MESSAGE FROM THE CHAIRMAN
Your Fund's Objective:
Seeks 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 share price.*
*An investment in the fund is neither insured nor guaranteed by the U.S.
government. There is no assurance that the $1.00 per share price will be
maintained.
To reduce the volume of mail shareholders receive and to reduce expenses, only
one copy of most Fund reports, such as the Fund's annual and semi-annual
reports, may be mailed to a household. Additional reports may be obtained,
without charge, by calling Fund Information at 1-800/DIAL BEN (1-800/342-5236).
September 15, 1996
Dear Shareholder:
It's a pleasure to bring you the Franklin Tax-Exempt Money Fund's annual report
for the period ended July 31, 1996.
The Economy
During the first half of the fund's fiscal year, market conditions were
distinctly different from those of the last half. Interest rates gradually
declined through the end of 1995 as a result of slower economic growth
(annualized at a rate of 0.5%), which allowed the Federal Reserve Board to keep
interest rates at low levels. The yield of the 30-year U.S. Treasury bond, which
stood at 6.63% on June 30, 1995, declined to 5.96% on December 31, 1995.**
**Source: Micropal.
In mid-February 1996, however, interest rates began to rise in response to
evidence of renewed economic strength. Uncertainty and confusion followed a much
stronger-than-expected employment report released in early March. While
economists disagreed on the market's direction, investors reacted to its mixed
messages. Nervous investors, fearing inflation might accelerate, caused a 3%
decline in bond prices and a short-lived 120-point drop in the Dow Jones
Industrial Average(R). Later reports showed that the economy had actually grown
slowly in the first quarter of 1996 at an annualized rate of approximately 2.2%,
with inflation coming in at the 2% level. Economic growth accelerated in the
second quarter, with GDP rising to 4.2%.
Portfolio Activity
We maintained a relatively neutral position during the reporting period. The
fund's average maturity on July 31, 1996, was 49 days, up slightly from 47 days
one year earlier. By keeping the maturity relatively short, we were able to
reinvest in secu-rities offering higher rates, thereby increasing
the fund's yield.
GRAPHIC MATERIAL 1 OMITTED - SEE APPENDIX AT END OF DOCUMENT
On July 31, 1996, the fund's seven-day effective yield, which assumes the
compounding of daily dividends, was 2.90%, and the fund's seven-day
annualized yield was 2.86%. This tax-free rate is generally higher than the
after-tax return on a comparable taxable investment. For example, an investor in
the maximum federal personal income tax bracket of 39.6% would need to earn
4.74% from a taxable investment to match the fund's tax-free yield.
Liquidity and quality of investments drive our management approach. In keeping
with this, we purchased only the highest-quality securities available to money
market portfolios. We will continue to manage the fund with an emphasis on high
quality securities and liquidity.
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. During the
fiscal year, the fund's yield closely followed overall interest rate trends, as
should be expected given its investment objective. In addition, the fund
maintained its $1.00 per share value, as it has since its inception 14 years
ago.
As a Franklin Tax-Exempt Money Fund shareholder, you benefit from convenient,
easy access to your money, and a high degree of credit safety. You also enjoy a
wide range of services, including check writing for amounts of at least $100,
free check books, and access to TeleFACTS(R), our around-the-clock automated
customer service line.
We appreciate your support and look forward to serving your investment needs in
the years ahead.
Sincerely,
Charles B. Johnson
Chairman
Franklin Tax-Exempt Money Fund
Franklin Tax-Exempt Money Fund
Period ended 7/31/96
Seven-day effective yield1 2.90%
Seven-day annualized yield 2.86%
Taxable equivalent yield2 4.74%
1. The seven-day effective yield assumes the compounding of daily dividends.
2. Taxable equivalent yield assumes the 1996 maximum federal personal income tax
bracket of 39.6%.
Annualized and effective yields are for the seven days ended July 31, 1996.
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 is not predictive of
future results.
The fund's manager agreed in advance to waive a portion of
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 2.64% and 2.67%, respectively. The fee waiver may be
discontinued at any time, upon notice to the fund's Board of Directors.
FRANKLIN TAX-EXEMPT MONEY FUND
Statement of Investments in Securities and Net Assets, July 31, 1996
<TABLE>
<CAPTION>
Face Value
Amount (Note 1)
Investments 100.9%
Alaska1.3%
<C> <S> <C>
$ 2,100,000 aValdez Marine Terminal Revenue, Refunding, Exxon Pipeline Co. Project, Series A,
Daily VRDN and Put, 3.65%, 12/01/33............................................. $ 2,100,000
-------------
Arizona1.7%
aApache County IDA,
100,000 IDR, Tuscon Electric Power, Springerville Project, Series C, Weekly VRDN
and Put, 3.60%, 12/15/18........................................................ 100,000
500,000 PCR, Tuscon Electric Power, Series A, Weekly VRDN and Put, 3.65%, 06/15/20...... 500,000
500,000 aMaricopa County IDA, Hospital Facilities Revenue, Samaritan Health Services Hospital,
Series B-2, MBIA Insured, Daily VRDN and Put, 3.70%, 12/01/08................... 500,000
200,000 aMaricopa County IDAR, Refunding, Royal Oaks Sun City Project, Weekly VRDN
and Put, 3.80%, 09/01/02........................................................ 200,000
600,000 aMaricopa County PCC, PCR, Refunding, Arizona Public Services Co., Series E,
Daily VRDN and Put, 3.60%, 05/01/29............................................. 600,000
1,000,000 aPinal County, IDA, PCR, Magma-Copper Newmont Mining Corp., Daily VRDN
and Put, 3.75%, 12/01/09 ....................................................... 1,000,000
-------------
2,900,000
-------------
Arkansas1.9%
1,100,000 aSheridan IDR, Kohler Project, Weekly VRDN and Put, 3.65%, 08/01/00.............. 1,100,000
2,000,000 aUniversity of Arkansas Revenue, Weekly VRDN and Put, 3.60%, 12/01/19 ........... 2,000,000
-------------
3,100,000
-------------
California8.4%
2,600,000 Alameda County TRAN, 4.50%, 06/30/97............................................. 2,612,546
aCalifornia Health Facilities Financing Authority Revenue,
300,000 Catholic Health Care, Series B, MBIA Insured, Weekly VRDN and Put,
3.25%, 07/01/16 ................................................................ 300,000
1,000,000 Refunding, Catholic West, Series D, MBIA Insured, Weekly VRDN and Put,
3.25%, 07/01/18................................................................. 1,000,000
700,000 Refunding, Sutter CHS, Series B, AMBAC Insured, Daily VRDN and Put,
3.55%, 07/01/21................................................................. 700,000
aCalifornia PCFA, PCR,
100,000 Refunding, Shell Oil Co. Project, Series C, Daily VRDN and Put, 3.50%, 11/01/00. 100,000
1,100,000 Southern California Edison Co., Series A, Daily VRDN and Put, 3.40%, 02/28/08... 1,100,000
1,700,000 Southern California Edison Co., Series C, Daily VRDN and Put, 3.40%, 02/28/08... 1,700,000
200,000 Southern California Edison Co., Series D, Daily VRDN and Put, 3.40%, 02/28/08... 200,000
aIrvine Ranch Water District,
400,000 Construction Bonds, Series C, Daily VRDN and Put, 3.55%, 10/01/10............... 400,000
200,000 District Numbers 105, 140, 240, and 250, Daily VRDN and Put, 3.55%, 01/01/21.... 200,000
1,300,000 Improvement District No. 284, Series A, Daily VRDN and Put, 3.55%, 11/15/13..... 1,300,000
California (cont.)
$ 600,000 aLos Angeles MFHR, Mariposa Gardens Project, Series H, Weekly VRDN and Put,
3.15%, 09/01/15 ................................................................ $ 600,000
2,200,000 Sacramento MUD, TECP, 3.35%, 10/24/96 ........................................... 2,200,000
1,600,000 aTustin Improvement Bond Act 1915, Reassessment District No. 95-2, Series A,
Daily VRDN and Put, 3.55%, 09/02/13............................................. 1,600,000
-------------
14,012,546
-------------
Colorado2.9%
aColorado Health Facilities Authority Revenue,
295,000 Boulder Community Hospital Project, Series B, MBIA Insured, Weekly VRDN
and Put, 3.55%, 10/01/14........................................................ 295,000
2,490,000 Boulder Community Hospital Project, Series C, MBIA Insured, Weekly VRDN
and Put, 3.55%, 10/01/14........................................................ 2,490,000
2,000,000 Colorado State General Fund Revenue, TRAN, Series A, 4.50%, 06/27/97............. 2,011,317
-------------
4,796,317
-------------
Florida2.7%
1,800,000 aOkaloosa County Revenue, Gulf Coast Treatment Center, Weekly VRDN and Put,
3.65%, 11/01/14................................................................. 1,800,000
1,200,000 aOrange County HFAR, Refunding, MF, Smokewood/Sun, Series A, Weekly VRDN
and Put, 3.50%, 12/01/22........................................................ 1,200,000
1,100,000 aVolusia County Health Facilities Authority Revenue, Alliance Community Retirement
Living, Inc., Daily VRDN and Put, 3.55%, 09/01/20............................... 1,100,000
450,000 aVolusia County HFA, MFHR, Sun Pointe Apartments Project, Series H, Weekly
VRDN and Put, 3.60%, 12/01/05................................................... 450,000
-------------
4,550,000
-------------
Georgia13.3%
1,000,000 Atlanta TAN, 4.25%, 12/31/96..................................................... 1,003,057
1,100,000 aBurke County Development Authority, PCR, Georgia Power Co., Plant Vogtle,
Series 9, Daily VRDN and Put, 3.65%, 10/01/24................................... 1,100,000
2,000,000 aDe Kalb County Hospital Authority Revenue Anticipation Certificates, De Kalb
Medical Center Project, Weekly VRDN and Put, 3.70%, 09/01/09.................... 2,000,000
1,000,000 De Kalb County TAN, 3.75%, 12/31/96.............................................. 1,002,426
5,000,000 aDe Kalb Private Hospital Authority Revenue Anticipation Certificates,
Egleston Children's Hospital, Series A, Weekly VRDN and Put, 3.55%, 03/01/24.... 5,000,000
2,750,000 aFulton County Housing Authority, MFHR, Refunding, Spring Creek Crossing,
Weekly VRDN and Put, 3.60%, 10/01/24............................................ 2,750,000
1,000,000 Georgia Municipal Electric Authority, Power Revenue, Refunded, Series L,
7.75%, 01/01/97................................................................. 1,038,677
3,500,000 Georgia State Municipal Gas Authority, TECP, 3.50%, 10/08/96..................... 3,500,000
Georgia (cont.)
$ 1,800,000 aHapeville Development Authority, IDR, Hapeville Hotel Limited, Daily VRDN and Put,
3.65%, 11/01/15................................................................. $ 1,800,000
1,000,000 aMacon-Bibb County Hospital Authority Revenue, Medical Center of Central Georgia,
Weekly VRDN and Put, 3.70%, 04/01/07............................................ 1,000,000
1,900,000 aRockdale County Hospital Authority Revenue Anticipation Certificates, Weekly VRDN
and Put, 3.70%, 10/01/09........................................................ 1,900,000
-------------
22,094,160
-------------
Hawaii1.8%
500,000 Hawaii State Department of Budget and Finance, Special Purpose Mortgage Revenue,
Kaiser Permanente Medical Care, Series B, Optional Put 9/1/96, 3.75%, 03/01/14 . 500,000
Hawaii State GO,
1,000,000 6.90%, 08/01/96................................................................. 1,000,000
500,000 Refunded, 7.00%, 08/01/96....................................................... 507,500
1,000,000 Refunded, 7.10%, 08/01/96....................................................... 1,015,000
-------------
3,022,500
-------------
Illinois5.4%
2,860,000 aCity of Chicago, O'Hare International Airport Revenue, General Airport, Second Lien,
Series B, Weekly VRDN and Put, 3.60%, 01/01/15 ................................. 2,860,000
1,100,000 aIllinois Development Finance Authority Revenue, Refunding, Olin Corp. Project,
Series A, Daily VRDN and Put, 3.70%, 06/01/04 .................................. 1,100,000
aIllinois Health Facilities Authority Revenue,
300,000 Hospital Sisters Services, Series E, MBIA Insured, Weekly VRDN and Put,
3.60%, 12/01/14................................................................. 300,000
200,000 Palos Community Hospital, Series B, Weekly VRDN and Put, 3.45%, 12/01/15........ 200,000
4,500,000 aLisle MFR, Ashley Lisle Project, Weekly VRDN and Put, 3.55%, 12/15/25........... 4,500,000
-------------
8,960,000
-------------
Indiana.7%
1,000,000 Indiana Bond Bank Advance Funding Notes, Series A, 4.25%, 01/09/97............... 1,003,197
100,000 aIndianapolis EDR, Edgecomb Metals Co., Weekly VRDN and Put, 3.60%, 12/01/08..... 100,000
-------------
1,103,197
-------------
Iowa3.0%
5,000,000 Iowa School Corps Warrant Certificates, Series A, FSA Insured, 4.75%, 06/27/97... 5,034,763
-------------
Louisiana4.0%
2,200,000 aCalcasieu Parish Inc., IDB, PCR, Citgo Petrol Corp., Weekly VRDN and Put,
3.60%, 08/01/04................................................................. 2,200,000
2,700,000 aEast Baton Rouge Parish, PCR, Georgia Pacific Corp., Weekly VRDN and Put,
3.60%, 10/01/99................................................................. 2,700,000
Louisiana (cont.)
$ 200,000 aJefferson Parish IDBR, Refunding, George J. Ackel Project, Weekly VRDN and Put,
3.65%, 12/01/04................................................................. $ 200,000
150,000 aSaint Charles Parish, PCR, Shell Oil Co. Project, Weekly VRDN and Put,
3.35%, 06/01/05 ................................................................ 150,000
1,400,000 aSouth Louisiana Port Commission, Marine Terminal Facilities Revenue,
Occidental Petro., Refunding, Monthly VRDN and Put, 3.60%, 07/01/21............. 1,400,000
-------------
6,650,000
-------------
Maine2.1%
3,500,000 Maine State TAN, 4.50%, 06/27/97................................................. 3,519,025
-------------
Massachusetts1.9%
aMassachusetts State Health and Educational Facilities Authority Revenue,
1,900,000 Capital Asset Program, Series G-1, MBIA Insured, Weekly VRDN and Put,
3.30%, 01/01/19................................................................. 1,900,000
1,200,000 Harvard University, Weekly VRDN and Put, 3.50%, 08/01/17........................ 1,200,000
-------------
3,100,000
-------------
Michigan6.6%
1,000,000 aGrand Rapids Water Supply System Revenue, Refunding, FGIC Insured, Daily VRDN
and Put, 3.45%, 01/01/20........................................................ 1,000,000
1,100,000 aMichigan Higher Education Student Loan Authority Revenue, Refunding, Series XII-B,
AMBAC Insured, Weekly VRDN and Put, 3.65%, 10/01/13............................. 1,100,000
7,500,000 Michigan State GO Notes, 4.00%, 09/30/96......................................... 7,512,223
1,400,000 aMichigan State Strategic Fund, IDR, Norcer Manufacturing Project, Weekly VRDN
and Put, 3.60%, 12/01/00........................................................ 1,400,000
-------------
11,012,223
-------------
Minnesota.5%
500,000 aBeltrami County Environmental Control Revenue, Refunding, Northwood Panel Board,
Weekly VRDN and Daily Put, 3.65%, 12/01/21...................................... 500,000
400,000 aDuluth Tax Increment Revenue, Lake Superior, Weekly VRDN and Put,
3.80%, 09/01/10 ................................................................ 400,000
-------------
900,000
-------------
Mississippi.3%
aJackson County PCR, Refunding, Chevron U.S.A., Inc. Project,
100,000 Daily VRDN and Put, 3.65%, 12/01/16............................................. 100,000
400,000 Weekly VRDN and Put, 3.65%, 06/01/23............................................ 400,000
-------------
500,000
-------------
Missouri1.2%
$ 2,000,000 aMissouri State Health and Educational Facilities Authority, Health Facilities Revenue,
Sisters of Mercy, Refunding, Series B, Weekly VRDN and Put, 3.50%, 06/01/14..... $ 2,000,000
-------------
Montana.3%
500,000 aForsythe PCR, Portland General Electric, Series D, Weekly VRDN and Put,
3.60%, 06/01/13................................................................. 500,000
-------------
Nevada1.5%
1,000,000 aClark County, Airport Improvement Revenue, Sub Lien, Series A-1, Weekly VRDN
and Put, 3.55%, 07/01/25 ....................................................... 1,000,000
1,410,000 Nevada State Highway Improvement Revenue, Motor Vehicle Fuel Tax, Series A,
5.30%, 04/01/97................................................................. 1,425,474
-------------
2,425,474
-------------
New Jersey1.5%
500,000 Dover Sewer Authority Revenue, Refunding, Series B and C, 5.65%, 12/01/96........ 503,915
2,000,000 aNew Jersey State Turnpike Authority Revenue, Refunding, Series D, FGIC Insured,
Weekly VRDN and Put, 3.25%, 01/01/18............................................ 2,000,000
-------------
2,503,915
-------------
New Mexico1.7%
aFarmington PCR, Refunding, Arizona Public Services Co.,
1,000,000 Series A, Daily VRDN and Put, 3.60%, 05/01/24................................... 1,000,000
100,000 Series B, Daily VRDN and Put, 3.70%, 09/01/24................................... 100,000
1,700,000 aUniversity of New Mexico Revenue, Refunding, Sub Lien, AMBAC Insured,
Weekly VRDN and Put, 3.55%, 06/01/06............................................ 1,700,000
-------------
2,800,000
-------------
New York8.9%
aNew York City GO,
100,000 Subseries A-4, Daily VRDN and Put, 3.70%, 08/01/23.............................. 100,000
1,500,000 Subseries A-5, Daily VRDN and Put, 3.65%, 08/01/15.............................. 1,500,000
1,000,000 Subseries B-3, MBIA Insured, Daily VRDN and Put, 3.65%, 08/15/04................ 1,000,000
100,000 Subseries B-4, MBIA Insured, Daily VRDN and Put, 3.65%, 08/15/23 ............... 100,000
600,000 aNew York City Housing Development Corp. Mortgage Revenue, Columbus Apartments,
Series A, Weekly VRDN and Put, 3.35%, 03/15/25.................................. 600,000
2,800,000 aNew York City Municipal Water Finance Authority, Water and Sewer System Revenue,
Series C, FGIC Insured, Daily VRDN and Put, 3.65%, 06/15/22..................... 2,800,000
New York State Dormitory Authority Revenue,
1,000,000 Memorial Sloan Kettering, TECP, Series B, 3.55%, 10/16/96....................... 1,000,000
3,600,000 aMetropolitan Museum of Art, Series A, Weekly VRDN and Put, 3.25%, 07/01/15...... 3,600,000
New York (cont.)
$ 2,400,000 aNew York State Local Government Assistance Corp., Series A, Weekly VRDN and Put,
3.50%, 04/01/22 ................................................................ $ 2,400,000
1,800,000 aTriborough Bridge and Tunnel Authority, Special Obligation, FGIC Insured, Weekly
VRDN and Put, 3.45%, 01/01/24................................................... 1,800,000
-------------
14,900,000
-------------
North Carolina.9%
1,450,000 aGreensboro Public Improvement, Series B, Weekly VRDN and Put, 3.55%, 04/01/08... 1,450,000
100,000 aWake County Industrial Facilities and PCFA Revenue, Carolina Power and Light Co.,
Series A, Weekly VRDN and Put, 3.60%, 05/01/15.................................. 100,000
-------------
1,550,000
-------------
Ohio3.6%
1,000,000 aColumbus GO, Series 1, Weekly VRDN and Put, 3.25%, 06/01/16 .................... 1,000,000
5,000,000 aCuyahoga County Hospital Revenue, Cleveland Clinic Foundation, Series A,
Weekly VRDN and Put, 3.50%, 01/01/26............................................ 5,000,000
-------------
6,000,000
-------------
Pennsylvania2.5%
1,000,000 Carbon County IDA, Resource Recovery Revenue, Panther Creek Partners, Series A,
3.75%, 08/06/96................................................................. 1,000,000
1,000,000 aNortheastern Hospital and Education Authority Revenue, Allhealth Pooled
Financing Program, Weekly VRDN and Put, 3.65%, 07/01/26......................... 1,000,000
900,000 aPennsylvania Energy Development Authority, Energy Development Revenue,
B&W Ebensburg Project, Weekly VRDN and Put, 3.65%, 12/01/11..................... 900,000
1,300,000 Verango IDA, TECP, 3.65%, 10/09/96............................................... 1,300,000
-------------
4,200,000
-------------
South Carolina.2%
325,000 aRock Hill Utility Systems Revenue, FGIC Insured, Weekly VRDN and Put,
3.60%, 01/01/22 ................................................................ 325,000
-------------
Tennessee1.8%
1,000,000 aFranklin IDB, MFR, Landings Project, Class B, Weekly VRDN and Put,
3.60%, 12/01/06................................................................. 1,000,000
1,000,000 aNashville Metropolitan Airport Authority Revenue, Refunding, FGIC Insured,
Weekly VRDN and Put, 3.55%, 07/01/19 ........................................... 1,000,000
1,000,000 Shelby County GO, Refunding, Series A, 6.625%, 08/01/96.......................... 1,017,500
-------------
3,017,500
-------------
Texas12.9%
$ 200,000 aHarris County IDC, PCR, Exxon Project, Series B, Daily VRDN and Put,
3.60%, 03/01/24................................................................. $ 200,000
1,600,000 Houston GO, TECP, 3.65%, 09/10/96................................................ 1,600,000
7,100,000 Lower Colorado River Authority, TECP, 3.65%, 08/08/96............................ 7,100,000
950,000 aMontgomery County, IDC, IDR, Series A, Weekly VRDN and Put, 3.65%, 12/01/03 .... 950,000
1,285,000 aNueces County Health Facilities Development Corp. Revenue, Driscoll Childrens
Foundation, VRDN and Put, 3.65%, 07/01/15 ...................................... 1,285,000
2,000,000 aPort Arthur Navigation District, PCR, Star Enterprises Project, Weekly VRDN and
Put, 3.65%, 04/01/14............................................................ 2,000,000
1,100,000 aPort Development Corp., Texas Marine Term Revenue, Refunding, Stolt Terminals
Project, Weekly VRDN and Put, 3.55%, 01/15/14................................... 1,100,000
1,300,000 aRed River Authority, PCR, Refunding, Southwestern Public Services Co., Weekly
VRDN and Put, 3.60%, 07/01/11 .................................................. 1,300,000
6,000,000 Texas State TRAN, Series A, 4.75%, 08/30/96 ..................................... 6,006,576
-------------
21,541,576
-------------
Utah.4%
600,000 aUtah State Board Regents, Student Loan Revenue, Series B, AMBAC Insured,
Weekly VRDN and Put, 3.55%, 11/01/00............................................ 600,000
-------------
Washington3.3%
2,480,000 bKitsap County GO, Series B, MBIA Insured, 4.00%, 07/01/97....................... 2,480,000
100,000 aPort Skagit County, IDC Revenue, Hexcel Corp. Project, Weekly VRDN and Put,
3.90%, 12/01/24 ................................................................ 100,000
2,000,000 aSeattle Water System Revenue, Weekly VRDN and Put, 3.60%, 09/01/25.............. 2,000,000
100,000 aWashington State Health Care Facilities Authority Revenue, Sisters Providence,
Series B, Daily VRDN and Put, 3.70%, 10/01/05 .................................. 100,000
900,000 aWashington State Public Power Supply Revenue, Refunding, Nuclear Project No. 3,
Series A, Weekly VRDN and Put, 3.60%, 07/01/18.................................. 900,000
-------------
5,580,000
-------------
Wisconsin.1%
100,000 aMilwaukee Housing Authority, MFHR, Yankee Hill Apartments, Weekly VRDN
and Put, 3.60%, 12/01/09........................................................ 100,000
-------------
Wyoming1.6%
aLincoln County, PCR, Exxon Project,
$ 800,000 Series B, Daily VRDN and Put, 3.65%, 11/01/14 .................................. $ 800,000
400,000 Series C, Daily VRDN and Put, 3.65%, 11/01/14................................... 400,000
1,300,000 Series C, Daily VRDN and Put, 3.75%, 07/01/17................................... 1,300,000
250,000 aUinta County PCR, Amoco Standard Oil Co., Series A, Annual VRDN,
3.98%, 12/01/12 ................................................................ 250,000
-------------
2,750,000
-------------
Total Investments (Cost $168,148,196) 100.9%..................................... 168,148,196
Liabilities in Excess of Other Assets(.9%)....................................... (1,434,749)
-------------
Net Assets100.0%................................................................. $166,713,447
=============
At July 31, 1996, there was no unrealized appreciation or depreciation for
financial statement or income tax purposes.
</TABLE>
PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
CHS - Community Health Services
EDR - Economic Development Revenue
FGIC - Financial Guaranty Insurance Co.
FSA - Financial Security Assistance
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
TAN - Tax Anticipation Notes
TECP - Tax-Exempt Commercial Paper
TRAN - Tax Revenue Anticipation Notes
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, 1996
Assets:
Investments in securities,
at value and cost $168,148,196
Cash 173,859
Interest Receivable 1,072,319
--------------
Total assets 169,394,374
--------------
Liabilities:
Payables:
Investment securities purchased on
a when-issued basis (Note 1) 2,490,196
Distributions to shareholders 13,719
Management fees 119,983
Shareholder servicing costs 19,013
Accrued expenses and other liabilities 38,016
--------------
Total liabilities 2,680,927
--------------
Net assets (equivalent to $1.00 per
share based on 166,713,447 shares
of capital stock outstanding) $166,713,447
==============
Statement of Operations
for the year ended July 31, 1996
Investment income:
Interest $5,957,667
Expenses:
Management fees (Note 5) $1,016,591
Shareholder servicing costs
(Note 5) 230,143
Reports to shareholders 112,875
Registration fees 56,786
Professional fees 21,035
Directors' fees and expenses 14,482
Custodian fees 8,310
Other 9,506
Management fees waived
by manager (Note 5) (372,208)
--------------
Total expenses 1,097,520
--------------
Net investment income 4,860,147
--------------
Net realized loss on investments (688)
--------------
Net increase in net assets
resulting from operations $4,859,459
==============
Statements of Changes in Net Assets
for the years ended July 31, 1996 and 1995
Year Ended Year Ended
July 31, 1996 July 31, 1995
----------- -----------
Increase (decrease) in net assets:
Operations:
Net investment income $ 4,860,147 $ 5,688,225
Net realized loss from
security transactions (688) (9,193)
----------- -----------
Net increase in net
assets resulting
from operations 4,859,459 5,679,032
Distributions to
shareholders from
undistributed net
investment income (4,859,459)+ (5,679,032)+
Decrease in net assets
from capital share
transactions (Note 2) (6,409,169) (29,760,192)
----------- -----------
Net decrease in
net assets (6,409,169) (29,760,192)
Net assets (there is
no undistributed net
investment income
at beginning or
end of period)
Beginning of period 173,122,616 202,882,808
----------- -----------
End of period $166,713,447 $173,122,616
=========== ===========
+Distributions were decreased by net realized loss from security transactions of
$688 in 1996 and $9,193 in 1995.
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 an open-end, diversified management
investment company (mutual fund), registered under the Investment Company Act of
1940, as amended. The investment objective of the Fund is high current income
exempt from federal income taxes, consistent with capital preservation and
liquidity.
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. Security 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 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 asked prices. The Board of Directors (The Board)
has 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 will be deemed to mature on the
first day on which the put may be exercised.
c. Income Taxes:
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.
d. 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.
e. 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 distribution
is computed daily and includes the net investment income, plus or minus any
gains or losses on security transactions and any changes in unrealized portfolio
appreciation or depreciation.
Distributions are normally declared each day the New York Stock Exchange is open
for business, equal to the total available for distribution (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.
1. SIGNIFICANT ACCOUNTING POLICIES (cont.)
f. Accounting Estimates:
The preparation of financial statements in accordance with generally accepted
accounting principles 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.
g. Securities Purchased on a When-Issued or Delayed Delivery Basis:
The Fund may purchase 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 holding the
securities, it may sell the securities before the settlement date. These
securities are identified on the accompanying Statement of Investments in
Securities and Net Assets.
2. CAPITAL STOCK
At July 31, 1996, there were 5,000,000,000 shares of no par value capital stock
authorized. Transactions in the Fund's shares at $1.00 per share were as
follows:
Year Ended Year Ended
July 31, 1996 July 31, 1995
---------- -----------
Shares sold.................................... $264,699,526 $382,178,293
Shares issued in reinvestment of distributions. 4,872,946 5,662,520
Shares redeemed................................ (275,981,641) (417,601,005)
---------- -----------
Net decrease................................... $ (6,409,169) $ (29,760,192)
========== ===========
3. DISTRIBUTIONS AND CAPITAL LOSS CARRYOVERS
At July 31, 1996, for tax purposes, the Fund had capital loss carryovers as
follows:
Expiring in: 2003........................... $9,193
2004........................... 688
--------
$9,881
========
For tax purposes, the aggregate cost of securities is the same as for financial
reporting purposes at July 31, 1996.
4. PURCHASES AND SALES OF SECURITIES
Purchases and sales/maturities of securities for the year ended July 31, 1996
aggregated $330,610,367 and $333,695,054, respectively.
5. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
a. Management Agreement:
Under the terms of a management agreement, Franklin Advisers, Inc., (Advisers)
provides investment advice, administrative services, office space and facilities
to the Fund, and receives fees computed daily on the net assets of the Fund as
follows:
Annualized Fee Rate Month End Net Assets
------------- ----------------------------------
0.625% First $100 million
0.500% Over $100 million, up to and including $250 million
0.450% 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. For the year ended July 31, 1996, the
Fund's expenses did not exceed these limitations. However, Advisers agreed in
advance to waive management fees as noted in the Statement of Operations.
b. Shareholder Services Agreement:
Under the terms of a shareholder services agreement with Franklin/Templeton
Investor Services, Inc. (Investor Services), the Fund pays costs on a per
shareholder account basis. Shareholder servicing costs incurred by the Fund for
the year ended July 31, 1996 aggregated $230,143, of which $153,227 was paid to
Investor Services.
c. Other Affiliated Parties and Transactions:
Certain officers and directors of the Fund are also officers and/or directors of
Advisers and Investor Services, all wholly-owned subsidiaries of Franklin
Resources, Inc.
6. CREDIT RISKS
The Fund has investments in excess of 10% of its total net assets in the states
of Georgia and Texas. Such concentration may subject the Fund more significantly
to economic changes occurring within those states.
7. FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Selected data for a share of capital stock outstanding throughout the period are
as follows:
Year Ended July 31,
1996 1995 1994 1993 1992
------- ------- ------- ------- -------
Per Share Operating Performance
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of period................. $1.00 $1.00 $1.00 $1.00 $1.00
------- ------- ------- ------- -------
Net investment income.................................. .029 .029 .020 .021 .031
Distributions from net investment income............... (.029) (.029) (.020) (.021) (.031)
------- ------- ------- ------- -------
Net asset value at end of period....................... $1.00 $1.00 $1.00 $1.00 $1.00
======= ======= ======= ======= =======
Total return+.......................................... 2.93% 2.98% 1.85% 2.08% 3.14%
Ratios/Supplemental Data
Net assets at end of period (in 000's)................. $166,713 $173,123 $202,883 $193,565 $207,374
Ratio of expenses to average net assets++.............. .65% .65% .65% .69% .70%
Ratio of net investment income to average net assets... 2.88% 2.65% 1.84% 2.10% 3.15%
</TABLE>
+Total return measures the change in value of an investment over the periods
indicated. It is not annualized. It assumes reinvestment of dividends and
capital gains at net asset value.
++During the periods indicated below, Advisers agreed in advance to waive a
portion of the Fund's management fees. Had such action not been taken, the
Fund's ratio of expenses to average net assets would have been as follows:
Ratio of Expenses
to Average Net Assets
1992............................. .75%
1993............................. .80%
1994............................. .81%
Ratio of Expenses
to Average Net Assets
1995............................. .78%
1996............................. .87%
During the fiscal year ended July 31, 1996, the Fund paid distributions from net
investment income in the amounts shown in the Statement of Changes in Net
Assets. 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 the
Franklin Tax-Exempt Money Fund (the Fund), including the statement of
investments in securities and net assets, as of July 31, 1996, 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 periods presented. 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 include confirmation of investments held by the
custodian as of July 31, 1996 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 the
Fund as of July 31, 1996, 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 generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
San Francisco, California
September 5, 1996
Franklin Tax-Exempt Money Fund Annual Report July 31, 1996.
APPENDIX
DESCRIPTION OF GRAPHIC MATERIAL OMITTED FROM EDGAR FILING
(PURSUANT TO ITEM 304 (a) OF REGULATION S-T)
GRAPHIC MATERIAL (1)
This chart shows in bar format the comparison between the fund's seven-day
annualized yield of 2.86% and the taxable equivalent yield of 4.74% on July 31,
1996.
