CHAIRMAN'S MESSAGE
September 15, 1995
Dear Shareholder:
We are pleased to bring you the 14th annual report of the Franklin Tax-Exempt
Money Fund for the period ended July 31, 1995.
As you know, the Franklin Tax-Exempt Money Fund is a short-term money market
fund, intended to provide preservation of capital and easy access to your money.
In addition, the fund works to maintain its $1.00 per share value, as it has
since its inception in 1980. Please remember, however, that an investment in the
fund is neither insured nor guaranteed by the U.S. government, and that there
can be no assurance that the fund will be able to maintain a stable net asset
value of $1.00 per share.
As a Franklin Tax-Exempt Money Fund shareholder, you continue to benefit from
convenience, easy access to your money, and a high degree of credit safety. You
also enjoy a wide range of services, including free checks, unlimited check-
writing for amounts of $100 or more, free wiring privileges, and a toll-free
24-hour automated customer service line.
Furthermore, the Franklin Templeton Group offers over 115 different mutual
funds, each having its own investment objective, giving you the opportunity to
choose a fund best suited to your financial needs, should your investment
objectives change.
We thank you for your continued support of the Franklin Tax-Exempt Money Fund
and look forward to serving your needs in the years to come.
Sincerely,
Charles B. Johnson
Chairman
Franklin Tax-Exempt Money Fund
MANAGER'S DISCUSSION
Fund Objective:
To provide a high level of current income consistent with liquidity and
preservation of capital. The fund pursues a conservative investment policy by
limiting its investments to high quality securities as it seeks to maintain a
$1.00 per share net asset value.
The fiscal year ended July 31, 1995, was one of contrasts. The first half of the
fiscal period was marked by a steadily growing economy and sharply higher
interest rates. In response to this rapid growth and the accompanying threat of
inflation, the Federal Reserve Board raised the federal funds rate by one and
one-quarter percentage points in the first six months of the reporting period.
Economic growth slowed in the first half of 1995 as the effects of the Fed's
tightening actions began to be felt. A variety of economic indicators,
including retail, home and auto sales, declined during the first two quarters of
1995. Despite these signs of economic slowdown, robust labor markets, higher
corporate earnings and continued tight conditions in the manufacturing sector
still warranted inflationary concerns. With this in mind, the Fed raised
short-term interest rates once more in February of this year, apparently ending
the series of rate increases begun a year earlier.
The economy has slowed considerably since this final rate hike, and to head off
further contraction, the Fed lowered the federal funds rate by 25 basis points
on July 6, to 5.75% from 6.00%.
Short-term market rates reflected the trends in economic growth over the fund's
fiscal year. During the first half of the reporting period, when growth was
especially strong, one-year Treasury bill yields rose nearly one and one-half
percent-age points to 6.84% on January 31, 1995, from 5.37% on July 31, 1994.
By the end of the reporting period, economic growth slowed and the one-year
Treasury yield dropped to 5.67%.*
We reduced the fund's weighted average maturity to 28 days on January 31, 1995,
from 48 days on July 31, 1994. This enabled us to reinvest the fund's assets
more quickly in new securities offering higher yields. As a result, the fund's
seven-day effective yield rose to 3.10% on January 31, 1995, from 2.41% on July
31, 1994.
As long-term interest rates began to drop in the second half of the fund's
fiscal year, we lengthened the average maturity to lock in higher rates for as
long as possible. By July 31, 1995, the fund's average maturity was 47 days and
its seven-day effective yield rose to 3.14%. The fund's seven-day annualized
yield rose to 3.09% on July 31, 1995, up from 3.06% at the start of the
reporting period.
GRAPHIC MATERIAL 1 OMMITTED - SEE APPENDIX AT END OF DOCUMENT
The chart above illustrates that if you are in the maximum federal income tax
bracket of 39.6%, you would have to earn almost two percentage points more from
a taxable investment to match your fund's tax-free seven-day annualized yield.**
Looking forward, we believe interest rates may drift slightly higher by the end
of calendar year 1995; however, we do not feel this will be dramatic. Going
forward into 1996 -- an election year -- we believe rates should remain fairly
stable. We will continue to invest the fund's assets in first tier securities
that are among the highest quality available to money market portfolios. Since
the fund's objective is to provide share-holders with a high-quality,
conservative investment, we do not invest in leveraged derivatives or other
volatile securities.
*Source: Micropal, July 1995 Yield Report
Franklin Tax-Exempt Money Fund
Periods ended July 31, 1995
Seven-day effective yield1................ 3.14%
Seven-day annualized yield ............... 3.09%
Taxable equivalent annualized yield2...... 5.12%
1. The seven-day effective yield assumes the compounding of daily dividends.
2. Taxable equivalent annualized yield reflects the 1995 maximum federal income
tax rate of 39.6%. Annualized and effective yields are for the seven days ended
July 31, 1995. Yields reflect fluctuations in interest rates on portfolio
investments, as well as fund expenses. Yields should be viewed in terms of the
current, low rate of inflation -- just as high inflation usually results in
higher yields, low inflation often results in lower yields. Past performance
does not guarantee future results.
The fund's manager has agreed in advance to waive a portion of its management
fees, which reduces expenses and increases yield to shareholders. Without these
reductions, the fund's annualized and effective yields for the period would have
been 2.91% and 2.95%, respectively. The fee waiver may be discontinued at any
time upon notification of the fund's Board of Directors.
**The fund's dividends are generally subject to state and local income taxes,
if any. For investors subject to federal or state alternative minimum tax, a
small portion of the income may be subject to such tax. Distributions of capital
gains and of ordinary income from accrued market discount, if any, are generally
taxable.
FRANKLIN TAX-EXEMPT MONEY FUND
Statement of Investments in Securities and Net Assets, July 31, 1995
<TABLE>
<CAPTION>
Face Value
Amount (Note 1)
Investments 99.0%
<S> <C> <C>
Arizona 2.4 %
$ 100,000 a Apache County IDA, IDR, Tucson Electric Power, Springerville Project, Weekly
VRDN and Put, 4.00%, 12/15/18 ................................................... $100,000
400,000 a Maricopa County IDA, Hospital Facilities Revenue, Samaritan Health Services
Hospital, Series B-2, MBIA Insured, Daily VRDN and Put, 3.90%, 12/01/08 ......... 400,000
300,000 a Maricopa County IDAR, Refunding, Royal Oaks Sun City Project, Weekly VRDN
and Put, 4.10%, 09/01/02 ........................................................ 300,000
a Maricopa County PCC, PCR, Refunding, Arizona Public Services Co.,
1,200,000 Series D, Daily VRDN and Put, 3.75%, 05/01/29 ................................ 1,200,000
600,000 Series E, Daily VRDN and Put, 3.90%, 05/01/29 ................................ 600,000
500,000 b Maricopa County UHSD No. 210, Phoenix, GO, Series A, 3.75%, 07/01/96 ............. 500,000
1,000,000 a Pinal County, IDA, PCR, Magma-Copper Newmont Mining Corp., Daily VRDN
and Put, 3.85%, 12/01/09 ........................................................ 1,000,000
-----------
4,100,000
-----------
Arkansas 1.2%
2,000,000 a University of Arkansas Revenue, Weekly VRDN and Put, 3.90%, 12/01/19 ............. 2,000,000
-----------
California 12.9%
a California Health Facilities Financing Authority Revenue,
300,000 Catholic Health Care, Series B, MBIA Insured, Weekly VRDN and Put, 3.65%,
07/01/16 .................................................................... 300,000
100,000 Sutter Health, Series A, Daily VRDN and Put, 3.75%, 03/01/20 ................. 100,000
California PCFA, PCR,
1,000,000 Refunding, Pacific Gas and Electric, TECP, 3.60%, 10/17/95 ................... 1,000,000
900,000 a Refunding, Shell Oil Co. Project, Series B, Daily VRDN and Put, 3.75%, 11/01/00 900,000
2,100,000 a Refunding, Shell Oil Co. Project, Series C, Daily VRDN and Put, 3.75%, 10/01/11 2,100,000
1,100,000 a Southern California Edison Co., Series A, Daily VRDN and Put, 4.15%, 02/28/08 1,100,000
200,000 a Southern California Edison Co., Series B, Daily VRDN and Put, 4.15%, 02/28/08 200,000
4,000,000 a Southern California Edison Co., Series D, Daily VRDN and Put, 4.15%, 02/28/08 4,000,000
1,000,000 a California PCFA, Solid Waste Disposal Revenue, Taormina Industries Project,
Series B, Weekly VRDN and Put, 3.80%, 08/01/14 .................................. 1,000,000
7,700,000 California State RAW, Series C, 5.75%, 04/25/96 .................................. 7,815,080
1,000,000 East Bay MUD, TECP, 3.60%, 09/11/95 .............................................. 1,000,000
600,000 a Los Angeles MFHR, Mariposa Gardens Project, Series H, Weekly VRDN and Put,
3.80%, 09/01/15 .................................................................. 600,000
2,200,000 Sacramento MUD, TECP, 3.60%, 09/12/95 ............................................ 2,200,000
-----------
22,315,080
-----------
Colorado 4.0%
3,000,000 Arapahoe County Capital Improvement, Highway Trust Fund Revenue, E-470,
Project Series I, Optional Put 08/31/95, 4.45%, 08/31/26 ........................ 3,000,000
Colorado (cont.)
a Colorado Health Facilities Authority Revenue,
$ 200,000 Boulder Community Hospital Project, Series B, MBIA Insured, Weekly VRDN
and Put, 3.80%, 10/01/14.................................................... $ 200,000
300,000 Boulder Community Hospital Project, Series C, MBIA Insured, Weekly VRDN
and Put, 3.80%, 10/01/14 ................................................... 300,000
1,820,000 a Englewood MFR, Marks Project, Series A, Weekly VRDN and Put, 3.90%, 12/15/97...... 1,820,000
1,550,000 a Pitkin County MFR, Centennial Aspen Project, Weekly VRDN and Put, 3.9541%,
04/01/07......................................................................... 1,550,000
-----------
6,870,000
-----------
Connecticut .3%
500,000 a Connecticut GO, State Economic Recreation Notes, Series B, Weekly VRDN and
Put, 3.75%, 06/01/96 ............................................................ 500,000
-----------
Florida 4.7%
1,435,000 a Brevard County HFA, MFHR, EKS, Inc. Project, Weekly VRDN and Put, 3.90%,
01/01/15 ........................................................................ 1,435,000
200,000 a Florida HFA, MF, Sun Point Cove Apartments, Weekly VRDN and Put, 3.90%, 12/01/07.. 200,000
1,900,000 a Okaloosa County Revenue, Gulf Coast Treatment Center, Weekly VRDN and Put,
3.90%, 11/01/14 ................................................................. 1,900,000
200,000 a Orange County HFAR, Refunding, MF, Smokewood/Sun, Series A, Weekly VRDN
and Put, 3.80%, 12/01/22 ........................................................ 200,000
4,000,000 Sunshine State Governmental Financing Commission Revenue, TECP, 3.80%,
08/01/95 ........................................................................ 4,000,000
450,000 a Volusia County HFA, MFHR, Sun Pointe Apartments Project, Series H, Weekly
VRDN and Put, 3.90%, 12/01/05 ...... ............................................ 450,000
-----------
8,185,000
-----------
Georgia 5.3%
2,000,000 a De Kalb County Hospital Authority Revenue Anticipation Certificates, De Kalb
Medical Center Project, Weekly VRDN and Put, 3.85%, 09/01/09 .................... 2,000,000
a De Kalb County Housing Authority MFHR,
300,000 Columbia on Clairmont Project, Series H, Weekly VRDN and Put, 3.90%, 08/01/05. 300,000
100,000 Wood Brook Project, Series J, Weekly VRDN and Put, 3.85%, 08/01/07 ........... 100,000
2,750,000 a Fulton County Housing Authority, MFHR, Refunding, Spring Creek Crossing, Weekly
VRDN and Put, 3.90%, 10/01/24 ... ............................................... 2,750,000
500,000 Georgia State GO, Refunding, Series B, 6.60%, 09/01/95 ........................... 500,985
600,000 a Hapeville IDAR, Hapeville Hotel, Ltd., Daily VRDN and Put, 4.00%, 11/01/15 ....... 600,000
1,000,000 a Macon-Bibb County Hospital Authority Revenue, Medical Center of Central Georgia,
Weekly VRDN and Put, 3.85%, 04/01/07 ..... .................................... 1,000,000
Georgia (cont.)
$2,000,000 a Rockdale County, Hospital Authority Revenue, Anticipation Certificates, Weekly
VRDN and Put, 3.85%, 10/01/09 ................................................... $ 2,000,000
-----------
9,250,985
-----------
Hawaii .3 %
500,000 Hawaii State Department of Budget and Finance, Special Purpose Mortgage Revenue,
Kaiser Permanente Medical Care, Series B, Optional Put 09/01/95, 4.40%, 03/01/14 500,000
-----------
Illinois 7.8%
4,200,000 a Chicago GO, Weekly VRDN and Put, 3.85%, 01/01/10 ................................. 4,200,000
1,500,000 a Chicago GO, Tender Notes, Series B, Weekly VRDN and Put, 3.75%, 10/31/95 ......... 1,500,000
2,935,000 City of Chicago, O'Hare International Airport Revenue, General Airport, Second Lien,
Series B, Optional Put 01/01/96, 3.80%, 01/01/15 ................................ 2,935,000
1,100,000 a Illinois Development Finance Authority Revenue, Refunding, Olin Corp., Series A,
Daily VRDN and Put, 3.80%, 06/01/04 ............................................. 1,100,000
Illinois Health Facilities Authority Revenue,
535,000 Franciscan Sisters Health Care, Refunding, Series C, MBIA Insured, 4.30%,
09/01/95 .................................................................... 535,000
300,000 a Hospital Sisters Services, Series E, MBIA Insured, Weekly VRDN and Put, 3.75%,
12/01/14 .................................................................... 300,000
200,000 a Palos Community Hospital, Series B, Weekly VRDN and Put, 3.65%, 12/01/15 ..... 200,000
2,800,000 a Lisle MFR, Ashley Lisle Project, Weekly VRDN and Put, 3.75%, 12/15/25 ............ 2,800,000
-----------
13,570,000
-----------
Indiana .1%
100,000 a Indianapolis EDR, Edgecomb Metals Co., Weekly VRDN and Put, 3.75%, 12/01/08....... 100,000
-----------
Iowa 2.9%
5,000,000 Iowa School Corps, Aniticipation Certificates, Series A, CGIC Insured, 4.75%, 06/28/96 5,039,278
-----------
Louisiana 3.4%
700,000 a East Baton Rouge Parish, PCR, Georgia Pacific Corp., Weekly VRDN and Put, 3.80%,
10/01/99 ........................................................................ 700,000
200,000 a Jefferson Parish IDBR, Refunding, George J. Ackel Project, Weekly VRDN and Put,
3.90%, 12/01/04 ................................................................ 200,000
2,550,000 a Saint Charles Parish, PCR, Shell Oil Co. Project, Weekly VRDN and Put, 3.60%,
06/01/05 ........................................................................ 2,550,000
1,400,000 a South Louisiana Port Commission, Marine Terminal Facilities Revenue, Refunding,
Weekly VRDN and Put, 3.90%, 07/01/21 ............................................ 1,400,000
1,100,000 a West Feliciana Parish, PCR, Gulf States Utilities Co., Series D, Daily VRDN and Put,
3.90%, 12/01/15 ................................................................. 1,100,000
-----------
5,950,000
-----------
Maine 1.2%
$2,000,000 Maine State TAN, 4.50%, 06/28/96 ................................................. $ 2,012,855
-----------
Massachusetts .8%
200,000 a Massachusetts State GO, Updates Series B, Daily VRDN and Put, 3.75%, 12/01/97 .... 200,000
1,200,000 a Massachusetts State Health & Educational Facilities Authority Revenue, Harvard
University, Weekly VRDN and Put, 3.35%, 08/01/17 ................................ 1,200,000
-----------
1,400,000
-----------
Michigan .6%
1,000,000 a Grand Rapids Water Supply System Revenue, Refunding, FGIC Insured, Daily VRDN
and Put, 3.80%, 01/01/20 ........................................................ 1,000,000
-----------
Minnesota 1.8 %
524,000 a Austin Commercial Development Revenue, Hy-Vee Food Stores, Monthly VRDN and
Weekly Put, 3.75%, 12/01/04 ..................................................... 524,000
500,000 a Duluth Tax Increment Revenue, Lake Superior, Weekly VRDN and Put, 3.85%, 09/01/10. 500,000
2,000,000 Minnesota State GO, 4.90%, 08/01/95 .............................................. 2,000,000
100,000 a Minnetonka MFHR, Cliffs At Ridgedale, Weekly VRDN and Put, 3.90%, 03/01/09 ....... 100,000
-----------
3,124,000
-----------
Mississippi .7%
300,000 a Jackson County PCR, Refunding, Chevron U.S.A., Inc. Project, Daily VRDN and Put,
3.80%, 06/01/23 ................................................................. 300,000
900,000 a Perry County PCR, Refunding, Leaf River Forest Project, Daily VRDN and Put,
3.85%, 03/01/02 ....... ......................................................... 900,000
-----------
1,200,000
-----------
Missouri .8%
1,100,000 a Kansas City IDA, MFHR, Locarno MF Project, Weekly VRDN and Put, 3.90%, 12/01/15... 1,100,000
135,000 a Saint Louis County, IDA, IDR, Riverport Association Project, Weekly VRDN and Put,
3.85%, 12/01/15 ................................................................. 135,000
200,000 a West Plains, IDA, IDR, West Plains Manor Project, Monthly VRDN and Weekly Put,
4.10%, 11/01/10 .................................... ............................ 200,000
-----------
1,435,000
-----------
Montana .3 %
500,000 a Forsythe PCR, Portland General Electric, Series D, Swiss Bank Corp., Weekly VRDN
and Put, 3.75%, 06/01/13 .................................................. ..... 500,000
-----------
Nevada .6 %
1,000,000 a Clark County, Airport Improvement Revenue, Sub Lien, Series A-1, Weekly VRDN
and Put, 3.75%, 07/01/25 ......................................................... 1,000,000
-----------
New York 11.8%
500,000 Hempstead Town BAN, Series D, 4.50%, 08/17/95 .................................... 500,040
New York (cont.)
a New York City GO,
$ 700,000 Subseries B-4, Daily VRDN and Put, 4.25%, 08/15/22 ........................... $ 700,000
2,100,000 Subseries B-4, Daily VRDN and Put, 3.90%, 08/15/23 ........................... 2,100,000
a New York City Municipal Water Finance Authority Revenue, Water and Sewer Systems,
200,000 Series C, FGIC Insured, Daily VRDN and Put, 3.90%, 06/15/22 .................. 200,000
1,100,000 Series C, FGIC Insured, Daily VRDN and Put, 3.90%, 06/15/23 .................. 1,100,000
1,800,000 Series G, FGIC Insured, Daily VRDN and Put, 3.80%, 06/15/24 .................. 1,800,000
3,600,000 a New York State Dormitory Authority Revenue, Metropolitan Museum of Art, Series A,
Weekly VRDN and Put, 3.60%, 07/01/15 ............................................ 3,600,000
a New York State Energy Research and Development Authority, PCR,
1,000,000 New York Electric and Gas, Series B, Refunding, Daily VRDN and Put, 3.70%,
02/01/29 ................................................................... 1,000,000
400,000 Niagara-Mohawk Power, Series A, Daily VRDN and Put, 4.30%, 07/01/15 .......... 400,000
a New York State Local Government Assistance Corp.,
800,000 Series A, Weekly VRDN and Put, 3.60%, 04/01/22 ............................... 800,000
3,400,000 Series A, Weekly VRDN and Put, 3.50%, 04/01/23 ............................... 3,400,000
4,800,000 a Triborough Bridge and Tunnel Authority, Special Obligation, FGIC Insured, Weekly
VRDN and Put, 3.50%, 01/01/24 ................................................... 4,800,000
-----------
20,400,040
-----------
North Carolina 1.6%
2,700,000 a North Carolina Medical Care-Community Hospital Revenue, Pooled Equipment
Financing Project, MBIA Insured, Weekly VRDN and Put, 3.75%, 12/01/25 ........... 2,700,000
100,000 a Wake County Industrial Facilities and PCFA Revenue, Carolina Power and Light Co.,
Series A, Weekly VRDN and Put, 3.75%, 05/01/15 .................................. 100,000
-----------
2,800,000
-----------
Ohio .6%
1,000,000 a Columbus GO, Series 1, Weekly VRDN and Put, 3.50%, 06/01/16 ...................... 1,000,000
-----------
Pennsylvania 1.3%
1,000,000 Carbon County IDA Recovery Revenue, Panther Creek Apartments, Series A, 3.50%,
10/04/95......................................................................... 1,000,000
1,300,000 Venango IDA Recovery Revenue, Scrubgrass Project, TECP, 3.70%, 08/02/95 .......... 1,300,000
-----------
2,300,000
-----------
Rhode Island 1.7%
3,000,000 Rhode Island State TAN, 4.50%, 06/28/96 .......................................... 3,022,320
-----------
South Carolina 5.0%
2,500,000 a Abbeyville County IDR, Bibb Co. Project, Weekly VRDN and Put, 3.95%, 10/01/04 .... 2,500,000
South Carolina (cont.)
$5,900,000 a Florence County Hospital Revenue, McLeod Regional Medical Center, Series A,
FGIC Insured, Weekly VRDN and Put, 3.80%, 11/01/15 .............................. $ 5,900,000
325,000 a Rock Hill Utility Systems Revenue, FGIC Insured, Weekly VRDN and Put, 3.85%,
01/01/22 ........................................................................ 325,000
-----------
8,725,000
-----------
Tennessee 1.7%
1,000,000 a Franklin IDB, MFR, Landings Project, Class B, Weekly VRDN and Put, 3.90%,
12/01/06.......................................................................... 1,000,000
1,000,000 a Nashville Metropolitan Airport Authority Revenue, Refunding, FGIC Insured, Weekly
VRDN and Put, 3.75%, 07/01/19 ................................................... 1,000,000
1,000,000 a Tennessee State GO, BAN, Series B, Weekly VRDN and Put, 3.75%, 05/01/96 .......... 1,000,000
-----------
3,000,000
-----------
Texas 14.4%
a Harris County IDC, PCR, Exxon Project,
300,000 Series A, Daily VRDN and Put, 3.90%, 03/01/24 ................................ 300,000
200,000 Series B, Daily VRDN and Put, 3.90%, 03/01/24 ................................ 200,000
1,600,000 Houston, Series A, TECP, 3.45%, 08/03/95 ......................................... 1,600,000
8,000,000 Lower Colorado River Authority, TECP, 3.30%, 10/02/95 ............................ 8,000,000
1,000,000 Lower Neches Valley Authority PCR, Chevron U.S.A. Inc. Project, Optional Put
08/16/95, 4.45%, 02/15/17 ....................................................... 1,000,000
950,000 a Montgomery County, IDC, IDR, Series A, Weekly VRDN and Put, 3.90%, 12/01/03 ...... 950,000
1,285,000 a Nueces County Health Facilities Development Corp. Revenue, Driscoll Childrens
Foundation, Weekly VRDN and Put, 3.90%, 07/01/15 ................................ 1,285,000
2,000,000 a Port Arthur Navigation District, PCR, Star Enterprises Project, Weekly VRDN and
Put, 3.95%, 04/01/14 ............................................................ 2,000,000
1,300,000 a Red River Authority, PCR, Refunding, Southwestern Public Services Co., Weekly
VRDN and Daily Put, 3.70%, 07/01/11 ............................................. 1,300,000
3,000,000 San Antonio Water Revenue, TECP, 3.55%, 10/05/95 ................................. 3,000,000
5,400,000 Texas State TRAN, 5.00%, 08/31/95 ................................................ 5,403,735
-----------
25,038,735
-----------
Utah .4%
600,000 a Utah State Board of Regents, Student Loan Revenue, Series B, AMBAC Insured,
Weekly VRDN and Put, 3.80%, 11/01/00 ............................................ 600,000
-----------
Washington 2.3%
100,000 a Port Skagit County, IDC Revenue, Hexcel Corp. Project, Weekly VRDN and Put, 4.25%,
12/01/24 ........................................................................ 100,000
Washington (cont.)
a Washington State Health Care Facilities Authority Revenue,
$2,500,000 Sisters Providence, Series B, Daily VRDN and Put, 3.85%, 10/01/05 ............ $ 2,500,000
300,000 Sisters Providence, Series E, Board Purchase Agreement, Daily VRDN and Put,
3.85%, 10/01/05 ........................................................... 300,000
1,000,000 a Washington State Public Power Supply Revenue, Refunding, Nuclear System Project
No. 3, Series A, Weekly VRDN and Put, 3.85%, 07/01/18 ........................... 1,000,000
-----------
3,900,000
-----------
Wisconsin .1%
100,000 a Milwaukee Housing Authority, MFHR, Yankee Hill Apartments, Weekly VRDN and
Put, 3.90%, 12/01/09 ............................................................ 100,000
-----------
Wyoming 6.0%
a Lincoln County, PCR, Exxon Project,
800,000 Series B, Daily VRDN and Put, 3.90%, 11/01/14 ................................ 800,000
800,000 Series C, Daily VRDN and Put, 3.90%, 11/01/14 ................................ 800,000
1,400,000 a Platte County PCR, Tri-State G&T, Series A, Daily VRDN and Put, 4.00%, 07/01/14 .. 1,400,000
a Uinta County PCR, Refunding,
250,000 Amoco Standard Oil Co., Series A, Annual VRDN, Semi-Annual Put, 4.27%,
12/01/12 .................................................................... 250,000
7,200,000 Refunding, Chevron, Inc. Project, Daily VRDN and Put, 3.80%, 08/15/20 ............ 7,200,000
-----------
10,450,000
-----------
Total Investments (Cost $171,388,294) 99.0%...................................... 171,388,294
Other Assets and Liabilities, Net 1.0%........................................... 1,734,322
-----------
Net Assets 100.0%................................................................ $173,122,616
=============
</TABLE>
At July 31, 1995, there was no unrealized appreciation or depreciation for
financial statement or income tax purposes.
PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
BAN - Bond Anticipation Notes
CGIC - Capital Guaranty Insurance Co.
EDR - Economic Development Revenue
FGIC - Financial Guaranty Insurance Co.
GO - General Obligation
HFA - Housing Finance Authority/Agency
HFAR - Housing Finance Agency Revenue
IDA - Industrial Development Authority/Agency
IDAR - Industrial Development Authority/Agency Revenue
IDB - Industrial Development Board
IDBR - Industrial Development Board Revenue
IDC - Industrial Development Corp.
IDR - Industrial Development Revenue
MBIA - Municipal Bond Investors Assurance Corp.
MF - Multi-Family
MFR - Multi-Family Revenue
MFHR - Multi-Family Housing Revenue
MUD - Municipal Utility District
PCC - Pollution Control Corp.
PCFA - Pollution Control Financing Authority
PCR - Pollution Control Revenue
RAW - Revenue Anticipation Warrants
TAN - Tax Anticipation Notes
TECP - Tax-Exempt Commercial Paper
TRAN - Tax Revenue Anticipation Notes
UHSD - Union High School District
aVariable rate demand notes (VRDN's) are tax-exempt obligations which contain a
floating or variable interest rate adjustment formula and an unconditional right
of demand to receive payment of the principal balance plus accrued interest upon
short notice prior to specified dates. The interest rate may change on specified
dates in relationship with changes in a designated rate (such as the prime
interest rate or U.S. Treasury bills rate).
bSee Note 1(g) regarding securities issued on a when-issued basis.
The accompanying notes are an integral part of these financial statements.
FRANKLIN TAX-EXEMPT MONEY FUND
Financial Statements
Statement of Assets and Liabilities
July 31, 1995
Assets:
Investments in securities,
at value and cost $171,388,294
Cash 1,656,452
Interest receivable 747,055
------------
Total assets 173,791,801
------------
Liabilities:
Payables:
Investment securities purchased:
When-issued basis (Note 1) 501,927
Dividends to shareholders 27,209
Management fees 80,500
Shareholder servicing costs 19,624
Accrued expenses and other liabilities 39,925
------------
Total liabilities 669,185
------------
Net assets (equivalent to $1.00 per
share based on 173,122,616 shares
of capital stock outstanding) $173,122,616
============
Statement of Operations
for the year ended July 31, 1995
Investment income:
Interest $6,974,353
Expenses:
Management fees, net (Note 6) $742,949
Shareholder servicing costs
(Note 6) 237,642
Reports to shareholders 143,076
Registration fees 72,311
Professional fees 36,699
Custodian fees 20,389
Directors' fees and expenses 14,704
Other 18,358
------------
Total expenses 1,286,128
------------
Net investment income 5,688,225
Realized loss on investments (9,193)
------------
Net increase in net assets resulting
from operations $5,679,032
============
Statements of Changes in Net Assets
for the years ended July 31, 1995 and 1994
1995 1994
----------- -----------
Increase (decrease) in net assets:
Operations:
Net investment
income $5,688,225 $ 4,138,176
Net realized loss
on investments (9,193) --
----------- -----------
Net increase in net
assets resulting
from operations 5,679,032+ 4,138,176
Distributions to
shareholders from
net investment income (5,679,032) (4,138,176)
Increase (decrease) in
net assets from capital
share transactions
(Note 3) (29,760,192) 9,317,388
----------- -----------
Net increase
(decrease) in
net assets (29,760,192) 9,317,388
Net assets (there is
no undistributed net
investment income
at beginning or end
of year):
Beginning of
year 202,882,808 193,565,420
----------- -----------
End of year $173,122,616 $202,882,808
=========== ===========
+Distributions were reduced by a net realized loss from security transactions of
$9,193.
The accompanying notes are an integral part of these financial statements.
FRANKLIN TAX-EXEMPT MONEY FUND
Notes to Financial Statements
1. SIGNIFICANT ACCOUNTING POLICIES
Franklin Tax-Exempt Money Fund (the Fund) is a no-load, open-end diversified
management investment company (mutual fund), registered under the Investment
Company Act of 1940, as amended.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles for
investment companies.
A. SECURITIES VALUATION: Portfolio securities are valued at amortized cost,
which approximates value. The Fund must maintain a dollar weighted average
maturity of 90 days or less and only purchase instruments having remaining
maturities of 397 days or less. If the Fund's portfolio has a remaining weighted
average maturity of greater than 90 days, the portfolio will be stated at value
based on recorded closing sales on a national securities exchange or, in the
absence of a recorded sale, within the range of the most recent quoted bid and
ask prices. The directors have established procedures designed to stabilize, to
the extent reasonably possible, the Fund's price per share as computed for the
purpose of sales and redemptions at $1.00.
B. MUNICIPAL BONDS OR NOTES WITH "PUTS": The Fund has purchased municipal bonds
or notes with the right to resell the bonds or notes to the seller at an agreed
upon price or yield on a specified date or within a specified period (which will
be prior to the maturity date of the bonds or notes). Such a right to resell is
commonly known as a "put." In determining the weighted average maturity of the
Fund's portfolio, municipal bonds and notes as to which the Fund holds a put are
deemed to mature on the last day on which the put may be exercised.
C. VARIABLE RATE DEMAND NOTES: The Fund has invested in certain variable
interest rate demand notes with maturities greater than 90 days but which are
redeemable at specified intervals upon demand. The maturity of these instruments
for the purpose of calculating the portfolio's weighted average maturity is
considered to be the greater of the period until the interest rate is adjusted
or until the principal can be recovered by demand.
D. INCOME TAX: The Fund intends to continue to qualify for the tax treatment
applicable to regulated investment companies under the Internal Revenue Code and
to make the requisite distributions to its shareholders which will be sufficient
to relieve it from income and excise taxes. Therefore, no income tax provision
is required.
E. SECURITY TRANSACTIONS: Security transactions are accounted for on the date
the securities are purchased or sold (trade date). Realized gains and losses on
security transactions are determined on the basis of specific identification for
both financial statement and income tax purposes.
F. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS: Net investment income includes
income, calculated on an accrual basis, amortization of original issue and
market discount or premium, if any, and estimated expenses which are accrued
daily. The total available for distributions is computed daily and includes the
net investment income, plus or minus any gains or losses on security
transactions and changes in unrealized portfolio appreciation or depreciation,
if any.
Distributions normally are declared each day the New York Stock Exchange is open
for business, equal to the total available for distributions (as defined above)
and are payable to shareholders of record as of the close of business the
preceding day. Such distributions are automatically reinvested daily in
additional shares of the Fund at net asset value.
G. SECURITIES PURCHASED ON A WHEN-ISSUED BASIS: The Fund may trade securities on
a when-issued or delayed delivery basis, with payment and delivery scheduled for
a future date. These transactions are subject to market fluctuations and are
subject to the risk that the value at delivery may be more or less than the
trade date purchase price. Although the Fund will generally purchase these
securities with the intention of acquiring such securities, they may sell such
securities before the settlement date. These securities are identified on the
accompanying statement of investments in securities and net assets. The Fund has
set aside sufficient investment securities as collateral for these purchase
commitments.
2. ACQUISITION OF TEMPLETON TAX FREE MONEY FUND
On August 27, 1993, the Fund acquired all of the net assets of Templeton Tax
Free Money Fund (the Templeton Money) pursuant to a plan of reorganization
approved by the shareholders of the Templeton Money on that date.
The acquisition was accomplished by a tax-free exchange of the Franklin
Tax-Exempt Money Fund shares for all the net assets of the Templeton Money,
which is accounted for as a pooling-of-interests without restatement for
financial reporting purposes.
The selected financial information and shares outstanding immediately before and
after the acquisition for the funds were as follows:
<TABLE>
<CAPTION>
Net Asset
Net Assets Value Per Share Outstanding
---------- ---------- ---------
<S> <C> <C> <C>
Templeton Tax Free Money Fund................ $ 28,904,384 $1.00 28,904,384
Franklin Tax-Exempt Money Fund............... 162,656,518 1.00 162,656,518
Combined..................................... 191,560,902 1.00 191,560,902
3. CAPITAL STOCK
At July 31, 1995, there was 5,000,000,000 shares of no par value capital stock
authorized and capital paid in aggregated $173,122,616. Transactions in capital
stock at $1.00 per share were as follows:
Year ended Year ended
July 31, 1995 July 31, 1994
------------- -------------
<S> <C> <C>
Shares sold............................................... $152,256,266 $174,818,597
Shares issued in connection with acquisition (Note 2)..... -- 28,904,384
Shares issued in reinvestment of distributions............ 5,662,520 4,129,686
Shares redeemed........................................... (237,371,157) (231,379,034)
Changes from exercise of exchange privilege:
Shares sold.............................................. 229,922,027 409,804,995
Shares redeemed.......................................... (180,229,848) (376,961,240)
------------- -------------
Net increase (decrease)................................... $(29,760,192) $9,317,388
============= =============
</TABLE>
4. CAPITAL LOSS CARRYOVERS
At July 31, 1995, for tax purposes, the Fund had a capital loss carryover of
$9,193 expiring in 2003. For tax purposes, the aggregate cost of securities are
the same for financial statement purposes at July 31, 1995.
5. PURCHASES AND SALES OF SECURITIES
Purchases and sales/maturities of securities for the year ended July 31, 1995
aggregated $580,758,587 and $620,148,166 respectively.
6. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
Franklin Advisers, Inc., under the terms of a management agreement, provides
investment advice, administrative services, office space and facilities to the
Fund, and receives fees computed daily at 1/584 of 1% (approximately 5/8 of 1%
annually) of the net assets on the first $100 million, 1/730 of 1%
(approximately 1/2 of 1% annually) of net assets in excess of $100 million up to
$250 million, and 1/811 of 1% (approximately 45/100 of 1% annually) of net
assets in excess of $250 million. The terms of the management agreement provide
that aggregate annual expenses of the Fund be limited to the extent necessary to
comply with the limitations set forth in the laws, regulations and
administrative interpretations of the states in which the Fund's shares are
registered. The Fund's expenses did not exceed these limitations; however, for
the year ended July 31, 1995, Franklin Advisers, Inc. agreed in advance to waive
$359,294 of the management fees.
Under the terms of a shareholder services agreement with Franklin/Templeton
Investor Services, Inc., the Fund pays costs on a per shareholder account basis.
Shareholder servicing costs incurred for the year ended July 31, 1995 aggregated
$237,642, of which $236,390 was paid to Franklin/Templeton Investor Services,
Inc.
Certain officers and directors of the Fund are also officers and/or directors of
Franklin Advisers, Inc. and/or Franklin/Templeton Investor Services, Inc., both
wholly-owned subsidiaries of Franklin Resources, Inc.
On December 8, 1994, Franklin Resources, Inc. received approval from the
Securities and Exchange Commission to purchase $500,000 in face value of
unsecured Orange County Tax Revenue Anticipation Notes, 4.5%, 07/19/95 from the
Fund at amortized cost of $501,752 plus accrued interest of $9,625.
7. CREDIT RISKS
Although the Fund has a diversified investment portfolio, it has investments in
excess of 10% of its total net assets in the states of California, New York and
Texas, which may subject the Fund more significantly to economic changes
occurring in those states.
8. FINANCIAL HIGHLIGHTS
Selected data for a share of capital stock outstanding throughout each year are
as follows:
<TABLE>
<CAPTION>
Year Ended July 31,
1995 1994 1993 1992 1991
------- ------- ------- ------- -------
Per Share Operating Performance
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of year.................. $1.00 $1.00 $1.00 $1.00 $1.00
------- ------- ------- ------- -------
Net investment income................................. .029 .020 .021 .031 .045
Distributions from net investment income.............. (.029) (.020) (.021) (.031) (.045)
------- ------- ------- ------- -------
Net asset value at end of year........................ $1.00 $1.00 $1.00 $1.00 $1.00
======= ======= ======= ======= =======
Total return+......................................... 2.98% 1.85% 2.08% 3.14% 4.65%
Ratios/Supplemental Data
Net assets at end of year (in 000's).................. $173,123 $202,883 $193,565 $207,374 $249,214
Ratio of expenses to average net assets++............. .65% .65% .69% .70% .70%
Ratio of net investment income to average net assets.. 2.65% 1.84% 2.10% 3.15% 4.53%
+Total return measures the change in value of an investment over the periods
indicated. It assumes reinvestment of dividends at net asset value.
++During the years indicated below, the Manager agreed in advance to waive a
portion of its management fees incurred by the Fund. Had such action not been
taken, the ratios of operating expenses to average net assets would have been as
follows:
Ratio of Expenses
to Average Net Assets
--------------------
<S> <C>
1991.................................... .71%
1992.................................... .75
1993.................................... .80
1994.................................... .81
1995.................................... .78
</TABLE>
During this fiscal year, the Fund paid distributions from net investment income
in the amounts shown in the Financial Highlights Table. The Fund hereby
designates the total amount of these distributions as exempt-interest dividends
under Section 852 (b)(5) of the Internal Revenue Code.
FRANKLIN TAX-EXEMPT MONEY FUND
Report of Independent Auditors
To the Shareholders and Board of Directors
of Franklin Tax-Exempt Money Fund:
We have audited the accompanying statement of assets and liabilities of Franklin
Tax-Exempt Money Fund (the Fund), including the statement of investments in
securities and net assets, as of July 31, 1995, and the related statement of
operations for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended, and the financial highlights for
each of the five years in the period then ended. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits. We conducted our audits in accordance
with generally accepted auditing standards. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of July 31, 1995 by correspondence with the custodian and
brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Franklin Tax-Exempt Money Fund as of July 31, 1995, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the five years in the period then ended, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
San Francisco, California
August 31, 1995
This page intentionally left blank.
APPENDIX
DESCRIPTION OF GRAPHIC MATERIAL OMITTED FROM EDGAR FILING
(PURSUANT TO ITEM 304 (a) OF REGULATION S-T)
GRAPHIC MATERIAL (1)
This bar chart shows the comparison between the fund's seven-day effective
distribution rate of 3.09% and the seven-day effective taxable equivalent
distribution rate of 5.12%.
