CHAIRMAN'S MESSAGE
Fund 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 a money market fund is neither insured nor
guaranteed by the U.S. government or by any other entity or institution. There
is no assurance that the $1.00 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).
March 15, 1996
Dear Shareholder:
It's a pleasure to bring you the semi-annual report of the Franklin Tax-Exempt
Money Fund covering the period ended January 31, 1996.
During the third quarter of 1995, the economy appeared to be growing more
quickly than it had in the previous two quarters. However, growth slowed
considerably during the fourth quarter, as indicated by sluggish retail, home
and auto sales. Inflation also remained subdued. In response, the Federal
Reserve Board (the Fed) lowered its federal funds rate in December to 5.50% from
5.75%. It then lowered rates further to 5.25% in February 1996.
Since your fund's performance closely follows interest rates, its seven-day
annualized yield was 2.73% on January 31, 1996. The fund's seven-day effective
yield, which assumes the compounding of daily dividends, was 2.76%.
If you are in the maximum regular federal income tax bracket of 39.6%, as the
chart to the right illustrates, you would have to earn 4.52% from a taxable
short-term investment of similar quality to match your fund's tax-free yield.*
During the six-month reporting period, we continued to emphasize liquidity and
credit safety by purchasing the highest-quality securities available to money
market portfolios. Anticipating slightly lower interest rates in the near term,
we continued our recent practice of purchasing money market securities with
slightly longer maturities, in order to lock in relatively attractive rates. The
fund's weighted average maturity was 35 days on January 31, 1996, down slightly
from 47 days six months earlier, but somewhat longer than the 28-day average on
January 31, 1995.
GRAPHIC MATERIAL 1 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Looking forward, we anticipate slow economic growth, subdued inflation and
declining interest rates. We continue to manage the fund with an emphasis on
high quality and liquidity, avoiding leveraged derivatives or other potentially
volatile securities that involve undue risk.
*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.
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 at least $100, free wiring privileges and an
around-the-clock automated customer service line.
Franklin Templeton offers a selection of more than 115 different mutual funds,
each with its own investment objective. If your investment needs change, you're
likely to find a Franklin or Templeton fund to match your new goals.
Thank you for your continued support of the Franklin Tax-Exempt Money Fund. We
look forward to serving you in the years to come.
Sincerely,
Charles B. Johnson
Chairman
Franklin Tax-Exempt Money Fund
Performance Summary
Franklin Tax-Exempt Money Fund
Period ended January 31, 1996
Seven-day annualized yield 2.73%
Equivalent taxable
annualized yield1 4.52%
Seven-day effective yield2 2.76%
1. Equivalent taxable annualized yield assumes the 1996 maximum federal income
tax rate of 39.6%.
2. The seven-day effective yield assumes the compounding of daily dividends.
Annualized and effective yields are for the seven days ended January 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 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 2.51% and 2.54%, respectively. The fee waiver may be discontinued at any
time, upon notice to the fund's Board of Directors.
<TABLE>
<CAPTION>
FRANKLIN TAX-EXEMPT MONEY FUND
Statement of Investments in Securities and Net Assets, January 31, 1996 (unaudited)
Face Value
Amount (Note 1)
Investments 102.0%
<S> <C> <C>
Alaska 0.6 %
$1,000,000 Valdez Marine Revenue Refunding, ARCO Transportation Project, TECP, 3.70%,
02/13/96 ....................................................................... $ 1,000,000
-------------
Arizona 3.2 %
aApache County IDA,
100,000 IDR, Tuscon Electric Power, Springerville Project, Series A, Weekly VRDN and Put,
3.10%, 12/15/18 ..................................................... 100,000
500,000 PCR, Tuscon Electric Power, Weekly VRDN and Put, 3.15%, 06/15/20 ............ 500,000
2,200,000 aMaricopa County IDA, Hospital Facilities Revenue, Samaritan Health Services Hospital,
Series B-2, MBIA Insured, Daily VRDN and Put, 3.50%, 12/01/08 .................. 2,200,000
200,000 aMaricopa County IDAR, Refunding, Royal Oaks Sun City Project, Weekly VRDN and
Put, 3.50%, 09/01/02 ........................................................... 200,000
600,000 aMaricopa County PCC, PCR, Refunding, Arizona Public Services Co., Series E,
Daily VRDN and Put, 3.75%, 05/01/29 ............................................ 600,000
500,000 Maricopa County UHSD No. 210, Phoenix GO, Series A, 3.75%, 07/01/96 ............. 500,000
1,000,000 aPinal County, IDA, PCR, Magma-Copper Newmont Mining Corp., Daily VRDN and Put,
3.80%, 12/01/09 ................................................................ 1,000,000
-------------
5,100,000
-------------
Arkansas 1.5%
500,000 Arkansas State College Savings, Series B, 5.80%, 06/01/96 ....................... 503,208
2,000,000 aUniversity of Arkansas Revenue, Weekly VRDN and Put, 3.30%, 12/01/19 ........... 2,000,000
-------------
2,503,208
-------------
California 10.9%
aCalifornia Health Facilities Financing Authority Revenue,
300,000 Catholic Health Care, Series B, MBIA Insured, Weekly VRDN and Put, 2.85%, 07/01/16 300,000
3,700,000 St. Francis Memorial Hospital, Series B, Weekly VRDN and Put, 3.25%, 11/01/19 3,700,000
California PCFA, PCR,
1,000,000 Pacific Gas and Electric, TECP, 3.25%, 04/09/96 ............................. 1,000,000
100,000 aRefunding, Shell Oil Co. Project, Series B, Daily VRDN and Put, 3.25%, 11/01/00 100,000
100,000 aRefunding, Shell Oil Co. Project, Series B, Daily VRDN and Put, 3.25%, 10/01/11 100,000
800,000 aSouthern California Edison Co., Series C, Daily VRDN and Put, 3.70%, 02/28/08 800,000
7,700,000 California State RAW, Series C, 5.75%, 04/25/96 ................................. 7,736,070
600,000 aLos Angeles MFHR, Mariposa Gardens Project, Series H, Weekly VRDN and Put,
3.20%, 09/01/15 ................................................................ 600,000
2,200,000 Sacramento MUD, TECP, 3.30%, 03/14/96 ........................................... 2,200,000
1,100,000 Southern California Public Power Authority Transmission Project Revenue, Refunding,
AMBAC Insured, Optional Put 02/19/96, 2.75%, 07/01/19 .......................... 1,100,000
-------------
17,636,070
-------------
Colorado 3.3%
aColorado Health Facilities Authority Revenue,
$ 295,000 Boulder Community Hospital Project, Series B, MBIA Insured, Weekly VRDN and
Put, 3.15%, 10/01/14 ....................................................... $ 295,000
1,690,000 Boulder Community Hospital Project, Series C, MBIA Insured, Weekly VRDN and
Put, 3.15%, 10/01/14 ....................................................... 1,690,000
1,820,000 aEnglewood MFR, Marks Project, Series A, Weekly VRDN and Put, 3.15%, 12/15/97 ... 1,820,000
1,550,000 aPitkin County MFR, Centennial Aspen Project, Weekly VRDN and Put, 3.19%, 04/01/07 1,550,000
-------------
5,355,000
-------------
Delaware 0.6%
1,000,000 State Refunding, Series B, 7.00%, 07/01/96 ...................................... 1,033,248
-------------
Florida 5.9%
1,390,000 aBrevard County HFA, MFHR, EKS, Inc. Project, Weekly VRDN and Put, 3.15%, 01/01/15 1,390,000
1,000,000 aBroward County HFA, MFHR, Margate Investments Project, Weekly VRDN and Put,
3.20%, 11/01/05 ................................................................ 1,000,000
500,000 Florida Board of Education, GO, 7.80%, 06/01/96 ................................. 516,910
1,000,000 Hillsborough County Florida Capital Improvement Program Revenue, Subseries 2,
8.30%, 02/01/96 ................................................................ 1,020,000
1,800,000 aOkaloosa County Revenue, Gulf Coast Treatment Center, Weekly VRDN and Put,
3.20%, 11/01/14 ................................................................ 1,800,000
1,200,000 aOrange County HFAR, Refunding, MF, Smokewood/Sun, Series A, Weekly VRDN and
Put, 3.15%, 12/01/22 ........................................................... 1,200,000
1,000,000 St. Petersburg Utility Tax Revenue, MBIA Insured, Refunded, 7.60%, 06/01/96 ..... 1,032,171
1,100,000 aVolusia County Health Facilities Authority Revenue, Alliance Community Retirement
Living, Inc., Daily VRDN and Put, 3.60%, 09/01/20 .............................. 1,100,000
450,000 aVolusia County HFA, MFHR, Sun Pointe Apartments Project, Series H, Weekly VRDN
and Put, 3.15%, 12/01/05 ....................................................... 450,000
-------------
9,509,081
-------------
Georgia 4.7%
2,000,000 aDe Kalb County Hospital Authority Revenue Anticipation Certificates, De Kalb Medical
Center Project, Weekly VRDN and Put, 3.30%, 09/01/09 ........................... 2,000,000
2,750,000 aFulton County Housing Authority, MFHR, Refunding, Spring Creek Crossing, Weekly
VRDN and Put, 3.20%, 10/01/24 .................................................. 2,750,000
$1,000,000 aMacon-Bibb County Hospital Authority Revenue, Medical Center of Central Georgia,
Weekly VRDN and Put, 3.30%, 04/01/07 ........................................... $ 1,000,000
1,900,000 aRockdale County, Hospital Authority Revenue, Anticipation Certificates, Weekly VRDN
and Put, 3.30%, 10/01/09 ....................................................... 1,900,000
-------------
7,650,000
-------------
Hawaii 1.3 %
500,000 Hawaii State Department of Budget and Finance, Special Purpose Mortgage Revenue,
Kaiser Permanente Medical Care, Series B, Optional Put 3/1/96, 3.75%, 03/01/14 . 500,000
Hawaii State GO,
1,000,000 6.90%, 08/01/96 ............................................................. 1,014,977
500,000 Refunded, 7.00%, 08/01/96 ................................................... 515,090
-------------
2,030,067
-------------
Illinois 4.5%
2,860,000 City of Chicago, O'Hare International Airport Revenue, General Airport, Second Lien,
Series B, Optional Put 04/01/96, 3.20%, 01/01/15 ............................... 2,860,000
1,100,000 aIllinois Development Finance Authority Revenue, Refunding, Orlin Corp. Project,
Series A, Daily VRDN and Put, 3.45%, 06/01/04 .................................. 1,100,000
aIllinois Health Facilities Authority Revenue,
300,000 Hospital Sisters Services, Series E, MBIA Insured, Weekly VRDN and Put, 3.20%,
12/01/14 ................................................................... 300,000
200,000 Palos Community Hospital, Series B, Weekly VRDN and Put, 3.25%, 12/01/15 .... 200,000
2,800,000 aLisle MFR, Ashley Lisle Project, Weekly VRDN and Put, 3.05%, 12/15/25 .......... 2,800,000
-------------
7,260,000
-------------
Indiana 1.9%
bIndiana Bond Bank Advance Funding Notes,
2,000,000 Series A, 4.25%, 07/08/96 ................................................... 2,007,720
1,000,000 Series A, 4.25%, 01/09/97 ................................................... 1,006,810
100,000 aIndianapolis EDR, Edgecomb Metals Co., Weekly VRDN and Put, 3.20%, 12/01/08 .... 100,000
-------------
3,114,530
-------------
Iowa 3.1%
5,000,000 Iowa School Corps, Anticipation Certificates, Series A, CGIC Insured, 4.75%, 06/28/96 5,017,509
-------------
Kentucky 0.6%
1,000,000 Kentucky State Turnpike Authority EDR, Revitalization Projects, 6.60%, 05/15/96 . 1,008,068
-------------
Louisiana 7.8%
aCalcasieu Parish Inc., IDB,
$1,900,000 Industrial Revenue Refunding, Olin Corp. Project, Series B, Daily VRDN and Put,
3.45%, 02/01/16........................................................... $ 1,900,000
2,200,000 PCR, Citgo Petrol Corp., Weekly VRDN and Put, 3.15%, 08/01/04 ............... 2,200,000
2,700,000 aEast Baton Rouge Parish, PCR, Georgia Pacific Corp., Weekly VRDN and Put,
3.15%, 10/01/99.......................................................... 2,700,000
200,000 aJefferson Parish IDBR, Refunding, George J. Ackel Project, Weekly VRDN and Put,
3.15%, 12/01/04 ................................................................ 200,000
3,150,000 aSaint Charles Parish, PCR, Shell Oil Co. Project, Weekly VRDN
and Put, 2.90%, 06/01/05....................................................... 3,150,000
1,400,000 aSouth Louisiana Port Commission, Marine Terminal Facilities Revenue,
Occidental Petro., Refunding, Weekly VRDN and Put, 3.10%, 07/01/21 ............. 1,400,000
1,100,000 aWest Feliciana Parish, PCR, Gulf States Utilities Co., Series D, Daily VRDN and Put,
3.50%, 12/01/15 ................................................................ 1,100,000
-------------
12,650,000
-------------
Maine 1.2%
2,000,000 Maine State TAN, 4.50%, 06/28/96 ................................................ 2,005,731
-------------
Massachusetts 1.7%
1,500,000 Boston, Refunding, Series A, AMBAC Insured, 4.00%, 07/01/96 ..................... 1,500,867
1,200,000 aMassachusetts State Health and Educational Facilities Authority Revenue,
Harvard University, Weekly VRDN and Put, 2.75%, 08/01/17 ....................... 1,200,000
-------------
2,700,867
-------------
Michigan 1.2%
2,000,000 aMichigan State Strategic Fund, Limited Obligation Revenue, Refunding,
Detroit Edison Co., Daily VRDN and Put, 3.40%, 09/01/30 ........................ 2,000,000
-------------
Minnesota 0.6 %
524,000 aAustin Commercial Development Revenue, Hy-Vee Food Stores, Monthly VRDN and
Weekly Put, 3.70%, 12/01/04 .................................................... 524,000
500,000 aDuluth Tax Increment Revenue, Lake Superior, Weekly VRDN and Put, 3.40%,
09/01/10 ....................................................................... 500,000
-------------
1,024,000
-------------
Mississippi 1.2%
1,500,000 aJackson County PCR, Refunding, Chevron U.S.A., Inc. Project, Daily VRDN and Put,
3.40%, 12/01/16 ................................................................ 1,500,000
500,000 aPerry County PCR, Refunding, Leaf River Forest Project, Daily VRDN
and Put, 3.45%, 03/01/02 ...................................................... 500,000
-------------
2,000,000
-------------
Missouri 1.9%
$1,000,000 aIndependence Missouri IDA, MFHR, Independence Ridge Apartments Project,
Weekly VRDN and Put, 3.15%, 12/01/15 ........................................... $ 1,000,000
2,000,000 aMissouri State Health and Educational Facilities Authority, Health Facilities Revenue,
Sisters of Mercy, Refunding, Series B, Weekly VRDN and Put, 3.05%, 06/01/14 .... 2,000,000
-------------
3,000,000
-------------
Montana 0.3%
500,000 aForsythe PCR, Portland General Electric, Series D, Swiss Bank Corp., Weekly VRDN
and Put, 3.05%, 06/01/13 ....................................................... 500,000
-------------
Nevada 0.6 %
1,000,000 aClark County, Airport Improvement Revenue, Sub Lien, Series A-1, Weekly VRDN and
Put, 3.05%, 07/01/25 ........................................................... 1,000,000
-------------
New York 13.5%
aNew York City GO,
700,000 Subseries B-4, Daily VRDN and Put, 3.80%, 08/15/22 .......................... 700,000
100,000 Subseries B-4, Daily VRDN and Put, 3.50%, 08/15/23 .......................... 100,000
200,000 aNew York City Municipal Water Finance Authority Revenue, Water and Sewer Systems,
Series C, FGIC Insured, Daily VRDN and Put, 3.50%, 06/15/23 .................... 200,000
New York State Dormitory Authority Revenue,
1,000,000 Memorial Sloan Kettering, TECP, 3.25%, 04/03/96 ............................. 1,000,000
3,600,000 aMetropolitan Museum of Art, Series A, Weekly VRDN and Put, 2.75%, 07/01/15 . 3,600,000
1,000,000 Sloan Kettering, TECP, 3.60%, 02/13/96 ...................................... 1,000,000
aNew York State Energy Research and Development Authority, PCR,
1,000,000 Hudson Gas & Electric Co. Project, Series A, Weekly VRDN and Put, 3.00%, 06/01/27 1,000,000
1,100,000 Hudson Gas & Electric Co., Series B, Weekly VRDN and Put, 2.90%, 06/01/27 1,100,000
400,000 New York Electric and Gas, Series B, Refunding, Daily VRDN and Put,
3.20%, 02/01/29 .......................................................... 400,000
aNew York State Local Government Assistance Corp.,
5,600,000 Series A, Weekly VRDN and Put, 2.95%, 04/01/22 .............................. 5,600,000
2,400,000 Series A, Weekly VRDN and Put, 2.85%, 04/01/23 .............................. 2,400,000
4,800,000 aTriborough Bridge and Tunnel Authority, Special Obligation, FGIC Insured, Weekly
VRDN and Put, 2.95%, 01/01/24 .................................................. 4,800,000
-------------
21,900,000
-------------
North Carolina 1.7%
$2,700,000 aNorth Carolina Medical Care-Community Hospital Revenue, Pooled Equipment
Financing Project, MBIA Insured, Weekly VRDN and Put, 3.10%, 12/01/25 .......... $ 2,700,000
100,000 aWake County Industrial Facilities and PCFA Revenue, Carolina Power and Light Co.,
Series A, Weekly VRDN and Put, 3.20%, 05/01/15 ................................. 100,000
-------------
2,800,000
-------------
Ohio 0.6%
1,000,000 aColumbus GO, Series 1, Weekly VRDN and Put, 2.90%, 06/01/16 .................... 1,000,000
-------------
Pennsylvania 2.0%
1,000,000 Carbon County Resource Recovery, TECP, 3.50%, 05/15/96 .......................... 1,000,000
900,000 aPennsylvania Energy Development Authority, Energy Development Revenue, B&W
Ebensburg Project, Weekly VRDN and Put, 3.20%, 12/01/11 ........................ 900,000
1,300,000 Venango IDA Recovery Revenue, Scrubgrass Project, TECP, 3.80%, 02/15/96 ......... 1,300,000
-------------
3,200,000
-------------
Rhode Island 1.9%
3,000,000 Rhode Island State TAN, 4.50%, 06/28/96 ......................................... 3,009,950
-------------
South Carolina 2.1%
2,500,000 aAbbeyville County IDR, Bibb Co. Project, Weekly VRDN and Put, 3.30%, 10/01/04 .. 2,500,000
600,000 aCharleston County Industrial Revenue, Massey Coal Term South Carolina Corp.,
Refunding, Daily VRDN and Put, 3.40%, 01/01/07 ................................. 600,000
325,000 aRock Hill Utility Systems Revenue, FGIC Insured, Weekly VRDN and Put, 3.15%,
01/01/22 ....................................................................... 325,000
-------------
3,425,000
-------------
Tennessee 2.5%
1,000,000 aFranklin IDB, MFR, Landings Project, Class B, Weekly VRDN and Put, 3.15%,
12/01/06 ....................................................................... 1,000,000
1,000,000 aNashville Metropolitan Airport Authority Revenue, Refunding, FGIC Insured, Weekly
VRDN and Put, 3.20%, 07/01/19 .................................................. 1,000,000
1,000,000 Shelby County GO, Refunding, Series A, 6.625%, 08/01/96 ......................... 1,031,114
1,000,000 aTennessee State GO, BAN, Series B, Weekly VRDN and Put, 3.20%, 05/01/96 ........ 1,000,000
-------------
4,031,114
-------------
Texas 11.3%
680,000 Austin Utility System Revenue, Series A, Refunding, FGIC Insured, 6.60%, 05/15/96 685,889
1,000,000 Beaumont Texas, Refunding, FGIC Insured, 6.70%, 03/01/96 ........................ 1,002,552
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, Series A, TECP, 3.40%, 02/12/96 ........................................ 1,600,000
7,100,000 Lower Colorado River Authority, TECP, 3.35%, 02/14/96 ........................... 7,100,000
$ 950,000 aMontgomery County, IDC, IDR, Series A, Weekly VRDN and Put, 3.15%, 12/01/03 .... $ 950,000
1,285,000 aNueces County Health Facilities Development Corp. Revenue, Driscoll Childrens
Foundation, Weekly VRDN and Put, 3.15%, 07/01/15 ............................... 1,285,000
2,000,000 aPort Arthur Navigation District, PCR, Star Enterprises Project, Weekly VRDN and Put,
3.30%, 04/01/14 ................................................................ 2,000,000
1,100,000 aPort Development Corp., Texas Marine Term Revenue, Refunding, Stolt Terminals
Project, Weekly VRDN and Put, 3.05%, 01/15/14 .................................. 1,100,000
1,300,000 aRed River Authority, PCR, Refunding, Southwestern Public Services Co., Weekly VRDN
and Put, 3.10%, 07/01/11 ....................................................... 1,300,000
1,000,000 Texas State TRAN, 4.75%, 08/30/96 ............................................... 1,003,825
-------------
18,227,266
-------------
Utah 0.9%
600,000 aUtah State Board Regents, Student Loan Revenue, Series B, AMBAC Insured, Weekly
VRDN and Put, 3.10%, 11/01/00 .................................................. 600,000
760,000 Utah State Municipal Power Agency Electric System Revenue, Refunding, Series A,
6.875%, 07/01/96 ............................................................... 784,052
-------------
1,384,052
-------------
Washington 3.5%
100,000 aPort Skagit County, IDC Revenue, Hexcel Corp. Project, Weekly VRDN and Put, 3.65%,
12/01/24 ....................................................................... 100,000
Seattle Water System Revenue,
1,070,000 Refunding, 3.90%, 06/01/96 .................................................. 1,070,146
2,000,000 aWeekly VRDN and Put, 3.20%, 09/01/25 ....................................... 2,000,000
1,400,000 aWashington State Health Care Facilities Authority Revenue, Sisters Providence,
Series E, Board Purchase Agreement, Daily VRDN and Put, 3.40%, 10/01/05 ........ 1,400,000
1,000,000 aWashington State Public Power Supply Revenue, Refunding, Nuclear Project No. 3,
Series A, Weekly VRDN and Put, 3.10%, 07/01/18 ................................. 1,000,000
-------------
5,570,146
-------------
Wisconsin 0.1%
100,000 aMilwaukee Housing Authority, MFHR, Yankee Hill Apartments, Weekly VRDN and Put,
3.15%, 12/01/09 ................................................................ 100,000
-------------
Wyoming 3.3%
aLincoln County, PCR, Exxon Project,
800,000 Series B, Daily VRDN and Put, 3.50%, 11/01/14 ............................... 800,000
800,000 Series C, Daily VRDN and Put, 3.50%, 11/01/14 ............................... 800,000
600,000 aPlatte County PCR, Tri-State G&T, Series A, Daily VRDN and Put, 3.60%, 07/01/14 600,000
aUinta County PCR,
$ 250,000 Amoco Standard Oil Co., Series A, Annual VRDN, 3.98%, 12/01/12 .............. $ 250,000
2,800,000 Refunding, Chevron U.S.A., Inc. Project, Weekly VRDN and Put, 3.40%, 08/15/20 2,800,000
-------------
5,250,000
-------------
Total Investments (Cost $164,994,907) 102.0%.......................... 164,994,907
Liabilities in Excess of Other Assets, Net (2.0)% .................... (3,309,768)
-------------
Net Assets 100.0% .................................................... $161,685,139
=============
</TABLE>
At January 31, 1996, 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 (VRDNs) 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 purchased on a when-issued basis.
Financial Statements
Statement of Assets and Liabilities
January 31, 1996 (unaudited)
Assets:
Investments in securities,
at value and cost $164,994,907
Receivables:
Capital shares sold 5,000
Interest 1,201,217
--------------
Total assets 166,201,124
--------------
Liabilities:
Payables:
Investment securities purchased:
Regular delivery 523,843
When-issued basis (Note 1) 3,014,530
Dividends to shareholders 44,979
Management fees 73,251
Shareholder servicing costs 24,546
Bank overdraft 806,298
Accrued expenses and other liabilities 28,538
--------------
Total liabilities 4,515,985
--------------
Net assets (equivalent to $1.00 per share
based on 161,685,139 shares of
capital stock outstanding) $161,685,139
==============
Statements of Changes in Net Assets for the six months ended January 31, 1996
(unaudited) and the year ended July 31, 1995
Six Months Year
Ended Ended
January 31, 1996 July 31, 1995
----------- -----------
Increase (decrease)
in net assets:
Operations:
Net investment
income $ 2,610,752 $ 5,688,225
Net realized loss on
investments -- (9,193)
----------- -----------
Net increase in net
assets resulting
from operations 2,610,752 5,679,032
Distributions to
shareholders from
net investment
income (2,610,752) (5,679,032)+
Decrease in net
assets from capital
share transactions
(Note 2) (11,437,477) (29,760,192)
----------- -----------
Net decrease in
net assets (11,437,477) (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 $161,685,139 $173,122,616
=========== ===========
+Distributions were reduced by a net realized loss from security transactions of
$9,193.
Statement of Operations
for the six months ended January 31, 1996 (unaudited)
Investment income:
Interest $3,165,664
Expenses:
Management fees (Note 5) $489,994
Shareholder servicing costs
(Note 5) 121,048
Reports to shareholders 57,906
Registration fees 26,417
Professional fees 17,910
Custodian fees 6,929
Directors' fees and expenses 5,422
Other 3,437
Expenses waived by manager
(Note 5) (174,151)
--------------
Total expenses 554,912
--------------
Net investment income $2,610,752
==============
The accompanying notes are an integral part of these financial statements.
Notes to Financial Statements (unaudited)
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. 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'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 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 are deemed to mature on the
first 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 397 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 lesser of the
period until the interest rate is adjusted or until the principal can be
recovered by demand.
d. 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.
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.
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 dividends 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 are normally declared on 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 or Delayed Delivery 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 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. The Fund has set aside sufficient investment
securities as collateral for these purchase commitments.
2. CAPITAL STOCK
At January 31, 1996, there were 5,000,000,000 shares of no par value capital
stock authorized. Transactions in the capital stock at $1.00 per share were as
follows:
<TABLE>
<CAPTION>
Six months
ended Year ended
January 31, 1996 July 31, 1995
---------- -----------
<S> <C> <C>
Shares sold................................................................... $ 76,377,683 $152,256,266
Shares issued in reinvestment of distributions................................ 2,592,979 5,662,520
Shares redeemed............................................................... (93,794,619) (237,371,157)
Changes from exercise of exchange privilege:
Shares sold.................................................................. 42,917,014 229,922,027
Shares redeemed.............................................................. (39,530,534) (180,229,848)
---------- -----------
Net decrease.................................................................. $ (11,437,477) $ (29,760,192)
========== ===========
</TABLE>
3. 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 as for financial statement purposes at January 31, 1996.
4. PURCHASE AND SALES OF SECURITIES
Purchases and sales/maturities of securities for the six months ended January
31, 1996 aggregated $146,246,013 and $152,442,889, 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 at
the last day of the month as follows:
Annualized Fee Rate Month End Net Assets
- ------------- ----------------------------------
0.625% First $100 million
0.50% Over $100 million up to and including $250 million
0.45% Over $250 million up to and including $10 billion
Fees are further reduced on net assets over $10 billion. The terms of the
management agreement provide that annual aggregate 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 six months ended January 31, 1996, Advisers agreed
in advance to waive $174,151 of the management fees.
b. Shareholder Services Agreement
Pursuant to a shareholder service agreement with Franklin/Templeton Investor
Services, Inc. (Investor Services), the Fund pays costs on a per shareholder
account basis. Such costs incurred for the six months ended January 31, 1996
aggregated $121,048, of which $115,466 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/or Investor Services, all wholly-owned subsidiaries of Franklin
Resources, Inc.
6. CREDIT RISK
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.
7. FINANCIAL HIGHLIGHTS
Selected data for a share of capital stock outstanding throughout the period are
as follows:
<TABLE>
<CAPTION>
Year Ended
19961 1995 1994 1993 1992 1991
------- ------- ------- ------- ------- -------
Per Share Operating Performance
<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of period............. $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
------- ------- ------- ------- ------- -------
Net investment income.............................. .015 .029 .020 .021 .031 .045
Distributions from net investment income........... (.015) (.029) (.020) (.021) (.031) (.045)
------- ------- ------- ------- ------- -------
Net asset value at end of period................... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
======= ======= ======= ======= ======= =======
Total return+...................................... 1.54% 2.98% 1.85% 2.08% 3.14% 4.65%
Ratios/Supplemental Data
Net assets at end of year (in 000's)............... $161,685 $173,123 $202,883 $193,565 $207,374 $249,214
Ratio of expenses to average net assets++.......... .66%* .65% .65% .69% .70% .70%
Ratio of net investment income to average net assets 3.08%* 2.65% 1.84% 2.10% 3.15% 4.53%
</TABLE>
*Annualized.
+Total return measures the change in value of an investment over the periods
indicated. It is not annualized. It assumes reinvestment of dividends at net
asset value.
1For the six months ended January 31, 1996.
++During the periods indicated below, Advisers 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
-------
1991......................... .71%
1992......................... .75
1993......................... .80
1994......................... .81
1995......................... .78
19961........................ .86*
Franklin Tax-Exempt Money Fund
APPENDIX
DESCRIPTION OF GRAPHIC MATERIAL OMITTED FROM EDGAR FILING
(PERSUANT TO ITEM 304 (a) OF REGULATION S-T)
GRAPHIC MATERIAL (1)
This bar chart shows the comparison between the fund's seven-day annualized
yield of 2.73% and the equivalent taxable yield of 4.52%.
