ANNUAL
REPORT
Franklin Tax-Exempt Money Fund
July 31, 1998
Thank you for investing with Franklin Templeton. Our most valuable assets are
the trust and confidence of our clients. In responding to your needs, we strive
to provide you with the highest quality products, superior investment
performance and the best level of service in our industry. We appreciate your
past support and look forward to serving your investment needs in the years
ahead.
Charles B. Johnson
Chairman
Franklin Tax-Exempt Money Fund
CONTENTS
Shareholder Letter ........................................... 1
Performance Summary .......................................... 4
Financial Highlights &
Statement of Investments ..................................... 5
Financial Statements ......................................... 11
Notes to
Financial Statements ......................................... 14
Independent
Auditor's Report ............................................. 16
You will find a complete listing of the fund's portfolio holdings, including
dollar value and number of shares or principal amount, beginning on page 6 of
this report.
SHAREHOLDER LETTER
Your Fund's Objective: Franklin Tax-Exempt Money Fund 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:
It's a pleasure to bring you Franklin Tax-Exempt Money Fund's annual report for
the period ended July 31, 1998.
During much of the period under review, the U.S. economy continued its
remarkable expansion, demonstrating strong growth with few signs of inflation.
Consumer prices, as measured by the consumer price index (CPI), increased only
1.68% over the 12-month period ended June 30, 1998. However, by the period's
end, the preliminary, annualized, second quarter Gross Domestic Product gain of
1.4% reflected some economic slowdown due to the Asian financial crisis.
Interest rates declined during the year under review, with the 30-year Treasury
yield ending the period at 5.72%, down from 6.30% on July 31, 1997.
The strength of the national economy left state and local municipalities with
cash surpluses and less need for short-term financing. June 1998's year-to-date
municipal note supply was $15.736 billion versus $17.759 billion for the same
period last year. Along with the decrease in supply came an increase in demand,
as demonstrated by the record asset levels in tax-exempt money market funds.
According to IBC Financial Data, an information provider focusing on money
market mutual funds, tax-exempt money fund assets increased during the year
under review, from $144 billion in June 1997 to $169 billion in June 1998. This
supply and demand imbalance put significant pricing pressure on the short end of
the market. For example, weekly variable and put rates for VRDNs averaged 3.85%
during the second quarter of 1998, declining 0.15% from levels in second quarter
1997.
During the reporting period the fund participated in several attractive deals.
Notable purchases included Wisconsin Operating Notes, Colorado state TRANs and
Texas state TRANs. We also bought Utah state general obligation TECP and
University of Arkansas weekly VRDNs.
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.
You will find a complete listing of the fund's portfolio holdings, including
dollar value and number of shares or principal amount, beginning on page 6 of
this report.
Money Market Acronyms
The report mentions the following acronyms often used in the short-term
municipal market.
TECP - Tax-Exempt Commercial Paper
TRAN - Tax and Revenue Anticipation Note
VRDN - Variable-Rate Demand Note
Falling interest rates caused the fund's seven-day effective yield to decrease,
from 3.09% on July 31, 1997, to 2.93% at the end of the reporting period. The
fund's seven-day annualized yield also decreased, from 3.05%, to 2.89% for the
same period. 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 4.78% from a taxable investment to match
the fund's tax-free yield.
As always, Franklin Tax-Exempt Money Fund's investment strategy emphasizes high
quality and liquidity. In an effort to provide safety and stability of
principal, we manage the fund more conservatively than required by SEC
guidelines. For example, SEC guidelines allow tax-exempt money funds to purchase
first- and second-tier securities. Franklin Templeton purchases only first-tier
securities for inclusion in its tax-exempt money market portfolios. In addition,
Franklin Tax-Exempt Money Fund does not buy any derivatives. Instead, the fund
purchases only plain vanilla, tax-exempt variable-rate securities. The fund does
not have any exposure to Japanese banks or their U.S. agencies, in accordance
with our philosophy of purchasing securities only from what management believes
are the most credit-worthy institutions. Please remember, this discussion
reflects our views, opinions and portfolio holdings as of July 31, 1998, the end
of the reporting period. However, market and economic conditions are changing
constantly, which can be expected to affect our strategies and the fund's
portfolio composition. Although historic performance is no guarantee of future
results, these insights may help you understand our investment and management
philosophy.
Sincerely,
Charles B. Johnson
Chairman
Franklin Tax-Exempt Money Fund
GRAPHIC MATERIAL 1 OMITTED - SEE APPENDIX AT END OF DOCUMENT
PERFORMANCE SUMMARY
Franklin Tax-Exempt Money Fund
Period ended 7/31/98
Seven-day effective yield1 2.93%
Seven-day annualized yield 2.89%
Taxable equivalent yield2 4.78%
1. The seven-day effective yield assumes the compounding of daily dividends.
2. Taxable equivalent yield assumes the 1998 maximum 39.6% federal personal
income tax rate.
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 effective and annualized yields for the period would have
been 2.70% and 2.67%, 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
Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year ........ $1.00 $1.00 $1.00 $1.00 $1.00
--------------------------------------------------------------
Income from investment operations:
Net investment income .................... .029 .029 .029 .029 .020
Less distributions from net investment income (.029) (.029) (.029) (.029) (.020)
---------------------------------------------------------------
Net asset value, end of year .............. $1.00 $1.00 $1.00 $1.00 $1.00
===============================================================
Total return* ............................. 2.99% 2.94% 2.93% 2.98% 1.85%
Ratios/supplemental data
Net assets, end of year (000's) ........... $164,525 $161,038 $166,713 $173,123 $202,883
Ratios to average net assets:
Expenses ................................. 0.65% 0.65% 0.65% 0.65% 0.65%
Expenses excluding waiver and
payments by affiliate ................... 0.83% 0.80% 0.81% 0.78% 0.87%
Net investment income .................... 2.94% 2.91% 2.88% 2.65% 1.84%
*Total return is not annualized.
See notes to financial statements.
FRANKLIN TAX-EXEMPT MONEY FUND
Statement of Investments, July 31, 1998
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
Investments 99.5%
Arizona 4.8%
a Apache County IDA, Tucson Electric Power, Series A, Weekly VRDN and Put, 3.55%, 12/15/18 ..... $3,200,000 $ 3,200,000
a Maricopa County, PCR, Arizona Pollution Control Corp. Refunding,
Series A, Daily VRDN and Put, 3.70%, 5/01/29 ................................................ 2,700,000 2,700,000
a Maricopa County, Washington Elementary Project, Series C, FGIC Insured, 4.25%, 7/01/99 ....... 2,000,000 2,008,670
------------
7,908,670
------------
Arkansas 1.6%
a University of Arkansas Revenue, Refunding, MBIA Insured,
Weekly VRDN and Put, 3.55%, 12/01/19 ........................................................ 2,600,000 2,600,000
------------
Colorado 4.3%
a Colorado Health Facilities Authority Revenue, Boulder Community
Hospital Project, Series B, MBIA Insured,
Weekly VRDN and Put, 3.55%, 10/01/14 ........................................................... 15,000 15,000
Colorado State General Fund TRAN, Series A,
4.00%, 6/25/99 ............................................................................... 5,000,000 5,018,456
4.25%, 6/25/99 ............................................................................... 2,000,000 2,011,786
------------
7,045,242
------------
Delaware 1.8%
a Delaware State Economic Development Authority, IDR, Refunding, Delaware Clean Power Project, Series C,
Weekly VRDN and Put, 3.65%, 8/01/29 ......................................................... 3,000,000 3,000,000
------------
Georgia 8.8%
a De Kalb County Hospital Authority, Revenue Anticipation Certificates,
De Kalb Medical Center Project, Weekly VRDN
and Put, 3.65%, 9/01/09 ..................................................................... 1,900,000 1,900,000
a Hapeville Development Authority, IDR, Hapeville Hotel Ltd.,
Daily VRDN and Put, 3.70%, 11/01/15 ......................................................... 5,100,000 5,100,000
a Macon-Bibb County Hospital Authority, Revenue Certificates,
Medical Center of Central Georgia, Weekly VRDN and Put, 3.65%, 4/01/07 ..................... 900,000 900,000
a Municipal Electric Authority, Series B, Weekly VRDN and Put, 3.55%, 6/01/20 .................. 5,000,000 5,000,000
a Rockdale County Hospital Authority, Revenue Anticipation Certificates,
Weekly VRDN and Put, 3.65%, 10/01/09 ......................................................... 1,610,000 1,610,000
------------
14,510,000
------------
Illinois 1.7%
a City of Chicago, O'Hare International Airport Revenue, General Airport,
Second Lien, Series B, Weekly VRDN and Put, 3.50%, 1/01/15 .................................. 2,770,000 2,770,000
------------
Indiana .9%
a Princeton PCR, PSI Energy Income Project, Refunding, Daily VRDN, 3.75%, 4/01/22 .............. 1,400,000 1,400,000
------------
Iowa 3.7%
a Iowa Financial Authority, Cedar River Paper Co., Solid Waste Disposal Revenue,
Daily VRDN and Put, 3.80%, 5/01/25 .......................................................... 1,100,000 1,100,000
Iowa State School Corps Warrant Certificates, Series A, FSA Insured, 4.50%, 6/25/99 .......... 5,000,000 5,036,844
------------
6,136,844
------------
Kentucky 3.5%
a Kentucky Development Finance Authority Revenue, Pooled Loan Program,
Series A, FGIC Insured, Weekly VRDN and Put, 3.55%, 12/01/15 ............................... 1,300,000 1,300,000
a Kentucky Economic Development Finance Authority, Hospital Facilities Revenue,
Health Alliance, Series D, MBIA Insured, Weekly VRDN and Put, 3.50%, 1/01/22 ............... 4,500,000 4,500,000
------------
5,800,000
------------
Louisiana 5.0%
a Calcasieu Parish, Inc., IDB, PCR, Citgo Petroleum Corp.,
Weekly VRDN and Put, 3.60%, 8/01/04 .......................................................... $2,200,000 $ 2,200,000
a Louisiana Public Facilities Authority, Hospital Revenue,
Willis-Knighton Medical Project, Refunding, AMBAC, Weekly VRDN and Put, 3.70%, 9/01/23 ...... 1,000,000 1,000,000
a Louisiana Public Facilities Authority Revenue, Kenner Hotel Ltd.,
Daily VRDN and Put, 3.70%, 12/01/15 .......................................................... 3,605,000 3,605,000
a State Offshore Terminal Authority, Deepwater Port Revenue,
Refunding, Daily VRDN and Put, 3.70%, 9/01/06 ............................................... 1,400,000 1,400,000
------------
8,205,000
------------
Michigan 6.8%
a Delta County Environmental Impact Revenue, Economic Development Corp.,
Refunding, Daily VRDN, 3.70%, 12/01/23....................................................... 3,400,000 3,400,000
a Michigan Higher Education Student Loan Authority Revenue, Refunding,
Series XII-B, AMBAC Insured, Daily VRDN and Put, 3.50%, 10/01/13 ............................ 1,100,000 1,100,000
Michigan State NTS, 4.50%, 9/30/98 ........................................................... 4,000,000 4,004,710
a Michigan State Strategic Fund, Detroit Edison Co., Refunding, Daily
VRDN and Put, 3.70%, 9/01/30 ................................................................ 2,600,000 2,600,000
------------
11,104,710
------------
Mississippi 2.7%
a Perry County, Mississippi PCR, Leaf River Forest Project, Refunding,
Daily VRDN and Put, 3.70%, 3/01/02 .......................................................... 4,400,000 4,400,000
------------
Missouri 3.9%
a Kansas City IDA, Hospital Revenue, Resh Health Services Systems,
MBIA Insured, Daily VRDN and Put, 3.70%, 10/15/15 .......................................... 1,400,000 1,400,000
Missouri Development Finance Board, Infrastructure Facilities Revenue,
Science City Union Station, Series A, 3.80%, 12/01/98 ...................................... 5,000,000 5,000,000
------------
6,400,000
------------
Nevada .6%
a Clark County, Airport Improvement Revenue, Sub. Lien, Series A-1,
Weekly VRDN and Put, 3.40%, 7/01/25 ......................................................... 1,000,000 1,000,000
------------
New Mexico 1.8%
a Farmington PCR, Refunding, Arizona Public Services Co., Series A,
Daily VRDN and Put, 3.70%, 5/01/24 .......................................................... 1,400,000 1,400,000
a University of New Mexico Revenue, Refunding, Sub. Lien, AMBAC Insured,
Weekly VRDN and Put, 3.40%, 6/01/06 ......................................................... 1,600,000 1,600,000
------------
3,000,000
------------
New York 9.1%
a New York City, Sub-Series B-7, AMBAC Insured,
Daily VRDN and Put, 3.70%, 8/15/18 .......................................................... 600,000 600,000
a New York City Municipal Assistance Corp, Sub-Series K-2,
Weekly VRDN and Put, 3.35%, 7/01/08 ......................................................... 1,400,000 1,400,000
a New York City Municipal Water Finance Authority,
Water and Sewer System Revenue, Series C, FGIC Insured, Daily VRDN and Put, 3.70%, 6/15/23 .. 800,000 800,000
a New York State Dormitory Authority Revenue, Oxford University Press,
Weekly VRDN and Put, 3.40%, 7/01/25 .......................................................... 1,000,000 1,000,000
a New York State Job Development Authority, Guaranteed Special Purpose,
Series A-1, Daily VRDN and Put, 3.70%, 3/01/07 .............................................. 1,400,000 1,400,000
Suffolk County TAN, Series RA-1, 4.25%, 8/13/98 .............................................. 3,000,000 3,000,591
a Triborough Bridge and Tunnel Authority, Special Obligation, FGIC Insured,
Weekly VRDN and Put, 3.35%, 1/01/24 ......................................................... 1,800,000 1,800,000
Westchester County TAN, 3.59%, 12/29/98 ...................................................... 5,000,000 5,000,382
------------
15,000,973
------------
North Carolina 3.3%
a North Carolina Medical Care Community Hospital Revenue,
Aces-Pooled Financing Project, Series A, Daily VRDN and Put, 3.70%, 10/01/20 ................ $5,300,000 $ 5,300,000
a Wake County Industrial Facilities and PCFA Revenue,
Carolina Power and Light Co., Series A, Weekly VRDN and Put, 3.50%, 5/01/15 ................. 100,000 100,000
------------
5,400,000
------------
Ohio 3.0%
a Cuyahoga County Hospital Revenue, Cleveland Clinic Foundation,
Series A, Weekly VRDN and Put, 3.50%, 1/01/26 ............................................... 5,000,000 5,000,000
------------
Pennsylvania 4.5%
Montgomery County IDAR, Peco Energy Co., TECP, 3.50%, 9/15/98 ................................ 3,100,000 3,100,000
a Philadelphia Water and Wastewater Revenue, AMBAC Insured,
Series B, Weekly VRDN and Put, 3.82%, 8/01/27 ............................................... 3,000,000 3,000,000
Venango IDA, TECP, 3.60%, 9/14/98 ............................................................ 1,300,000 1,300,000
------------
7,400,000
------------
Rhode Island .9%
a Rhode Island State Industrial Facilities Corp., Electric Facilities Revenue,
Blackstone Valley Electric Co., Weekly VRDN and Put, 3.60%, 12/01/14 ....................... 1,500,000 1,500,000
------------
Texas 17.3%
a Brazos River Authority, Houston Lighting and Power Company,
Refunding, Series 1997, AMBAC Insured, Daily VRDN and Put, 3.80%, 11/01/18 ................... 6,000,000 6,000,000
a Nueces County Health Facilities Development Corp. Revenue,
Driscoll Childrens Foundation, Weekly VRDN and Put, 3.60%, 7/01/15 .......................... 1,285,000 1,285,000
a Port Arthur Naval District, IDC, PCR, American Petrofina Inc.,
Daily VRDN and Put, 3.70%, 5/01/03 .......................................................... 2,900,000 2,900,000
a Port Arthur Naval District Environmental Facility Revenue,
Refunding, Star Enterprise Project, Daily VRDN and Put, 3.65%, 5/01/03 ...................... 5,000,000 5,000,000
a Red River Authority, PCR, Refunding, Southwestern Public Services Co.,
Weekly VRDN and Put, 3.75%, 7/01/11 ......................................................... 1,300,000 1,300,000
a Sabine River Authority, PCR, Texas Utilities Co.,
Daily VRDN and Put, 3.75%, 4/01/30 ........................................................... 5,000,000 5,000,000
a Silsbee Health Facilities Development Corp. Hospital Revenue,
Silsbee Doctors Hospital, Weekly VRDN and Put, 3.55%, 11/01/04 .............................. 2,000,000 2,000,000
Texas State TRAN, Series A, 4.75%, 8/31/98 ................................................... 5,000,000 5,003,682
------------
28,488,682
------------
Utah 4.5%
Utah State GO, TECP, 3.65%, 8/06/98 .......................................................... 7,400,000 7,400,000
------------
Washington 2.4%
a Seattle Water System Revenue, Weekly VRDN and Put, 3.50%, 9/01/25 ............................ 2,000,000 2,000,000
a Washington State Housing Finance Commission, MF, Mortgage Revenue,
Lake Washington Apartments Project, Weekly VRDN and Put, 3.70%, 10/01/26 .................... 2,000,000 2,000,000
------------
4,000,000
------------
Wisconsin 2.6%
a La Crosse Industrial Development Revenue, Refunding, Dairyland Power Coop,
Series C, AMBAC Insured, Daily VRDN and Put, 3.70%, 2/01/15................................. $1,210,000 $ 1,210,000
a Wisconsin State Health & Educational Facilities Authority Revenue,
Wheaton Franciscan Services, Weekly VRDN and Put, 3.50%, 8/15/16 ........................... 1,000,000 1,000,000
Wisconsin State Operating Notes, Series 2, 4.50%, 6/15/99 .................................... 2,000,000 2,016,164
------------
4,226,164
------------
Total Investments (Cost $163,696,285) 99.5%................................................... 163,696,285
Other Assets, less Liabilities .5%............................................................ 828,850
------------
Net Assets 100.0%............................................................................. $164,525,135
============
</TABLE>
See glossary of terms on page 10.
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 at
specified dates.
Glossary of Terms
AMBAC - American Municipal Bond Assurance Corp.
FGIC - Financial Guaranty Insurance Co.
FSA - Financial Security Assistance
GO - General Obligation
IDA - Industrial Development Authority/Agency
IDAR - Industrial Development Authority/Agency Revenue
IDB - Industrial Development Board
IDC - Industrial Development Corp.
IDR - Industrial Development Revenue
MBIA - Municipal Bond Investors Assurance Corp.
MF - Multi-Family
PCFA - Pollution Control Financing Authority
PCR - Pollution Control Revenue
TAN - Tax Anticipation Notes
TECP - Tax-Exempt Commercial Paper
TRAN - Tax Revenue Anticipation Notes
FRANKLIN TAX-EXEMPT MONEY FUND
Financial Statements
<TABLE>
<CAPTION>
Statement of Assets and Liabilities
July 31, 1998
<S> <C>
Assets:
Investments in securities, at value and cost ............................................. $163,696,285
Cash ..................................................................................... 214,774
Interest receivable ..................................................................... 1,098,332
--------------
Total assets ........................................................................ 165,009,391
--------------
Liabilities:
Payables:
Affiliates .............................................................................. 147,268
Shareholders ............................................................................ 285,576
Distributions to shareholders ............................................................ 9,822
--------------
Other liabilities ........................................................................ 41,590
--------------
Total liabilities ................................................................... 484,256
--------------
Net assets (equivalent to $1.00 per share based on 164,525,135
shares of capital stock outstanding) ..................................................... $164,525,135
==============
See notes to financial statements.
Statement of Operations
for the year ended July 31, 1998
<S> <C> <C>
Investment income:
Interest .......................................................................... $5,836,320
Expenses:
Management fees (Note 3) .......................................................... 938,729
Transfer agent fees (Note 3) ...................................................... 203,275
Custodian fees .................................................................... 2,354
Reports to shareholders ........................................................... 110,740
Registration and filing fees ...................................................... 65,166
Professional fees ................................................................. 16,095
Directors' fees and expenses ...................................................... 11,592
Other ............................................................................. 4,218
---------
Total expenses ............................................................... 1,352,169
Expenses waived/paid by affiliate (Note 3) ................................... (293,976)
------------
Net expenses ................................................................ 1,058,193
------------
Net investment income ...................................................... 4,778,127
------------
Net realized gain from investments ................................................. 1,693
------------
Net increase in net assets resulting from operations ............................... $4,779,820
============
See notes to financial statements.
Statements of Changes in Net Assets
for the years ended July 31, 1998 and 1997
1998 1997
------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ................................................... $ 4,778,127 $ 4,674,684
Net realized gain (loss) from investments ............................... 1,693 (1,844)
------------------------------
Net increase in net assets resulting from operations ................ 4,779,820 4,672,840
Distributions to shareholders from net investment income ................. (4,779,820)+ (4,672,840)+
Capital share transactions (Note 2) ...................................... 3,487,344 (5,675,656)
------------------------------
Net increase (decrease) in net assets ............................... 3,487,344 (5,675,656)
Net assets (there is no undistributed net investment
income at beginning or end of period):
Beginning of year ........................................................ 161,037,791 166,713,447
-----------------------------
End of year .............................................................. $164,525,135 $161,037,791
=============================
</TABLE>
+Distributions were increased by net realized gains from security transactions
of $1,693 for the year ended July 31, 1998 and decreased by net realized losses
of $1,844 for the year ended July 31, 1997.
See notes to financial statements.
FRANKLIN TAX-EXEMPT MONEY FUND
Notes to Financial Statements
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Franklin Tax-Exempt Money Fund (the Fund) is registered under the Investment
Company Act of 1940 as a diversified, open-end investment company. The Fund
seeks high current income exempt from federal income taxes, consistent with
capital preservation and liquidity.
The following summarizes the Fund's significant accounting policies.
A. SECURITY VALUATION:
Securities are valued at amortized cost which approximates value.
B. INCOME TAXES:
No provision has been made for income taxes because the Fund's policy is to
qualify as a regulated investment company under the Internal Revenue Code and to
distribute all of its taxable income.
C. SECURITY TRANSACTIONS:
Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Interest income and estimated expenses are accrued daily. Dividends from net
investment income and capital gains or losses are normally declared daily. Such
distributions are reinvested in additional shares of the Fund.
D. ACCOUNTING ESTIMATES:
The preparation of financial statements in accordance with 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, 1998, there were five billion shares authorized (no par value).
Transactions in the Fund's shares at $1.00 per share were as follows:
YEAR ENDED JULY 31
--------------------------
1998 1997
--------------------------
Shares sold ..................$ 358,177,980$ 264,112,919
Shares issued in reinvestment
of distributions ............ 4,792,736 4,663,817
Shares redeemed .............. (359,483,372)(274,452,392)
--------------------------
Net increase (decrease) $ 3,487,344 $ (5,675,656)
============================
3. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
Certain officers and directors of the Fund are also officers and/or directors of
Franklin Advisers, Inc. (Advisers), Franklin/Templeton Investor Services, Inc.
(Investor Services), and Franklin Templeton Services Inc. (FT Services), the
Fund's investment manager, transfer agent, and administrative manager,
respectively.
The Fund pays an investment management fee to Advisers based on the average net
assets of the Fund as follows:
ANNUALIZED
FEE RATE AVERAGE DAILY NET ASSETS
------------------------------------------------------------------
.625% First $100 million
.500% Over $100 million, up to and including $250 million
.450% In excess of $250 million
Under an agreement with Advisers, FT Services provides administrative services
to the Fund. The fee is paid by Advisers based on average daily net assets, and
is not an additional expense of the Fund.
Advisers agreed in advance to waive management fees for the Fund, as noted in
the Statement of Operations.
4. INCOME TAXES
At July 31, 1998, the Fund had tax basis capital losses of $9,413, which may be
carried over to offset future capital gains. Such losses expire as follows:
Capital loss carryovers expiring in:
2003 ............................ $6,881
2004 ............................ 688
2005 ............................ 1,844
-------
$9,413
=======
At July 31, 1998, the Fund has deferred capital losses occurring subsequent to
October 31, 1997 of $619. For tax purposes, such losses will be reflected in the
year ending July 31, 1999.
5. 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 occurring within that state.
FRANKLIN TAX-EXEMPT MONEY FUND
Independent Auditor's Report
To the Shareholders and Board of Trustees
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, as of July 31, 1998, 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 included confirmation of securities owned as of July
31, 1998, 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
Franklin Tax-Exempt Money Fund as of July 31, 1998, 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 its financial highlights for each of
the periods presented, in conformity with generally accepted accounting
principles.
PricewaterhouseCoopers L.L.P.
San Francisco, California
September 4, 1998
Franklin Tax-Exempt Money Fund
Annual Report
July 31, 1998.
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 Franklin Tax-Exempt Money
Fund's seven-day annualized yield of 2.89% and the taxable equivalent yield of
4.78% on 7/31/98.
