UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSRS
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
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(Address of principal executive offices) (Zip code)
CRAIG S. TYLE, 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: 1/31/08
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ITEM 1. REPORTS TO STOCKHOLDERS.
[GRAPHIC OMITTED]
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JANUARY 31, 2008
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SEMIANNUAL REPORT AND SHAREHOLDER LETTER TAX-FREE INCOME
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[LOGO](R)
FRANKLIN TEMPLETON
INVESTMENTS
FRANKLIN o Templeton o Mutual Series
Franklin Templeton Investments
GAIN FROM OUR PERSPECTIVE(R)
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 offices in over 25 countries,
Templeton offers investors a truly global
perspective.
MUTUAL SERIES. Founded in 1949, Mutual Series is
dedicated to a unique style of value investing,
searching aggressively for opportunity among what
it believes are undervalued stocks, as well as
arbitrage situations and distressed securities.
TRUE DIVERSIFICATION Because our management groups work independently
and adhere to different investment approaches,
Franklin, Templeton and Mutual Series funds
typically have distinct portfolios. That's why
our funds can be used to build truly diversified
allocation plans 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, accurate and personal service
that has 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 semiannual report
Contents
SHAREHOLDER LETTER ....................................................... 1
SEMIANNUAL REPORT
Franklin Tax-Exempt Money Fund ........................................... 3
Performance Summary ...................................................... 4
Your Fund's Expenses ..................................................... 6
Financial Highlights and Statement of Investments ........................ 8
Financial Statements ..................................................... 15
Notes to Financial Statements ............................................ 18
Shareholder Information .................................................. 23
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Shareholder Letter
Dear Shareholder:
During the six months ended January 31, 2008, the U.S. economy slowed. Tighter
credit conditions, triggered by the U.S. subprime mortgage crisis, prompted the
Federal Reserve Board (Fed) to cut the discount rate and the federal funds
target rate five times. Over the six-month reporting period, the federal funds
target rate fell from 5.25% to 3.00% as the Fed acted to help promote moderate
growth over time and mitigate risks to economic activity. In an environment of
high equity market volatility and cautious investor sentiment, the Standard &
Poor's 500 Index (S&P 500) had a total return of -4.32%, the Dow Jones
Industrial Average -3.06% and the NASDAQ Composite Index -5.83% for the six
months under review. 1 As increasingly risk-averse investors fled
poorer-performing assets for government bond markets, the 10-year Treasury yield
fell during the period from 4.78% to 3.67%.
1. Source: Standard & Poor's Micropal. The S&P 500 consists of 500 stocks chosen
for market size, liquidity and industry group representation. Each stock's
weight in the index is proportionate to its market value. The S&P 500 is one of
the most widely used benchmarks of U.S. equity performance. The Dow Jones
Industrial Average is price weighted based on the average market price of 30
blue chip stocks of companies that are generally industry leaders. The NASDAQ
Composite Index measures all NASDAQ domestic and international based common type
stocks listed on the NASDAQ Stock Market. The index is market value weighted and
includes more than 3,000 companies.
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eDELIVERY DETAILS
Log in at franklintempleton.com and click on eDelivery. Shareholders who are
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NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE
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Not part of the semiannual report | 1
In the enclosed semiannual report for Franklin Tax-Exempt Money Fund, the
portfolio manager discusses market conditions, investment management decisions
and Fund performance during the period under review. You will also find
performance data and financial information. Please remember that all securities
markets fluctuate, as do mutual fund share prices. As always, we recommend
investors consult their financial advisors and review their portfolios to design
a long-term strategy and portfolio allocation that meet their individual needs,
goals and risk tolerance. We firmly believe that most people benefit from
professional advice, and that advice is never more valuable than during a
volatile market.
As a Franklin Tax-Exempt Money Fund shareholder, you continue to benefit from
convenient, easy access to your money, and a high degree of credit safety. You
can also enjoy a wide range of services, including check-writing privileges and
access to your account at ATMs nationwide. 2 If you would like more information
or more frequent updates, FRANKLINTEMPLETON.COM provides daily prices, monthly
performance figures, portfolio holdings and other information. You can also
access your account, buy and sell shares, read timely articles, and find helpful
financial planning tools. We hope you will take advantage of these online
services.
We thank you for investing with Franklin Templeton, welcome your questions and
comments, and look forward to serving your investment needs in the years ahead.
Sincerely,
/s/ Charles B. Johnson
Charles B. Johnson, Jr.
Chairman
Franklin Tax-Exempt Money Fund
2. Check minimum of $500. A Franklin Templeton Cash Advantage Card is available
for Franklin money fund accounts registered to one or more individuals. It is
not available to accounts registered as UGMAs/UTMAs, certain trusts, retirement
plans, accounts that require more than one signature, accounts with non-U.S.
addresses (including U.S. territories), corporations, partnerships or other such
legal entities. The Cash Advantage Card is a Platinum MasterCard(R) offered by
Franklin Templeton Bank & Trust, F.S.B. to Fund shareholders. Others terms
apply. For more information, please call Franklin Templeton Shareholder Services
at 1-800/632-2301.
THIS LETTER REFLECTS OUR ANALYSIS AND OPINIONS AS OF JANUARY 31, 2008. THE
INFORMATION IS NOT A COMPLETE ANALYSIS OF EVERY ASPECT OF ANY MARKET, COUNTRY,
INDUSTRY, SECURITY OR FUND. STATEMENTS OF FACT ARE FROM SOURCES CONSIDERED
RELIABLE.
2 | Not part of the semiannual report
Semiannual Report
Franklin Tax-Exempt Money Fund
YOUR FUND'S GOAL AND MAIN INVESTMENTS: Franklin Tax-Exempt Money Fund seeks to
provide as high a level of income exempt from federal income taxes as is
consistent with prudent investment management and preservation of capital. 1 The
Fund invests at least 80% of its total assets in high-quality, short-term
municipal securities free from federal income taxes, including the federal
alternative minimum tax, as it seeks to maintain a stable $1.00 share price.
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PERFORMANCE DATA REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE
RESULTS. INVESTMENT RETURN 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 semiannual report for Franklin Tax-Exempt Money Fund covers the period
ended January 31, 2008.
PERFORMANCE OVERVIEW
Short-term interest rates fell and money market portfolio yields declined during
the period. Largely as a result, Franklin Tax-Exempt Money Fund's seven-day
effective yield decreased from 2.93% at the beginning of the period to 2.15% on
January 31, 2008.
ECONOMIC AND MARKET OVERVIEW
The pace of U.S. economic growth decelerated for the six-month period ended
January 31, 2008, as fourth quarter gross domestic product grew at an estimated
0.6% annualized rate, down from 4.9% annualized in the third quarter. Although
consumer spending and personal income continued to support the economy, signs of
a slowdown became evident during the six months under review as a number of
indicators reflected a housing market correction, financial market strains, and
softening business and consumer spending, as well as upward inflation pressures
from increasing food, energy and commodity prices, and a weaker dollar.
1. For investors subject to alternative minimum tax, a small portion of Fund
dividends may be taxable. Distributions of capital gains are generally taxable.
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 9.
Semiannual Report | 3
PERFORMANCE SUMMARY
SYMBOL: FTMXX
1/31/08
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Seven-day effective yield 1 2.15%
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Seven-day annualized yield 2.13%
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Taxable equivalent yield 2 3.27%
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1. Seven-day effective yield assumes the compounding of daily dividends.
2. Taxable equivalent yield assumes the 2008 maximum regular federal income tax
rate of 35.00%.
Annualized and effective yields are for the seven-day period ended 1/31/08. The
Fund's average weighted maturity was 29 days. Yields reflect Fund expenses and
fluctuations in interest rates on portfolio investments.
PERFORMANCE DATA REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE
RESULTS. INVESTMENT RETURN 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.
Volatile oil prices reached a historical high in early January, topping $100 per
barrel, before retreating to $92 by period-end. Core inflation, which excludes
food and energy costs, rose modestly for the period, signaling that inflation
risk remains. For January 2008, core inflation had a 12-month increase of 2.5%.
2 The Federal Reserve Board's (Fed's) preferred measure of inflation, the core
personal consumption expenditures price index, reported a 12-month increase of
2.2%. 3
As investor uncertainty persisted, the Fed remained committed to act in an
effort to restore normalcy to U.S. financial markets. After a broad-based
international stock sell-off near the end of the reporting period, the Fed cut
interest rates twice in January and brought the federal funds target rate to
3.0%. Likewise, President Bush and Congress hammered out the details of a $170
billion stimulus plan intended to boost the flagging U.S. economy.
Over the period, investors sought relative safety in short-term U.S. Treasuries,
Treasury yields declined and the yield curve steepened. Short-term, two- and
five-year yields declined significantly, with the two-year bill yielding 2.17%
at the end of January, down from 4.56% six months earlier. The 10-year U.S.
Treasury note ended January yielding 3.67%, compared with 4.78% at the beginning
of the period.
INVESTMENT STRATEGY
We invest predominantly in high-quality, short-term municipal securities.
Although the Fund tries to invest all of its assets in tax-free securities, it
is possible, although not anticipated, that up to 20% 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.
2. Source: Bureau of Labor Statistics.
3. Source: Bureau of Economic Analysis.
4 | Semiannual Report
MANAGER'S DISCUSSION
Short-term municipal bond yields declined during the reporting period,
reflecting increased demand for high-quality, short-term instruments, and five
reductions in the federal funds target rate by the Fed.
The Securities Industry and Financial Markets Association (SIFMA) Municipal Swap
Index, a benchmark for variable rate securities, which make up a large portion
of Franklin Tax-Exempt Money Fund, averaged a rate of 3.45% for the period under
review. 4
During the reporting period, the Fund participated in several new issues
including Massachusetts Development Finance Agency tax-exempt commercial paper;
New York City Metropolitan Transportation Authority tax-exempt commercial paper;
and St. Louis, Missouri, Municipal Financing Corp. Leasehold Revenue bonds.
Thank you for your continued participation in Franklin Tax-Exempt Money Fund. We
look forward to serving your future investment needs.
PORTFOLIO BREAKDOWN
1/31/08
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% OF TOTAL
INVESTMENTS
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Variable Rate Notes 83.4%
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Notes & Bonds 8.2%
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Tax-Exempt Commercial Paper 6.2%
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Put or Option Tender Bonds 2.2%
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4. Source: Thomson Financial. The SIFMA Municipal Swap Index is a weekly
high-grade market index composed of seven-day tax-exempt variable rate demand
notes produced by the Municipal Market Data Group. Actual issues are selected
from Municipal Market Data's database of more than 10,000 active issues based on
several specific criteria.
THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS
AS OF JANUARY 31, 2008, 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 INVESTMENT MANAGER 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.
Semiannual Report | 5
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) of the table 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) of 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 Fund's actual expense ratio 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.
6 | Semiannual Report
Your Fund's Expenses (CONTINUED)
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 of the table 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 8/1/07 VALUE 1/31/08 PERIOD* 8/1/07-1/31/08
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Actual $1,000 $1,013.64 $3.85
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Hypothetical (5% return before expenses) $1,000 $1,021.32 $3.86
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* Expenses are calculated using the most recent six-month annualized expense
ratio of 0.76%, multiplied by the average account value over the period,
multiplied by 184/366 to reflect the one-half year period.
Semiannual Report | 7
Franklin Tax-Exempt Money Fund
FINANCIAL HIGHLIGHTS
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SIX MONTHS ENDED
JANUARY 31, 2008 YEAR ENDED JULY 31,
(UNAUDITED) 2007 2006 2005 2004 2003
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PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period .............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
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Income from investment operations:
Net investment income .......................... 0.014 0.029 0.023 0.011 0.002 0.005
Net realized and unrealized gains (losses) ..... -- -- c -- c -- -- --
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Total from investment operations .................. 0.014 0.029 0.023 0.011 0.002 0.005
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Less distributions from net investment income ..... (0.014) (0.029) (0.023) (0.011) (0.002) (0.005)
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Net asset value, end of period .................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
==============================================================================
Total return a .................................... 1.36% 2.89% 2.36% 1.11% 0.23% 0.53%
RATIOS TO AVERAGE NET ASSETS b
Expenses .......................................... 0.76% 0.77% 0.74% 0.73% 0.74% 0.76%
Net investment income ............................. 2.72% 2.84% 2.32% 1.10% 0.24% 0.53%
SUPPLEMENTAL DATA
Net assets, end of period (000's) ................. $ 200,894 $ 182,227 $ 183,282 $ 165,736 $ 179,372 $ 176,834
a Total return does not reflect sales commissions or contingent deferred
sales charges, if applicable, and is not annualized for periods less than
one year.
b Ratios are annualized for periods less than one year.
c Amount rounds to less than $0.001 per share.
8 | The accompanying notes are an integral part of these financial statements.
| Semiannual Report
Franklin Tax-Exempt Money Fund
STATEMENT OF INVESTMENTS, JANUARY 31, 2008 (UNAUDITED)
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PRINCIPAL AMOUNT VALUE
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INVESTMENTS 100.9%
MUNICIPAL BONDS 100.9%
ARIZONA 1.6%
a Apache County IDA, IDR, Tucson Electric Power Co. Project, Springerville Project, Series C,
Weekly VRDN and Put, 2.15%, 12/15/18 ........................................................ $ 1,000,000 $ 1,000,000
a Arizona State University System Revenues, Series B, AMBAC Insured, Weekly VRDN and Put,
2.55%, 7/01/34 .............................................................................. 1,300,000 1,300,000
a Nanotechnology Research LLC Lease Revenue, Arizona State University Project, Series A,
MBIA Insured, Weekly VRDN and Put, 3.25%, 3/01/34 ........................................... 1,000,000 1,000,000
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3,300,000
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COLORADO 6.9%
a Colorado Educational and Cultural Facilities Authority Revenue, National Jewish Federation
Bond Program,
Refunding, Series D-1, Daily VRDN and Put, 1.90%, 7/01/36 ................................. 1,000,000 1,000,000
Series A10, Daily VRDN and Put, 1.90%, 9/01/37 ............................................ 700,000 700,000
a Colorado Springs Utilities Revenue, sub. lien, Series A, Weekly VRDN and Put, 2.32%,
11/01/29 .................................................................................... 5,200,000 5,200,000
a Denver City and County COP,
Refunding, AMBAC Insured, Weekly VRDN and Put, 2.70%, 12/01/29 ............................ 4,000,000 4,000,000
Wellington E. Webb, Refunding, Series C3, AMBAC Insured, Weekly VRDN and Put, 5.00%,
12/01/29 ................................................................................ 3,000,000 3,000,000
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13,900,000
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FLORIDA 13.6%
a Dade County Water and Sewer System Revenue, FGIC Insured, Weekly VRDN and Put, 3.65%,
10/05/22 .................................................................................... 2,730,000 2,730,000
a Florida Higher Education Facilities Financing Authority Revenue, St. Thomas University Project,
Daily VRDN and Put, 1.80%, 1/01/19 .......................................................... 1,490,000 1,490,000
a Jea Electric System Revenue, Refunding, Series Three A, CIFG Insured, Weekly VRDN and Put,
2.12%, 10/01/36 ............................................................................. 3,000,000 3,000,000
a Jea Water and Sewer System Revenue, Refunding, Series B, XLCA Insured, Weekly VRDN and
Put, 4.00%, 10/01/41 ........................................................................ 5,100,000 5,100,000
a Martin County IDA, IDR, YMCA Treasure Coast Project, Weekly VRDN and Put, 2.17%,
10/01/16 .................................................................................... 1,100,000 1,100,000
a Orange County School Board COP, Series B,
AMBAC Insured, Daily VRDN and Put, 2.00%, 8/01/25 ......................................... 700,000 700,000
MBIA Insured, Daily VRDN and Put, 2.00%, 8/01/27 .......................................... 800,000 800,000
a Orlando-Orange County Expressway Authority Revenue,
Refunding, Series C1, FSA Insured, Weekly VRDN and Put, 2.42%, 7/01/25 .................... 3,400,000 3,400,000
Sub Series A-1, AMBAC Insured, Weekly VRDN and Put, 3.82%, 7/01/40 ........................ 4,300,000 4,300,000
Palm Beach County Revenue, TECP, 2.62%, 4/03/08 ............................................... 2,500,000 2,500,000
a Palm Beach County School Board COP, Series B, AMBAC Insured, Weekly VRDN and Put,
3.85%, 8/01/29 .............................................................................. 2,100,000 2,100,000
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27,220,000
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GEORGIA 6.4%
a Atlanta Downtown Development Authority Revenue, Underground Atlanta Project, Refunding,
AMBAC Insured, Weekly VRDN and Put, 2.63%, 10/01/16 ......................................... 600,000 600,000
a Fulco Hospital Authority Revenue, Anticipation Certificates, Shepherd Center Inc. Project,
Refunding, Weekly VRDN and Put, 2.13%, 9/01/17 .............................................. 1,000,000 1,000,000
Semiannual Report | 9
Franklin Tax-Exempt Money Fund
STATEMENT OF INVESTMENTS, JANUARY 31, 2008 (UNAUDITED) (CONTINUED)
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PRINCIPAL AMOUNT VALUE
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INVESTMENTS (CONTINUED)
MUNICIPAL BONDS (CONTINUED)
GEORGIA (CONTINUED)
a Metropolitan Atlanta Rapid Transit Authority Sales Tax Revenue, Series B, Weekly VRDN and
Put, 2.10%, 7/01/25 ......................................................................... $ 8,000,000 $ 8,000,000
a Roswell Housing Authority MFR, Azalea Park Apartments, Refunding, FNMA Insured,
Weekly VRDN and Put, 2.14%, 6/15/25 ......................................................... 3,200,000 3,200,000
-----------
12,800,000
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HAWAII 0.5%
a Hawaii State Department of Budget and Finance Special Purpose Revenue, Adventist Health
System West, Weekly VRDN and Put, 2.13%, 3/01/08 ............................................ 1,000,000 1,000,000
-----------
ILLINOIS 1.6%
a Illinois State Toll Highway Authority Toll Highway Priority Revenue, Refunding, Series B,
MBIA Insured, Weekly VRDN and Put, 2.55%, 1/01/10 ........................................... 3,125,000 3,125,000
-----------
IOWA 4.0%
Iowa State School Cash Anticipation Program Revenue, Iowa School Corps., wts. Certificates,
Series A, 4.50%, 6/27/08 .................................................................. 5,000,000 5,014,901
Series B, 3.75%, 1/23/09 .................................................................. 3,000,000 3,031,369
-----------
8,046,270
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KENTUCKY 2.5%
a Kentucky Development Finance Authority Revenue, Pooled Loan Program, Series A,
FGIC Insured, Weekly VRDN and Put, 3.85%, 12/01/15 .......................................... 3,500,000 3,500,000
a Shelby County Lease Revenue, Series A, Daily VRDN and Put, 1.90%, 9/01/34 ..................... 1,500,000 1,500,000
-----------
5,000,000
-----------
LOUISIANA 1.1%
a Louisiana State Offshore Terminal Authority Deepwater Port Revenue, Loop Inc. Project,
First Stage, ACES, Refunding, Daily VRDN and Put, 2.00%, 9/01/17 ............................ 2,155,000 2,155,000
-----------
MARYLAND 1.0%
a Community Development Administration MF Development Revenue, Avalon Ridge Apartments
Project, Refunding, FNMA Insured, Weekly VRDN and Put, 2.24%, 6/15/26 ....................... 2,100,000 2,100,000
-----------
MASSACHUSETTS 9.2%
a Massachusetts State GO, Refunding, Series B, Weekly VRDN and Put, 2.29%, 9/01/16 .............. 7,700,000 7,700,000
a Massachusetts State Health and Educational Facilities Authority Revenue, Capital Asset Program,
Series D, MBIA Insured, Daily VRDN and Put, 2.90%, 1/01/35 .................................. 1,100,000 1,100,000
Massachusetts State School Building Authority Revenue, TECP, Series A, 2.81%, 3/12/08 ......... 6,000,000 6,000,000
a Massachusetts State Water Resources Authority Revenue, Multi-Modal, General, Refunding,
Sub Series D, Daily VRDN and Put, 2.00%, 8/01/17 ............................................ 3,650,000 3,650,000
-----------
18,450,000
-----------
MICHIGAN 2.4%
a Detroit Sewage Disposal Revenue, senior lien, Series B, FSA Insured, Daily VRDN and Put,
2.00%, 7/01/33 .............................................................................. 725,000 725,000
Detroit Sewer Disposal System Revenue, second lien, Mandatory Put 7/10/08, Series E,
FGIC Insured, 3.74%, 7/01/31 ................................................................ 1,500,000 1,500,000
10 | Semiannual Report
Franklin Tax-Exempt Money Fund
STATEMENT OF INVESTMENTS, JANUARY 31, 2008 (UNAUDITED) (CONTINUED)
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PRINCIPAL AMOUNT VALUE
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INVESTMENTS (CONTINUED)
MUNICIPAL BONDS (CONTINUED)
MICHIGAN (CONTINUED)
a Michigan State University Revenues,
General, Refunding, Series B, Weekly VRDN and Put, 2.30%, 2/15/26 .................... $ 2,000,000 $ 2,000,000
Series A, Daily VRDN and Put, 2.00%, 8/15/32 ......................................... 605,000 605,000
------------
4,830,000
------------
MINNESOTA 2.3%
a Brown County Purchase Revenue, Martin Luther College Project, Weekly VRDN and Put, 2.15%,
9/01/24 ................................................................................ 1,300,000 1,300,000
a Minneapolis MFR, Seven Corners Apartments Project, Weekly VRDN and Put, 2.15%,
11/01/31 ............................................................................... 250,000 250,000
a Minneapolis Revenue, Adjusted Guthrie Theater Project, Series A, Weekly VRDN and Put,
2.05%, 10/01/23 ........................................................................ 3,000,000 3,000,000
------------
4,550,000
------------
MISSOURI 2.6%
a Missouri State Health and Educational Facilities Authority Educational Authority Revenue,
St. Louis University, Refunding, Series A, MBIA Insured, Daily VRDN and Put, 4.50%,
10/01/35 ............................................................................. 300,000 300,000
a Missouri State Health and Educational Facilities Authority Health Facilities Revenue,
SSM Health Care Corp., Refunding, Series C-1, FSA Insured, Daily VRDN and Put, 2.00%,
6/01/19 .............................................................................. 300,000 300,000
St. Louis General Fund Revenue, TRAN, 4.50%, 6/30/08 ..................................... 3,500,000 3,510,370
St. Louis Municipal Finance Corp. Leasehold Revenue, Civil Courts Building Project,
Refunding, Series A, FSA Insured, 5.00%, 8/01/08 ....................................... 1,055,000 1,063,295
------------
5,173,665
------------
NEVADA 0.5%
a Las Vegas Valley Water District GO, Water Improvement, Series C, Daily VRDN and Put,
2.00%, 6/01/36 ......................................................................... 1,000,000 1,000,000
------------
NEW HAMPSHIRE 1.4%
a New Hampshire Health and Educational Facilities Authority Revenue, Dartmouth College,
Refunding, Series B, Daily VRDN and Put, 1.90%, 6/01/41 ................................ 2,900,000 2,900,000
------------
NEW JERSEY 3.9%
a New Jersey EDA School Revenue, School Facilities Construction, Sub Series R-3, Daily VRDN
and Put, 1.75%, 9/01/31 ................................................................ 2,800,000 2,800,000
a New Jersey Sports and Exposition Revenue, Series C, MBIA Insured, Weekly VRDN and Put,
3.04%, 9/01/24 ......................................................................... 2,500,000 2,500,000
a New Jersey State Turnpike Authority Turnpike Revenue, Series C-2, FSA Insured, Weekly VRDN
and Put, 2.00%, 1/01/24 ................................................................ 2,500,000 2,500,000
------------
7,800,000
------------
NEW MEXICO 0.8%
a Farmington PCR, Arizona Public Service Co., Refunding, Series B, Daily VRDN and Put,
2.00%, 9/01/24 ........................................................................... 1,500,000 1,500,000
------------
Semiannual Report | 11
Franklin Tax-Exempt Money Fund
STATEMENT OF INVESTMENTS, JANUARY 31, 2008 (UNAUDITED) (CONTINUED)
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
INVESTMENTS (CONTINUED)
MUNICIPAL BONDS (CONTINUED)
NEW YORK 4.6%
a Long Island Power Authority, Electric System Revenue, Series 7 Sub Series-7-B, Weekly VRDN
and Put, MBIA Insured, 2.60%, 4/01/25 ...................................................... $ 3,000,000 $ 3,000,000
a Monroe County IDA Civic Facility Revenue, St. John Fisher College Project, Radian Insured,
Weekly VRDN and Put, 5.00%, 6/01/34 ........................................................ 1,700,000 1,700,000
MTA Transportation Facilities Revenue, TECP, 3.05%, 8/12/08 .................................. 4,000,000 4,000,000
a New York City Trust for Cultural Resources Revenue, Manhattan School of Music, Radian Insured,
Weekly VRDN and Put, 6.50%, 10/01/29 ....................................................... 500,000 500,000
------------
9,200,000
------------
NORTH CAROLINA 4.7%
a North Carolina Eastern Municipal Power Agency Power System Revenue, Refunding,
MBIA Insured, Weekly VRDN and Put, 3.40%, 1/01/24 .......................................... 5,300,000 5,300,000
a North Carolina State GO, Public Improvement, Series D, Weekly VRDN and Put, 2.16%,
5/01/21 .................................................................................... 4,135,000 4,135,000
------------
9,435,000
------------
OHIO 1.5%
a Ohio State Water Development Authority Pollution Control Facilities Revenue, First Energy
General Corp., Refunding, Series A, Daily VRDN and Put, 1.90%, 5/15/19 ..................... 3,000,000 3,000,000
------------
OREGON 2.9%
Deschutes County Administrative School District No. 1 GO, FGIC Insured, 4.50%, 6/15/08 ....... 3,000,000 3,008,605
a Oregon State GO, Series 73F, Weekly VRDN and Put, 2.00%, 12/01/17 ............................ 2,900,000 2,900,000
------------
5,908,605
------------
PENNSYLVANIA 10.3%
a Chester County IDAR, Refunding, Daily VRDN and Put, 2.05%, 7/01/31 ........................... 400,000 400,000
a Delaware Valley Regional Finance Authority Local Government Revenue,
Series A, Weekly VRDN and Put, 2.08%, 12/01/18 ........................................... 1,000,000 1,000,000
Series A, Weekly VRDN and Put, 2.08%, 12/01/20 ........................................... 2,100,000 2,100,000
Series C, Weekly VRDN and Put, 2.08%, 12/01/20 ........................................... 700,000 700,000
Series D, Weekly VRDN and Put, 2.06%, 12/01/20 ........................................... 3,100,000 3,100,000
a Emmaus General Authority Revenue,
FSA Insured, Weekly VRDN and Put, 2.15%, 12/01/28 ........................................ 4,500,000 4,500,000
Local Government, Series F-19, Weekly VRDN and Put, 2.03%, 3/01/24 ....................... 850,000 850,000
Sub Series G-19, Weekly VRDN and Put, 2.03%, 3/01/24 ..................................... 1,400,000 1,400,000
a Erie Higher Education Building Authority College Revenue, Gannon University Project, Series F,
Weekly VRDN and Put, 2.17%, 7/01/13 ........................................................ 3,700,000 3,700,000
a Upper Dauphin IDAR, United Church Christ Homes, Weekly VRDN and Put, 2.20%,
12/01/26 ................................................................................... 2,900,000 2,900,000
------------
20,650,000
------------
TENNESSEE 5.7%
a Clarksville PBA Revenue, Pooled Financing, Tennessee Municipal Bond Fund, Daily VRDN and
Put, 1.90%,
7/01/31 .................................................................................. 100,000 100,000
11/01/35 ................................................................................. 1,745,000 1,745,000
12 | Semiannual Report
Franklin Tax-Exempt Money Fund
STATEMENT OF INVESTMENTS, JANUARY 31, 2008 (UNAUDITED) (CONTINUED)
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
INVESTMENTS (CONTINUED)
MUNICIPAL BONDS (CONTINUED)
TENNESSEE (CONTINUED)
a Montgomery County PBA Pooled Financing Revenue, Tennessee County Loan Pool,
Daily VRDN and Put, 1.90%, 4/01/32 .................................................... $ 1,780,000 $ 1,780,000
Daily VRDN and Put, 1.90%, 7/01/34 .................................................... 5,885,000 5,885,000
Weekly VRDN and Put, 2.15%, 11/01/27 .................................................. 2,000,000 2,000,000
------------
11,510,000
------------
TEXAS 3.6%
a Bexar County HFA, MFR, Altamonte Apartments Project, Refunding, FNMA Insured,
Weekly VRDN and Put, 2.15%, 9/15/26 ..................................................... 5,100,000 5,100,011
Denton ISD, GO, Mandatory Put 8/15/08, Series B, 3.75%, 8/15/21 ........................... 1,200,000 1,200,000
a University of Texas University Revenues, Financing System, Refunding, Series B, Weekly VRDN
and Put, 2.25%, 8/01/33 ................................................................. 1,000,000 1,000,000
------------
7,300,011
------------
UTAH 2.1%
a Utah Transit Authority Sales Tax Revenue,
Sub Series A, Daily VRDN and Put, 1.86%, 6/15/36 ...................................... 1,200,000 1,200,000
Subordinated, Series B, Daily VRDN and Put, 1.80%, 6/15/36 ............................ 3,100,000 3,100,000
------------
4,300,000
------------
WASHINGTON 1.7%
a Snohomish County PUD No. 001 Generation System Revenue, Refunding, Series A-1,
FSA Insured, Weekly VRDN and Put, 2.11%, 12/01/19 ....................................... 3,470,000 3,470,000
------------
U.S. TERRITORY 1.5%
PUERTO RICO 1.5%
Puerto Rico Commonwealth GO, Public Improvement, Mandatory Put 7/01/08, Refunding,
Series C, MBIA Insured, 5.00%, 7/01/28 .................................................. 3,000,000 3,019,789
------------
TOTAL INVESTMENTS (COST $202,643,340) 100.9% .............................................. 202,643,340
OTHER ASSETS, LESS LIABILITIES (0.9)% ..................................................... (1,748,962)
------------
NET ASSETS 100.0% ......................................................................... $200,894,378
============
See Selected Portfolio Abbreviations on page 14.
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. The coupon rate shown represents the rate at period end.
Semiannual Report |
The accompanying notes are an integral part of these financial statements. | 13
Franklin Tax-Exempt Money Fund
STATEMENT OF INVESTMENTS, JANUARY 31, 2008 (UNAUDITED)
SELECTED PORTFOLIO ABBREVIATIONS
ACES - Adjustable Convertible Exempt Security
AMBAC - American Municipal Bond Assurance Corp.
CIFG - CDC IXIS Financial Guaranty
COP - Certificate of Participation
EDA - Economic Development Authority
FGIC - Financial Guaranty Insurance Co.
FNMA - Federal National Mortgage Association
FSA - Financial Security Assurance Inc.
GO - General Obligation
HFA - Housing Finance Authority/Agency
IDA - Industrial Development Authority/Agency
IDAR - Industrial Development Authority Revenue
IDR - Industrial Development Revenue
ISD - Independent School District
MBIA - Municipal Bond Investors Assurance Corp.
MF - Multi-Family
MFR - Multi-Family Revenue
MTA - Metropolitan Transit Authority
PBA - Public Building Authority
PCR - Pollution Control Revenue
PUD - Public Utility District
TECP - Tax-Exempt Commercial Paper
TRAN - Tax and Revenue Anticipation Note
XLCA - XL Capital Assurance
14 | The accompanying notes are an integral part of these financial statements.
| Semiannual Report
Franklin Tax-Exempt Money Fund
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
January 31, 2008 (unaudited)
Assets:
Investments in securities, at amortized cost ............. $ 202,643,340
Cash ..................................................... 835,623
Receivables:
Investment securities sold ............................. 1,002,764
Capital shares sold .................................... 156,176
Interest ............................................... 872,142
-------------
Total assets ......................................... 205,510,045
-------------
Liabilities:
Payables:
Capital shares redeemed ................................ 4,494,705
Affiliates ............................................. 107,245
Accrued expenses and other liabilities ................... 13,717
-------------
Total liabilities .................................... 4,615,667
-------------
Net assets, at value ............................... $ 200,894,378
=============
Net assets consist of:
Paid-in capital .......................................... $ 200,959,686
Accumulated net realized gain (loss) ..................... (65,308)
-------------
Net assets, at value ............................... $ 200,894,378
=============
Shares outstanding .......................................... 200,956,695
=============
Net asset value per share a ................................. $ 1.00
=============
a Redemption price is equal to net asset value less contingent deferred sales
charges, if applicable.
Semiannual Report |
The accompanying notes are an integral part of these financial statements. | 15
Franklin Tax-Exempt Money Fund
FINANCIAL STATEMENTS (CONTINUED)
STATEMENT OF OPERATIONS
for the six months ended January 31, 2008 (unaudited)
Investment income:
Interest ...................................................................................................... $ 3,434,023
-------------
Expenses:
Management fees (Note 3a) ..................................................................................... 556,532
Transfer agent fees (Note 3d) ................................................................................. 101,000
Custodian fees ................................................................................................ 1,432
Reports to shareholders ....................................................................................... 14,271
Registration and filing fees .................................................................................. 37,767
Professional fees ............................................................................................. 12,833
Trustees' fees and expenses ................................................................................... 4,339
Other ......................................................................................................... 19,671
-------------
Total expenses ............................................................................................. 747,845
-------------
Net investment income ................................................................................... 2,686,178
-------------
Net increase (decrease) in net assets resulting from operations .................................................. $ 2,686,178
=============
16 | The accompanying notes are an integral part of these financial statements.
| Semiannual Report
Franklin Tax-Exempt Money Fund
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS
---------------------------------
SIX MONTHS ENDED
JANUARY 31, 2008 YEAR ENDED
(UNAUDITED) JULY 31, 2007
---------------------------------
Increase (decrease) in net assets:
Operations:
Net investment income ................................................................... $ 2,686,178 $ 5,113,277
Net realized gain (loss) from investments ............................................... -- (393)
---------------------------------
Net increase (decrease) in net assets resulting from operations ...................... 2,686,178 5,112,884
---------------------------------
Distributions to shareholders from net investment income ................................... (2,686,178) (5,107,950)
Capital share transactions (Note 2) ........................................................ 18,667,160 (1,059,859)
---------------------------------
Net increase (decrease) in net assets ................................................ 18,667,160 (1,054,925)
Net assets (there is no undistributed net investment income at the beginning or end of period):
Beginning of period ........................................................................ 182,227,218 183,282,143
---------------------------------
End of period .............................................................................. $ 200,894,378 $ 182,227,218
=================================
Semiannual Report |
The accompanying notes are an integral part of these financial statements. | 17
Franklin Tax-Exempt Money Fund
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Franklin Tax-Exempt Money Fund (Trust) is registered under the Investment
Company Act of 1940, as amended, (1940 Act) as a diversified, open-end
investment company, consisting of one fund, the Franklin Tax-Exempt Money Fund
(Fund).
The following summarizes the Fund's significant accounting policies.
A. SECURITY VALUATION
Securities are valued at amortized cost which approximates market value. This
method involves valuing an instrument at its cost and thereafter assuming a
constant amortization to maturity of any discount or premium. All security
valuation procedures are approved by the Fund's Board of Trustees.
B. INCOME TAXES
No provision has been made for U.S. income taxes because it is the Fund's policy
to qualify as a regulated investment company under the Internal Revenue Code and
to distribute to shareholders substantially all of its income and net realized
gains.
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. Amortization of
premium and accretion of discount on debt securities are included in interest
income. Dividends from net investment income are normally declared daily.
Distributions to shareholders are determined according to income tax regulations
(tax basis). Distributable earnings determined on a tax basis may differ from
earnings recorded in accordance with accounting principles generally accepted in
the United States of America. These differences may be permanent or temporary.
Permanent differences are reclassified among capital accounts to reflect their
tax character. These reclassifications have no impact on net assets or the
results of operations. Temporary differences are not reclassified, as they may
reverse in subsequent periods.
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 Trust's organizational documents, its officers and directors are
indemnified by the Trust against certain liabilities arising out of the
performance of their duties to the Trust. Additionally, in the normal course of
business, the Trust enters into contracts with service providers that contain
18 | Semiannual Report
Franklin Tax-Exempt Money Fund
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
E. GUARANTEES AND INDEMNIFICATIONS (CONTINUED)
general indemnification clauses. The Trust's maximum exposure under these
arrangements is unknown as this would involve future claims that may be made
against the Trust that have not yet occurred. Currently, the Trust expects the
risk of loss to be remote.
2. CAPITAL STOCK
At January 31, 2008, there were an unlimited number of shares authorized
(without par value). Transactions in the Fund's shares at $1.00 per share were
as follows:
---------------------------------
SIX MONTHS ENDED YEAR ENDED
JANUARY 31, 2008 JULY 31, 2007
---------------------------------
Shares sold .................................................... $ 230,580,060 $ 203,756,462
Shares issued in reinvestment of distributions ................. 2,658,254 5,116,096
Shares redeemed ................................................ (214,571,154) (209,932,417)
---------------------------------
Net increase (decrease) ........................................ $ 18,667,160 $ (1,059,859)
=================================
3. TRANSACTIONS WITH AFFILIATES
Franklin Resources, Inc. is the holding company for various subsidiaries that
together are referred to as Franklin Templeton Investments. Certain officers and
trustees of the Fund are also officers and/or directors of the following
subsidiaries:
- --------------------------------------------------------------------------------
SUBSIDIARY 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
A. MANAGEMENT FEES
Effective January 1, 2008, 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
- --------------------------------------------------------------------------------
0.625% Up to and including $100 million
0.500% Over $100 million, up to and including $250 million
0.450% Over $250 million, up to and including $7.5 billion
0.440% Over $7.5 billion, up to and including $10 billion
0.430% Over $10 billion, up to and including $12.5 billion
0.420% Over $12.5 billion, up to and including $15 billion
0.400% Over $15 billion, up to and including $17.5 billion
0.380% Over $17.5 billion, up to and including $20 billion
0.360% In excess of $20 billion
Semiannual Report | 19
Franklin Tax-Exempt Money Fund
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
3. TRANSACTIONS WITH AFFILIATES (CONTINUED)
A. MANAGEMENT FEES (CONTINUED)
Prior to January 1, 2008, the Fund paid fees to Advisers based on the average
daily net assets of the Fund as follows:
- --------------------------------------------------------------------------------
ANNUALIZED FEE RATE NET ASSETS
- --------------------------------------------------------------------------------
0.625% Up to and including $100 million
0.500% Over $100 million, up to and including $250 million
0.450% Over $250 million, up to and including $10 billion
0.440% Over $10 billion, up to and including $12.5 billion
0.420% Over $12.5 billion, up to and including $15 billion
0.400% Over $15 billion, up to and including $17.5 billion
0.380% Over $17.5 billion, up to and including $20 billion
0.360% In excess of $20 billion
B. ADMINISTRATIVE FEES
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.
C. SALES CHARGES/UNDERWRITING AGREEMENTS
Distributors has advised the Fund of the following commission transactions
related to the sales and redemptions of the Fund's shares for the period:
Contingent deferred sales charges retained ............. $1,369
D. TRANSFER AGENT FEES
For the period ended January 31, 2008, the Fund paid transfer agent fees of
$101,000, of which $51,473 was retained by Investor Services.
4. INCOME TAXES
For tax purposes, capital losses may be carried over to offset future capital
gains, if any. At July 31, 2007, the capital loss carryforwards were as follows:
Capital loss carryforwards expiring in:
2008 .............................................. $ 8,419
2009 .............................................. 26,572
2012 .............................................. 17,134
2013 .............................................. 932
2014 .............................................. 282
2015 .............................................. 11,574
--------
$ 64,913
========
20 | Semiannual Report
Franklin Tax-Exempt Money Fund
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
4. INCOME TAXES (CONTINUED)
For tax purposes, realized capital losses occurring subsequent to October 31,
may be deferred and treated as occurring on the first day of the following
fiscal year. At July 31, 2007, the Fund deferred realized capital losses of
$393.
At January 31, 2008, the cost of investments for book and income tax purposes
was the same.
5. REGULATORY AND LITIGATION MATTERS
As part of various investigations by a number of federal, state, and foreign
regulators and governmental entities, including the Securities and Exchange
Commission (SEC), relating to certain practices in the mutual fund industry,
including late trading, market timing and marketing support payments to
securities dealers who sell fund shares (marketing support), Franklin Resources,
Inc. and certain of its subsidiaries (collectively, the Company), entered into
settlements with certain of those regulators and governmental entities.
Specifically, the Company entered into settlements with the SEC, among others,
concerning market timing and marketing support.
On June 6, 2007, the SEC posted for public comment the proposed plan of
distribution for the market timing settlement. Once the SEC approves the final
plan of distribution, disbursements of settlement monies will be made promptly
to individuals who were shareholders of the designated funds during the relevant
period, in accordance with the terms and conditions of the settlement and plan.
In addition, the Company, as well as most of the mutual funds within Franklin
Templeton Investments and certain current or former officers, Company directors,
fund directors, and employees, have been named in private lawsuits (styled as
shareholder class actions, or as derivative actions on behalf of either the
named funds or Franklin Resources, Inc.). The lawsuits relate to the industry
practices referenced above.
The Company and fund management believe that the claims made in each of the
private lawsuits referenced above are without merit and intend to defend against
them vigorously. The Company cannot predict with certainty the eventual outcome
of these lawsuits, nor whether they will have a material negative impact on the
Company. If it is determined that the Company 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.
6. NEW ACCOUNTING PRONOUNCEMENTS
The Fund adopted Financial Accounting Standards Board (FASB) issued FASB
Interpretation No. 48, "Accounting for Uncertainty in Income Taxes - an
Interpretation of FASB Statement No. 109" (FIN 48), on January 31, 2008. FIN 48
clarifies the accounting for uncertainty in tax
Semiannual Report | 21
Franklin Tax-Exempt Money Fund
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
6. NEW ACCOUNTING PRONOUNCEMENTS (CONTINUED)
positions taken or expected to be taken in a tax return. FIN 48 provides
guidance on the measurement, recognition, classification and disclosure of tax
positions, along with accounting for the related interest and penalties. The
Fund has reviewed the tax positions for each of the three open tax years as of
July 31, 2007 and has determined that the implementation of FIN 48 did not have
a material impact on the Fund's financial statements.
In September 2006, FASB issued FASB Statement No. 157, "Fair Value Measurement"
(SFAS 157), which defines fair value, establishes a framework for measuring fair
value, and expands disclosures about fair value measurements. SFAS 157 is
effective for fiscal years beginning after November 15, 2007, and interim
periods within those fiscal years. The Fund believes the adoption of SFAS 157
will have no material impact on its financial statements.
22 | Semiannual Report
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 1-954/527-7678 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 U.S. Securities and Exchange
Commission's website at sec.gov and reflect the most recent 12-month period
ended June 30.
QUARTERLY STATEMENT OF INVESTMENTS
The Fund files a complete statement of investments with the U.S. 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.
Semiannual Report | 23
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Literature Request
LITERATURE REQUEST. TO RECEIVE A BROCHURE AND PROSPECTUS, PLEASE CALL US AT
1-800/DIAL BEN(R) (1-800/342-5236) OR VISIT FRANKLINTEMPLETON.COM. INVESTORS
SHOULD CAREFULLY CONSIDER A FUND'S INVESTMENT GOALS, RISKS, CHARGES AND EXPENSES
BEFORE INVESTING. THE PROSPECTUS CONTAINS THIS AND OTHER INFORMATION. PLEASE
CAREFULLY READ THE PROSPECTUS BEFORE INVESTING. 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 FUNDS
INTERNATIONAL
Mutual European Fund
Templeton BRIC Fund
Templeton China World Fund
Templeton Developing Markets Trust
Templeton Emerging Markets Small Cap Fund
Templeton Foreign Fund
Templeton Foreign Smaller Companies Fund 1
GLOBAL
Mutual Discovery Fund
Templeton Global Long-Short Fund
Templeton Global Opportunities Trust
Templeton Global Smaller Companies Fund 1
Templeton Growth Fund
Templeton World Fund
GROWTH
Franklin Capital Growth Fund
Franklin Flex Cap Growth Fund
Franklin Growth Opportunities Fund 2
Franklin Small Cap Growth Fund II 3
Franklin Small-Mid Cap Growth Fund
VALUE
Franklin All Cap Value Fund
Franklin Balance Sheet Investment Fund 1
Franklin Equity Income Fund
Franklin Large Cap Value Fund
Franklin MicroCap Value Fund 1
Franklin MidCap Value Fund
Franklin Small Cap Value Fund
Mutual Beacon Fund
Mutual Qualified Fund
Mutual Recovery Fund 4
Mutual Shares Fund
BLEND
Franklin Balanced Fund
Franklin Convertible Securities Fund
Franklin Focused Core Equity Fund
Franklin Growth Fund
Franklin Rising Dividends Fund
SECTOR
Franklin Biotechnology Discovery Fund
Franklin DynaTech Fund
Franklin Global Communications Fund
Franklin Global Health Care Fund
Franklin Global Real Estate Fund
Franklin Gold and Precious Metals Fund
Franklin Natural Resources Fund
Franklin Real Estate Securities Fund
Franklin Technology Fund
Franklin Utilities Fund
Mutual Financial Services Fund
ASSET ALLOCATION
Franklin Templeton Corefolio(R) Allocation Fund
Franklin Templeton Founding Funds Allocation Fund
Franklin Templeton Perspectives Allocation Fund
Franklin Templeton Conservative Target Fund
Franklin Templeton Growth Target Fund
Franklin Templeton Moderate Target Fund
Franklin Templeton 2015 Retirement Target Fund
Franklin Templeton 2025 Retirement Target Fund
Franklin Templeton 2035 Retirement Target Fund
Franklin Templeton 2045 Retirement Target Fund
INCOME
Franklin Adjustable U.S. Government Securities Fund 5
Franklin Floating Rate Daily Access Fund
Franklin High Income Fund
Franklin Income Fund
Franklin Limited Maturity U.S. Government Securities Fund 5
Franklin Low Duration Total Return Fund
Franklin Real Return Fund
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
Templeton Income Fund
Templeton International Bond Fund
TAX-FREE INCOME 6
NATIONAL FUNDS
Double Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund 7
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
Alabama
Arizona
California 8
Colorado
Connecticut
Florida
Georgia
Kentucky
Louisiana
Maryland
Massachusetts 7
Michigan 7
Minnesota 7
Missouri
New Jersey
New York 8
North Carolina
Ohio 7
Oregon
Pennsylvania
Tennessee
Virginia
INSURANCE FUNDS
Franklin Templeton Variable Insurance Products Trust 9
1. The fund is closed to new investors. Existing shareholders and select
retirement plans can continue adding to their accounts.
2. Effective 11/1/07, Franklin Aggressive Growth Fund changed its name to
Franklin Growth Opportunities Fund. The fund's investment goal and strategy
remained the same.
3. The fund is closed to new investors. Existing shareholders can continue
adding to their accounts.
4. 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.
5. An investment in the fund is neither insured nor guaranteed by the U.S.
government or by any other entity or institution.
6. For investors subject to the alternative minimum tax, a small portion of fund
dividends may be taxable. Distributions of capital gains are generally taxable.
7. The fund invests primarily in insured municipal securities.
8. 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).
9. The funds of the Franklin Templeton Variable Insurance Products Trust are
generally available only through insurance company variable contracts.
12/07 Not part of the semiannual report
[LOGO](R)
FRANKLIN TEMPLETON One Franklin Parkway
INVESTMENTS San Mateo, CA 94403-1906
o WANT TO RECEIVE THIS DOCUMENT FASTER VIA EMAIL?
Eligible shareholders can sign up for eDelivery at
franklintempleton.com. See inside for details.
SEMIANNUAL 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 S2008 03/08
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 12(a)(1), 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 John B. Wilson and he is
"independent" as defined under the relevant Securities and Exchange Commission
Rules and Releases.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. N/A
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. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT
INVESTMENT COMPANIES. N/A
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END
MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. N/A
ITEM 10. 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 11. 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 12. EXHIBITS.
(a)(1) Code of Ethics
(a)(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
of Galen G. Vetter, Chief Executive Officer - Finance and Administration, and
Laura F. Fergerson, Chief Financial Officer and Chief Accounting Officer
(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of
Galen G. Vetter, Chief Executive Officer - Finance and Administration, and Laura
F. Fergerson, Chief Financial Officer and Chief Accounting 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/GALEN G. VETTER
------------------
Galen G. Vetter
Chief Executive Officer - Finance and Administration
Date March 27, 2008
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/GALEN G. VETTER
------------------
Galen G. Vetter
Chief Executive Officer - Finance and Administration
Date March 27, 2008
By /S/LAURA F. FERGERSON
---------------------
Laura F. Fergerson
Chief Financial Officer and Chief Accounting Officer
Date March 27, 2008