-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OEltVJKRX6L/8ijyVnPlH1eQfcVWCIRhfwoNSz9D2rWFf7YLfDyLnFhznURwVT99 9JKO8u8WlzmNJao9lPp1Hw== 0000936373-03-000011.txt : 20030905 0000936373-03-000011.hdr.sgml : 20030905 20030905144707 ACCESSION NUMBER: 0000936373-03-000011 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20030630 FILED AS OF DATE: 20030905 EFFECTIVENESS DATE: 20030905 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FRANKLIN FEDERAL MONEY FUND CENTRAL INDEX KEY: 0000316403 IRS NUMBER: 942655342 STATE OF INCORPORATION: CA FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-03052 FILM NUMBER: 03883560 BUSINESS ADDRESS: STREET 1: ONE FRANKLIN PARKWAY CITY: SAN MATEO STATE: CA ZIP: 94403-1906 BUSINESS PHONE: 650-312-2000 MAIL ADDRESS: STREET 1: ONE FRANKLIN PARKWAY CITY: SAN MATEO STATE: CA ZIP: 94403-1906 FORMER COMPANY: FORMER CONFORMED NAME: FRANKLIN FEDERAL MONEY FUND INC DATE OF NAME CHANGE: 19810701 FORMER COMPANY: FORMER CONFORMED NAME: FRANKLIN MONEY FUND II DATE OF NAME CHANGE: 19810623 N-CSR 1 ffmfncsrform.txt 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 ------- 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. [GRAPHIC OMITTED] [LOGO OMITTED] 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 [GRAPHIC OMITTED] 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 This page intentionally left blank This page intentionally left blank 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 EX-99.CERT 3 ffmfjimg302.txt EXHIBIT (B)(1) CERTIFICATIONS I, Jimmy D. Gambill, certify that: 1. I have reviewed this report on Form N-CSR of Franklin Federal Money Fund; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of as date within 90 days prior to the filing date of this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. August 7, 2003 /S/JIMMY D. GAMBILL Chief Executive Officer - Finance and Administration I, Kimberley H. Monasterio, certify that: 1. I have reviewed this report on Form N-CSR of Franklin Federal Money Fund; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of as date within 90 days prior to the filing date of this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. August 7, 2003 /S/KIMBERLEY H. MONASTERIO Treasurer and Chief Financial Officer EX-99.906CERT 4 ffmfjimg906.txt EXHIBIT (B)(2) CERTIFICATIONS CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURUSANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 I, Jimmy D. Gambill, Chief Executive Officer of the Franklin Federal Money Fund (the "Registrant"), certify, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge: 1. The periodic report on Form N-CSR of the Registrant for the period ended 6/30/03 (the "Form N-CSR") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Registrant. Dated: August 7, 2003 /S/JIMMY D. GAMBILL Chief Executive Officer - Finance and Administration A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Registrant and will be retained by Registrant and furnished to the Securities and Exchange Commission or its staff upon request. CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURUSANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 I, Kimberley H. Monasterio, Chief Financial Officer of the Franklin Federal Money Fund (the "Registrant"), certify, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge: 1. The periodic report on Form N-CSR of the Registrant for the period ended 6/30/03 (the "Form N-CSR") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Registrant. Dated: August 7, 2003 /S/KIMBERLEY H. MONASTERIO Treasurer and Chief Financial Officer A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Registrant and will be retained by Registrant and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----