,695
Other ........................................................... 26,256
-----------
Total expenses ........................................... 4,053,381
-----------
Net investment income .................................. 22,921,779
-----------
Net increase (decrease) in net assets resulting from operations .. $22,921,779
===========
Semiannual Report | See notes to financial statements. | 11
FRANKLIN MONEY FUND
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS
-------------------------------------
SIX MONTHS ENDED
DECEMBER 31, 2005 YEAR ENDED
(UNAUDITED) JUNE 30, 2005
-------------------------------------
Increase (decrease) in net assets:
Operations:
Net investment income ................................................................... $ 22,921,779 $ 23,316,443
Distribution to shareholders from net investment income ................................. (22,955,919) (23,316,443)
Capital share transactions (Note 2) ..................................................... 111,188,308 (169,803,744)
------------------------------------
Net increase (decrease) in net assets ............................................. 111,154,168 (169,803,744)
Net assets (there is no undistributed net investment income at beginning or end of period):
Beginning of period ...................................................................... 1,446,026,617 1,615,830,361
------------------------------------
End of period ............................................................................ $1,557,180,785 $1,446,026,617
====================================
12 | See notes to financial statements. | Semiannual Report
FRANKLIN MONEY FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Franklin Money Fund (the Fund) is registered under the Investment Company Act of
1940 as a diversified, open-end investment company.
The Fund invests substantially all of its assets in The Money Market Portfolio
(the Portfolio), which is registered under the Investment Company Act of 1940 as
a diversified, open-end investment company. The accounting policies of the
Portfolio, including the Portfolio's security valuation policies, will directly
affect the recorded value of the Fund's investment in the Portfolio. The
financial statements of the Portfolio, including the Statement of Investments,
are included elsewhere in this report and should be read in conjunction with the
Fund's financial statements.
The following summarizes the Fund's significant accounting policies.
A. SECURITY VALUATION
The Fund holds Portfolio shares that are valued at its proportionate interest in
the closing net asset value of the Portfolio. As of December 31, 2005, the Fund
owns 27.72% of the Portfolio.
B. INCOME TAXES
No provision has been made for U.S. income taxes because the Fund's policy is to
continue to qualify as a regulated investment company under the Internal Revenue
Code and to distribute to shareholders substantially all of its taxable income
and net realized gains.
C. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Income and estimated expenses are accrued daily. Dividends from net investment
income received from the Portfolio are normally declared daily. Such
distributions are reinvested in additional shares of the Fund. Distributions to
shareholders are determined according to income tax regulations (tax basis).
Distributable earnings determined on a tax basis may differ from earnings
recorded in accordance with generally accepted accounting principles. These
differences may be permanent or temporary. Permanent differences are
reclassified among capital accounts to reflect their tax character. These
reclassifications have no impact on net assets or the results of operations.
Temporary differences are not reclassified, as they may reverse in subsequent
periods.
D. ACCOUNTING ESTIMATES
The preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the amounts of income
and expenses during the reporting period. Actual results could differ from those
estimates.
Semiannual Report | 13
FRANKLIN MONEY FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
E. GUARANTEES AND INDEMNIFICATIONS
Under the Fund's organizational documents, its officers and Directors are
indemnified by the Fund against certain liabilities arising out of the
performance of their duties to the Fund. Additionally, in the normal course of
business, the Fund enters into contracts with service providers that contain
general indemnification clauses. The Fund's maximum exposure under these
arrangements is unknown as this would involve future claims that may be made
against the Fund that have not yet occurred. However, based on experience, the
Fund expects the risk of loss to be remote.
2. CAPITAL STOCK
At December 31, 2005, there were five billion shares authorized ($0.01 par
value). Transactions in the Fund's shares at $1.00 per share were as follows:
---------------------------------------
SIX MONTHS ENDED YEAR ENDED
DECEMBER 31, 2005 JUNE 30, 2005
---------------------------------------
Shares sold .................................. $ 885,241,833 $ 1,541,320,102
Shares issued in reinvestment of distributions 22,695,355 23,346,144
Shares redeemed .............................. (796,748,880) (1,734,469,990)
------------------------------------
Net increase (decrease) ...................... $ 111,188,308 $ (169,803,744)
====================================
3. TRANSACTIONS WITH AFFILIATES
Franklin Resources, Inc. is the holding company for various subsidiaries that
together are referred to as Franklin Templeton Investments. Certain officers and
directors of the Fund are also officers and/or directors of the Portfolio and of
the following subsidiaries:
- ---------------------------------------------------------------------------------------------
SUBSIDIARY AFFILIATION
- ---------------------------------------------------------------------------------------------
Franklin Advisers, Inc. (Advisers) Administrative manager
Franklin Templeton Distributors, Inc. (Distributors) Principal underwriter
Franklin Templeton Investor Services, LLC (Investor Services) Transfer agent
A. ADMINISTRATIVE FEES
The Fund pays an administrative fee to Advisers based on the Fund's average
daily net assets as follows:
- --------------------------------------------------------------------------------
ANNUALIZED FEE RATE NET ASSETS
- --------------------------------------------------------------------------------
0.455% Up to and including $100 million
0.330% Over $100 million, up to and including $250 million
0.280% In excess of $250 million
14 | Semiannual Report
FRANKLIN MONEY FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
3. TRANSACTIONS WITH AFFILIATES (CONTINUED)
B. SALES CHARGES/UNDERWRITING AGREEMENTS
Distributors has advised the Fund of the following commission transactions
related to the sales and redemptions of the Fund's shares for the period:
Contingent deferred sales charges retained .................. $46,217
C. TRANSFER AGENT FEES
The Fund paid transfer agent fees of $1,635,648, of which $991,377 was retained
by Investor Services.
4. INCOME TAXES
At December 31, 2005, the cost of investments for book and income tax purposes
was the same.
5. REGULATORY MATTERS
As part of various investigations by a number of federal, state, and foreign
regulators and governmental entities, relating to certain practices in the
mutual fund industry, including late trading, market timing and marketing
support payments to securities dealers who sell fund shares, Franklin Resources,
Inc. and certain of its subsidiaries (collectively, the "Company"), entered into
settlements with certain of those regulators.
Specifically, the Company entered into settlements with the Securities and
Exchange Commission ("SEC") concerning market timing (the "August 2, 2004 SEC
Order") and marketing support payments to securities dealers who sell fund
shares (the "December 13, 2004 SEC Order") and with the California Attorney
General's Office ("CAGO") concerning marketing support payments to securities
dealers who sell fund shares (the "CAGO Settlement"). Under the terms of the
settlements with the SEC and the CAGO, the Company retained an Independent
Distribution Consultant ("IDC") to develop a plan for distribution of the
respective settlement monies. The CAGO approved the distribution plan under the
CAGO Settlement and, in accordance with the terms and conditions of that
settlement, the monies were disbursed to the relevant funds. The Fund did not
participate in the CAGO Settlement. The SEC has not yet approved the
distribution plan pertaining to the December 13, 2004 SEC Order. When approved,
disbursements of settlement monies will be made promptly to the relevant funds,
in accordance with the terms and conditions of that order. The IDC continues to
develop the plan of distribution under the August 2, 2004 SEC Order that
resolved the SEC's market timing investigation.
Semiannual Report | 15
FRANKLIN MONEY FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
5. REGULATORY MATTERS (CONTINUED)
In addition, the Company, as well as most of the mutual funds within Franklin
Templeton Investments and certain current or former officers, directors, and/or
employees, have been named in private lawsuits (styled as shareholder class
actions, or as derivative actions on behalf of either the named funds or
Franklin Resources, Inc.) relating to the industry practices referenced above,
as well as to allegedly excessive advisory fees, commissions, and/or 12b-1 fees.
The lawsuits were filed in different courts throughout the country. Many of
those suits are now pending in a multi-district litigation in the United States
District Court for the District of Maryland.
The Company and fund management strongly believe that the claims made in each of
the private lawsuits referenced above are without merit and intend to defend
against them vigorously. The Company cannot predict with certainty the eventual
outcome of these lawsuits, nor whether they will have a material negative impact
on the Company. If it is determined that the Company bears responsibility for
any unlawful or inappropriate conduct that caused losses to the Fund, it is
committed to making the Fund or its shareholders whole, as appropriate.
16 | Semiannual Report
THE MONEY MARKET PORTFOLIOS
FINANCIAL HIGHLIGHTS
THE MONEY MARKET PORTFOLIO
----------------------------------------------------------------------------------------
SIX MONTHS ENDED
DECEMBER 31, 2005 YEAR ENDED JUNE 30,
(UNAUDITED) 2005 2004 2003 2002 2001
----------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout
the period)
Net asset value, beginning of period .... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------------------------------------------------------------------------------------
Income from investment operations -
net investment income .................. 0.018 0.020 0.009 0.014 0.026 0.059
Less distributions from net investment
income ................................. (0.018) (0.020) (0.009) (0.014) (0.026) (0.059)
-------------------------------------------------------------------------------------
Net asset value, end of period .......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
=====================================================================================
Total return(a)......................... 1.82% 2.06% 0.94% 1.41% 2.63% 6.08%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ....... $5,626,123 $5,676,479 $5,505,394 $5,331,200 $4,734,196 $4,490,919
Ratios to average net assets:
Expenses ............................... 0.16%(b) 0.16% 0.16% 0.15% 0.16% 0.16%
Expenses net of waiver and
payments by affiliate ................. 0.16%(b) 0.16% 0.15% 0.15% 0.15% 0.15%
Net investment income .................. 3.57%(b) 2.04% 0.93% 1.39% 2.56% 5.91%
(a) Total return is not annualized for periods less than one year.
(b) Annualized.
Semiannual Report | See notes to financial statements. | 17
THE MONEY MARKET PORTFOLIOS
STATEMENT OF INVESTMENTS, DECEMBER 31, 2005 (UNAUDITED)
- ----------------------------------------------------------------------------------------------------------------
THE MONEY MARKET PORTFOLIO PRINCIPAL AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------
BANK NOTES (COST $200,000,801) 3.6%
Bank of America NA, 4.29%, 1/30/06 ........................................ $ 200,000,000 $ 200,000,801
--------------
CERTIFICATES OF DEPOSIT 50.7%
Abbey National Treasury Services PLC, Stamford Branch, 4.24% - 4.29%,
1/31/06 - 2/01/06 ....................................................... 200,000,000 200,001,156
ABN AMRO Bank, N.V., Chicago Branch, 4.295%, 2/03/06 ...................... 200,000,000 200,000,858
Bank of Montreal, Chicago Branch, 4.24% - 4.28%, 1/10/06 - 1/20/06 ........ 200,000,000 200,000,761
Bank of Nova Scotia, Portland Branch, 4.24%, 1/11/06 ...................... 100,000,000 100,000,277
Banque Nationale de Paris, San Francisco Branch, 4.39%, 3/03/06 ........... 200,000,000 200,000,000
Barclay's Bank PLC, New York Branch, 4.235% - 4.39%, 1/23/06 - 2/28/06 .... 200,000,000 200,002,226
Calyon North America Inc., New York Branch, 4.38%, 2/23/06 - 2/24/06 ...... 200,000,000 200,000,000
DEPFA Bank PLC, New York Branch, 4.30%, 1/20/06 ........................... 75,000,000 75,000,197
Dexia Credit Local, New York Branch, 4.385%, 2/21/06 - 2/22/06 ............ 200,000,000 200,000,000
HBOS Treasury Services, New York Branch, 4.24%, 1/31/06 (United Kingdom) .. 175,000,000 175,001,447
Rabobank Nederland N.V., New York Branch, 4.21%, 1/04/06 - 1/05/06 ........ 200,000,000 200,000,000
Societe Generale North America, New York Branch, 4.28%, 1/24/06 - 1/27/06 . 200,000,000 200,000,000
Svenska Handelsbanken, New York Branch, 4.24% - 4.40%, 1/17/06 - 2/27/06 .. 200,000,000 200,002,014
Toronto Dominion Bank, New York Branch, 4.28%, 1/19/06 - 1/20/06 .......... 200,000,000 200,000,000
UBS AG, Stamford Branch, 4.29%, 1/26/06 ................................... 100,000,000 100,000,346
Wells Fargo Bank NA, San Francisco Branch, 4.23% - 4.30%, 1/09/06 - 1/18/06 200,000,000 200,000,000
--------------
TOTAL CERTIFICATES OF DEPOSIT (COST $2,850,009,282) ....................... 2,850,009,282
--------------
(a)COMMERCIAL PAPER 39.5%
Bank of Ireland, 1/06/06 .................................................. 200,000,000 199,883,333
Commonwealth Bank of Australia, 1/03/06 - 1/25/06 ......................... 175,000,000 174,767,028
Concentrate Manufacturing Co., 1/05/06 - 2/08/06 .......................... 189,000,000 188,324,428
DEPFA Bank PLC, 1/04/06 - 1/20/06 ......................................... 125,000,000 124,902,629
General Electric Capital Corp., 1/05/06 - 1/06/06 ......................... 200,000,000 199,892,500
Goldman Sachs Group Inc., 1/04/06 - 1/17/06 ............................... 200,000,000 199,744,126
International Nederlanden U.S., 1/23/06 - 1/26/06 ......................... 180,370,000 179,865,304
Merrill Lynch & Co Inc., 1/03/06 .......................................... 200,000,000 199,953,444
Morgan Stanley Group Inc., 1/04/06 ........................................ 59,450,000 59,429,093
National Australia Funding, 1/09/06 - 1/12/06 ............................. 200,000,000 199,775,166
Toyota Motor Credit Corp., 2/06/06 - 2/07/06 .............................. 200,000,000 199,128,056
UBS AG Finance Delaware LLC, 1/13/06 ...................................... 100,000,000 99,860,000
Westpac Banking Corp., 1/23/06 ............................................ 200,000,000 199,475,667
--------------
TOTAL COMMERCIAL PAPER (COST $2,225,000,774) .............................. 2,225,000,774
--------------
(a)U.S. GOVERNMENT AND AGENCY SECURITIES (COST $90,692,073) 1.6%
Federal Home Loan Bank, 1/03/06 ........................................... 90,709,000 90,692,073
--------------
TOTAL INVESTMENTS BEFORE REPURCHASE AGREEMENTS (COST $5,365,702,930) ...... 5,365,702,930
--------------
18 | Semiannual Report
THE MONEY MARKET PORTFOLIOS
STATEMENT OF INVESTMENTS, DECEMBER 31, 2005 (UNAUDITED) (CONTINUED)
- -----------------------------------------------------------------------------------------------------------------
THE MONEY MARKET PORTFOLIO PRINCIPAL AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------
(b)REPURCHASE AGREEMENTS 11.6%
ABN AMRO Bank, N.V., New York Branch, 4.00%, 1/03/06 (Maturity Value
$295,131,111) Collateralized by U.S. Government Agency Securities,
4.25% - 4.625%, 1/15/08 - 8/15/10 ...................................... $ 295,000,000 $ 295,000,000
Deutsche Bank Securities Inc., 3.39%, 1/03/06 (Maturity Value $32,367,187)
Collateralized by (a)U.S. Treasury Bills, 6/08/06 ....................... 32,355,000 32,355,000
Morgan Stanley & Co. Inc., 3.40%, 1/03/06 (Maturity Value $32,372,225)
Collateralized by U.S. Treasury Notes, 3.50% - 4.00%, 2/15/10 - 4/15/10 . 32,360,000 32,360,000
UBS Securities LLC, 4.00%, 1/03/06 (Maturity Value $295,131,111)
Collateralized by U.S. Government Agency Securities, 7.25%, 1/15/10 ..... 295,000,000 295,000,000
---------------
TOTAL REPURCHASE AGREEMENTS (COST $654,715,000) ........................... 654,715,000
---------------
TOTAL INVESTMENTS (COST $6,020,417,930) 107.0% ............................ 6,020,417,930
OTHER ASSETS, LESS LIABILITIES (7.0)% ..................................... (394,295,419)
---------------
NET ASSETS 100.0% ......................................................... $5,626,122,511
===============
(a) A portion or all of the security is traded on a discount basis with no
stated coupon rate.
(b) See Note 1(b) regarding repurchase agreements.
Semiannual Report | See notes to financial statements. | 19
THE MONEY MARKET PORTFOLIOS
FINANCIAL HIGHLIGHTS
THE U.S. GOVERNMENT SECURITIES MONEY MARKET PORTFOLIO
-----------------------------------------------------------------------------------
SIX MONTHS ENDED
DECEMBER 31, 2005 YEAR ENDED JUNE 30,
(UNAUDITED) 2005 2004 2003 2002 2001
-----------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period .......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------------------------------------------------------------------------------
Income from investment operations - net
investment income ............................ 0.018 0.020 0.009 0.013 0.024 0.056
Less distributions from net investment income . (0.018) (0.020) (0.009) (0.013) (0.024) (0.056)
-------------------------------------------------------------------------------
Net asset value, end of period ................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
===============================================================================
Total return(a) ............................... 1.77% 1.99% 0.87% 1.34% 2.43% 5.75%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ............. $ 97,936 $110,761 $117,815 $201,758 $226,676 $186,718
Ratios to average net assets:
Expenses ..................................... 0.17%(b) 0.17% 0.16% 0.16% 0.16% 0.16%
Expenses net of waiver and payments
by affiliate ................................ 0.15%(b) 0.15% 0.15% 0.15% 0.15% 0.15%
Net investment income ........................ 3.48%(b) 1.97% 0.87% 1.34% 2.33% 5.63%
(a) Total return is not annualized for periods less than one year.
(b) Annualized.
20 | See notes to financial statements. | Semiannual Report
THE MONEY MARKET PORTFOLIOS
STATEMENT OF INVESTMENTS, DECEMBER 31, 2005 (UNAUDITED)
- -------------------------------------------------------------------------------------------------------------------------
THE U.S. GOVERNMENT SECURITIES MONEY MARKET PORTFOLIO PRINCIPAL AMOUNT VALUE
- -------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AND AGENCY SECURITIES 6.6%
(a)U.S. Treasury Bill, 4/27/06 ........................................................ $ 2,000,000 $ 1,973,707
(a)U.S. Treasury Bill, 5/04/06 ........................................................ 2,000,000 1,971,881
U.S. Treasury Note, 2.50%, 5/31/06 ................................................. 2,500,000 2,489,346
-----------
TOTAL U.S. GOVERNMENT AND AGENCY SECURITIES (COST $6,434,934) ...................... 6,434,934
-----------
(b)REPURCHASE AGREEMENTS 93.4%
ABN AMRO Bank, N.V., New York Branch, 3.30%, 1/03/06 (Maturity Value $5,001,833)
Collateralized by (a)U.S. Treasury Bills, 4/27/06 ................................ 5,000,000 5,000,000
Banc of America Securities LLC, 3.30%, 1/03/06 (Maturity Value $5,001,833)
Collateralized by U.S. Treasury Notes, 2.50%, 9/30/06 ............................ 5,000,000 5,000,000
Barclays Capital Inc., 3.30%, 1/03/06 (Maturity Value $5,001,833)
Collateralized by U.S. Treasury Notes, 3.25%, 8/15/07 ............................ 5,000,000 5,000,000
Bear, Stearns & Co. Inc., 3.10%, 1/03/06 (Maturity Value $5,001,722)
Collateralized by U.S. Treasury Notes, 4.625%, 5/15/06 ........................... 5,000,000 5,000,000
Deutsche Bank Securities Inc., 3.39%, 1/03/06 (Maturity Value $20,752,814)
Collateralized by (a)U.S. Treasury Bills, 4/13/06 ................................ 20,745,000 20,745,000
Dresdner Kleinwort Wasserstein Securities LLC, 3.50%, 1/03/06 (Maturity Value
$10,003,889) Collateralized by U.S. Treasury Notes, 4.00%, 6/15/09 ............... 10,000,000 10,000,000
Greenwich Capital Markets Inc., 3.35%, 1/03/06 (Maturity Value $10,003,722)
Collateralized by U.S. Treasury Notes, 1.625%, 2/28/06 ........................... 10,000,000 10,000,000
Merrill Lynch Government Securities Inc., 3.38%, 1/03/06 (Maturity Value $5,001,878)
Collateralized by U.S. Treasury Notes, 2.50%, 9/30/06 ............................ 5,000,000 5,000,000
Morgan Stanley & Co. Inc., 3.40%, 1/03/06 (Maturity Value $20,752,837)
Collateralized by U.S. Treasury Notes, 3.875% - 4.00%, 4/15/10 - 7/15/10 ......... 20,745,000 20,745,000
UBS Securities LLC, 3.50%, 1/03/06 (Maturity Value $5,001,944)
Collateralized by U.S. Treasury Notes, 3.875%, 5/15/09 ........................... 5,000,000 5,000,000
-----------
TOTAL REPURCHASE AGREEMENTS (COST $91,490,000) ..................................... 91,490,000
-----------
TOTAL INVESTMENTS (COST $97,924,934) 100.0% ........................................ 97,924,934
OTHER ASSETS, LESS LIABILITIES 0.0%(c) ............................................. 11,259
-----------
NET ASSETS 100.0% .................................................................. $97,936,193
===========
(a) A portion or all of the security is traded on a discount basis with no
stated coupon rate.
(b) See Note 1(b) regarding repurchase agreements.
(c) Rounds to less than 0.05% of net assets.
Semiannual Report | See notes to financial statements. | 21
THE MONEY MARKET PORTFOLIOS
FINANCIAL STATEMENTS
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 2005 (UNAUDITED)
----------------------------------
THE U.S.
GOVERNMENT
THE SECURITIES
MONEY MARKET MONEY MARKET
PORTFOLIO PORTFOLIO
----------------------------------
Assets:
Investments in securities, at amortized cost $5,365,702,930 $ 6,434,934
Repurchase agreements, at value and cost ... 654,715,000 91,490,000
----------------------------------
Total investments ................... 6,020,417,930 97,924,934
Cash ....................................... 4,780 4,871
Interest receivable ........................ 6,442,459 22,648
----------------------------------
Total assets ........................ 6,026,865,169 97,952,453
----------------------------------
Liabilities:
Payables:
Investment securities purchased ........... 400,000,858 --
Affiliates ................................ 716,288 10,676
Distributions to shareholders ............. 8,950 32
Accrued expenses and other liabilities ..... 16,562 5,552
----------------------------------
Total liabilities ................... 400,742,658 16,260
----------------------------------
Net assets, at value .............. $5,626,122,511 $ 97,936,193
==================================
Net assets consist of paid-in capital ....... $5,626,122,511 $ 97,936,193
==================================
Shares outstanding .......................... 5,626,122,511 97,936,193
==================================
Net asset value per share ................... $1.00 $1.00
==================================
22 | See notes to financial statements. | Semiannual Report
THE MONEY MARKET PORTFOLIOS
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF OPERATIONS
for the six months ended December 31, 2005 (unaudited)
----------------------------------
THE U.S.
GOVERNMENT
THE SECURITIES
MONEY MARKET MONEY MARKET
PORTFOLIO PORTFOLIO
----------------------------------
Investment income:
Interest ..................................................... $ 105,684,459 $ 1,807,759
----------------------------------
Expenses:
Management fees (Note 3a) .................................... 4,253,003 74,807
Custodian fees (Note 4) ...................................... 55,374 779
Reports to shareholders ...................................... 4,981 1,317
Professional fees ............................................ 25,268 6,114
Other ........................................................ 84,938 1,474
----------------------------------
Total expenses ........................................ 4,423,564 84,491
Expense reductions (Note 4) ........................... (24,817) (890)
Expenses waived/paid by affiliates (Note 3c) .......... -- (8,893)
----------------------------------
Net expenses ........................................ 4,398,747 74,708
----------------------------------
Net investment income .............................. 101,285,712 1,733,051
----------------------------------
Net increase (decrease) in net assets resulting from operations $ 101,285,712 $ 1,733,051
==================================
Semiannual Report | See notes to financial statements. | 23
THE MONEY MARKET PORTFOLIOS
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS
---------------------------------------------------------------------------------
THE U.S. GOVERNMENT SECURITIES
THE MONEY MARKET PORTFOLIO MONEY MARKET PORTFOLIO
---------------------------------------------------------------------------------
SIX MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, 2005 YEAR ENDED DECEMBER 31, 2005 YEAR ENDED
(UNAUDITED) JUNE 30, 2005 (UNAUDITED) JUNE 30, 2005
---------------------------------------------------------------------------------
Increase (decrease) in net assets:
Operations:
Net investment income ........................ $ 101,285,712 $ 119,375,531 $ 1,733,051 $ 2,239,743
Net realized gain (loss) from
investments ................................ -- -- -- 190
----------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations ......... 101,285,712 119,375,531 1,733,051 2,239,933
Distributions to shareholders from net
investment income ............................ (101,285,712) (119,375,531) (1,733,051) (2,239,933)(a)
Capital share transactions (Note 2) ........... (50,356,907) 171,085,254 (12,825,205) (7,053,156)
-------------------------------------------------------------------------------
Net increase (decrease) in
net assets ........................ (50,356,907) 171,085,254 (12,825,205) (7,053,156)
Net assets (there is no undistributed net
investment income at beginning or end
of period):
Beginning of period .......................... 5,676,479,418 5,505,394,164 $ 110,761,398 117,814,554
-------------------------------------------------------------------------------
End of period ................................ $ 5,626,122,511 $ 5,676,479,418 $ 97,936,193 $ 110,761,398
===============================================================================
(a) Distributions were increased by a net gain from investments of $190.
24 | See notes to financial statements. | Semiannual Report
THE MONEY MARKET PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Money Market Portfolios (the Trust) is registered under the Investment
Company Act of 1940 as 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 following summarizes the Portfolios' significant accounting policies.
A. SECURITY VALUATION
Securities are valued at amortized cost which approximates market value. This
method involves valuing an instrument at its cost and thereafter assuming a
constant amortization to maturity of any discount or premium. All security
valuation procedures are approved by the Portfolios' Board of Trustees.
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%.
Repurchase agreements are valued at cost. At December 31, 2005, all repurchase
agreements held by the Portfolios had been entered into on December 30, 2005.
C. INCOME TAXES
No provision has been made for U.S. income taxes because each Portfolio's policy
is to continue to qualify as a regulated investment company under the Internal
Revenue Code and to distribute to shareholders substantially all of its taxable
income and net realized gains.
D. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Interest income and estimated expenses are accrued daily. Amortization of
premium and accretion of discount on debt securities are included in interest
income. Dividends from net investment income are normally declared daily and
distributed monthly. Such distributions are reinvested in additional shares of
the Portfolios. Distributions to shareholders are determined according to income
tax regulations (tax basis). Distributable earnings determined on a tax basis
may differ from earnings recorded in accordance with generally accepted
accounting principles. These differences may be permanent or temporary.
Permanent differences are reclassified among capital accounts to reflect their
tax character. These reclassifications have no impact on net assets or the
results of operations. Temporary differences are not reclassified, as they may
reverse in subsequent periods.
Semiannual Report | 25
THE MONEY MARKET PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
D. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
(CONTINUED)
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 of the
Trust. Portfolio specific expenses are charged directly to the Portfolio that
incurred the expense.
E. ACCOUNTING ESTIMATES
The preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the amounts of income
and expenses during the reporting period. Actual results could differ from those
estimates.
F. GUARANTEES AND INDEMNIFICATIONS
Under the Trust's organizational documents, its officers and trustees are
indemnified by the Trust against certain liabilities arising out of the
performance of their duties to the Trust. Additionally, in the normal course of
business, the Trust enters into contracts with service providers that contain
general indemnification clauses. The Trust's maximum exposure under these
arrangements is unknown as this would involve future claims that may be made
against the Trust that have not yet occurred. However, based on experience, the
Trust expects the risk of loss to be remote.
2. SHARES OF BENEFICIAL INTEREST
At December 31, 2005, there were an unlimited number of shares authorized ($0.01
par value). Transactions in the Portfolios' shares at $1.00 per share were as
follows:
--------------------------------------
THE
THE U.S. GOVERNMENT
MONEY MARKET SECURITIES MONEY
PORTFOLIO MARKET PORTFOLIO
--------------------------------------
Period ended December 31, 2005
Shares sold .................................. $ 3,139,751,857 $ 18,500,886
Shares issued in reinvestment of distributions 101,283,995 1,733,081
Shares redeemed .............................. (3,291,392,759) (33,059,172)
--------------------------------------
Net increase (decrease) ...................... $ (50,356,907) $ (12,825,205)
======================================
Period ended June 30, 2005
Shares sold .................................. $ 5,623,149,272 $ 52,184,664
Shares issued in reinvestment of distributions 119,380,707 2,240,711
Shares redeemed .............................. (5,571,444,725) (61,478,531)
--------------------------------------
Net increase (decrease) ...................... $ 171,085,254 $ (7,053,156)
======================================
26 | Semiannual Report
THE MONEY MARKET PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
3. TRANSACTIONS WITH AFFILIATES
Franklin Resources, Inc. is the holding company for various subsidiaries that
together are referred to as Franklin Templeton Investments. Certain officers and
trustees of the Portfolios are also officers and/or directors of the Franklin
Money Fund, the Institutional Fiduciary Trust, the Franklin Templeton Money Fund
Trust and the Franklin Federal Money Fund, and of the following subsidiaries:
- --------------------------------------------------------------------------------------
SUBSIDIARY AFFILIATION
- --------------------------------------------------------------------------------------
Franklin Advisers, Inc. (Advisers) Investment manager
Franklin Templeton Investor Services, LLC (Investor Services) Transfer agent
A. MANAGEMENT FEES
The Portfolios pay an investment management fee to Advisers of 0.15% per year of
the average daily net assets of each Portfolio.
B. TRANSFER AGENT FEES
Investor Services, under terms of an agreement, performs shareholder servicing
for the Portfolios and is not paid by the Portfolios for the services.
C. VOLUNTARY WAIVER AND EXPENSE REIMBURSEMENTS
Advisers agreed in advance to voluntarily waive a portion of management fees for
The U.S. Government Securities Money Market Portfolio, as noted in the Statement
of Operations. Total expenses waived by Advisers are not subject to
reimbursement by the Portfolio subsequent to the Portfolio's fiscal year end.
D. OTHER AFFILIATED TRANSACTIONS
At December 31, 2005, the shares of The Money Market Portfolio were owned by the
following funds:
-----------------------------------
PERCENTAGE OF
SHARES OUTSTANDING SHARES
-----------------------------------
Institutional Fiduciary Trust - Money Market Portfolio .... 3,829,069,311 68.06%
Franklin Money Fund ....................................... 1,559,471,151 27.72%
Institutional Fiduciary Trust - Franklin Cash Reserves Fund 144,730,938 2.57%
Franklin Templeton Money Fund Trust - Franklin Templeton
Money Fund ............................................... 92,851,111 1.65%
At December 31, 2005, the shares of The U.S. Government Securities Money Market
Portfolio were owned by the following fund:
-----------------------------------
PERCENTAGE OF
SHARES OUTSTANDING SHARES
-----------------------------------
Franklin Federal Money Fund .............................. 97,936,193 100.00%
Semiannual Report | 27
THE MONEY MARKET PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
4. EXPENSE OFFSET ARRANGEMENT
The Portfolios have entered into an arrangement with their custodian whereby
credits realized as a result of uninvested cash balances are used to reduce a
portion of the Portfolios' custodian expenses. During the period ended December
31, 2005, the custodian fees were reduced as noted in the Statements of
Operations.
5. INCOME TAXES
At December 31, 2005, the cost of investments for book and income tax purposes
was the same.
6. REGULATORY MATTERS
As part of various investigations by a number of federal, state, and foreign
regulators and governmental entities, relating to certain practices in the
mutual fund industry, including late trading, market timing and marketing
support payments to securities dealers who sell fund shares, Franklin Resources,
Inc. and certain of its subsidiaries (collectively, the "Company"), entered into
settlements with certain of those regulators.
Specifically, the Company entered into settlements with the Securities and
Exchange Commission ("SEC") concerning market timing (the "August 2, 2004 SEC
Order") and marketing support payments to securities dealers who sell fund
shares (the "December 13, 2004 SEC Order") and with the California Attorney
General's Office ("CAGO") concerning marketing support payments to securities
dealers who sell fund shares (the "CAGO Settlement"). Under the terms of the
settlements with the SEC and the CAGO, the Company retained an Independent
Distribution Consultant ("IDC") to develop a plan for distribution of the
respective settlement monies. The CAGO approved the distribution plan under the
CAGO Settlement and, in accordance with the terms and conditions of that
settlement, the monies were disbursed to the relevant funds. The Trust did not
participate in the CAGO Settlement. The SEC has not yet approved the
distribution plan pertaining to the December 13, 2004 SEC Order. When approved,
disbursements of settlement monies will be made promptly to the relevant funds,
in accordance with the terms and conditions of that order. The IDC continues to
develop the plan of distribution under the August 2, 2004 SEC Order that
resolved the SEC's market timing investigation.
In addition, the Company, as well as most of the mutual funds within Franklin
Templeton Investments and certain current or former officers, directors, and/or
employees, have been named in private lawsuits (styled as shareholder class
actions, or as derivative actions on behalf of either the named funds or
Franklin Resources, Inc.) relating to the industry practices referenced above,
as well as to allegedly excessive advisory fees, commissions, and/or 12b-1 fees.
The lawsuits were filed in different courts throughout the country. Many of
those suits are now pending in a multi-district litigation in the United States
District Court for the District of Maryland.
28 | Semiannual Report
THE MONEY MARKET PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
6. REGULATORY MATTERS (CONTINUED)
The Company and fund management strongly believe that the claims made in each of
the private lawsuits referenced above are without merit and intend to defend
against them vigorously. The Company cannot predict with certainty the eventual
outcome of these lawsuits, nor whether they will have a material negative impact
on the Company. If it is determined that the Company bears responsibility for
any unlawful or inappropriate conduct that caused losses to the Trust, it is
committed to making the Trust or its shareholders whole, as appropriate.
Semiannual Report | 29
FRANKLIN MONEY FUND
SHAREHOLDER INFORMATION
PROXY VOTING POLICIES AND PROCEDURES
The Fund has established Proxy Voting Policies and Procedures ("Policies") that
the Fund uses to determine how to vote proxies relating to portfolio securities.
Shareholders may view the Fund's complete Policies online at
franklintempleton.com. Alternatively, shareholders may request copies of the
Policies free of charge by calling the Proxy Group collect at 1-954/847-2268 or
by sending a written request to: Franklin Templeton Companies, LLC, 500 East
Broward Boulevard, Suite 1500, Fort Lauderdale, FL 33394, Attention: Proxy
Group. Copies of the Fund's proxy voting records are also made available online
at franklintempleton.com and posted on the U.S. Securities and Exchange
Commission's website at sec.gov and reflect the most recent 12-month period
ended June 30.
QUARTERLY STATEMENT OF INVESTMENTS
The Fund files a complete statement of investments with the U.S. Securities and
Exchange Commission for the first and third quarters for each fiscal year on
Form N-Q. Shareholders may view the filed Form N-Q by visiting the Commission's
website at sec.gov. The filed form may also be viewed and copied at the
Commission's Public Reference Room in Washington, DC. Information regarding the
operations of the Public Reference Room may be obtained by calling
1-800/SEC-0330.
30 | Semiannual Report
This page intentionally left blank.
This page intentionally left blank.
LITERATURE REQUEST
LITERATURE REQUEST. TO RECEIVE A BROCHURE AND PROSPECTUS, PLEASE CALL US AT
1-800/DIAL BEN(R) (1-800/342-5236) OR VISIT FRANKLINTEMPLETON.COM. INVESTORS
SHOULD CAREFULLY CONSIDER A FUND'S INVESTMENT GOALS, RISKS, CHARGES AND EXPENSES
BEFORE INVESTING. THE PROSPECTUS CONTAINS THIS AND OTHER INFORMATION. PLEASE
CAREFULLY READ THE PROSPECTUS BEFORE INVESTING. To ensure the highest quality of
service, we may monitor, record and access telephone calls to or from our
service departments. These calls can be identified by the presence of a regular
beeping tone.
FRANKLIN TEMPLETON INVESTMENTS
INTERNATIONAL
Mutual European Fund
Templeton China World Fund
Templeton Developing Markets Trust
Templeton Foreign Fund
Templeton Foreign Smaller Companies Fund
Templeton International (Ex EM) Fund
GLOBAL
Mutual Discovery Fund
Templeton Global Long-Short Fund
Templeton Global Opportunities Trust
Templeton Global Smaller Companies Fund
Templeton Growth Fund
Templeton World Fund
GROWTH
Franklin Aggressive Growth Fund
Franklin Capital Growth Fund
Franklin Flex Cap Growth Fund
Franklin Small-Mid Cap Growth Fund
Franklin Small Cap Growth Fund II(1)
VALUE
Franklin Balance Sheet Investment Fund(2)
Franklin Equity Income Fund
Franklin Large Cap Value Fund
Franklin MicroCap Value Fund(2)
Franklin MidCap Value Fund
Franklin Small Cap Value Fund
Mutual Beacon Fund
Mutual Qualified Fund
Mutual Recovery Fund(3)
Mutual Shares Fund
BLEND
Franklin Blue Chip Fund
Franklin Convertible Securities Fund
Franklin Growth Fund
Franklin Rising Dividends Fund
Franklin U.S. Long-Short Fund
SECTOR
Franklin Biotechnology Discovery Fund
Franklin DynaTech Fund
Franklin Global Communications Fund
Franklin Global Health Care Fund
Franklin Gold and Precious Metals Fund
Franklin Natural Resources Fund
Franklin Real Estate Securities Fund
Franklin Technology Fund
Franklin Utilities Fund
Mutual Financial Services Fund
ASSET ALLOCATION
Franklin Templeton Corefolio
Allocation Fund
Franklin Templeton Founding Funds Allocation Fund
Franklin Templeton Perspectives Allocation Fund
TARGET FUNDS
Franklin Templeton Conservative Target Fund
Franklin Templeton Growth Target Fund
Franklin Templeton Moderate Target Fund
INCOME
Franklin Adjustable U.S. Government
Securities Fund(4)
Franklin's AGE High Income Fund
Franklin Floating Rate Daily Access Fund
Franklin Income Fund
Franklin Limited Maturity
U.S. Government Securities Fund(4)
Franklin Low Duration Total Return Fund
Franklin Real Return Fund
Franklin Strategic Income Fund
Franklin Strategic Mortgage Portfolio
Franklin Templeton Hard Currency Fund
Franklin Total Return Fund
Franklin U.S. Government Securities Fund(4)
Templeton Global Bond Fund
Templeton Income Fund
TAX-FREE INCOME(5)
NATIONAL FUNDS
Double Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund(6)
LIMITED-TERM FUNDS
California Limited-Term Tax-Free Income Fund
Federal Limited-Term Tax-Free Income Fund
New York Limited-Term Tax-Free Income Fund
INTERMEDIATE-TERM FUNDS
California Intermediate-Term
Tax-Free Income Fund
Federal Intermediate-Term
Tax-Free Income Fund
New York Intermediate-Term
Tax-Free Income Fund
STATE-SPECIFIC
Alabama
Arizona
California(7)
Colorado
Connecticut
Florida(7)
Georgia
Kentucky
Louisiana
Maryland
Massachusetts(6)
Michigan(6)
Minnesota(6)
Missouri
New Jersey
New York(7)
North Carolina
Ohio(7)
Oregon
Pennsylvania
Tennessee
Virginia
INSURANCE FUNDS
Franklin Templeton Variable Insurance Products
Trust(8)
(1) The fund is closed to new investors. Existing shareholders can continue
adding to their accounts.
(2) The fund is only open to existing shareholders and select retirement
plans.
(3) The fund is a continuously offered, closed-end fund. Shares may be
purchased daily; there is no daily redemption. However, each quarter,
pending board approval, the fund will authorize the repurchase of 5%-25%
of the outstanding number of shares. Investors may tender all or a portion
of their shares during the tender period.
(4) An investment in the fund is neither insured nor guaranteed by the U.S.
government or by any other entity or institution.
(5) For investors subject to the alternative minimum tax, a small portion of
fund dividends may be taxable. Distributions of capital gains are
generally taxable.
(6) Portfolio of insured municipal securities.
(7) These funds are available in two or more variations, including long-term
portfolios, portfolios of insured securities, a high-yield portfolio (CA)
and limited-term, intermediate-term and money market portfolios (CA and
NY).
(8) The funds of the Franklin Templeton Variable Insurance Products Trust are
generally available only through insurance company variable contracts.
09/05
Not part of the semiannual report
[LOGO](R)
FRANKLIN TEMPLETON One Franklin Parkway
INVESTMENTS 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.
SEMIANNUAL REPORT AND SHAREHOLDER LETTER
FRANKLIN MONEY FUND
INVESTMENT MANAGER
Franklin Advisers, Inc.
DISTRIBUTOR
Franklin Templeton Distributors, Inc.
1-800/DIAL BEN(R)
franklintempleton.com
SHAREHOLDER SERVICES
1-800/632-2301
Authorized for distribution only when accompanied or preceded by a prospectus .
Investors should carefully consider a fund's investment goals, risks, charges
and expenses before investing. The prospectus contains this and other
information; please read it carefully before investing.
To ensure the highest quality of service, telephone calls to or from our service
departments may be monitored, recorded and accessed. These calls can be
identified by the presence of a regular beeping tone.
111 S2005 02/06
ITEM 2. CODE OF ETHICS.
(A) THE REGISTRANT HAS ADOPTED A CODE OF ETHICS THAT APPLIES TO ITS PRINCIPAL
EXECUTIVE OFFICERS AND PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER.
(C) N/A
(D) N/A
(F) PURSUANT TO ITEM 12(A)(1), THE REGISTRANT IS ATTACHING AS AN EXHIBIT A COPY
OF ITS CODE OF ETHICS THAT APPLIES TO ITS PRINCIPAL EXECUTIVE OFFICERS AND
PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
(A)(1) THE REGISTRANT HAS AN AUDIT COMMITTEE FINANCIAL EXPERT SERVING ON ITS
AUDIT COMMITTEE.
(2) THE AUDIT COMMITTEE FINANCIAL EXPERT IS FRANK W.T. LAHAYE, AND HE IS
"INDEPENDENT" AS DEFINED UNDER THE RELEVANT SECURITIES AND EXCHANGE COMMISSION
RULES AND RELEASES.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. N/A
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. N/A
ITEM 6. SCHEDULE OF INVESTMENTS. N/A
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-
END MANAGEMENT INVESTMENT COMPANIES. N/A
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. N/A
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS. N/A
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. There have been no
changes to the procedures by which shareholders may recommend nominees to the
Registrant's Board of Directors that would require disclosure herein.
ITEM 11. CONTROLS AND PROCEDURES.
(a) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. The Registrant maintains
disclosure controls and procedures that are designed to ensure that information
required to be disclosed in the Registrant's filings under the Securities
Exchange Act of 1934 and the Investment Company Act of 1940 is recorded,
processed, summarized and reported within the periods specified in the rules and
forms of the Securities and Exchange Commission. Such information is accumulated
and communicated to the Registrant's management, including its principal
executive officer and principal financial officer, as appropriate, to allow
timely decisions regarding required disclosure. The Registrant's management,
including the principal executive officer and the principal financial officer,
recognizes that any set of controls and procedures, no matter how well designed
and operated, can provide only reasonable assurance of achieving the desired
control objectives.
Within 90 days prior to the filing date of this Shareholder Report on Form
N-CSR, the Registrant had carried out an evaluation, under the supervision and
with the participation of the Registrant's management, including the
Registrant's principal executive officer and the Registrant's principal
financial officer, of the effectiveness of the design and operation of the
Registrant's disclosure controls and procedures. Based on such evaluation, the
Registrant's principal executive officer and principal financial officer
concluded that the Registrant's disclosure controls and procedures are
effective.
(B) CHANGES IN INTERNAL CONTROLS. There have been no significant changes in the
Registrant's internal controls or in other factors that could significantly
affect the internal controls subsequent to the date of their evaluation in
connection with the preparation of this Shareholder Report on Form N-CSR.
ITEM 12. EXHIBITS.
(A)(1) CODE OF ETHICS
(A)(2) CERTIFICATIONS PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
OF JIMMY D. GAMBILL, CHIEF EXECUTIVE OFFICER - FINANCE AND ADMINISTRATION, AND
GALEN G. VETTER, CHIEF FINANCIAL OFFICER
(B) CERTIFICATIONS PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 OF
JIMMY D. GAMBILL, CHIEF EXECUTIVE OFFICER - FINANCE AND ADMINISTRATION, AND
GALEN G. VETTER, CHIEF FINANCIAL OFFICER
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
FRANKLIN MONEY FUND
By /S/ JIMMY D. GAMBILL
Jimmy D. Gambill
Chief Executive Officer - Finance and Administration
Date February 21, 2006
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By /S/ JIMMY D. GAMBILL
Jimmy D. Gambill
Chief Executive Officer - Finance and Administration
Date February 21, 2006
By /S/ GALEN G. VETTER
Galen G. Vetter
Chief Financial Officer
Date February 21, 2006