UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-03193
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Franklin Tax-Exempt Money Fund
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(Exact name of registrant as specified in charter)
One Franklin Parkway, San Mateo, CA 94403-1906
(Address of principal executive offices) (Zip code)
Murray L. Simpson, One Franklin Parkway, San Mateo, CA 94403-1906
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(Name and address of agent for service)
Registrant's telephone number, including area code: (650) 312-2000
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Date of fiscal year end: 7/31
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Date of reporting period: 7/31/04
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Item 1. Reports to Stockholders.
[GRAPHIC OMITTED]
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JULY 31, 2004
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ANNUAL REPORT AND SHAREHOLDER LETTER | TAX-FREE INCOME
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WANT TO RECEIVE
THIS DOCUMENT
FASTER VIA EMAIL?
FRANKLIN
TAX-EXEMPT MONEY FUND Eligible shareholders can
sign up for eDelivery at
franklintempleton.com.
See inside for details.
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[LOGO](R)
FRANKLIN(R) TEMPLETON(R)
INVESTMENTS
Franklin o Templeton o Mutual Series
FRANKLIN TEMPLETON INVESTMENTS
GAIN FROM OUR PERSPECTIVE
Franklin Templeton's distinct multi-manager
structure combines the specialized expertise of
three world-class investment management
groups--Franklin, Templeton and Mutual Series.
SPECIALIZED EXPERTISE Each of our portfolio management groups operates
autonomously, relying on its own research and
staying true to the unique investment disciplines
that underlie its success.
FRANKLIN. Founded in 1947, Franklin is a
recognized leader in fixed income investing and
also brings expertise in growth- and value-style
U.S. equity investing.
TEMPLETON. Founded in 1940, Templeton pioneered
international investing and, in 1954, launched
what has become the industry's oldest global fund.
Today, with research offices in over 25 countries,
they offer investors the broadest global reach in
the industry.
MUTUAL SERIES. Founded in 1949, Mutual Series is
dedicated to a unique style of value investing,
searching aggressively for opportunity among
undervalued stocks, arbitrage situations and
distressed companies.
TRUE DIVERSIFICATION Because our management groups work independently
and adhere to distinctly different investment
approaches, Franklin, Templeton and Mutual Series
funds typically have a low overlap of securities.
That's why our funds can be used to build truly
diversified portfolios covering every major asset
class.
RELIABILITY YOU CAN TRUST At Franklin Templeton Investments, we seek to
consistently provide investors with exceptional
risk-adjusted returns over the long term, as well
as the reliable account services that have helped
us become one of the most trusted names in
financial services.
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MUTUAL FUNDS | RETIREMENT PLANS | 529 COLLEGE SAVINGS PLANS | SEPARATE ACCOUNTS
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[GRAPHIC OMITTED]
Not part of the annual report
CONTENTS
SHAREHOLDER LETTER ........................................................ 1
ANNUAL REPORT
Franklin Tax-Exempt Money Fund ............................................ 3
Performance Summary ....................................................... 4
Your Fund's Expenses ...................................................... 5
Financial Highlights and Statement of Investments ......................... 6
Financial Statements ...................................................... 12
Notes to Financial Statements ............................................. 15
Report of Independent Registered Public Accounting Firm ................... 20
Tax Designation ........................................................... 21
Board Members and Officers ................................................ 22
Shareholder Information ................................................... 26
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ANNUAL REPORT
FRANKLIN TAX-EXEMPT MONEY FUND
YOUR FUND'S GOAL AND MAIN INVESTMENTS: Franklin Tax-Exempt Money Fund seeks to
provide a high level of current income exempt from federal income tax,
consistent with liquidity and preservation of capital.(1) The Fund pursues a
conservative investment policy by investing predominantly in high quality,
short-term, municipal securities as it seeks to maintain a stable $1.00 share
price.
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PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT GUARANTEE
FUTURE RESULTS. INVESTMENT RETURNS WILL FLUCTUATE. CURRENT PERFORMANCE MAY
DIFFER FROM FIGURES SHOWN. PLEASE VISIT FRANKLINTEMPLETON.COM OR CALL
1-800/342-5236 FOR MOST RECENT MONTH-END PERFORMANCE.
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AN INVESTMENT IN THE FUND IS NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY OR INSTITUTION. ALTHOUGH
THE FUND SEEKS TO PRESERVE THE VALUE OF YOUR INVESTMENT AT $1.00 PER SHARE, IT
IS POSSIBLE TO LOSE MONEY BY INVESTING IN THE FUND.
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This annual report for Franklin Tax-Exempt Money Fund covers the fiscal year
ended July 31, 2004.
PERFORMANCE OVERVIEW
During the reporting period, interest rates in the short-term market remained
relatively low. Franklin Tax-Exempt Money Fund's seven-day effective yield
increased from 0.24% on July 31, 2003, to 0.30% on July 31, 2004.
ECONOMIC AND MARKET OVERVIEW
During the 12 months ended July 31, 2004, the U.S. economy remained strong.
One-year gross domestic product (GDP) rose an estimated 4.7% through June. Major
contributors to growth included inventory investment, equipment and software
spending, and federal government spending. Despite solid export growth and a
resilient housing market, annualized second quarter 2004 GDP grew an estimated
2.8%, which was less than expected, due largely to the weakest consumer spending
growth in three years. Approximately 70% of GDP stemmed from consumer activity,
which slowed as personal liquidity from tax cuts and low interest-rate
incentives faded. Business investment and corporate profits rose and contributed
to overall economic growth.
Labor market conditions improved during the reporting period. More than one-half
of the jobs lost during the recession and weak economic expansion have been
recovered. The economy created 1.5 million jobs since summer 2003. In addition,
the unemployment rate fell from 6.2% in July 2003 to 5.5% at period-end.(2)
Services created the most jobs led by leisure and hospitality, education and
health, and business and professional services.
(1) Fund dividends are generally subject to state and local taxes, if any. For
investors subject to the alternative minimum tax, a small portion of Fund
dividends may be taxable. Distributions of capital gains are generally
taxable.
(2) Source: Bureau of Labor Statistics.
THE DOLLAR VALUE, NUMBER OF SHARES OR PRINCIPAL AMOUNT, AND NAMES OF ALL
PORTFOLIO HOLDINGS ARE LISTED IN THE FUND'S STATEMENT OF INVESTMENTS (SOI). THE
SOI BEGINS ON PAGE 7.
Annual Report | 3
PERFORMANCE SUMMARY
7/31/04
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Seven-day effective yield(1) 0.30%
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Seven-day annualized yield 0.30%
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Taxable equivalent yield(2) 0.46%
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(1) Seven-day effective yield assumes the compounding of daily dividends.
(2) Taxable equivalent yield assumes the 2004 maximum 35.00% federal income
tax rate.
Annualized and effective yields are for the seven-day period ended 7/31/04. The
Fund's average weighted maturity was 38 days. Yields reflect Fund expenses and
fluctuations in interest rates on portfolio investments.
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT GUARANTEE
FUTURE RESULTS. INVESTMENT RETURNS WILL FLUCTUATE. CURRENT PERFORMANCE MAY
DIFFER FROM FIGURES SHOWN. PLEASE VISIT FRANKLINTEMPLETON.COM OR CALL
1-800/342-5236 FOR MOST RECENT MONTH-END PERFORMANCE.
PORTFOLIO BREAKDOWN
7/31/04
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% of Total
Investments
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Variable Rate Notes 77.0%
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Put or Option Tender Bonds 10.2%
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Tax-Exempt Anticipation Notes 8.3%
(BAN, RAN, TAN, TRAN)
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Tax-Exempt Commercial Paper 4.0%
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Revenue and General Obligation
Notes & Bonds 0.5%
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In light of positive economic developments, consumer inflation remained modest
but picked up speed in 2004. Excluding the volatile food and energy categories,
consumer prices increased 1.8% for the 12 months ended July 31, 2004.
Consequently, for the first time in more than four years, the Federal Reserve
Board (Fed) raised the federal funds target rate on June 30, 2004, by a
quarter-point to 1.25%. Because Fed policymakers expect inflation to remain
relatively low, they believe they can raise interest rates at a measured pace.
Nonetheless, the Fed said it will respond to changes in economic prospects as
needed to fulfill its obligation to maintain price stability. The 10-year
Treasury note yield began the period at 4.49% and rose to a high of 4.89% on
June 14 in anticipation of the Fed's rate increase. On July 31, 2004, the
10-year Treasury yielded 4.50%.
INVESTMENT STRATEGY
We invest predominantly in high-quality, short-term tax-free securities.
Although the Fund tries to invest all of its assets in tax-free securities, it
is possible, although not anticipated, that a portion of its assets may be in
securities that pay taxable interest, including interest that may be subject to
federal alternative minimum tax. We maintain a dollar-weighted average portfolio
maturity of 90 days or less.
MANAGER'S DISCUSSION
During the reporting period, the Fund participated in several deals including
Texas State tax and revenue anticipation notes, Iowa School cash anticipation
notes, Northside Texas Independent School District mandatory puts, and
Commonwealth of Massachusetts commercial paper.
Thank you for your participation in Franklin Tax-Exempt Money Fund. We look
forward to serving your future investment needs.
THIS DISCUSSION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS AS OF
JULY 31, 2004, THE END OF THE REPORTING PERIOD. THE WAY WE IMPLEMENT OUR MAIN
INVESTMENT STRATEGIES AND THE RESULTING PORTFOLIO HOLDINGS MAY CHANGE DEPENDING
ON FACTORS SUCH AS MARKET AND ECONOMIC CONDITIONS. THESE OPINIONS MAY NOT BE
RELIED UPON AS INVESTMENT ADVICE OR AN OFFER FOR A PARTICULAR SECURITY. THE
INFORMATION IS NOT A COMPLETE ANALYSIS OF EVERY ASPECT OF ANY MARKET, COUNTRY,
INDUSTRY, SECURITY OR THE FUND. STATEMENTS OF FACT ARE FROM SOURCES CONSIDERED
RELIABLE, BUT THE ADVISER MAKES NO REPRESENTATION OR WARRANTY AS TO THEIR
COMPLETENESS OR ACCURACY. ALTHOUGH HISTORICAL PERFORMANCE IS NO GUARANTEE OF
FUTURE RESULTS, THESE INSIGHTS MAY HELP YOU UNDERSTAND OUR INVESTMENT MANAGEMENT
PHILOSOPHY.
4 | Annual Report
YOUR FUND'S EXPENSES
As a Fund shareholder, you can incur two types of costs:
o Transaction costs, including sales charges (loads) on Fund purchases and
redemption fees; and
o Ongoing Fund costs, including management fees, distribution and service
(12b-1) fees, and other Fund expenses. All mutual funds have ongoing
costs, sometimes referred to as operating expenses.
The following table shows ongoing costs of investing in the Fund and can help
you understand these costs and compare them with those of other mutual funds.
The table assumes a $1,000 investment held for the six months indicated.
ACTUAL FUND EXPENSES
The first line (Actual) for each share class listed in the table below provides
actual account values and expenses. The "Ending Account Value" is derived from
the Fund's actual return, which includes the effect of Fund expenses.
You can estimate the expenses you paid during the period, by following these
steps. OF COURSE, YOUR ACCOUNT VALUE AND EXPENSES WILL DIFFER FROM THOSE IN THIS
ILLUSTRATION:
1. Divide your account value by $1,000.
IF AN ACCOUNT HAD AN $8,600 VALUE, THEN $8,600 / $1,000 = 8.6.
2. Multiply the result by the number under the heading "Expenses Paid During
Period."
IF EXPENSES PAID DURING PERIOD WERE $7.50, THEN 8.6 X $7.50 = $64.50.
In this illustration, the estimated expenses paid this period are $64.50.
HYPOTHETICAL EXAMPLE FOR COMPARISON WITH OTHER FUNDS
Information in the second line (Hypothetical) for each class in the table can
help you compare ongoing costs of investing in the Fund with those of other
mutual funds. This information may not be used to estimate the actual ending
account balance or expenses you paid during the period. The hypothetical "Ending
Account Value" is based on the actual expense ratio for each class and an
assumed 5% annual rate of return before expenses, which does not represent the
Fund's actual return. The figure under the heading "Expenses Paid During Period"
shows the hypothetical expenses your account would have incurred under this
scenario. You can compare this figure with the 5% hypothetical examples that
appear in shareholder reports of other funds.
PLEASE NOTE THAT EXPENSES SHOWN IN THE TABLE ARE MEANT TO HIGHLIGHT ONGOING
COSTS AND DO NOT REFLECT ANY TRANSACTION COSTS, SUCH AS SALES CHARGES OR
REDEMPTION FEES. Therefore, the second line for each class is useful in
comparing ongoing costs only, and will not help you compare total costs of
owning different funds. In addition, if transaction costs were included, your
total costs would have been higher. Please refer to the Fund prospectus for
additional information on operating expenses.
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BEGINNING ACCOUNT ENDING ACCOUNT EXPENSES PAID DURING
VALUE 1/31/04 VALUE 7/31/04 PERIOD* 1/31/04-7/31/04
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Actual $1,000 $1,002.30 $3.68
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Hypothetical (5% return before expenses) $1,000 $1,021.18 $3.72
* Expenses are equal to the Fund's annualized expense ratio of 0.74%,
multiplied by the average account value over the period, multiplied by
182/366 to reflect the one-half year period.
Annual Report | 5
FRANKLIN TAX-EXEMPT MONEY FUND
FINANCIAL HIGHLIGHTS
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YEAR ENDED JULY 31,
2004 2003 2002 2001 2000
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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
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Income from investment operations - net investment income .... .002 .005 .011 .029 .030
Less distributions from net investment income ................ (.002) (.005) (.011) (.029) (.030)
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Net asset value, end of year ................................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
=============================================================
Total return(a) .............................................. .23% .53% 1.06% 2.98% 3.02%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) .............................. $179,372 $176,834 $163,710 $167,705 $169,338
Ratios to average net assets:
Expenses .................................................... .74% .76% .76% .76% .74%
Net investment income ....................................... .24% .53% 1.05% 2.94% 3.02%
(a) Total return does not reflect the contingent deferred sales charge, and is
not annualized for periods less than one year.
6 | See notes to financial statements. | Annual Report
FRANKLIN TAX-EXEMPT MONEY FUND
STATEMENT OF INVESTMENTS, JULY 31, 2004
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PRINCIPAL AMOUNT VALUE
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BONDS 101.0%
ALABAMA 2.3%
(a) Evergreen IDB, IDR, Tenax Manufacturing Project, Refunding, Weekly VRDN and Put, 1.09%,
12/01/12 ..................................................................................... $2,600,000 $ 2,600,000
(a) Mobile IDA Pollution Control Revenue, Refunding, ExxonMobile Project, Daily VRDN and Put,
1.02%, 7/15/32 ............................................................................... 1,500,000 1,500,000
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4,100,000
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ARIZONA 2.1%
(a) Apache County IDA, IDR, Tucson Electric Power Co. Project, Springerville Project, Series C,
Weekly VRDN and Put, 1.13%, 12/15/18 ......................................................... 1,000,000 1,000,000
(a) Arizona Health Facilities Authority Hospital System Revenue, Series B, MBIA Insured,
Weekly VRDN and Put, 1.08%, 10/01/26 ......................................................... 1,800,000 1,800,000
(a) Nanotechnology Research LLC Arizona Lease Revenue, Arizona State University Project,
Series A, MBIA Insured, Weekly VRDN and Put, 1.08%, 3/01/34 .................................. 1,000,000 1,000,000
------------
3,800,000
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CALIFORNIA 1.1%
CSUCI Financing Authority Revenue, Rental Housing, Mandatory Put, 1.60%, 8/01/31 ............... 2,000,000 2,000,000
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COLORADO 5.0%
(a) Colorado Springs Utilities Revenue, sub. lien, Series A, Weekly VRDN and Put, 1.07%,
11/01/29 ..................................................................................... 2,000,000 2,000,000
(a) Denver City and County COP,
Refunding, AMBAC Insured, Weekly VRDN and Put, 1.05%, 12/01/29 ............................... 4,000,000 4,000,000
Wellington E Web-C3, Refunding, AMBAC Insured, Weekly VRDN and Put, 1.08%,
12/01/29 ..................................................................................... 3,000,000 3,000,000
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9,000,000
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FLORIDA 6.4%
Florida Local Government Commission, Series A, TECP, 1.06%, 9/10/04 ............................ 3,300,000 3,300,000
(a) Orange County School Board COP, Series B,
AMBAC Insured, Daily VRDN and Put, 1.10%, 8/01/25 ............................................ 1,200,000 1,200,000
MBIA Insured, Daily VRDN and Put, 1.10%, 8/01/27 ............................................. 1,960,000 1,960,000
(a) Pinellas County Health Facilities Authority Revenue, Pooled Hospital Loan Program, Refunding,
AMBAC Insured, Daily VRDN and Put, 1.12%, 12/01/15 ............................................. 5,000,000 5,000,000
------------
11,460,000
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GEORGIA 8.3%
(a) Athens-Clarke County Unified Government Authority Revenue, University of Georgia Athletic
Association Project, Daily VRDN and Put, 1.13%, 8/01/33 ...................................... 1,500,000 1,500,000
(a) De Kalb County Hospital Authority RAN, De Kalb Medical Center Project, Weekly VRDN and Put,
1.08%, 9/01/09 ............................................................................... 1,100,000 1,100,000
(a) Fulco Hospital Authority Revenue, Anticipation Certificates, Shepherd Center Inc. Project,
Weekly VRDN and Put, 1.08%, 9/01/17 .......................................................... 1,000,000 1,000,000
(a) Metropolitan Atlanta Rapid Transit Authority Sales Tax Revenue, Series B, Weekly VRDN and
Put, 1.08%, 7/01/25 .......................................................................... 8,000,000 8,000,000
(a) Roswell Housing Authority MFR, Azalea Park Apartments, Refunding, FNMA Insured, Weekly
VRDN and Put, 1.08%, 6/15/25 ................................................................. 3,200,000 3,200,000
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14,800,000
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Annual Report | 7
FRANKLIN TAX-EXEMPT MONEY FUND
STATEMENT OF INVESTMENTS, JULY 31, 2004 (CONTINUED)
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PRINCIPAL AMOUNT VALUE
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BONDS (CONT.)
HAWAII 4.8%
(a) Hawaii State Department of Budget and Finance Special Purpose Revenue, Adventist Health
System West, Weekly VRDN and Put, 1.05%, 3/01/08 ............................................. $3,700,000 $ 3,700,000
Honolulu City and County GO, Series C, FGIC Insured, Optional Put, 1.18%, 12/01/06 ............. 5,000,000 5,000,000
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8,700,000
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ILLINOIS 7.8%
Chicago GO, Temporary Notes, 1.05%, 1/07/05 .................................................... 7,000,000 7,000,000
(a) Illinois State Toll Highway Authority Toll Highway Priority Revenue, Refunding, Series B,
MBIA Insured, WeeklyVRDN and Daily Put, 1.05%, 1/01/10 ....................................... 7,000,000 7,000,000
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14,000,000
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INDIANA 3.9%
Indiana Bond Bank Revenue, Advance Program Notes, Series A, 2.00%, 1/25/05 ..................... 2,000,000 2,008,654
(a) Indiana State Educational Facilities Authority Revenue, Indiana Wesleyan University Project,
Weekly VRDN and Put, 1.08%, 12/01/08 ......................................................... 1,500,000 1,500,000
(a) Indianapolis Local Public Improvement Bond Bank Revenue, Refunding, Series F-2,
MBIA Insured, Weekly VRDN and Put, 1.05%, 2/01/20 ............................................ 2,500,000 2,500,000
(a) Miami County EDR, Dukes Memorial Hospital Project, Weekly VRDN and Put, 1.08%,
10/01/30 ..................................................................................... 1,000,000 1,000,000
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7,008,654
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IOWA 2.8%
Iowa School Corps. Warrants Certificates, Iowa School Cash Anticipation Program, Series A,
FSA Insured, 3.00%, 6/30/05 .................................................................... 5,000,000 5,063,460
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KENTUCKY 2.6%
(a) Kentucky Development Finance Authority Revenue, Pooled Loan Program, Series A,
FGIC Insured, Weekly VRDN and Put, 1.09%, 12/01/15 ........................................... 4,600,000 4,600,000
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LOUISIANA 4.4%
(a) Louisiana State Offshore Terminal Authority Deepwater Port Revenue, Loop Inc. Project,
First Stage, ACES, Refunding, Daily VRDN and Put, 1.10%, 9/01/17 ............................. 7,960,000 7,960,000
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MARYLAND 1.2%
(a) Community Development Administration MF Development Revenue, Avalon Ridge Apartments
Project, Refunding, FNMA Insured, Weekly VRDN and Put, 1.08%, 6/15/26 ........................ 2,100,000 2,100,000
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MASSACHUSETTS 8.4%
(a) Massachusetts Bay Transportation Authority GO, General Transportation System, Weekly VRDN
and Put, 1.08%, 3/01/30 ...................................................................... 3,900,000 3,900,000
(a) Massachusetts State Health and Educational Facilities Authority Revenue, Capital Assets
Program, Series D, MBIA Insured, Daily VRDN and Put, 1.07%, 1/01/35 .......................... 1,520,000 1,520,000
(a) Massachusetts State HFAR, Series F, FSA Insured, Weekly VRDN and Put, 1.09%,
12/01/37 ..................................................................................... 2,500,000 2,500,000
(a) Massachusetts State Water Resource Authority Revenue, Multi-Modal, Refunding, Sub Series D,
Daily VRDN and Put, 1.10%, 8/01/17 ........................................................... 7,100,000 7,100,000
------------
15,020,000
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8 | Annual Report
FRANKLIN TAX-EXEMPT MONEY FUND
STATEMENT OF INVESTMENTS, JULY 31, 2004 (CONTINUED)
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PRINCIPAL AMOUNT VALUE
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BONDS (CONT.)
MICHIGAN 5.8%
(a) Detroit Sewage Disposal Revenue, senior lien, Series B, Daily VRDN and Put, 1.10%,
7/01/33 ...................................................................................... $2,700,000 $ 2,700,000
(a) Detroit Sewer Disposal Revenue, Series C-2, Refunding, FGIC Insured, Weekly VRDN and Put,
1.09%, 7/01/29 ............................................................................... 3,000,000 3,000,000
Greater Detroit Resources Recovery Authority Revenue, Refunding, Series A, AMBAC Insured,
5.50%, 12/13/04 .............................................................................. 1,000,000 1,016,014
(a) Michigan State University Revenues, Series A, Daily VRDN and Put, 1.10%, 8/15/32 ............... 3,650,000 3,650,000
------------
10,366,014
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MINNESOTA 3.4%
(a) Minneapolis Housing Development Revenue, One Ten Grant Project, Refunding, FNMA Insured,
Weekly VRDN and Put, .93%, 9/01/08 ........................................................... 1,200,000 1,200,000
(a) Minneapolis MFHR, Seven Corners Apartments Project, Weekly VRDN and Put, 1.03%,
10/01/31 ..................................................................................... 1,950,000 1,950,000
(a) Minneapolis Revenue, Adjusted Guthrie Theater Project, Series A, Weekly VRDN and Put,
1.08%, 10/01/23 .............................................................................. 3,000,000 3,000,000
------------
6,150,000
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NEVADA 2.2%
(a) Clark County Airport Improvement Revenue, sub. lien,
Series A-1, Weekly VRDN and Put, 1.05%, 7/01/25 .............................................. 900,000 900,000
Series B-1, Weekly VRDN and Put, 1.10%, 7/01/29 .............................................. 3,000,000 3,000,000
------------
3,900,000
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NEW JERSEY 2.8%
(a) New Jersey State Turnpike Authority Turnpike Revenue,
Series D, FGIC Insured, Weekly VRDN and Put, 1.05%, 1/01/18 .................................. 2,600,000 2,600,000
Series C-2, FSA Insured, Weekly VRDN and Put, 1.08%, 1/01/24 ................................. 2,500,000 2,500,000
------------
5,100,000
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NEW MEXICO 4.3%
(a) Albuquerque Gross Receipts Lodgers Tax Revenue, Weekly VRDN and Put, 1.08%, 7/01/23 ............ 300,000 300,000
(a) Farmington PCR, Arizona Public Service Co.,
Refunding, Series B, Daily VRDN and Put, 1.10%, 9/01/24 ...................................... 2,600,000 2,600,000
Series A, Daily VRDN and Put, 1.15%, 5/01/24 ................................................. 4,400,000 4,400,000
(a) University of New Mexico Revenues, Refunding, AMBAC Insured, Weekly VRDN and Put,
1.05%, 6/01/06 ............................................................................... 500,000 500,000
------------
7,800,000
------------
NEW YORK 1.1%
(a) Jay Street Development Corp. Certificates Facility Lease Revenue, Jay Street Project,
Series A-4, Daily VRDN and Put, 1.08%, 5/01/22 ............................................... 1,985,000 1,985,000
------------
NORTH CAROLINA .7%
(a) North Carolina Medical Care Commission Hospital Revenue, Pooled Financing Project, ACES,
Series B, Daily VRDN and Put, 1.10%, 10/01/13 ................................................ 1,200,000 1,200,000
------------
Annual Report | 9
FRANKLIN TAX-EXEMPT MONEY FUND
STATEMENT OF INVESTMENTS, JULY 31, 2004 (CONTINUED)
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
BONDS (CONT.)
OKLAHOMA 1.2%
(a) Oklahoma City Industrial and Culture Facilities Trust Revenue, Oklahoma City University Project,
Weekly VRDN and Put, 1.05%, 8/01/15 .......................................................... $2,100,000 $ 2,100,000
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OREGON .6%
(a) Tri-County Metropolitan Transportation District Revenue, Interstate Max Project, Series A,
Weekly VRDN and Put, 1.09%, 12/01/21 ......................................................... 1,000,000 1,000,000
-------------
PENNSYLVANIA 2.9%
(a) Delaware Valley Regional Finance Authority Local Government Revenue,
Series A, Weekly VRDN and Put, 1.08%, 12/01/20 ............................................... 2,150,000 2,150,000
Series D, Weekly VRDN and Put, 1.08%, 12/01/20 ............................................... 3,100,000 3,100,000
-------------
5,250,000
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TENNESSEE 2.9%
(a) Clarksville PBA Revenue, Pooled Financing, Tennessee Municipal Bond Fund, Daily VRDN and
Put, 1.13%,
7/01/31 ...................................................................................... 1,000,000 1,000,000
1/01/33 ...................................................................................... 1,100,000 1,100,000
(a) Montgomery County PBA Pooled Financing Revenue, Tennessee County Loan Pool, Daily VRDN
and Put, 1.13%, 7/01/34 ...................................................................... 1,100,000 1,100,000
(a) Montgomery County PBA, Pooled Financing Revenue, Tennessee County Loan Pool,
Weekly VRDN and Daily Put, 1.08%, 11/01/27 ................................................... 1,955,000 1,955,000
-------------
5,155,000
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TEXAS 11.3%
(a) Bexar County HFA, MFR, Altamonte Apartments Project, Refunding, FNMA Insured,
Weekly VRDN and Put, 1.09%, 9/15/26 .......................................................... 3,900,000 3,900,000
Harris County Flood Control District, TECP, 1.13%, 8/27/04 ..................................... 4,000,000 4,000,000
Northside ISD, GO, School Building, Mandatory Put, 1.67%, 6/15/33 .............................. 4,400,000 4,400,000
Texas State TRAN, 2.00%, 8/31/04 ............................................................... 8,000,000 8,005,875
-------------
20,305,875
-------------
WISCONSIN .7%
(a) Wisconsin Housing and EDA Home Ownership Revenue, Series I, FSA Insured, Weekly VRDN
and Put, 1.12%, 3/01/25 ...................................................................... 1,240,000 1,240,000
-------------
TOTAL BONDS (COST $181,164,003) 101.0% ......................................................... 181,164,003
OTHER ASSETS, LESS LIABILITIES (1.0)% .......................................................... (1,792,089)
-------------
NET ASSETS 100.0% .............................................................................. $179,371,914
=============
See glossary of terms on page 11.
(a) Variable 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.
10 | See notes to financial statements. | Annual Report
FRANKLIN TAX-EXEMPT MONEY FUND
STATEMENT OF INVESTMENTS, JULY 31, 2004 (CONTINUED)
GLOSSARY OF TERMS
ACES - Adjustable Convertible Exempt Securities
AMBAC - American Municipal Bond Assurance Corp.
COP - Certificate of Participation
EDA - Economic Development Authority
EDR - Economic Development Revenue
FGIC - Financial Guaranty Insurance Co.
FNMA - Federal National Mortgage Association
FSA - Financial Security Assistance
GO - General Obligation
HFA - Housing Finance Authority/Agency
HFAR - Housing Finance Authority/Agency Revenue
IDA - Industrial Development Authority/Agency
IDB - Industrial Development Bond/Board
IDR - Industrial Development Revenue
ISD - Independent School District
LLC - Limited Liability Corp.
MBIA - Municipal Bond Investors Assurance Corp.
MF - Multi-Family
MFHR - Multi-Family Housing Revenue
MFR - Multi-Family Revenue
PBA - Public Building Authority
PCR - Pollution Control Revenue
RAN - Revenue Anticipation Notes
TECP - Tax-Exempt Commercial Paper
TRAN - Tax and Revenue Anticipation Notes
Annual Report | 11
FRANKLIN TAX-EXEMPT MONEY FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
July 31, 2004
ASSETS:
Investments in securities, at amortized cost (Note 1) ........ $181,164,003
Cash ......................................................... 107,454
Receivables:
Capital shares sold ........................................ 545,738
Interest ................................................... 415,839
------------
Total assets ............................................ 182,233,034
------------
Liabilities:
Payables:
Investment securities purchased ............................ 2,000,089
Capital shares redeemed .................................... 740,136
Affiliates ................................................. 93,863
Distributions to shareholders ................................ 6,352
Other liabilities ............................................ 20,680
------------
Total liabilities ....................................... 2,861,120
------------
Net assets, at value ........................................... $179,371,914
============
Shares outstanding ............................................. 179,371,914
============
Net asset value per sharea ..................................... $ 1.00
============
(a) Redemption price is equal to net asset value less any applicable
contingent deferred sales charge.
12 | See notes to financial statements. | Annual Report
FRANKLIN TAX-EXEMPT MONEY FUND
FINANCIAL STATEMENTS (CONTINUED)
STATEMENT OF OPERATIONS
for the year ended July 31, 2004
Investment income:
Interest ....................................................... $ 1,641,238
------------
Expenses:
Management fees (Note 3) ....................................... 961,417
Transfer agent fees (Note 3) ................................... 165,638
Custodian fees ................................................. 2,294
Reports to shareholders ........................................ 21,760
Registration and filing fees ................................... 46,180
Professional fees .............................................. 12,833
Directors' fees and expenses ................................... 8,319
Other .......................................................... 21,758
------------
Total expenses ............................................ 1,240,199
------------
Net investment income ................................... 401,039
------------
Net realized gain (loss) from investments ........................ (15,236)
------------
Net increase (decrease) in net assets resulting from operations .. $ 385,803
============
Annual Report | See notes to financial statements. | 13
FRANKLIN TAX-EXEMPT MONEY FUND
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS
for the years ended July 31, 2004 and 2003
----------------------------------
2004 2003
----------------------------------
Increase (decrease) in net assets:
Operations:
Net investment income .................................................................. $ 401,039 $ 899,878
Net realized gain (loss) from investments .............................................. (15,236) (2,830)
----------------------------------
Net increase (decrease) in net assets resulting from operations ..................... 385,803 897,048
Distributions to shareholders from net investment income ................................. (385,803)(a) (897,048)(b)
Capital share transactions (Note 2) ...................................................... 2,537,557 13,124,529
----------------------------------
Net increase (decrease) in net assets ............................................... 2,537,557 13,124,529
Net assets (there is no undistributed net investment income at beginning or end of year):
Beginning of year ........................................................................ 176,834,357 163,709,828
----------------------------------
End of year .............................................................................. $179,371,914 $176,834,357
==================================
(a) Distributions were decreased by a net realized loss from investments of
$15,236.
(b) Distributions were decreased by a net realized loss from investments of
$2,830.
14 | See notes to financial statements. | Annual Report
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 income. Fund distributions to shareholders
are determined on a tax basis and may differ from net investment income and
realized gains for financial reporting purposes.
C. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
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. Premiums on securities
are amortized over the lives of the respective securities. 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 accounting principles
generally accepted in the United States of America 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 expenses during the reporting period. Actual results could differ from those
estimates.
E. GUARANTEES AND INDEMNIFICATIONS
Under the Fund's organizational documents, its officers and directors are
indemnified against certain liability arising out of the performance of their
duties to the Fund. Additionally, in the normal course of business, the Fund
enters into contracts with service providers that contain general
indemnification clauses. The Fund's maximum exposure under these arrangements is
unknown as this would involve future claims that may be made against the Fund
that have not yet occurred. However, based on experience, the Fund expects the
risk of loss to be remote.
Annual Report | 15
FRANKLIN TAX-EXEMPT MONEY FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. CAPITAL STOCK
At July 31, 2004, 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,
2004 2003
--------------------------------
Shares sold ....................................... $ 205,085,529 $ 198,328,356
Shares issued in reinvestment of distributions .... 390,258 893,203
Shares redeemed ................................... (202,938,230) (186,097,030)
--------------------------------
Net increase (decrease) ........................... $ 2,537,557 $ 13,124,529
================================
3. TRANSACTIONS WITH AFFILIATES
Certain officers and directors of the Fund are also officers and/or directors of
the following entities:
- ----------------------------------------------------------------------------------------
ENTITY AFFILIATION
- ----------------------------------------------------------------------------------------
Franklin Advisers Inc. (Advisers) Investment manager
Franklin Templeton Services LLC (FT Services) Administrative manager
Franklin/Templeton Distributors Inc (Distributors) Principal underwriter
Franklin/Templeton Investor Services LLC (Investor Services) Transfer agent
The Fund pays an investment management fee to Advisers based on the average
daily net assets of the Fund as follows:
- --------------------------------------------------------------------------------
ANNUALIZED FEE RATE 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.
Distributors has advised the Fund of the following commission transactions
related to the sale of the Fund's shares for the year:
Contingent deferred sales charges retained ........................... $16,506
The Fund paid transfer agent fees of $165,638, of which $127,906 was paid to
Investor Services.
16 | Annual Report
FRANKLIN TAX-EXEMPT MONEY FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. INCOME TAXES
At July 31, 2004, the Fund had tax basis capital losses which may be carried
over to offset future capital gains. Such losses expire as follows:
Capital loss carryovers expiring in:
2005 ............................................................. $ 1,844
2008 ............................................................. 8,419
2009 ............................................................. 26,572
2012 ............................................................. 17,134
-------
$53,969
=======
On July 31, 2004, the Fund had expired capital loss carryovers of $492.
At July 31, 2004, the Fund had deferred capital losses occurring subsequent to
October 31, 2003 of $932. For tax purposes such losses will be reflected in the
year ending July 31, 2005.
The tax character of distributions paid during the years ended July 31, 2004 and
2003, was as follows:
---------------------
2004 2003
---------------------
Distributions paid from tax-exempt income .............. $385,803 $897,048
=====================
At July 31, 2004, the cost of investments and undistributed tax-exempt income
for income tax purposes were as follows.
Costs of investments ............................................ $181,164,003
============
Undistributed tax-exempt income ................................. $ 56,416
============
5. REGULATORY MATTERS
MASSACHUSETTS ADMINISTRATIVE PROCEEDING
On February 4, 2004, the Securities Division of the Office of the Secretary of
the Commonwealth of Massachusetts filed an administrative complaint against
Franklin Resources, Inc. and certain of its subsidiaries (the "Company")
claiming violations of the Massachusetts Uniform Securities Act ("Massachusetts
Act") with respect to an alleged arrangement to permit market timing (the "Mass.
Proceeding"). On February 17, 2004, the Company filed an answer denying all
violations of the Massachusetts Act.
U.S. SECURITIES AND EXCHANGE COMMISSION (SEC) SETTLEMENT
On August 2, 2004, the Company announced that an agreement had been reached by
the Fund's investment manager with the SEC that resolved the issues resulting
from the SEC's investigation of market timing activity. The SEC issued an "order
instituting administrative and cease-and-desist proceedings pursuant to sections
203(e) and 203(k) of the Investment Advisers Act of 1940 and
Annual Report | 17
FRANKLIN TAX-EXEMPT MONEY FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. REGULATORY MATTERS (CONTINUED)
U.S. SECURITIES AND EXCHANGE COMMISSION (SEC) SETTLEMENT (CONTINUED)
sections 9(b) and 9(f) of the Investment Company Act of 1940, making findings
and imposing remedial sanctions and a cease and desist order" (the "Order"). The
SEC's Order concerns the activities of a limited number of third parties that
ended in 2000 and those that are the subject of the Mass. Proceeding described
above.
Under the terms of the SEC's Order, pursuant to which the Fund's investment
manager neither admits nor denies any wrongdoing, the Fund's investment manager
has agreed to pay $50 million, of which $20 million is a civil penalty, to be
distributed to certain fund shareholders in accordance with a plan to be
developed by an Independent Distribution Consultant. At this time, it is unclear
whether shareholders of all funds will receive distributions or whether all
shareholders of any particular fund will receive distributions. The SEC Order
also requires the Fund's investment manager to, among other things, enhance and
periodically review compliance policies and procedures.
OTHER GOVERNMENTAL INVESTIGATIONS
As part of ongoing investigations by the SEC, the U.S. Attorney for the Northern
District of California, the New York Attorney General, the California Attorney
General, the U.S. Attorney for the District of Massachusetts, the Florida
Department of Financial Services and the Commissioner of Securities, the West
Virginia Attorney General, the Vermont Department of Banking, Insurance,
Securities, and Health Care Administration and the National Association of
Securities Dealers, relating to certain practices in the mutual fund industry,
including late trading, market timing and payments to securities dealers who
sell fund shares, the Company and its subsidiaries, as well as certain current
or former executives and employees of the Company, have received requests for
information and/or subpoenas to testify or produce documents. The Company has
been providing documents and information in response to these requests and
subpoenas. In addition, the Company has responded to requests for similar kinds
of information from regulatory authorities in some of the foreign countries
where the Company conducts its global asset management business.
The Staff of the SEC has also informed the Company that it is considering
recommending a civil action or proceeding against the Fund's investment manager
and the Fund's principal underwriter concerning payments to securities dealers
who sell fund shares (commonly referred to as "revenue sharing"). The staff of
the California Attorney General's Office (CAGO) also has advised the Company
that it is authorized to bring a civil action against Franklin Resources, Inc.
and the Fund's principal underwriter arising from the same events. Even though
the Company currently believes that the charges the SEC staff and CAGO staff are
contemplating are unwarranted, it also believes that it is in the best interest
of the Company and fund shareholders to resolve these issues voluntarily, to the
extent the Company can reasonably do so.
18 | Annual Report
FRANKLIN TAX-EXEMPT MONEY FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. REGULATORY MATTERS (CONTINUED)
OTHER LEGAL PROCEEDINGS
The Fund, in addition to other entities within Franklin Templeton Investments,
including the Company and certain of its subsidiaries, other funds, and current
and former officers, employees, and directors have been named in multiple
lawsuits in different federal courts in Nevada, California, Illinois, New York
and Florida, alleging violations of various federal securities laws and seeking,
among other things, monetary damages and costs. Specifically, the lawsuits claim
breach of duty with respect to alleged arrangements to permit market timing
and/or late trading activity, or breach of duty with respect to the valuation of
the portfolio securities of certain funds managed by Company subsidiaries,
resulting in alleged market timing activity. The majority of these lawsuits
duplicate, in whole or in part, the allegations asserted in the Mass. Proceeding
detailed above. The lawsuits are styled as class actions or derivative actions
on behalf of either the named funds or the Company.
In addition, the Company and certain of its subsidiaries, as well as certain
current and former officers, employees, and directors have been named in
multiple lawsuits alleging violations of various securities laws and pendent
state law claims relating to the disclosure of directed brokerage payments
and/or payment of allegedly excessive commissions and advisory fees. These
lawsuits are styled as class actions and derivative actions.
The Company's management strongly believes that the claims made in each of these
lawsuits, as more specifically described below, are without merit and intends to
vigorously defend against them.
The Company cannot predict with certainty the eventual outcome of the foregoing
Mass. Proceeding, other governmental investigations or other legal proceedings.
The impact, if any, of these matters on the Fund is uncertain at this time. If
the Company determines that it bears responsibility for any unlawful or
inappropriate conduct that caused losses to the Fund, it is committed to making
the Fund or its shareholders whole, as appropriate.
Annual Report | 19
FRANKLIN TAX-EXEMPT MONEY FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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, 2004, 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 five years in the period then
ended, in conformity with accounting principles generally accepted in the United
States of America. 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 the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits 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, 2004 by correspondence with the custodian and brokers,
provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
San Francisco, California
September 9, 2004
20 | Annual Report
FRANKLIN TAX-EXEMPT MONEY FUND
TAX DESIGNATION (UNAUDITED)
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, 2004. A portion of
the Fund's exempt-interest dividends may be subject to the federal alternative
minimum tax. In January 2005, shareholders will be notified of amounts for use
in preparing their 2004 income tax returns.
Annual Report | 21
BOARD MEMBERS AND OFFICERS
The name, age and address of the officers and board members, as well as their
affiliations, positions held with the Fund, principal occupations during the
past five years and number of portfolios overseen in the Franklin Templeton
Investments fund complex are shown below. Each board member will serve until
that person's successor is elected and qualified.
INDEPENDENT BOARD MEMBERS
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
LENGTH OF FUND COMPLEX OVERSEEN
NAME, AGE AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------------------------------------------------------------------------------------
FRANK H. ABBOTT, III (83) Director Since 1980 111 None
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
President and Director, Abbott Corporation (an investment company).
- ------------------------------------------------------------------------------------------------------------------------------------
HARRIS J. ASHTON (72) Director Since 1982 140 Director, Bar-S Foods (meat packing
One Franklin Parkway company).
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director of various companies; and FORMERLY, Director, RBC Holdings, Inc. (bank holding company) (until 2002); and President,
Chief Executive Officer and Chairman of the Board, General Host Corporation (nursery and craft centers) (until 1998).
- ------------------------------------------------------------------------------------------------------------------------------------
S. JOSEPH FORTUNATO (72) Director Since 1989 141 None
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Attorney; and FORMERLY, member of the law firm of Pitney, Hardin, Kipp & Szuch.
- ------------------------------------------------------------------------------------------------------------------------------------
FRANK W.T. LAHAYE (75) Director Since 1980 113 Director, The California Center for
One Franklin Parkway Land Recycling (redevelopment).
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
General Partner, Las Olas L.P. (Asset Management); and FORMERLY, Chairman, Peregrine Venture Management Company (venture capital).
- ------------------------------------------------------------------------------------------------------------------------------------
GORDON S. MACKLIN (76) Director Since 1992 140 Director, White Mountains Insurance
One Franklin Parkway Group, Ltd. (holding company);
San Mateo, CA 94403-1906 Martek Biosciences Corporation;
MedImmune, Inc. (biotechnology); and
Overstock.com (Internet services);
and FORMERLY, Director, MCI
Communication Corporation (subse-
quently known as MCI WorldCom, Inc.
and WorldCom, Inc.) (communications
services) (1988-2002) and Spacehab,
Inc. (aerospace services) (1994-2003).
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Deputy Chairman, White Mountains Insurance Group, Ltd. (holding company); and FORMERLY, Chairman, White River Corporation
(financial services) (1993-1998) and Hambrecht & Quist Group (investment banking) (1987-1992); and President, National Association
of Securities Dealers, Inc. (1970-1987).
- ------------------------------------------------------------------------------------------------------------------------------------
22 | Annual Report
INTERESTED BOARD MEMBERS AND OFFICERS
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
LENGTH OF FUND COMPLEX OVERSEEN
NAME, AGE AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------------------------------------------------------------------------------------
**CHARLES B. JOHNSON (71) Director and Director since 140 None
One Franklin Parkway Chairman of 1980 and
San Mateo, CA 94403-1906 the Board Chairman of the
Board since 1993
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Chairman of the Board, Member-Office of the Chairman and Director, Franklin Resources, Inc.; Vice President, Franklin Templeton
Distributors, Inc.; Director, Fiduciary Trust Company International; and officer and/or director or trustee, as the case may be,
of some of the other subsidiaries of Franklin Resources, Inc. and of 46 of the investment companies in Franklin Templeton
Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
**RUPERT H. JOHNSON, JR. (63) Director, Director since 123 None
One Franklin Parkway President 1980, President
San Mateo, CA 94403-1906 and Chief since 1993 and
Executive Chief Executive
Officer - Officer-
Investment Investment
Management Management
since 2002
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice Chairman, Member-Office of the Chairman and Director, Franklin Resources, Inc.; Vice President and Director, Franklin
Templeton Distributors, Inc.; Director, Franklin Advisers, Inc. and Franklin Investment Advisory Services, Inc.; Senior Vice
President, Franklin Advisory Services, LLC; and officer and/or director or trustee, as the case may be, of some of the other
subsidiaries of Franklin Resources, Inc. and of 49 of the investment companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
SHEILA AMOROSO (44) Vice President Since 1999 Not Applicable None
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Vice President, Franklin Advisers, Inc.; and officer of eight of the investment companies in Franklin Templeton
Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
HARMON E. BURNS (59) Vice President Since 1986 Not Applicable None
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice Chairman, Member-Office of the Chairman and Director, Franklin Resources, Inc.; Vice President and Director, Franklin
Templeton Distributors, Inc.; Executive Vice President, Franklin Advisers, Inc.; Director, Franklin Investment Advisory Services,
Inc.; and officer and/or director or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc.
and of 49 of the investment companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
RAFAEL R. COSTAS, JR. (39) Vice President Since 1999 Not Applicable None
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Vice President, Franklin Advisers, Inc.; and officer of eight of the investment companies in Franklin Templeton
Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
JAMES M. DAVIS (52) Chief Since July 2004 Not Applicable None
One Franklin Parkway Compliance
San Mateo, CA 94403-1906 Officer
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Officer of 51 of the investment companies in Franklin Templeton Investments; Director, Global Compliance, Franklin Resources,
Inc., and FORMERLY, Director of Compliance, Franklin Resources, Inc. (1994-2001).
- ------------------------------------------------------------------------------------------------------------------------------------
Annual Report | 23
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
LENGTH OF FUND COMPLEX OVERSEEN
NAME, AGE AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------------------------------------------------------------------------------------
LAURA FERGERSON (42) Treasurer Since July 2004 Not Applicable None
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Officer of 34 of the investment companies in Franklin Templeton Investments; and FORMERLY, Director and member of Audit and
Valuation Committees, Runkel Funds, Inc. (2003-2004); Assistant Treasurer of most of the investment companies in Franklin
Templeton Investments (1997-2003); and Vice President, Franklin Templeton Services, LLC (1997-2003).
- ------------------------------------------------------------------------------------------------------------------------------------
MARTIN L. FLANAGAN (44) Vice President Since 1995 Not Applicable None
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Co-President and Chief Executive Officer, Franklin Resources, Inc.; Senior Vice President and Chief Financial Officer, Franklin
Mutual Advisers, LLC; Executive Vice President, Chief Financial Officer and Director, Templeton Worldwide, Inc.; Executive Vice
President and Chief Operating Officer, Templeton Investment Counsel, LLC; President and Director, Franklin Advisers, Inc.;
Executive Vice President, Franklin Investment Advisory Services, Inc. and Franklin Templeton Investor Services, LLC; Chief
Financial Officer, Franklin Advisory Services, LLC; Chairman, Franklin Templeton Services, LLC; and officer and/or director or
trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 49 of the investment companies
in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
JIMMY D. GAMBILL (56) Senior Vice Since 2002 Not Applicable None
500 East Broward Blvd. President
Suite 2100 and Chief
Fort Lauderdale, FL Executive
33394-3091 Officer-
Finance and
Administration
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
President, Franklin Templeton Services, LLC; Senior Vice President, Templeton Worldwide, Inc.; and officer of 51 of the investment
companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
DAVID P. GOSS (57) Vice President Since 2000 Not Applicable None
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Associate General Counsel, Franklin Resources, Inc.; officer and director of one of the subsidiaries of Franklin Resources, Inc.;
officer of 51 of the investment companies in Franklin Templeton Investments; and FORMERLY, President, Chief Executive Officer and
Director, Property Resources Equity Trust (until 1999) and Franklin Select Realty Trust (until 2000).
- ------------------------------------------------------------------------------------------------------------------------------------
BARBARA J. GREEN (56) Vice President Since 2000 Not Applicable None
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice President, Deputy General Counsel and Secretary, Franklin Resources, Inc.; Secretary and Senior Vice President, Templeton
Worldwide, Inc.; Secretary, Franklin Advisers, Inc., Franklin Advisory Services, LLC, Franklin Investment Advisory Services, Inc.,
Franklin Mutual Advisers, LLC, Franklin Templeton Alternative Strategies, Inc., Franklin Templeton Investor Services, LLC,
Franklin Templeton Services, LLC, Franklin Templeton Distributors, Inc., Templeton Investment Counsel, LLC, and Templeton/Franklin
Investment Services, Inc.; and officer of some of the other subsidiaries of Franklin Resources, Inc. and of 51 of the investment
companies in Franklin Templeton Investments; and FORMERLY, Deputy Director, Division of Investment Management, Executive Assistant
and Senior Advisor to the Chairman, Counselor to the Chairman, Special Counsel and Attorney Fellow, U.S. Securities and Exchange
Commission (1986-1995); Attorney, Rogers & Wells (until 1986); and Judicial Clerk, U.S. District Court (District of Massachusetts)
(until 1979).
- ------------------------------------------------------------------------------------------------------------------------------------
24 | Annual Report
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
LENGTH OF FUND COMPLEX OVERSEEN
NAME, AGE AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------------------------------------------------------------------------------------
MICHAEL O. MAGDOL (67) Vice President Since 2002 Not Applicable Director, FTI Banque, Arch Chemicals,
600 Fifth Avenue -AML Inc. and Lingnan Foundation.
Rockefeller Center Compliance
New York, NY 10020-2302
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice Chairman, Chief Banking Officer and Director, Fiduciary Trust Company International; and officer and/or director, as the case
may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 48 of the investment companies in Franklin Templeton
Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
MURRAY L. SIMPSON (67) Vice President Since 2000 Not Applicable None
One Franklin Parkway and Secretary
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Executive Vice President and General Counsel, Franklin Resources, Inc.; officer and/or director, as the case may be, of some of
the subsidiaries of Franklin Resources, Inc. and of 51 of the investment companies in Franklin Templeton Investments; and
FORMERLY, Chief Executive Officer and Managing Director, Templeton Franklin Investment Services (Asia) Limited (until 2000); and
Director, Templeton Asset Management Ltd. (until 1999).
- ------------------------------------------------------------------------------------------------------------------------------------
GALEN G. VETTER (52) Chief Financial Since May 2004 Not Applicable None
500 East Broward Blvd. Officer
Suite 2100
Fort Lauderdale, FL
33394-3091
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Officer of 51 of the investment companies in Franklin Templeton Investments; Senior Vice President, Franklin Templeton Services,
LLC; and formerly, Managing Director, RSM McGladrey, Inc.; and Partner, McGladrey & Pullen, LLP.
- ------------------------------------------------------------------------------------------------------------------------------------
THOMAS WALSH (42) Vice President Since 1999 Not Applicable None
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Vice President, Franklin Advisers, Inc.; and officer of eight of the investment companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
* We base the number of portfolios on each separate series of the U.S.
registered investment companies within the Franklin Templeton Investments
fund complex. These portfolios have a common investment adviser or
affiliated investment advisers.
** Charles B. Johnson and Rupert H. Johnson, Jr. are considered to be
interested persons of the Fund under the federal securities laws due to
their positions as officers and directors and major shareholders of
Franklin Resources, Inc., which is the parent company of the Fund's
adviser and distributor.
Note: Charles B. Johnson and Rupert H. Johnson, Jr. are brothers.
THE SARBANES-OXLEY ACT OF 2002 AND RULES ADOPTED BY THE SECURITIES AND EXCHANGE
COMMISSION REQUIRE THE FUND TO DISCLOSE WHETHER THE FUND'S AUDIT COMMITTEE
INCLUDES AT LEAST ONE MEMBER WHO IS AN AUDIT COMMITTEE FINANCIAL EXPERT WITHIN
THE MEANING OF SUCH ACT AND RULES. THE FUND'S BOARD OF DIRECTORS HAS DETERMINED
THAT THERE IS AT LEAST ONE SUCH FINANCIAL EXPERT ON THE AUDIT COMMITTEE AND HAS
DESIGNATED FRANK W.T. LAHAYE AS ITS AUDIT COMMITTEE FINANCIAL EXPERT. THE BOARD
BELIEVES THAT MR. LAHAYE QUALIFIES AS SUCH AN EXPERT IN VIEW OF HIS EXTENSIVE
BUSINESS BACKGROUND AND EXPERIENCE, INCLUDING SERVICE AS PRESIDENT AND DIRECTOR
OF MCCORMICK SELPH ASSOCIATES FROM 1954 THROUGH 1965; DIRECTOR AND CHAIRMAN OF
TELEDYNE CANADA LTD. FROM 1966 THROUGH 1971; DIRECTOR AND CHAIRMAN OF
QUARTERDECK CORPORATION FROM 1982 THROUGH 1998; AND SERVICES AS A DIRECTOR OF
VARIOUS OTHER PUBLIC COMPANIES INCLUDING U.S. TELEPHONE INC. (1981-1984), FISHER
IMAGING INC. (1991-1998) AND DIGITAL TRANSMISSIONS SYSTEMS (1995-1999). IN
ADDITION, MR. LAHAYE SERVED FROM 1981 TO 2000 AS A DIRECTOR AND CHAIRMAN OF
PEREGRINE VENTURE MANAGEMENT CO., A VENTURE CAPITAL FIRM, AND HAS BEEN A MEMBER
AND CHAIRMAN OF THE FUND'S AUDIT COMMITTEE SINCE ITS INCEPTION. AS A RESULT OF
SUCH BACKGROUND AND EXPERIENCE, THE BOARD OF DIRECTORS BELIEVES THAT MR. LAHAYE
HAS ACQUIRED AN UNDERSTANDING OF GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AND
FINANCIAL STATEMENTS, THE GENERAL APPLICATION OF SUCH PRINCIPLES IN CONNECTION
WITH THE ACCOUNTING ESTIMATES, ACCRUALS AND RESERVES, AND ANALYZING AND
EVALUATING FINANCIAL STATEMENTS THAT PRESENT A BREADTH AND LEVEL OF COMPLEXITY
OF ACCOUNTING ISSUES GENERALLY COMPARABLE TO THOSE OF THE FUND, AS WELL AS AN
UNDERSTANDING OF INTERNAL CONTROLS AND PROCEDURES FOR FINANCIAL REPORTING AND AN
UNDERSTANDING OF AUDIT COMMITTEE FUNCTIONS. MR. LAHAYE IS AN INDEPENDENT
DIRECTOR AS THAT TERM IS DEFINED UNDER THE RELEVANT SECURITIES AND EXCHANGE
COMMISSION RULES AND RELEASES.
THE STATEMENT OF ADDITIONAL INFORMATION (SAI) INCLUDES ADDITIONAL INFORMATION
ABOUT THE BOARD MEMBERS AND IS AVAILABLE, WITHOUT CHARGE, UPON REQUEST.
SHAREHOLDERS MAY CALL 1-800/DIAL BEN (1-800/342-5236) TO REQUEST THE SAI.
Annual Report | 25
FRANKLIN TAX-EXEMPT MONEY FUND
SHAREHOLDER INFORMATION
PROXY VOTING POLICIES AND PROCEDURES
The Fund has established Proxy Voting Policies and Procedures ("Policies") that
the Fund uses to determine how to vote proxies relating to portfolio securities.
Shareholders may view the Fund's complete Policies online at
franklintempleton.com. Alternatively, shareholders may request copies of the
Policies free of charge by calling the Proxy Group collect at 1-954/847-2268 or
by sending a written request to: Franklin Templeton Companies, LLC, 500 East
Broward Boulevard, Suite 1500, Fort Lauderdale, FL 33394, Attention: Proxy
Group. Copies of the Fund's proxy voting records are also made available online
at franklintempleton.com and posted on the Securities and Exchange Commission's
website at sec.gov and reflect the 12-month period beginning July 1, 2003, and
ending June 30, 2004.
QUARTERLY STATEMENT OF INVESTMENTS
The Fund files a complete statement of investments with the Securities and
Exchange Commission for the first and third quarters for each fiscal year on
Form N-Q. Shareholders may view the filed Form N-Q by visiting the Commission's
website at sec.gov. The filed form may also be viewed and copied at the
Commission's Public Reference Room in Washington, DC. Information regarding the
operations of the Public Reference Room may be obtained by calling
1-800/SEC-0330.
26 | Annual Report
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LITERATURE REQUEST
For a brochure and prospectus, which contains more complete information,
including charges, expenses and risks, call Franklin Templeton Investments at
1-800/DIAL BEN(R) (1-800/342-5236). Please read the prospectus carefully before
investing or sending money. To ensure the highest quality of service, we may
monitor, record and access telephone calls to or from our service departments.
These calls can be identified by the presence of a regular beeping tone.
FRANKLIN TEMPLETON INVESTMENTS
INTERNATIONAL
Mutual European Fund
Templeton China World Fund
Templeton Developing Markets Trust
Templeton Foreign Fund
Templeton Foreign Smaller Companies Fund
Templeton International (Ex EM) Fund
GLOBAL
Franklin Global Aggressive Growth Fund
Franklin Global Growth Fund
Mutual Discovery Fund
Templeton Capital Accumulator Fund
Templeton Global Long-Short Fund
Templeton Global Opportunities Trust
Templeton Global Smaller Companies Fund
Templeton Growth Fund
Templeton World Fund
GROWTH
Franklin Aggressive Growth Fund
Franklin Capital Growth Fund
Franklin Flex Cap Growth Fund
Franklin Small-Mid Cap Growth Fund
Franklin Small Cap Growth Fund II(1)
VALUE
Franklin Balance Sheet Investment Fund(2)
Franklin Equity Income Fund
Franklin Large Cap Value Fund
Franklin MicroCap Value Fund(2)
Franklin Small Cap Value Fund
Mutual Beacon Fund
Mutual Qualified Fund
Mutual Recovery Fund(3)
Mutual Shares Fund
BLEND
Franklin Blue Chip Fund
Franklin Convertible Securities Fund
Franklin Growth Fund
Franklin Rising Dividends Fund
Franklin U.S. Long-Short Fund(4)
SECTOR
Franklin Biotechnology Discovery Fund
Franklin DynaTech Fund
Franklin Global Communications Fund
Franklin Global Health Care Fund
Franklin Gold and Precious Metals Fund
Franklin Natural Resources Fund
Franklin Real Estate Securities Fund
Franklin Utilities Fund
Franklin Technology Fund
Mutual Financial Services Fund
ASSET ALLOCATION
Franklin Templeton Corefolio Allocation Fund
Franklin Templeton Founding Funds Allocation Fund
TARGET FUNDS
Franklin Templeton Conservative Target Fund
Franklin Templeton Growth Target Fund
Franklin Templeton Moderate Target Fund
INCOME
Franklin Adjustable U.S. Government Securities Fund(5)
Franklin's AGE High Income Fund
Franklin Federal Money Fund(5),(6)
Franklin Floating Rate Daily Access Fund
Franklin Floating Rate Trust(3)
Franklin Income Fund
Franklin Money Fund(5),(6)
Franklin Short-Intermediate U.S. Government Securities Fund(5)
Franklin Strategic Income Fund
Franklin Strategic Mortgage Portfolio
Franklin Templeton Hard Currency Fund
Franklin Total Return Fund
Franklin U.S. Government Securities Fund(5)
Templeton Global Bond Fund
TAX-FREE INCOME(7)
NATIONAL FUNDS
Double Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund(8)
Tax-Exempt Money Fund(5),(6)
LIMITED-TERM FUNDS
California Limited-Term Tax-Free Income Fund
Federal Limited-Term Tax-Free Income Fund
New York Limited-Term Tax-Free Income Fund
INTERMEDIATE-TERM FUNDS
California Intermediate-Term Tax-Free Income Fund
Federal Intermediate-Term Tax-Free Income Fund
New York Intermediate-Term Tax-Free Income Fund
STATE-SPECIFIC(7)
Alabama Michigan(8)
Arizona Minnesota(8)
California(9) Missouri
Colorado New Jersey
Connecticut New York(9)
Florida(9) North Carolina
Georgia Ohio(8)
Kentucky Oregon
Louisiana Pennsylvania
Maryland Tennessee
Massachusetts(8) Virginia
INSURANCE FUNDS
Franklin Templeton Variable Insurance Products Trust(10)
(1) The fund is closed to new investors. Existing shareholders can continue
adding to their accounts.
(2) The fund is only open to existing shareholders as well as select
retirement plans.
(3) The fund is a continuously offered, closed-end fund. Shares may be
purchased daily; there is no daily redemption. However, each quarter,
pending board approval, the fund will authorize the repurchase of 5%-25%
of the outstanding number of shares. Investors may tender all or a portion
of their shares during the tender period.
(4) Upon reaching approximately $350 million in assets, the fund intends to
close to all investors.
(5) An investment in the fund is neither insured nor guaranteed by the U.S.
government or by any other entity or institution.
(6) No assurance exists that the fund's $1.00 per share price will be
maintained. It is possible to lose money by investing in the fund.
(7) For investors subject to the alternative minimum tax, a small portion of
fund dividends may be taxable. Distributions of capital gains are
generally taxable.
(8) Portfolio of insured municipal securities.
(9) These funds are available in two or more variations, including long-term
portfolios, portfolios of insured securities, a high-yield portfolio (CA)
and limited-term, intermediate-term and money market portfolios (CA and
NY).
(10) The funds of the Franklin Templeton Variable Insurance Products Trust are
generally available only through insurance company variable contracts.
02/04 Not part of the annual report
[LOGO](R) One Franklin Parkway
FRANKLIN(R) TEMPLETON(R) San Mateo, CA 94403-1906
INVESTMENTS
o WANT TO RECEIVE THIS DOCUMENT FASTER VIA EMAIL?
Eligible shareholders can sign up for eDelivery at franklintempleton.com.
See inside for details.
ANNUAL REPORT AND SHAREHOLDER LETTER
FRANKLIN TAX-EXEMPT MONEY FUND
INVESTMENT MANAGER
Franklin Advisers, Inc.
DISTRIBUTOR
Franklin Templeton Distributors, Inc.
1-800/DIAL BEN(R)
franklintempleton.com
SHAREHOLDER SERVICES
1-800/632-2301
Authorized for distribution only when accompanied or preceded by a prospectus.
Investors should carefully consider a fund's investment goals, risks, charges
and expenses before investing. The prospectus contains this and other
information; please read it carefully before investing.
To ensure the highest quality of service, telephone calls to and from our
service departments may be monitored, recorded and accessed. These calls can be
identified by the presence of a regular beeping tone.
114 A2004 09/04
Item 2. Code of Ethics.
(a) The Registrant has adopted a code of ethics that applies to its principal
executive officers and principal financial and accounting officer.
(c) N/A
(d) N/A
(f) Pursuant to Item 11(A), the Registrant is attaching as an exhibit a copy of
its code of ethics that applies to its principal executive officers and
principal financial and accounting officer.
Item 3. Audit Committee Financial Expert.
(a)(1) The Registrant has an audit committee financial expert serving on its
audit committee.
(2) The audit committee financial expert is Frank W. T. LaHaye, and he is
"independent" as defined under the relevant Securities and Exchange Commission
Rules and Releases.
Item 4. Principal Accountant Fees and Services.
(a) Audit Fees
The aggregate fees paid to the principal accountant for professional services
rendered by the principal accountant for the audit of the registrant's annual
financial statements or for services that are normally provided by the
principal accountant in connection with statutory and regulatory filings or
engagements were $21,460 for the fiscal year ended July 31, 2004 and $9,562
for the fiscal year ended July 31, 2003.
(b) Audit-Related Fees
There were no fees paid to the principal accountant for assurance and related
services rendered by the principal accountant to the registrant that are
reasonably related to the performance of the audit of the registrant's
financial statements and are not reported under paragraph (a) of Item 4.
The aggregate fees paid to the principal accountant for assurance and related
services rendered by the principal accountant to the registrant's investment
adviser and any entity controlling, controlled by or under common control
with the investment adviser that provides ongoing services to the registrant
that are reasonably related to the performance of the audit of the their
financial statements were $48,134 for the fiscal year ended July 31, 2004 and
$0 for the fiscal year ended July 31, 2003. The services for which these
fees were paid included attestation services.
(c) Tax Fees
There were no fees paid to the principal accountant for professional services
rendered by the principal accountant to the registrant for tax compliance,
tax advice and tax.
There were no fees paid to the principal accountant for professional services
rendered by the principal accountant to the registrant's investment adviser
and any entity controlling, controlled by or under common control with the
investment adviser that provides ongoing services to the registrant for tax
compliance, tax advice and tax planning.
(d) All Other Fees
The aggregate fees paid to the principal accountant for products and services
rendered by the principal accountant to the registrant not reported in
paragraphs (a)-(c) of Item 4 were $85 for the fiscal year ended July 31, 2004
and $0 for the fiscal year ended July 31, 2003. The services for which these
fees were paid included review of materials provided to the fund Board in
connection with the investment management contract renewal process.
The aggregate fees paid to the principal accountant for products and services
rendered by the principal accountant to the registrant's investment adviser
and any entity controlling, controlled by or under common control with the
investment adviser that provides ongoing services to the registrant not
reported in paragraphs (a)-(c) of Item 4 were $99,915 for the fiscal year
ended July 31, 2004 and $12,972 for the fiscal year ended July 31, 2003. The
services for which these fees were paid included review of materials provided
to the fund Board in connection with the investment management contract
renewal process, subscription fees and a review of an ICI transfer agent
survey.
(e) (1) The registrant's audit committee is directly responsible for
approving the services to be provided by the auditors, including:
(i) pre-approval of all audit and audit related services;
(ii) pre-approval of all non-audit related services to be provided to
the Fund by the auditors;
(iii)pre-approval of all non-audit related services to be provided to
the registrant by the auditors to the registrant's investment adviser or to
any entity that controls, is controlled by or is under common control with
the registrant's investment adviser and that provides ongoing services to the
registrant where the non-audit services relate directly to the operations or
financial reporting of the registrant; and
(iv) establishment by the audit committee, if deemed necessary or
appropriate, as an alternative to committee pre-approval of services to be
provided by the auditors, as required by paragraphs (ii) and (iii) above, of
policies and procedures to permit such services to be pre-approved by other
means, such as through establishment of guidelines or by action of a
designated member or members of the committee; provided the policies and
procedures are detailed as to the particular service and the committee is
informed of each service and such policies and procedures do not include
delegation of audit committee responsibilities, as contemplated under the
Securities Exchange Act of 1934, to management; subject, in the case of (ii)
through (iv), to any waivers, exceptions or exemptions that may be available
under applicable law or rules.
(e) (2) None of the services provided to the registrant described in
paragraphs (b)-(d) of Item 4 were pre-approved by the audit committee
pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of regulation S-X.
(f) No disclosures are required by this Item 4(f).
(g) The aggregate non-audit fees paid to the principal accountant for
services rendered by the principal accountant to the registrant and the
registrant's investment adviser and any entity controlling, controlled by or
under common control with the investment adviser that provides ongoing
services to the registrant were $148,134 for the fiscal year ended July 31,
2004 and $12,972 for the fiscal year ended July 31, 2003.
(h) No disclosures are required by this Item 4(h).
Item 5. Audit Committee of Listed Registrants. N/A
Item 6. Schedule of Investments. N/A
Item 7. Disclosure of Proxy Voting Policies and Procedures for
Closed-End Management Investment Companies. N/A
Item 8. Purchases of Equity Securities by Closed-End Management
Investment Company and Affiliated Purchasers. N/A
Item 9. Submission of Matters to a Vote of Security Holders. There have
been no changes to the procedures by which shareholders may recommend nominees
to the Registrant's Board of Trustees that would require disclosure herein.
Item 10. Controls and Procedures.
(a) Evaluation of Disclosure Controls and Procedures. The Registrant maintains
disclosure controls and procedures that are designed to ensure that information
required to be disclosed in the Registrant's filings under the Securities
Exchange Act of 1934 and the Investment Company Act of 1940 is recorded,
processed, summarized and reported within the periods specified in the rules and
forms of the Securities and Exchange Commission. Such information is accumulated
and communicated to the Registrant's management, including its principal
executive officer and principal financial officer, as appropriate, to allow
timely decisions regarding required disclosure. The Registrant's management,
including the principal executive officer and the principal financial officer,
recognizes that any set of controls and procedures, no matter how well designed
and operated, can provide only reasonable assurance of achieving the desired
control objectives.
Within 90 days prior to the filing date of this Shareholder Report on Form
N-CSR, the Registrant had carried out an evaluation, under the supervision and
with the participation of the Registrant's management, including the
Registrant's principal executive officer and the Registrant's principal
financial officer, of the effectiveness of the design and operation of the
Registrant's disclosure controls and procedures. Based on such evaluation, the
Registrant's principal executive officer and principal financial officer
concluded that the Registrant's disclosure controls and procedures are
effective.
(b) Changes in Internal Controls. There have been no significant changes in the
Registrant's internal controls or in other factors that could significantly
affect the internal controls subsequent to the date of their evaluation in
connection with the preparation of this Shareholder Report on Form N-CSR.
Item 11. Exhibits.
(A) Code of Ethics
(B) (1) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
of Jimmy D. Gambill, Chief Executive Officer - Finance and Administration, and
Galen G. Vetter, Chief Financial Officer
(B) (2) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
of Jimmy D. Gambill, Chief Executive Officer - Finance and Administration, and
Galen G. Vetter, Chief Financial Officer
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
FRANKLIN TAX-EXEMPT MONEY FUND
By /s/Jimmy D. Gambill
Chief Executive Officer - Finance and Administration
Date September 30, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By /s/Jimmy D. Gambill
Chief Executive Officer - Finance and Administration
Date September 30, 2004
By /s/Galen G. Vetter
Chief Financial Officer
Date September 30, 2004