CONTENTS
Shareholder Letter.......................... 1
Performance Summary ........................ 4
Statement of Investments.................... 5
Financial Statements........................ 11
Notes to Financial
Statements.................................. 13
SHAREHOLDER LETTER
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.1
1. Please remember, an investment in the fund is neither insured nor guaranteed
by the U.S. government or by any other entity or institution, and there can be
no assurance that the fund will be able to maintain a net asset value of $1.00
per share.
Dear Shareholder,
We are pleased to bring you the Franklin Tax-Exempt Money Fund's annual report
for the period ended July 31, 1997.
Strong economic growth coupled with low inflation characterized most of the
period. In the first half of the year under review, the nation's low inflation
and strong, but tempered growth, combined to produce a stable economic
environment in which the Federal Reserve Board (the Fed) saw no need to make any
significant adjustments to monetary policy and left short-term interest rates at
5.25%.
However, in the second half of the fund's fiscal year, while inflation remained
mild, economic growth accelerated considerably, and the unemployment level
dropped below 4.80%, its lowest level in over twenty years.2 In spite of the low
inflation, the Fed responded to the threat of higher prices represented by this
increasing growth and high level of employment. In March, the Fed increased the
federal funds rate (the rate banks charge each other for overnight loans)25
basis points, from 5.25% to 5.50%.
2. Source: U.S. Bureau of Labor Statistics.
GRAPHIC MATERIAL 1 OMITTED - SEE APPENDIX AT END OF DOCUMENT
The rise in interest rates caused the fund's seven-day effective yield to
increase, from 2.90% on July 31, 1996, to 3.09% at the end of the period. The
fund's seven-day annualized yield also increased, from 2.86%, to 3.05% on July
31, 1997. 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
tax bracket of 39.6% would need to earn 5.05% from a taxable investment to match
the fund's tax-free yield.
Looking forward, we believe the economy is in the later stages of this current
business cycle. Higher private consumption, capital spending, and improving
foreign economies should propel future growth. However, such growth, coupled
with a tight labor market, could result in higher inflation expectations. As a
result, the Fed may raise interest rates again. The short-weighted maturity and
high quality of the securities in the Franklin Tax-Exempt Money Fund's portfolio
should allow the fund to adjust quickly in an environment of rising short-term
rates.
This discussion reflects the strategies we employed for the fund during the year
under review and includes our opinions as of the close of the period. Since
economic and market conditions are constantly changing, our strategies,
evaluations, conclusions and decisions regarding portfolio holdings may change
as newcircumstances arise. Although past performance of a specific investment or
sector cannot guarantee future performance, such information can be useful in
analyzing securities we purchase or sell for the fund. The fund's objective is
to provide shareholders with a high-quality, conservative investment; therefore,
we do not invest in leveraged derivatives or other potentially volatile
securities that we believe involve undue risk.
As a Franklin Tax-Exempt Money Fund shareholder, you continue to benefit from
convenient, easy access to your money, and a high degree of credit safety. You
can also enjoy a wide range of services, including draft writing for amounts of
$100 or more, free draft books, and access to TeleFACTS(R), our
around-the-clock, automated, customer service line.
Sincerely,
Charles B. Johnson
Chairman
Franklin Tax-Exempt Money Fund
PERFORMANCE SUMMARY
Franklin Tax-Exempt Money Fund
Period ended 7/31/97
Seven-day effective yield1 3.09%
Seven-day annualized yield 3.05%
Taxable equivalent yield2 5.05%
1. The seven-day effective yield assumes the compounding of daily dividends.
2. Taxable equivalent yield assumes the 1997 maximum 39.6% federal personal
income tax bracket.
Annualized and effective yields are for the seven days ended July 31, 1997.
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.
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 2.78% and 2.82%, respectively. The fee waiver may be discontinued at any
time, upon notice to the fund's Board of Directors.
Past performance is not predictive of future results.
FRANKLIN TAX-EXEMPT MONEY FUND
Statement of Investments in Securities and Net Assets, July 31, 1997
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE1)
Investments 99.9%
Alaska 0.1%
<S> <C> <C>
$ 100,000 aValdez Marine Terminal Revenue, Refunding, Exxon Pipeline Co. Project,
Series A, Daily VRDN and Put, 3.80%, 12/01/33 ............................... $ 100,000
-------------
Arizona 0.6%
100,000 aApache County IDA, IDR, Tuscon Electric Power, Springerville Project, Series C,
Weekly VRDN and Put, 3.75%, 12/15/18 ......................................... 100,000
200,000 aMaricopa County IDAR, Refunding, Royal Oaks Sun City Project,
Weekly VRDN and Put, 3.65%, 09/01/02 ......................................... 200,000
600,000 aMaricopa County PCC, PCR, Refunding, Arizona Public Services Co.,
Series E, Daily VRDN and Put, 3.70%, 05/01/29 ................................ 600,000
-------------
900,000
-------------
Arkansas 2.4%
2,000,000 aSheridan IDR, Kohler Project, Weekly VRDN and Put, 3.65%, 08/01/00 ........... 2,000,000
1,900,000 aUniversity of Arkansas Revenue, Weekly VRDN and Put, 3.65%, 12/01/19 ......... 1,900,000
-------------
3,900,000
-------------
California 4.7%
300,000 aCalifornia Health Facilities Financing Authority Revenue,
Catholic Health Care, Series B, MBIA Insured, Weekly VRDN and
Put, 3.35%, 07/01/16 ......................................................... 300,000
aCalifornia PCFA, PCR,
100,000 Refunding, Shell Oil Co. Project, Series C, Daily VRDN and Put, 3.45%, 11/01/00 100,000
100,000 Southern California Edison Co., Series A, Daily VRDN and Put, 3.40%, 02/28/08 . 100,000
aIrvine Ranch Water District, Refunding, DATES, Consolidated Boards,
Series B, Daily VRDN and Put, 3.55%,
200,000 10/01/99 ...................................................................... 200,000
200,000 10/01/04 ...................................................................... 200,000
5,000,000 Los Angeles County TRAN, Series A, 4.50%, 06/30/98 ............................ 5,028,543
1,700,000 Sacramento MUD, TECP, 3.60%, 09/15/97 ......................................... 1,700,000
-------------
7,628,543
-------------
Colorado 1.0%
aColorado Health Facilities Authority Revenue, Boulder Community Hospital Project,
285,000 Series B, MBIA Insured, Weekly VRDN and Put, 3.65%, 10/01/14 .................. 285,000
1,355,000 Series C, MBIA Insured, Weekly VRDN and Put, 3.65%, 10/01/14 .................. 1,355,000
-------------
1,640,000
-------------
Florida 8.4%
1,000,000 aDade County Water and Sewer System Revenue, FGIC Insured,
Weekly VRDN and Put, 3.60%, 10/05/22 ......................................... 1,000,000
2,000,000 aFlorida HFA MF, Woodlands Apts.,Weekly VRDN and Put, 3.65%, 12/01/07 ......... 2,000,000
1,200,000 aOrange County HFAR, Refunding, MF, Smokewood/Sun, Series A,
Weekly VRDN and Put, 3.65%, 12/01/22 ......................................... 1,200,000
500,000 Orange County Water and Wastewater Revenue, MBIA Insured, 7.20%, 10/01/99 ..... 512,611
5,800,000 aPinellas County Health Facilities Authority Revenue, Refunding, DATES,
Daily VRDN and Put, 3.70%, 12/01/15 .......................................... 5,800,000
700,000 aPutnam County Development Authority, PCR, Refunding, Florida
Power and Light Co. Project, Daily VRDN and
Put, 3.65%, 09/01/24 ......................................................... 700,000
2,000,000 aSaint Lucie County, PCR, Refunding, Florida Power and Light Co.
Project, Daily VRDN and Put, 3.65%, 01/01/26 ................................. 2,000,000
250,000 aVolusia County HFA, MFHR, Sun Pointe Apartments Project,
Series H, Weekly VRDN and Put, 3.80%, 12/01/05 ............................... 250,000
-------------
13,462,611
-------------
Georgia 6.6%
$ 1,000,000 Bartow County School District, Georgia State Aid Intercept Program,
4.00%, 01/01/98...............................................................$ 1,000,000
Burke County Development Authority, PCR,
1,100,000 aGeorgia Power Co., Plant Vogtle, Series 9, Daily VRDN and Put, 3.75%, 10/01/24 1,100,000
1,500,000 Refunding, Oglethorpe Power Corp., Plant Vogtle, AMBAC Insured, 3.60%, 12/01/97 1,500,000
1,900,000 aDe Kalb County Hospital Authority Revenue Anticipation Certificates,
De Kalb Medical Center Project, Weekly VRDN
and Put, 3.70%, 09/01/09 ..................................................... 1,900,000
1,250,000 Fulton County Water and Sewer Revenue, 8.25%, 01/01/98 ........................ 1,296,667
1,200,000 aHapeville IDAR, Hapeville Hotel Ltd., Daily VRDN and Put, 3.75%, 11/01/15 .... 1,200,000
900,000 aMacon-Bibb County Hospital Authority Revenue Certificates,
Medical Center of Central Georgia, Weekly VRDN
and Put, 3.70%, 04/01/07 ..................................................... 900,000
1,810,000 aRockdale County Hospital Authority Revenue Anticipation Certificates,
Weekly VRDN and Put, 3.70%, 10/01/09.......................................... 1,810,000
-------------
10,706,667
-------------
Illinois 3.5%
2,000,000 Chicago Tender Notes, 3.55%, 01/31/98 ......................................... 2,000,000
2,860,000 aCity of Chicago, O'Hare International Airport Revenue,
General Airport, Second Lien, Series B, Weekly VRDN and
Put, 3.65%, 01/01/15 ......................................................... 2,860,000
200,000 aIllinois Development Finance Authority Revenue, Refunding,
Olin Corp. Project, Series A, Daily VRDN and Put,
3.75%, 06/01/04 .............................................................. 200,000
aIllinois Health Facilities Authority Revenue,
300,000 Hospital Sisters Services, Series E, MBIA Insured,
Weekly VRDN and Put, 3.65%, 12/01/14 ......................................... 300,000
200,000 Palos Community Hospital, Series B, Weekly VRDN and Put, 3.60%, 12/01/15 ...... 200,000
-------------
5,560,000
-------------
Indiana 0.1%
100,000 aIndianapolis EDR, Edgecomb Metals Co.,
Weekly VRDN and Put, 3.60%, 12/01/08 ......................................... 100,000
-------------
Iowa 4.4%
Iowa State School Corps Warrant Certificates,
5,000,000 Series A, FSA Insured, 4.50%, 06/26/98 ........................................ 5,030,376
2,000,000 Series B, FSA Insured, 4.25%, 01/30/98 ........................................ 2,006,365
-------------
7,036,741
-------------
Kentucky 3.7%
1,300,000 aKentucky Development Finance Authority Revenue,
Pooled Loan Program, Series A, FGIC Insured, Weekly VRDN
and Put, 3.65%, 12/01/15 ..................................................... 1,300,000
4,600,000 aKentucky Economic Development Finance Authority,
Hospital Facilities Revenue, Health Alliance, Series D,
MBIA Insured, Weekly VRDN and Put, 3.60%, 01/01/22 ........................... 4,600,000
-------------
5,900,000
-------------
Louisiana 2.9%
2,200,000 aCalcasieu Parish, Inc. IDB, PCR, Citgo Petroleum Corp.,
Weekly VRDN and Put, 3.65%, 08/01/04 ......................................... 2,200,000
200,000 aJefferson Parish IDBR, Refunding, George J. Ackel Project,
Weekly VRDN and Put, 3.65%, 12/01/04 ......................................... 200,000
300,000 aLouisiana Public Facilities Authority Revenue, Kenner Hotel Ltd.,
Weekly VRDN and Put, 3.75%, 12/01/15 ......................................... 300,000
150,000 aSaint Charles Parish PCR, Shell Oil Co. Project,
Weekly VRDN and Put, 3.55%, 06/01/05 ......................................... 150,000
Louisiana (cont.)
$ 1,200,000 aSouth Louisiana Port Commission, Port Revenue,
Refunding, Occidental Petroleum Corp. Project,
Weekly VRDN and Put, 3.65%, 07/01/18 ........................................ $ 1,200,000
700,000 aState Offshore Terminal Authority, Deepwater Port Revenue,
Refunding, Daily VRDN and Put, 3.75%, 9/01/06 ................................ 700,000
-------------
4,750,000
-------------
Massachusetts 2.5%
aMassachusetts State Health and Educational Facilities Authority Revenue,
2,800,000 Capital Asset Program, Series G-1, MBIA Insured,
Weekly VRDN and Put, 3.35%, 01/01/19 ......................................... 2,800,000
1,200,000 Harvard University, Series I, Weekly VRDN and Put, 3.45%, 08/01/17 ............ 1,200,000
-------------
4,000,000
-------------
Michigan 1.6%
500,000 aBruce Township, Michigan Hospital Finance Authority,
Health Care System Revenue, Sisters of Charity St. Joseph,
MBIA Insured, Weekly VRDN and Put, 3.55%, 05/01/18 ........................... 500,000
900,000 aGrand Rapids Water Supply System Revenue, Refunding,
FGIC Insured, Daily VRDN and Put, 3.55%, 01/01/20 ............................ 900,000
1,100,000 aMichigan Higher Education Student Loan Authority Revenue,
Refunding, Series XII-B, AMBAC
Insured, Weekly VRDN and Put, 3.70%, 10/01/13 ................................ 1,100,000
-------------
2,500,000
-------------
Minnesota 0.2%
300,000 aDuluth Tax Increment Revenue, Lake Superior,
Weekly VRDN and Put, 3.65%, 09/01/10 ......................................... 300,000
-------------
Mississippi 3.1%
aJackson County PCR, Refunding, Chevron U.S.A., Inc. Project,
2,100,000 Daily VRDN and Put, 3.70%, 12/01/16 ........................................... 2,100,000
2,900,000 Weekly VRDN and Put, 3.70%, 06/01/23 .......................................... 2,900,000
-------------
5,000,000
-------------
Missouri 5.1%
aKansas City IDA, Hospital Revenue Research, Health Services System,
MBIA Insured, Daily VRDN and Put, 3.75%,
1,000,000 10/15/14....................................................................... 1,000,000
3,000,000 10/15/15....................................................................... 3,000,000
1,485,000 Kansas City Water Revenue, Refunding, Series A, 4.25%, 12/01/97 ............... 1,488,618
aMissouri State Health and Educational Facilities Authority,
700,000 Educational Facilities Revenue, Refunding,
Washington University, Series A, Daily VRDN and
Put, 3.70%, 09/01/30 ......................................................... 700,000
1,990,000 Health Facilities Revenue, Refunding, Sisters of Mercy, Series B,
Weekly VRDN and Put, 3.60%, 06/01/14 ......................................... 1,990,000
-------------
8,178,618
-------------
Montana 0.3%
500,000 aForsythe PCR, Portland General Electric, Series D,
Weekly VRDN and Put, 3.65%, 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, 3.60%, 07/01/25 ............................. 1,000,000
-------------
New Jersey 3.8%
5,960,000 Camden County Municipal Utility Authority,
Sewer Revenue, FGIC Insured, 8.25%, 12/01/97 ................................. 6,164,958
-------------
New Mexico 3.9%
aFarmington PCR, Refunding,
$ 1,000,000 Arizona Public Services Co., Series A, Daily VRDN and Put, 3.65%, 05/01/24 .... $ 1,000,000
2,100,000 Arizona Public Services Co., Series B, Daily VRDN and Put, 3.75%, 09/01/24 .... 2,100,000
1,460,000 New Mexico Public Service Co., San Juan Project, Series B,
Weekly VRDN and Put, 3.65% , 04/01/22 ........................................ 1,460,000
1,700,000 aUniversity of New Mexico Revenue, Refunding, Sub. Lien,
AMBAC Insured, Weekly VRDN and Put, 3.60%, 06/01/06 .......................... 1,700,000
-------------
6,260,000
-------------
New York 8.1%
aNew York City GO,
2,000,000 Series D, FGIC Insured, Weekly VRDN and Put, 3.65%, 02/01/20 .................. 2,000,000
900,000 Subseries A-5, Daily VRDN and Put, 3.75%, 08/01/15 ............................ 900,000
2,000,000 Subseries A-8, Daily VRDN and Put, 3.75%, 08/01/17 ............................ 2,000,000
200,000 Subseries B-3, MBIA Insured, Daily VRDN and Put, 3.75%, 08/15/04 .............. 200,000
100,000 Subseries B-4, MBIA Insured, Daily VRDN and Put, 3.75%, 08/15/23 .............. 100,000
100,000 aNew York City Municipal Water Finance Authority,
Water and Sewer System Revenue, Series G, FGIC Insured,
Daily VRDN and Put, 3.75%, 06/15/24 .......................................... 100,000
New York State Dormitory Authority Revenue,
1,000,000 Memorial Sloan Kettering, TECP, Series B, 3.60%, 10/06/97 ..................... 1,000,000
100,000 aMetropolitan Museum of Art, Series A, Weekly VRDN and Put, 3.50%, 07/01/15 ... 100,000
1,800,000 aNew York State Energy Research and Development Authority,
PCR, Refunding, New York Electric and Gas,
Series B, Daily VRDN and Put, 3.35%, 02/01/29 ................................ 1,800,000
2,000,000 Suffolk County TAN, Series I, 4.00%, 8/14/97 .................................. 2,000,489
1,000,000 Suffolk County TRAN, 4.50%, 9/11/97 ........................................... 1,000,593
1,800,000 aTriborough Bridge and Tunnel Authority, Special Obligation,
FGIC Insured, Weekly VRDN and Put, 3.60%, 01/01/24 ........................... 1,800,000
-------------
13,001,082
-------------
North Carolina 2.1%
1,900,000 aDurham Public Improvement, Weekly VRDN and Put, 3.65%, 02/01/13 .............. 1,900,000
1,450,000 aGreensboro Public Improvement, Series B, Weekly VRDN and Put, 3.65%, 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, 3.65%, 05/01/15 ................................................ 100,000
-------------
3,450,000
-------------
Ohio 4.3%
1,000,000 aColumbus GO, Series 1, Weekly VRDN and Put, 3.50%, 06/01/16 .................. 1,000,000
5,000,000 aCuyahoga County Hospital Revenue, Cleveland Clinic
Foundation, Series A, Weekly VRDN and Put, 3.55%, 01/01/26 ................... 5,000,000
1,000,000 Lorain County Hospital Revenue, Catholic Healthcare Partners,
TECP, 3.80%, 08/05/97.......................................................... 1,000,000
-------------
7,000,000
-------------
Pennsylvania 3.2%
1,000,000 aNortheastern Hospital and Education Authority Revenue,
Allhealth Pooled Financing Program, Weekly VRDN
and Put, 3.80%, 07/01/26 ..................................................... 1,000,000
865,000 aPennsylvania Energy Development Authority, Energy
Development Revenue, B&W Ebensburg Project, Weekly
VRDN and Put, 3.70%, 12/01/11 ................................................ 865,000
Pennsylvania (cont.)
$ 2,000,000 Philadelphia School District TRAN, 4.50%, 06/30/98 ............................ $ 2,009,651
1,300,000 Venango IDA, TECP, Residential Recovery Revenue,
Scrubgrass Project, 3.80%, 10/14/97 .......................................... 1,300,000
-------------
5,174,651
-------------
Rhode Island 0.9%
1,500,000 aRhode Island State Industrial Facilities Corp., Electric Facilities Revenue,
Blackstone Valley Electric Co., Weekly VRDN and Put, 3.75%, 12/01/14 ........ 1,500,000
-------------
South Carolina 0.4%
300,000 aCharleston County Industrial Revenue, Massey Coal Terminal,
South Carolina Corp., Refunding, Daily VRDN
and Put, 3.75%, 01/01/07 ..................................................... 300,000
325,000 aRock Hill Utility System Revenue, FGIC Insured, Weekly
VRDN and Put, 3.65%, 01/01/22 ................................................ 325,000
-------------
625,000
-------------
Tennessee 0.6%
1,000,000 aNashville Metropolitan Airport Authority Revenue, Refunding,
FGIC Insured, Weekly VRDN and Put, 3.65%, 07/01/19 ........................... 1,000,000
-------------
Texas 11.6%
1,300,000 aBrazos River Authority, Texas Revenue Refunding,
Houston Lighting and Power Co., Series 1997, AMBAC
Insured, Daily VRDN and Put, 3.75%, 11/01/18 ................................. 1,300,000
aHarris County IDC, PCR,
200,000 DATES, Exxon Project 1984, Series B, Daily VRDN and Put, 3.65%, 03/01/24 ...... 200,000
4,600,000 Refunding, Shell Oil Co. Project, Daily VRDN and Put, 3.65%, 04/01/27 ......... 4,600,000
2,000,000 Houston TRAN, 4.50%, 6/30/98 .................................................. 2,011,417
950,000 aMontgomery County IDC, IDR, Dal-Tile Corp., 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, Weekly
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, 3.70%, 04/01/14 ................................................ 2,000,000
1,300,000 aRed River Authority, PCR, Refunding, Southwestern Public
Services Co., Weekly VRDN and Put 3.65%, 07/01/11 ........................... 1,300,000
2,000,000 aSilsbee Health Facilities Development Corp. Hospital Revenue,
Silsbee Doctors Hospital, Weekly VRDN
and Put, 3.65%, 11/01/04...................................................... 2,000,000
3,000,000 Texas State TRAN, 4.75%, 08/29/97 ............................................. 3,002,196
-------------
18,648,613
-------------
Utah 0.6%
600,000 aUtah State Board Regents, Student Loan Revenue, Series B,
AMBAC Insured, Weekly VRDN and Put, 3.80%, 11/01/00 .......................... 600,000
300,000 Weber County Municipal Building Authority, Lease Revenue,
Refunding, MBIA Insured, 3.75%, 12/15/97 ..................................... 300,000
-------------
900,000
-------------
Virginia 0.3%
500,000 aPeninsula Ports Authority, Revenue Updates, Refunding,
Port Facility, Shell Oil Co., Series A, Daily
VRDN and Put, 3.75%, 12/01/05 ................................................. 500,000
-------------
Washington 3.0%
$ 2,000,000 aSeattle Water System Revenue, Weekly VRDN and Put, 3.60%, 09/01/25 ........... $ 2,000,000
2,000,000 aWashington State Housing Finance Commission, MF, Mortgage Revenue,
Lake Washington Apartments Project,
Weekly VRDN and Put, 3.80%, 10/01/26 ......................................... 2,000,000
900,000 aWashington State Public Power Supply System Revenue,
Refunding, Nuclear Project No. 3, Series 3A-1, Weekly
VRDN and Put, 3.65%, 07/01/18 ................................................ 900,000
-------------
4,900,000
-------------
Wisconsin 0.6%
1,000,000 aWisconsin State Health and Educational Facilities Authority Revenue,
Wheaton Franciscan Services, Weekly
VRDN and Put, 3.55%, 08/15/16 ................................................ 1,000,000
-------------
Wyoming 4.7%
aLincoln County PCR, Exxon Project,
2,500,000 Series A, Daily VRDN and Put, 3.75%, 11/01/14 ................................. 2,500,000
400,000 Series C, Daily VRDN and Put, 3.75%, 11/01/14 ................................. 400,000
500,000 Series D, Daily VRDN and Put, 3.75%, 11/01/14 ................................. 500,000
1,400,000 aPlatte County PCR, DATES,Tri-State G&T, Series A,
Daily VRDN and Put, 3.80%, 07/01/14 .......................................... 1,400,000
1,500,000 aSweetwater County, PCR, Refunding, Pacificorp Project,
Weekly VRDN and Put, 3.65%, 07/01/15 ......................................... 1,500,000
1,300,000 aUinta County PCR, Refunding, Chevron U.S.A., Inc. Project,
Daily VRDN and Put, 3.70%, 08/15/20 .......................................... 1,300,000
-------------
7,600,000
-------------
Total Investments (Cost $160,887,484) 99.9% ........................ 160,887,484
Other Assets and Liabilities, Net 0.1% ............................. 150,307
-------------
Net Assets 100.0%................................................... $161,037,791
=============
</TABLE>
At July 31, 1997, there was no unrealized appreciation or depreciation for
financial statement or income tax purposes.
PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
DATES - Demand Adjustable Tax-Exempt Securities
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
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).
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, 1997
<TABLE>
<CAPTION>
Assets:
<S> <C> <C>
Investments in securities,
at value and cost $160,887,484
Cash 57,704
Receivables:
Interest 925,759
Capital shares sold 218,862
--------------
Total assets 162,089,809
--------------
Liabilities:
Payables:
Capital shares repurchased 530,674
Management fees 93,554
Distributions to shareholders 22,738
Shareholder servicing costs 17,200
Other payables to shareholders 354,306
Accrued expenses and other liabilities 33,546
--------------
Total liabilities 1,052,018
--------------
Net assets
(equivalent to $1.00 per share
based on 161,037,791 shares
of capital stock outstanding) $161,037,791
==============
Statement of Operations
for the year ended July 31, 1997
Investment income:
Interest $5,720,328
Expenses:
Management fees (Note 5) $928,704
Shareholder servicing
costs (Note 5) 213,643
Reports to shareholders 126,532
Registration fees 61,848
Professional fees 21,893
Directors' fees and expenses 13,648
Custodian fees 1,645
Other 4,893
Management fees waived by
manager (Note 5) (327,162)
--------------
Total expenses 1,045,644
--------------
Net investment income 4,674,684
--------------
Net realized loss on investments (1,844)
--------------
Net increase in net assets
resulting from operations $4,672,840
==============
Statements of Changes in Net Assets
for the years ended July 31, 1997 and 1996
Year ended Year ended
July 31, 1997 July 31, 1996
-----------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income...................................................... $ 4,674,684 $ 4,860,147
Net realized loss on investments........................................... (1,844) (688)
-----------------------------------
Net increase in net assets resulting from operations........................ 4,672,840 4,859,459
Distributions to shareholders from undistributed net investment income...... (4,672,840)+ (4,859,459)+
Decrease in net assets from capital share transactions (Note 2)............. (5,675,656) (6,409,169)
-----------------------------------
Net decrease in net assets............................................ (5,675,656) (6,409,169)
Net assets (there is no undistributed net investment
income at beginning or end of year)
Beginning of year.......................................................... 166,713,447 173,122,616
-----------------------------------
End of year................................................................ $161,037,791 $166,713,447
===================================
</TABLE>
+Distributions were decreased by net realized loss from security transactions of
$1,844 in 1997 and $688 in 1996.
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 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. 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 to 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, 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 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.
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.
2. CAPITAL STOCK
At July 31, 1997, 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:
<TABLE>
<CAPTION>
Year ended Year ended
July 31, 1997 July 31, 1996
------------------------------------------
<S> <C> <C>
Shares sold..................................... $264,112,919 $264,699,526
Shares issued in reinvestment of
distributions.................................. 4,663,817 4,872,946
Shares redeemed................................. (274,452,392) (275,981,641)
------------------------------------------
Net decrease................................. $ (5,675,656) $ (6,409,169)
==========================================
</TABLE>
3. DISTRIBUTIONS AND CAPITAL LOSS CARRYOVERS
At July 31, 1997, for tax purposes, the Fund had capital loss carryovers as
follows:
Expiring in: 2003................... $9,193
2004................... 688
2005................... 1,844
--------
$11,725
========
For tax purposes, the aggregate cost of securities is the same as for financial
reporting purposes at July 31, 1997.
4. PURCHASES AND SALES OF SECURITIES
Purchases and sales/maturities of securities for the year ended July 31, 1997
aggregated $281,577,690 and $288,457,881, 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 and receives fees computed daily on the net assets of
the Fund as follows:
Annualized Fee Rate Average Daily 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
Under an agreement with Advisers, Franklin Templeton Services, Inc. (FT
Services) provides administrative services and facilities for the Fund. The fee
is paid by Advisers and computed monthly based on average daily net assets. It
is not a separate expense of the Fund.
Advisers agreed in advance to waive management fees for the Fund, as noted in
the Statement of Operations for the year ended July 31, 1997.
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, 1997 aggregated $213,643, of which $212,276 was paid to
Investor Services.
c. Other Affiliates and Related Party Transactions:
Certain officers and directors of the Fund are also officers and/or directors of
Advisers, Investor Services and FT 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 state
of Texas. Such concentration may subject the Fund more significantly to economic
changes occuring within that state.
7. FINANCIAL HIGHLIGHTS
Selected data for a share of capital stock outstanding throughout each period
are as follows:
<TABLE>
<CAPTION>
Year ended July 31,
------------------------------------------------
1997 1996 1995 1994 1993
------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net asset value at beginning of period ............... $1.00 $1.00 $1.00 $1.00 $1.00
------------------------------------------------
Net investment income ................................ .029 .029 .029 .020 .021
Distributions from net investment income ............. (.029) (.029) (.029) (.020) (.021)
------------------------------------------------
Net asset value at end of period ..................... $1.00 $1.00 $1.00 $1.00 $1.00
================================================
- ------------------------------------------------------------------------------------------------------------
Total Return+ ........................................ 2.94% 2.93% 2.98% 1.85% 2.08%
- ------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net assets at end of period (in 000's) ............... $161,038 $166,713 $173,123 $202,883 $193,565
Ratio of expenses to average net assets++ ............ .65% .65% .65% .65% .69%
Ratio of net investment income to average net assets . 2.91% 2.88% 2.65% 1.84% 2.10%
</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, Advisors 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
----------
1993 ........................................ .80%
1994 ........................................ .81%
1995 ........................................ .78%
1996 ........................................ .87%
1997 ........................................ .85%
During the fiscal year ended July 31, 1997, the Fund paid distributions from net
investment income in the amounts shown in the Statements 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 Accountants
To the Shareholders and Board of Trustees
of the Franklin Tax-Exempt Money Fund:
We have audited the accompanying statements of assets and liabilities of the
Franklin Tax-Exempt Money Fund (the Fund), including the statement of
investments, as of July 31, 1997, and the related statement of operations for
the year then ended, the statement 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 included confirmation of securities owned as of July
31, 1997, by correspondence with the custodian. 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, 1997, 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 financial highlights for each of the periods presented, in conformity
with generally accepted accounting principles.
COOPERS&LYBRAND L.L.P.
San Francisco, California
September 2, 1997
Franklin Tax-Exempt Money Fund Annual Report July 31, 1997
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 3.05% and the taxable equivalent yield of 5.05%.
