FRANKLIN TAX-EXEMPT MONEY FUND
ANNUAL REPORT
JULY 31, 1999
SHAREHOLDER LETTER
- --------------------------------------------------------------------------------
Your Fund's Goal: 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)
- --------------------------------------------------------------------------------
Dear Shareholder:
It's a pleasure to bring you Franklin Tax-Exempt Money Fund's annual report for
the period ended July 31, 1999.
During the year under review, the domestic economy's strength combined with
tentative signs of an international recovery and the potential for higher
inflation put the Federal Reserve Board (the Fed) on alert for a possible
interest rate increase. Indeed, the Fed raised the federal funds target rate
0.25%, to 5.00%, at its late-June meeting. The fund did not attempt to
anticipate Fed moves when purchasing securities, maintaining a neutral position
regarding maturities. The average maturity of securities held by Franklin
Tax-Exempt Money Fund was 50 days on July 31, 1999, compared with 48 days on
July 31, 1998.
Tax-exempt money market funds have continued to increase assets throughout the
year, mainly because of increased investor wealth and concern for taxes. The
fund's total net assets increased 16%, to $191 million on July 31, 1999, from
$165 million on July 31, 1998. However, the domestic economy's strength left
state and local municipalities with surpluses, resulting in less need for
short-term financing. Also, variable-rate issuance declined as issuers took
advantage of the low interest-rate environment to issue long-term fixed-rate
bonds. This supply and demand imbalance put downward pressure on short-term
rates. The fund had a current seven-day yield of 2.44% on July 31, 1999,
compared with 2.89% on July 31, 1998.
CONTENTS
Shareholder Letter ....................................................... 1
Performance Summary ...................................................... 3
Financial Highlights & Statement of Investments .......................... 4
Financial Statements ..................................................... 10
Notes to Financial Statements ............................................ 13
Independent Auditors' Report ............................................. 15
FUND CATEGORY
[PYRAMID CHART]
1. There is no assurance that the fund's $1.00 per share price will be
maintained. An investment in the fund is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government organization.
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 5 of
this report.
The investment strategy driving Franklin Tax-Exempt Money Fund's portfolio
managers continues to emphasize high quality and liquidity. We manage the fund
more conservatively than SEC guidelines require, seeking to ensure safety and
stability. For example, SEC guidelines allow tax-exempt money funds to purchase
both first- and second-tier securities. Franklin Templeton purchases only
first-tier securities for inclusion in its tax-exempt money market portfolios.
In addition, we refrain from investing in any exotic derivative securities in
our tax-exempt money funds -- we purchase only plain vanilla, short-term
securities. We eliminated our exposure to Japanese bank guarantees several years
ago because of the problems these banks were having, and we continue to follow
our philosophy of purchasing securities only from what we believe are the most
creditworthy institutions.
During the reporting period, the fund participated in several attractive deals
including St. Louis General Fund Revenue, Tax Revenue Anticipation Note (TRAN);
Philadelphia School District TRAN; and New York City Transitional Finance
Authority Revenue, sub-series bonds.
Please remember, this discussion reflects our views, opinions and portfolio
holdings as of July 31, 1999, 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 historical
performance is no guarantee of future results, these insights may help you
understand our investment and management philosophy.
Sincerely,
/s/ Charles B. Johnson
Charles B. Johnson
Chairman
Franklin Tax-Exempt Money Fund
Performance Summary
7/31/99
- --------------------------------------------------------------------------------
Seven-day effective yield (1) 2.47%
Seven-day annualized yield 2.44%
Taxable equivalent yield (2) 4.04%
1. The seven-day effective yield assumes the compounding of daily dividends, and
reflects 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.
2. Taxable equivalent yield assumes the 1999 maximum 39.6% federal personal
income tax rate.
Past expense reductions by the fund's manager increased the fund's yields.
Past performance is not predictive of future results.
FRANKLIN TAX-EXEMPT MONEY FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Year Ended July 31,
--------------------------------------------------------
1999 1998 1997 1996 1995
--------------------------------------------------------
<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
--------------------------------------------------------
Net investment income .025 .029 .029 .029 .029
Less distributions from net investment income (.025) (.029) (.029) (.029) (.029)
--------------------------------------------------------
Net asset value, end of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========================================================
Total return* 2.49% 2.99% 2.94% 2.93% 2.98%
Ratios/supplemental data
Net assets, end of year (000's) $190,727 $164,525 $161,038 $166,713 $173,123
Ratios to average net assets:
Expenses .74% .65% .65% .65% .65%
Expenses excluding waiver and payments by affiliate .82% .83% .80% .81% .78%
Net investment income 2.46% 2.94% 2.91% 2.88% 2.65%
</TABLE>
*Total return is not annualized.
See notes to financial statements.
FRANKLIN TAX-EXEMPT MONEY FUND
STATEMENT OF INVESTMENTS, JULY 31, 1999
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENTS 96.2%
ARIZONA 1.1%
Apache County IDA, Tucson Electric Power, Series A, Weekly VRDN
and Put, 3.20%, 12/15/18 ......................................................... $ 2,000,000 $ 2,000,000
Maricopa County PCR, El Paso Electric Co. Project, Series A, Weekly
VRDN and Put, 3.10%, 7/01/14 ..................................................... 100,000 100,000
------------
2,100,000
------------
COLORADO 1.3%
Colorado Health Facilities Authority Revenue,
Boulder County Hospital, Project C, Weekly VRDN and Put, 3.10%, 10/01/14 ...... 2,300,000 2,300,000
Catholic Health Initiatives, Series B, Weekly VRDN and Put, 3.15%, 12/01/25 ... 250,000 250,000
------------
2,550,000
------------
DELAWARE 1.6%
Delaware State EDA, IDR, Delaware Clean Power Project, Refunding, Series C,
Weekly VRDN and Put, 3.22%, 8/01/29 .............................................. 3,000,000 3,000,000
------------
FLORIDA 2.6%
Florida Local Government Finance Authority Revenue, TECP, 3.15%, 9/08/99 .......... 5,000,000 5,000,000
------------
GEORGIA 5.8%
De Kalb County Hospital Authority, Revenue Anticipation Certificates,
De Kalb Medical Center Project, Weekly VRDN and Put, 3.15%, 9/01/09 .............. 1,800,000 1,800,000
Hapeville IDAR, Hapeville Hotel Ltd., Daily VRDN and Put, 3.15%, 11/01/15 ......... 1,900,000 1,900,000
Macon-Bibb County Hospital Authority, Revenue Certificates, Medical
Center of Central Georgia, Weekly VRDN and Put, 3.15%, 4/01/07 ................... 800,000 800,000
Municipal Electric Authority, Series B, Weekly VRDN and Put, 3.15%, 6/01/20 ....... 5,000,000 5,000,000
Rockdale County Hospital Authority, Revenue Anticipation Certificates, Weekly
VRDN and Put, 3.15%, 10/01/09 .................................................... 1,510,000 1,510,000
------------
11,010,000
------------
ILLINOIS 6.6%
City of Chicago, GO, Tender Notes, 2.85%, 10/28/99 ................................ 2,000,000 2,000,000
City of Chicago, O'Hare International Airport Revenue, General
Airport, Second Lien, Series B, Weekly VRDN and Put, 3.00%, 1/01/15 .............. 2,670,000 2,670,000
Illinois State Toll Highway Authority, Toll Highway Priority Revenue,
Refunding, Series B, MBIA Insured, Weekly VRDN and Daily Put, 3.00%, 1/01/10 ..... 7,000,000 7,000,000
Illinois State Toll Highway Authority, Toll Highway Revenue, Refunding,
Series A, FGIC Insured, 5.00%, 1/01/00 ........................................... 1,000,000 1,006,755
------------
12,676,755
------------
INDIANA 4.7%
Allen County, EDR, Weekly VRDN and Daily Put, 3.20%, 8/01/21 ...................... 1,400,000 1,400,000
Fort Wayne Hospital Authority Revenue, Parkview Memorial Hospital, Series B,
Weekly VRDN and Put, 3.15%, 1/01/16 .............................................. 4,100,000 4,100,000
Indiana Health Facility Financing Authority, Pathfinder Services Inc.
Project, Refunding, Weekly VRDN and Daily Put, 3.20%, 11/01/19 ................... 2,505,000 2,505,000
Princeton PCR, PSI Energy Inc. Project, Refunding, Daily VRDN and
Put, 3.20%, 3/01/19 .............................................................. 900,000 900,000
------------
8,905,000
------------
</TABLE>
FRANKLIN TAX-EXEMPT MONEY FUND
STATEMENT OF INVESTMENTS, JULY 31, 1999 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENTS (CONT.)
KENTUCKY 3.6%
Ashland PCR, Ashland Oil Inc. Project, Weekly VRDN and Put, 3.00%, 4/01/09 ........ $ 2,500,000 $ 2,500,000
Kentucky Economic Development Finance Authority, Hospital Facilities
Revenue, Health Alliance, Series D, MBIA Insured, Weekly VRDN
and Put, 2.95%, 1/01/22 .......................................................... 4,300,000 4,300,000
------------
6,800,000
------------
LOUISIANA 2.5%
Louisiana Public Facilities Authority, Hospital Revenue, Willis-Knighton
Medical Project, AMBAC Insured, Weekly VRDN and Put, 3.25%, 9/01/27 ........... 1,700,000 1,700,000
Refunding, AMBAC Insured, Weekly VRDN and Put, 3.25%, 9/01/23 ................. 1,000,000 1,000,000
Louisiana State TECP, 3.10%, 8/19/99 .............................................. 2,150,000 2,150,000
------------
4,850,000
------------
MARYLAND .3%
Howard County MFR, Avalon Meadows Project, Refunding, Weekly VRDN
and Put, 3.05%, 6/15/26 .......................................................... 500,000 500,000
------------
MASSACHUSETTS 3.5%
Massachusetts State Health and Educational Facilities Authority
Revenue, Brigham and Women's Hospital, Series A, Weekly VRDN
and Put, 3.05%, 7/01/17 ......................................................... 1,850,000 1,850,000
Massachusetts State Resource Authority, TECP, 3.10%, 9/10/99 ...................... 4,900,000 4,900,000
------------
6,750,000
------------
MICHIGAN 5.4%
Delta County Environmental Impact Revenue, EDC, Refunding, Daily
VRDN and Put, 3.15%, 12/01/23 .................................................... 1,900,000 1,900,000
Michigan Higher Education Student Loan Authority Revenue, Refunding,
Series XII-B, AMBAC Insured, Daily VRDN and Put, 3.10%, 10/01/13 ................. 1,100,000 1,100,000
Michigan Municipal Bond Authority Revenue, Series D-2, 4.25%, 8/27/99 ............. 5,000,000 5,002,389
Michigan State Strategic Fund Limited Obligation Revenue, Detroit
Edison Co., Refunding, Daily VRDN and Put, 3.15%, 9/01/30 ........................ 2,200,000 2,200,000
------------
10,202,389
------------
MINNESOTA 3.2%
Maple Grove MFHR, Refunding, Series A, Weekly VRDN and
Put, 3.15%, 11/01/31 ............................................................. 1,935,000 1,935,000
Olmsted County, Human Services Campus Infrastructure,
Weekly VRDN and Put, 3.10%, 8/01/05 .............................................. 4,130,000 4,130,000
------------
6,065,000
------------
MISSOURI 7.2%
Kansas City IDA, Hospital Revenue, Research Health Services
System, MBIA Insured, Daily VRDN and Put, 3.15%
10/15/14 ...................................................................... 100,000 100,000
10/15/15 ...................................................................... 3,600,000 3,600,000
State Development Agency Metropolitan District, Saint Clair County
Metrolink, Series B, MBIA Insured, Weekly VRDN and Put, 3.10%, 7/01/28 ........... 5,000,000 5,000,000
St. Louis General Fund Revenue, TRAN, 4.00%, 6/30/00 .............................. 5,000,000 5,033,225
------------
13,733,225
------------
NEVADA .5%
Clark County, Airport Improvement Revenue, Sub. Lien, Series A-1,
Weekly VRDN and Put, 3.00%, 7/01/25 .............................................. 1,000,000 1,000,000
------------
</TABLE>
FRANKLIN TAX-EXEMPT MONEY FUND
STATEMENT OF INVESTMENTS, JULY 31, 1999 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENTS (CONT.)
NEW MEXICO 1.4%
Albuquerque Gross Receipts Lodgers Tax Revenue, Weekly VRDN and
Put, 3.05%, 7/01/23 .............................................................. $ 1,100,000 $ 1,100,000
University of New Mexico Revenue, Refunding, Sub. Lien, AMBAC
Insured, Weekly VRDN and Put, 3.00%, 6/01/06 ..................................... 1,600,000 1,600,000
------------
2,700,000
------------
NEW YORK 14.0%
Erie County, RAN, 4.00%, 10/13/99 ................................................. 2,000,000 2,003,936
Long Island Power Authority, Electricity Systems Revenue,
Sub Series 2, Daily VRDN and Put, 3.00%, 5/01/33 .............................. 2,500,000 2,500,000
Sub Series 5, Daily VRDN and Put, 3.10%, 5/01/33 .............................. 6,300,000 6,300,000
Nassau County, RAN, 4.25%, 3/15/00 ................................................ 3,000,000 3,011,860
New York City Municipal Water Finance Authority, Water and Sewer
System Revenue, Series C, FGIC Insured, Daily VRDN and Put, 3.15%, 6/15/23 ....... 500,000 500,000
New York City Transitional Finance Authority Revenue,
Sub Series B-1, 2.90%, 11/01/99 .................................................. 3,000,000 3,000,000
New York State Dormitory Authority Revenue, Oxford University
Press Inc., Weekly VRDN and Put, 2.90%, 7/01/25 .................................. 1,300,000 1,300,000
New York State Urban Development Corp. Revenue,
Correctional Capital Facilities, Series 1, 7.50%, 1/01/00 ........................ 1,000,000 1,036,155
Suffolk County TAN, Series 2, 3.75%, 9/09/99 ...................................... 7,000,000 7,003,112
------------
26,655,063
------------
NORTH CAROLINA 6.0%
North Carolina Educational Facilities Finance Agency Revenue, Catawba College,
Weekly VRDN and Put, 3.10%, 3/01/19 .............................................. 2,000,000 2,000,000
North Carolina Municipal Power Agency No. 1, Catawba Electric Revenue, TECP,
3.05%, 8/12/99 ................................................................ 2,000,000 2,000,000
3.10%, 8/12/99 ................................................................ 4,500,000 4,500,000
Wake County Industrial Facilities and PCFA Revenue, Carolina Power
and Light Co.,
Series A, Weekly VRDN and Put, 3.00%, 5/01/15 ................................. 100,000 100,000
Series C, Weekly VRDN and Put, 3.05%, 10/01/15 ................................ 2,900,000 2,900,000
------------
11,500,000
------------
OHIO 3.9%
Cuyahoga County EDR, The Cleveland Orchestra Project,
Daily VRDN and Put, 3.10%, 4/01/28 ............................................... 2,400,000 2,400,000
Cuyahoga County Hospital Revenue, Cleveland Clinic Foundation,
Series A, Weekly VRDN and Put, 3.10%, 1/01/26 .................................... 5,000,000 5,000,000
------------
7,400,000
------------
PENNSYLVANIA 7.3%
Emmaus General Authority Revenue, FSA Insured, Weekly VRDN and
Put, 3.15%, 12/01/28 ............................................................. 2,600,000 2,600,000
Philadelphia School District TRAN,
Series A, 4.00%, 6/30/00 ...................................................... 6,000,000 6,029,266
Series B, 4.00%, 6/30/00 ...................................................... 1,000,000 1,004,878
Philadelphia Water and Wastewater Revenue, Series B, AMBAC Insured,
Weekly VRDN and Put, 3.00%, 8/01/27 .............................................. 3,000,000 3,000,000
Venango IDA, TECP, 3.25%, 8/04/99 ................................................. 1,300,000 1,300,000
------------
13,934,144
------------
</TABLE>
FRANKLIN TAX-EXEMPT MONEY FUND
STATEMENT OF INVESTMENTS, JULY 31, 1999 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENTS (CONT.)
RHODE ISLAND .8%
Rhode Island State Industrial Facilities Corp., Electric
Facilities Revenue, Blackstone Valley Electric Co., Weekly VRDN
and Put, 3.10%, 12/01/14 ......................................................... $ 1,500,000 $ 1,500,000
------------
TENNESSEE 2.6%
Metropolitan Government of Nashville and Davidson, IDBR,
YMCA Project, Weekly VRDN and Put, 3.20%, 12/01/18 ............................... 5,000,000 5,000,000
------------
TEXAS 5.8%
Greater Texas Student Loan Corp., Student Loan Revenue, Refunding,
Series A, 3.00%, 3/01/00 ......................................................... 8,500,000 8,500,000
Guadalupe Blanco River Authority, PCR, Central Power and Light Co.
Project, Refunding, Daily VRDN and Put, 3.20%, 11/01/15 .......................... 200,000 200,000
Nueces County Health Facilities Development Corp. Revenue,
Driscoll Children's Foundation, Weekly VRDN and Put, 3.20%, 7/01/15 .............. 1,285,000 1,285,000
Texas Municipal Power Agency Revenue, FGIC Insured, Refunding, 7.00%, 9/01/99 ..... 1,000,000 1,003,317
------------
10,988,317
------------
UTAH 1.9%
Central Utah Water Conservancy District, GO, Series F,
Weekly VRDN and Put, 3.10%, 4/01/27 .............................................. 3,700,000 3,700,000
------------
WASHINGTON 2.1%
Seattle Water System Revenue, Weekly VRDN and Put, 3.00%, 9/01/25 ................. 2,000,000 2,000,000
Washington State Housing Finance Commission, MFMR, Lake
Washington Apartments Project, Weekly VRDN and Put, 3.35%, 10/01/26 .............. 2,000,000 2,000,000
------------
4,000,000
------------
WISCONSIN .5%
Wisconsin State Health and Educational Facilities Authority Revenue,
Wheaton Franciscan Services, Weekly VRDN and Put, 3.05%, 8/15/16 ................. 1,000,000 1,000,000
------------
TOTAL INVESTMENTS (COST $183,519,893) 96.2% ....................................... 183,519,893
OTHER ASSETS, LESS LIABILITIES 3.8% ............................................... 7,206,840
------------
NET ASSETS 100.0% ................................................................. $190,726,733
============
</TABLE>
See glossary of terms on page 9.
See notes to financial statements.
FRANKLIN TAX-EXEMPT MONEY FUND
STATEMENT OF INVESTMENTS, JULY 31, 1999 (CONT.)
<TABLE>
<CAPTION>
GLOSSARY OF TERMS
- --------------------------------------------------------------------------------
<S> <C>
AMBAC - American Municipal Bond Assurance Corp.
EDA - Economic Development Authority
EDC - Economic Development Corp.
EDR - Economic Development Revenue
FGIC - Financial Guaranty Insurance Co.
FSA - Financial Security Assistance
GO - General Obligation
IDA - Industrial Development Authority/Agency
IDAR - Industrial Development Authority/Agency Revenue
IDBR - Industrial Development Board Revenue
IDR - Industrial Development Revenue
MBIA - Municipal Bond Investors Assurance Corp.
MFHR - Multi-Family Housing Revenue
MFMR - Multi-Family Mortgage Revenue
MFR - Multi-Family Revenue
PCFA - Pollution Control Financing Authority
PCR - Pollution Control Revenue
RAN - Revenue Anticipation Note
TAN - Tax Anticipation Note
TECP - Tax-Exempt Commercial Paper
TRAN - Tax Revenue Anticipation Note
VRDN - Variable Rate Demand Note
</TABLE>
FRANKLIN TAX-EXEMPT MONEY FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 1999
Assets:
Investments in securities, at value and cost ................ $183,519,893
Receivables:
Interest receivable ........................................ 1,127,430
Capital shares sold ........................................ 6,751,004
------------
Total assets ........................................... 191,398,327
------------
Liabilities:
Payables:
Capital shares redeemed .................................... 279,477
Affiliates ................................................. 106,789
Shareholders ............................................... 181,722
Distributions to shareholders ............................... 11,629
Postage and mailing fees .................................... 44,211
Other liabilities ........................................... 47,766
------------
Total liabilities ...................................... 671,594
------------
Net assets, at value ........................................ $190,726,733
============
Shares outstanding .......................................... 190,726,733
============
Net asset value per share ................................... $ 1.00
============
See notes to financial statements.
FRANKLIN TAX-EXEMPT MONEY FUND
FINANCIAL STATEMENTS (CONTINUED)
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JULY 31, 1999
Investment income:
Interest .......................................... $ 5,619,262
-----------
Expenses:
Management fees (Note 3) .......................... 1,002,255
Transfer agent fees (Note 3) ...................... 225,702
Custodian fees .................................... 1,765
Reports to shareholders ........................... 116,810
Registration and filing fees ...................... 49,713
Professional fees ................................. 23,773
Directors' fees and expenses ...................... 9,224
Other ............................................. 6,670
-----------
Total expenses ............................... 1,435,912
Expenses waived/paid by affiliate (Note 3) ... (143,895)
-----------
Net expenses ................................ 1,292,017
-----------
Net investment income ...................... 4,327,245
-----------
Net realized loss from investments ................. (826)
-----------
Net increase in net assets resulting from operations $ 4,326,419
===========
See notes to financial statements.
FRANKLIN TAX-EXEMPT MONEY FUND
FINANCIAL STATEMENTS (CONTINUED)
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED JULY 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
------------- -------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ................................... $ 4,327,245 $ 4,778,127
Net realized gain (loss) from investments ............... (826) 1,693
------------- -------------
Net increase in net assets resulting from operations 4,326,419 4,779,820
Distributions to shareholders from net investment income . (4,326,419)* (4,779,820)*
Capital share transactions: (Note 2) ..................... 26,201,598 3,487,344
------------- -------------
Net increase in net assets .......................... 26,201,598 3,487,344
Net assets (there is no undistributed net investment income
at beginning or end of year):
Beginning of year ........................................ 164,525,135 161,037,791
------------- -------------
End of year .............................................. $ 190,726,733 $ 164,525,135
============= =============
</TABLE>
*Distributions were decreased by net realized losses from security transactions
of $826 for the year ended July 31, 1999 and increased by net realized gains of
$1,693 for the year ended July 31, 1998.
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 substantially 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, 1999, there were five billion shares authorized (no par value).
Transactions in the Fund's shares at $1.00 per share were as follows:
<TABLE>
<CAPTION>
Year Ended July 31
----------------------------------
1999 1998
------------- -------------
<S> <C> <C>
Shares sold ....................... $ 534,258,508 $ 358,177,980
Shares issued in reinvestment
of distributions ................. 4,325,631 4,792,736
Shares redeemed ................... (512,382,541) (359,483,372)
------------- -------------
Net increase ...................... $ 26,201,598 $ 3,487,344
============= =============
</TABLE>
FRANKLIN TAX-EXEMPT MONEY FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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), Franklin/Templeton Distributors, Inc. (Distributors), and
Franklin Templeton Services Inc. (FT Services), the Fund's investment manager,
transfer agent, principal underwriter, 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% Over $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 through December 31, 1998,
as noted in the Statement of Operations.
4. INCOME TAXES
At July 31, 1999, the Fund had tax basis capital losses of $2,439, which may be
carried over to offset future capital gains.
Such losses expire as follows:
Capital loss carryovers expiring in:
2004 ................................ $ 595
2005 ................................ 1,844
-------
$ 2,439
=======
At July 31, 1999, the Fund has deferred capital losses occurring subsequent to
October 31, 1998 of $8,419. For tax purposes, such losses will be reflected in
the year ending July 31, 2000.
5. CREDIT RISKS
The Fund has investments in excess of 10% of its total net assets in the state
of New York. Such concentration may subject the Fund more significantly to
economic changes occurring within that state.
FRANKLIN TAX-EXEMPT MONEY FUND
INDEPENDENT AUDITORS REPORT
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF
FRANKLIN TAX-EXEMPT MONEY FUND
In our opinion, the accompanying statement of assets and liabilities, including
the statement of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Franklin Tax-Exempt Money Fund (the
"Fund") at July 31, 1999, the results of its operations for the year then ended,
the changes in its net assets for each of the two years in the period then ended
and the financial highlights for each of the periods presented, in conformity
with generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at July 31, 1999 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
PricewaterhouseCoopers LLP
San Francisco, California
September 3, 1999
FRANKLIN TAX-EXEMPT MONEY FUND
TAX INFORMATION
Under Section 852(b)(5)(A) of the Internal Revenue Code, the fund hereby
designates 100% of the distributions paid from net investment income as
exempt-interest dividends for the fiscal year ended July 31, 1999.
