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
---------

Franklin Tax-Exempt Money Fund
------------------------------
(Exact name of registrant as specified in charter)

One Franklin Parkway, San Mateo, CA 94403-1906
-----------
(Address of principal executive offices) (Zip code)

Craig S. Tyle, One Franklin Parkway, San Mateo, CA 94403-1906
----------
(Name and address of agent for service)

Registrant's telephone number, including area code: (650) 312-2000
--------------
Date of fiscal year end: 7/31
-----
Date of reporting period: 7/31/08
--------

Item 1. Reports to Stockholders.

(GRAPHIC)

JULY 31, 2008

ANNUAL REPORT AND SHAREHOLDER LETTER

FRANKLIN
TAX-EXEMPT MONEY FUND

TAX-FREE INCOME

WANT TO RECEIVE THIS DOCUMENT FASTER VIA EMAIL?

Eligible shareholders can sign up for eDelivery at franklintempleton.com. See
inside for details.

(FRANKLIN TEMPLETON INVESTMENTS(R) LOGO)

FRANKLIN - Templeton - Mutual Series

Annual 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.

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.

This annual report for Franklin Tax-Exempt Money Fund covers the fiscal year
ended July 31, 2008.

PERFORMANCE OVERVIEW

Short-term interest rates fell and money market portfolio yields declined during
the fiscal year. 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 1.15% on
July 31, 2008.

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.

ECONOMIC AND MARKET OVERVIEW

During the 12 months ended July 31, 2008, the U.S. economy continued to expand,
albeit at a sluggish pace. Gross domestic product growth decelerated sharply and
registered a -0.2% annualized growth rate in the fourth quarter of 2007 from a
fairly robust growth rate of 4.8% in the preceding quarter. Ongoing weakness in
the financial, labor and housing markets and waning investor and consumer
confidence led to a pullback in consumer spending. These factors as well as
upward inflationary pressures from a weakening U.S. dollar and increasing food,
energy and commodity prices weighed on the overall economy. The retrenchment
continued in the first quarter of 2008 as the

(1.) For investors subject to alternative minimum tax, a small portion of Fund
dividends may be taxable. Distributions of capital gains are generally
taxable. To avoid imposition of 28% backup withholding on all Fund
distributions and redemption proceeds, U.S. investors must be properly
certified on Form W-9 and non-U.S. investors on Form W-8BEN.

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.

Annual Report | 3

PERFORMANCE SUMMARY
SYMBOL: FTMXX
7/31/08

Seven-day effective yield(1) 1.15%
Seven-day annualized yield 1.14%
Taxable equivalent yield(2) 1.76%

(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 7/31/08. The
Fund's average weighted maturity was 33 days. Yields reflect Fund expenses and
fluctuations in interest rates on portfolio investments.

economy grew at a 0.9% annualized rate. Economic growth, however, improved in
the second quarter and expanded at an upwardly revised 3.3% annualized rate,
reflecting strong exports, some improvements in the housing market and a slight
uptick in consumer spending.

Volatile oil prices reached a historical high in July, topping $146 per barrel,
before retreating to $124 by period-end. July's overall inflation rate was an
annual 5.6%, largely due to higher food and energy costs. Core inflation, which
excludes such costs, rose at a more moderate 2.5% annual rate; however, this
level was above the Federal Reserve Board's (Fed's) informal target range of
1.5%-2.0%.(2) The core personal consumption expenditures price index reported a
12-month increase of 2.4%.(3)

The Fed acted aggressively to restore liquidity and confidence to unsettled
financial markets and cut interest rates seven times over the 12-month period,
bringing the federal funds target rate to 2.00%. The Fed also implemented a
series of unconventional measures aimed at easing strained credit conditions.
However, since April 30, the Fed has held rates steady and indicated growing
concerns about inflation as it must balance the risks of a slowing economy and
mounting inflationary pressures.

Despite the Fed's actions, U.S. Treasuries rallied and financial stocks
continued to sell off for most of the reporting period. Fixed income spreads
generally widened relative to Treasury yields over the period due to heightened
market turbulence. Investors continued to seek the relative safety of short- and
intermediate-term U.S. Treasury securities as Treasury yields declined and the
yield curve steepened. Short-term, two- and five-year yields declined
significantly, with the two-year bill yielding 2.52% at the end of July, down
from 4.56% a year earlier. Over the same period, the 10-year U.S. Treasury note
yield declined from 4.78% to 3.99%.

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 | Annual Report

MANAGER'S DISCUSSION

Short-term municipal bond yields declined during the reporting period,
reflecting increased demand for high-quality, short-term instruments, and the
Fed's seven reductions in the federal funds target rate.

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 2.72% for the year under
review.(4)

During the reporting period, the Fund participated and reinvested in several
issues including Oregon State tax anticipation notes, Massachusetts State School
Building Authority tax-exempt commercial paper, Chicago Illinois Metropolitan
Water Authority Reclamation District general obligation bonds, and Wisconsin
State Health and Educational Facilities Authority variable rate demand notes.

Thank you for your continued participation in Franklin Tax-Exempt Money Fund. We
look forward to serving your future investment needs.

(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 JULY 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.

PORTFOLIO BREAKDOWN
7/31/08

% OF TOTAL
INVESTMENTS
-----------

Variable Rate Notes 77.5%
Notes & Bonds 11.1%
Tax-Exempt Commercial Paper 10.7%
Put or Option Tender Bonds 0.7%

Annual Report | 5

Your Fund's Expenses

As a Fund shareholder, you can incur two types of costs:

- - Transaction costs, including sales charges (loads) on Fund purchases and
redemption fees; and

- - 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 | Annual 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.

BEGINNING ACCOUNT ENDING ACCOUNT EXPENSES PAID DURING
VALUE 2/1/08 VALUE 7/31/08 PERIOD* 2/1/08-7/31/08
----------------- -------------- ----------------------

Actual $1,000 $1,007.00 $4.09
Hypothetical (5% return before expenses) $1,000 $1,020.79 $4.12

* Expenses are calculated using the most recent annualized six-month expense
ratio of 0.82%, multiplied by the average account value over the period,
multiplied by 182/366 to reflect the one-half year period.

Annual Report | 7

Franklin Tax-Exempt Money Fund

FINANCIAL HIGHLIGHTS

YEAR ENDED JULY 31,
--------------------------------------------------------
2008 2007 2006 2005 2004
-------- -------- -------- -------- --------

PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year .............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
Income from investment operations:
Net investment income ........................ 0.021 0.029 0.023 0.011 0.002
Net realized and unrealized gains (losses) ... -- --(a) --(a) -- --
-------- -------- -------- -------- --------
Total from investment operations ................ 0.021 0.029 0.023 0.011 0.002
-------- -------- -------- -------- --------
Less distributions from net investment income ... (0.021) (0.029) (0.023) (0.011) (0.002)
-------- -------- -------- -------- --------
Net asset value, end of year .................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total return(b) ................................. 2.07% 2.89% 2.36% 1.11% 0.23%
RATIOS TO AVERAGE NET ASSETS
Expenses ........................................ 0.79% 0.77% 0.74% 0.73% 0.74%
Net investment income ........................... 2.09% 2.84% 2.32% 1.10% 0.24%
SUPPLEMENTAL DATA
Net assets, end of year (000's) ................. $175,902 $182,227 $183,282 $165,736 $179,372

(a) Amount rounds to less than $0.001 per share.

(b) Total return does not reflect sales commissions or contingent deferred
sales charges, if applicable.

The accompanying notes are an integral part of these financial statements.

8 | Annual Report

Franklin Tax-Exempt Money Fund

STATEMENT OF INVESTMENTS, JULY 31, 2008

PRINCIPAL AMOUNT VALUE
---------------- -------------

INVESTMENTS 98.8%
MUNICIPAL BONDS 98.8%
ARIZONA 0.6%
(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
-------------
COLORADO 5.0%
(a) Colorado Educational and Cultural Facilities Authority
Revenue, National Jewish Federation Bond Program,
Refunding, Series D-1, Daily VRDN and Put, 2.10%,
7/01/36 ............................................... 400,000 400,000
Series C-4, Daily VRDN and Put, 2.10%, 6/01/37 ........... 3,200,000 3,200,000
(a) Colorado Springs Utilities Revenue, sub. lien, Series A,
Weekly VRDN and Put, 2.40%, 11/01/29 ..................... 5,200,000 5,200,000
-------------
8,800,000
-------------
CONNECTICUT 2.1%
Connecticut State GO, Series A, 5.00%, 3/01/09 .............. 3,685,000 3,754,876
-------------
FLORIDA 12.6%
(a) Collier County Health Facilities Authority Hospital Revenue,
Cleveland Clinic Health, Refunding, Series C-1, Daily VRDN
and Put, 2.05%, 1/01/35 .................................. 3,800,000 3,800,000

(a) Florida Higher Education Facilities Financing Authority
Revenue, St. Thomas University Project, Daily VRDN and
Put, 2.17%, 1/01/19 ...................................... 1,490,000 1,490,000
(a) JEA Electric System Revenue, Refunding,
Series C-3, Weekly VRDN and Put, 2.00%, 10/01/38 ......... 3,000,000 3,000,000
Series Three C-1, Weekly VRDN and Put, 2.00%, 10/01/34 ... 2,000,000 2,000,000
(a) Lakeland Energy System Revenue, Refunding, Series A, Weekly
VRDN and Put, 2.05%, 10/01/37 ............................ 1,000,000 1,000,000
(a) Martin County IDA, IDR, YMCA Treasure Coast Project, Weekly
VRDN and Put, 2.25%, 10/01/16 ............................ 1,100,000 1,100,000
(a) Orlando-Orange County Expressway Authority Revenue,
Refunding, Series C1, FSA Insured, Weekly VRDN and Put,
2.75%, 7/01/25 ........................................... 3,400,000 3,400,000
Palm Beach County Revenue, TECP, 1.35%, 8/14/08 .......... 2,500,000 2,500,000
(a) Palm Beach County School Board COP, Series B, FSA Insured,
Weekly VRDN and Put, 2.80%, 8/01/27 ...................... 3,800,000 3,800,000
-------------
22,090,000
-------------
GEORGIA 6.5%
(a) Atlanta Tax Allocation, Westside Project, Series A, Weekly
VRDN and Put, 2.14%, 12/01/23 ............................ 2,690,000 2,690,000
(a) Fulco Hospital Authority Revenue, Anticipation Certificates,
Shepherd Center Inc. Project, Refunding, Weekly VRDN and
Put, 2.17%, 9/01/17 ...................................... 1,600,000 1,600,000
(a) Metropolitan Atlanta Rapid Transit Authority Sales Tax
Revenue, Series A, Weekly VRDN and Put, 2.05%, 7/01/25 ... 4,000,000 4,000,000
(a) Roswell Housing Authority MFR, Azalea Park Apartments,
Refunding, Weekly VRDN and Put, 2.19%, 6/15/25 ........... 3,200,000 3,200,000
-------------
11,490,000
-------------
ILLINOIS 1.6%
Chicago Metropolitan Water Reclamation District Greater
Chicago GO, Capital Improvement, ETM, 5.50%, 12/01/08 .... 2,800,000 2,831,944
-------------

Annual Report | 9

Franklin Tax-Exempt Money Fund

STATEMENT OF INVESTMENTS, JULY 31, 2008 (CONTINUED)

PRINCIPAL AMOUNT VALUE
---------------- -------------

INVESTMENTS (CONTINUED)
MUNICIPAL BONDS (CONTINUED)
IOWA 1.7%
Iowa State School Cash Anticipation Program Revenue, Iowa
School Corps., wts. Certificates, Series B, FSA Insured,
3.75%, 1/23/09 ........................................... $ 3,000,000 $ 3,015,377
-------------
KENTUCKY 1.7%
(a) Shelby County Lease Revenue, Series A, Daily VRDN and Put,
2.05%, 9/01/34 ........................................... 3,050,000 3,050,000
-------------
MARYLAND 3.0%
(a) Washington Suburban Sanitation District GO, BAN, Series A,
Weekly VRDN and Put, 1.95%, 6/01/23 ...................... 5,250,000 5,250,000
-------------
MASSACHUSETTS 11.9%
(a) Massachusetts State GO, Refunding, Series B, Weekly VRDN and
Put, 2.10%, 9/01/16 ...................................... 7,700,000 7,700,000
(a) Massachusetts State Health and Educational Facilities
Authority Revenue, Northeastern University, Refunding,
Series Q, Daily VRDN and Put, 2.12%, 10/01/35 ............ 1,300,000 1,300,000
Massachusetts State School Building Authority Revenue, TECP,
Series A, 1.55%, 8/27/08 ................................. 6,000,000 6,000,000
Massachusetts State Water Resource Authority, TECP, 1.50%,
8/18/08 .................................................. 3,000,000 3,000,000
(a) Massachusetts State Water Resources Authority Revenue,
Multi-Modal, General, Refunding, Sub Series D, Daily VRDN
and Put, 2.40%, 8/01/17 .................................. 2,950,000 2,950,000
-------------
20,950,000
-------------
MICHIGAN 1.1%
(a) Michigan State University Revenues, General, Refunding,
Series B, Weekly VRDN and Put, 2.40%, 2/15/26 ............ 1,900,000 1,900,000
-------------
MINNESOTA 2.5%
(a) Brown County Purchase Revenue, Martin Luther College Project,
Weekly VRDN and Put, 2.19%, 9/01/24 ...................... 1,300,000 1,300,000
(a) Mendota Heights Housing Mortgage Revenue, MF, Series A,
Weekly VRDN and Put, 2.19%, 11/01/31 ..................... 615,000 615,000
(a) Minneapolis MFR, Seven Corners Apartments Project, Weekly
VRDN and Put, 2.19%, 11/01/31 ............................ 250,000 250,000
(a) Minneapolis Revenue, Adjusted Guthrie Theater Project,
Series A, Weekly VRDN and Put, 2.14%, 10/01/23 ........... 2,200,000 2,200,000
-------------
4,365,000
-------------
MISSOURI 2.3%
St. Louis General Fund Revenue, TRAN, 3.25%, 6/30/09 ........ 3,000,000 3,039,796
St. Louis Municipal Finance Corp. Leasehold Revenue, Civil
Courts Building Project, Refunding, Series A, FSA Insured,
5.00%, 8/01/08 ........................................... 1,055,000 1,055,000
-------------
4,094,796
-------------
NEBRASKA 0.7%
(a) Nebraska Educational Finance Authority Revenue, Creighton
University Projects, Refunding, Daily VRDN and Put, 2.05%,
7/01/35 .................................................. 1,190,000 1,190,000
-------------
NEVADA 1.7%
Clark County TECP, 1.35%, 12/08/08 .......................... 3,000,000 3,000,000
-------------
NEW HAMPSHIRE 1.5%
(a) New Hampshire Health and Education Facilities Authority
Revenue, Dartmouth College Issue, Weekly VRDN and Put,
2.18%, 6/01/32 ........................................... 2,600,000 2,600,000
-------------

10 | Annual Report

Franklin Tax-Exempt Money Fund

STATEMENT OF INVESTMENTS, JULY 31, 2008 (CONTINUED)

PRINCIPAL AMOUNT VALUE
---------------- -------------

INVESTMENTS (CONTINUED)
MUNICIPAL BONDS (CONTINUED)
NEW JERSEY 1.8%
(a) New Jersey EDA School Revenue, School Facilities
Construction, Sub Series R-3, Daily VRDN and Put, 2.05%,
9/01/31 .................................................. $ 2,600,000 $ 2,600,000
(a) New Jersey State Turnpike Authority Turnpike Revenue, Series
C-2, FSA Insured, Weekly VRDN and Put, 2.75%, 1/01/24 .... 500,000 500,000
-------------
3,100,000
-------------
NEW MEXICO 0.4%
(a) Farmington PCR, Arizona Public Service Co., Refunding, Series
B, Daily VRDN and Put, 2.40%, 9/01/24 .................... 700,000 700,000
-------------
NEW YORK 4.0%
(a) Long Island Power Authority Electric System Revenue, Sub
Series 3A, Weekly VRDN and Put, 1.99%, 5/01/33 ........... 1,300,000 1,300,000
MTA Transportation Facilities Revenue, TECP, 3.05%,
8/12/08 .................................................. 4,000,000 4,000,000
(a) New York City Transitional Finance Authority Revenue, Future
Tax Secured, Series A, Weekly VRDN and Put, 2.11%,
2/15/30 .................................................. 1,700,000 1,700,000
-------------
7,000,000
-------------
NORTH CAROLINA 7.0%
(a) Cary GO, Public Improvement, Weekly VRDN and Put, 2.16%,
6/01/27 .................................................. 2,270,000 2,270,000
(a) North Carolina State GO,
Public Improvement, Series D, Weekly VRDN and Put, 2.18%,
5/01/21 ............................................... 4,135,000 4,135,000
Refunding, Series B, Weekly VRDN and Put, 2.10%,
6/01/19 ............................................... 600,000 600,000
Refunding, Series D, Weekly VRDN and Put, 2.10%,
6/01/19 ............................................... 2,400,000 2,400,000
Series G, Weekly VRDN and Put, 2.10%, 5/01/21 ............ 900,000 900,000
(a) Raleigh COP, Downtown Improvement Projects, Series A, Weekly
VRDN and Put, 2.16%, 6/01/34 ............................. 2,000,000 2,000,000
-------------
12,305,000
-------------
OHIO 1.9%
(a) Ohio State Water Development Authority Pollution Control
Facilities Revenue, FirstEnergy General Corp., Refunding,
Series A, Daily VRDN and Put, 2.18%, 5/15/19 ............. 3,300,000 3,300,000
-------------
OREGON 4.4%
Oregon State GO,
(a) Series 73G, Weekly VRDN and Put, 2.05%, 12/01/18 ............ 2,700,000 2,700,000
TAN, Series A, 3.00%, 6/30/09 ............................ 5,000,000 5,058,275
-------------
7,758,275
-------------
PENNSYLVANIA 4.9%
(a) Delaware Valley Regional Finance Authority Local Government
Revenue,
Series A, Weekly VRDN and Put, 2.10%, 12/01/20 ........... 1,400,000 1,400,000
Series C, Weekly VRDN and Put, 2.10%, 12/01/20 ........... 1,700,000 1,700,000
(a) Emmaus General Authority Revenue,
Local Government, Series F-19, Weekly VRDN and Put, 2.15%,
3/01/24 ............................................... 850,000 850,000
Sub Series G-19, Weekly VRDN and Put, 2.15%, 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,
2.19%, 7/01/13 ........................................... 3,300,000 3,300,000
-------------
8,650,000
-------------

Annual Report | 11

Franklin Tax-Exempt Money Fund

STATEMENT OF INVESTMENTS, JULY 31, 2008 (CONTINUED)

PRINCIPAL AMOUNT VALUE
---------------- -------------

INVESTMENTS (CONTINUED)
MUNICIPAL BONDS (CONTINUED)
TENNESSEE 3.1%
(a) Metropolitan Government Nashville and Davidson County GO,
Refunding, Series A, Weekly VRDN and Put, 2.15%,
5/15/26 .................................................. $ 3,500,000 $ 3,500,000
(a) Montgomery County PBA Pooled Financing Revenue, Tennessee
County Loan Pool, Weekly VRDN and Put, 2.20%, 11/01/27 ... 1,950,000 1,950,000
-------------
5,450,000
-------------
TEXAS 4.7%
(a) Bexar County HFA, MFR, Altamonte Apartments Project,
Refunding, Weekly VRDN and Put, 2.19%, 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) San Antonio Hotel Occupancy Texas Revenue, Refunding, sub.
lien, Weekly VRDN and Put, 2.20%, 8/15/34 ................ 700,000 700,000
(a) Texas Water Development Board Revenue, State Revolver, sub
lien, Refunding, Series A, Daily VRDN and Put, 2.25%,
7/15/19 .................................................. 1,300,000 1,300,000
-------------
8,300,011
-------------
UTAH 1.4%
(a) Utah Transit Authority Sales Tax Revenue,
Sub Series A, Daily VRDN and Put, 2.10%, 6/15/36 ......... 1,200,000 1,200,000
Subordinated, Series B, Daily VRDN and Put, 2.05%,
6/15/36 ............................................. 1,300,000 1,300,000
-------------
2,500,000
-------------
VIRGINIA 2.3%
(a) Loudoun County Sanitation Authority Water and Sewer Revenue,
System, Parity Indebtedness, Weekly VRDN and Put, 2.10%,
1/01/30 .................................................. 4,045,000 4,045,000
-------------
WISCONSIN 6.4%
(a) University Hospitals and Clinics Authority Revenue,
Refunding, Series B, Daily VRDN and Put, 2.05%,
4/01/34 .................................................. 1,000,000 1,000,000
(a) Wisconsin State Health and Educational Facilities Authority
Revenue,
Goodwill Industries Inc., Weekly VRDN and Put,
2.24%, 6/01/28 ........................................ 4,255,000 4,255,000
Meriter Hospital Inc., Series B, Daily VRDN and Put,
2.22%, 12/01/26 ....................................... 6,100,000 6,100,000
-------------
11,355,000
-------------
TOTAL INVESTMENTS (COST $173,845,279) 98.8% ................. 173,845,279
OTHER ASSETS, LESS LIABILITIES 1.2% ......................... 2,056,778
-------------
NET ASSETS 100.0% ........................................... $ 175,902,057
=============

See Selected Portfolio Abbreviations on page 13.

(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.

The accompanying notes are an integral part of these financial statements.

12 | Annual Report

Franklin Tax-Exempt Money Fund

STATEMENT OF INVESTMENTS, JULY 31, 2008

SELECTED PORTFOLIO ABBREVIATIONS

BAN - Bond Anticipation Note
COP - Certificate of Participation
EDA - Economic Development Authority
ETM - Escrow to Maturity
FSA - Financial Security Assurance Inc.
GO - General Obligation
HFA - Housing Finance Authority/Agency
IDA - Industrial Development Authority/Agency
IDR - Industrial Development Revenue
ISD - Independent School District
MF - Multi-Family
MFR - Multi-Family Revenue
MTA - Metropolitan Transit Authority
PBA - Public Building Authority
PCR - Pollution Control Revenue
TAN - Tax Anticipation Note
TECP - Tax-Exempt Commercial Paper
TRAN - Tax and Revenue Anticipation Note

The accompanying notes are an integral part of these financial statements.

Annual Report | 13

Franklin Tax-Exempt Money Fund

FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES
July 31, 2008

Assets:
Investments in securities, at amortized cost .. $173,845,279
Cash .......................................... 9,877
Receivables:
Capital shares sold ........................ 2,076,774
Interest ................................... 564,438
------------
Total assets ............................ 176,496,368
------------
Liabilities:
Payables:
Capital shares redeemed .................... 422,273
Affiliates ................................. 93,213
Distributions to shareholders .............. 42,521
Accrued expenses and other liabilities ........ 36,304
------------
Total liabilities ....................... 594,311
------------
Net assets, at value ................. $175,902,057
============
Net assets consist of:
Paid-in capital ............................... $175,958,946
Accumulated net realized gain (loss) .......... (56,889)
------------
Net assets, at value ................. $175,902,057
============
Shares outstanding ............................ 175,964,374
============
Net asset value per share(a) .................. $ 1.00
============

(a) Redemption price is equal to net asset value less contingent deferred sales
charges, if applicable.

The accompanying notes are an integral part of these financial statements.

14 | Annual Report

Franklin Tax-Exempt Money Fund

FINANCIAL STATEMENTS (CONTINUED)

STATEMENT OF OPERATIONS
for the year ended July 31, 2008

Investment income:
Interest ...................................................... $5,672,416
----------
Expenses:
Management fees (Note 3a) ..................................... 1,111,033
Transfer agent fees (Note 3d) ................................. 220,942
Custodian fees ................................................ 3,056
Reports to shareholders ....................................... 29,396
Registration and filing fees .................................. 110,298
Professional fees ............................................. 46,740
Trustees' fees and expenses ................................... 6,080
Other ......................................................... 26,985
----------
Total expenses ............................................. 1,554,530
----------
Net investment income ................................... 4,117,886
==========
Net increase (decrease) in net assets resulting from operations .. $4,117,886
==========

The accompanying notes are an integral part of these financial statements.

Annual Report | 15

Franklin Tax-Exempt Money Fund

FINANCIAL STATEMENTS (CONTINUED)

STATEMENTS OF CHANGES IN NET ASSETS

YEAR ENDED JULY 31,
---------------------------
2008 2007
------------ ------------

Increase (decrease) in net assets:
Operations:
Net investment income ............................................................. $ 4,117,886 $ 5,113,277
Net realized gain (loss) from investments ......................................... -- (393)
------------ ------------
Net increase (decrease) in net assets resulting from operations ................ 4,117,886 5,112,884
------------ ------------
Distributions to shareholders from net investment income ............................. (4,117,886) (5,107,950)
Capital share transactions (Note 2) .................................................. (6,325,161) (1,059,859)
------------ ------------
Net increase (decrease) in net assets .......................................... (6,325,161) (1,054,925)
Net assets (there is no undistributed net investment income at beginning or end of year):
Beginning of year .................................................................... 182,227,218 183,282,143
------------ ------------
End of year .......................................................................... $175,902,057 $182,227,218
============ ============

The accompanying notes are an integral part of these financial statements.

16 | Annual Report

Franklin Tax-Exempt Money Fund

NOTES TO FINANCIAL STATEMENTS

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.

The Fund has reviewed the tax positions, taken on federal income tax returns,
for each of the three open tax years and as of July 31, 2008, and has determined
that no provision for income tax is required in the Fund's financial statements.

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.

Annual Report | 17

Franklin Tax-Exempt Money Fund

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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
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. SHARES OF BENEFICIAL INTEREST

At July 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:

YEAR ENDED JULY 31,
-----------------------------
2008 2007
------------- -------------

Shares sold ..................................... $ 425,902,268 $ 203,756,462
Shares issued in reinvestment of distributions .. 4,080,145 5,116,096
Shares redeemed ................................. (436,307,574) (209,932,417)
------------- -------------
Net increase (decrease) ......................... $ (6,325,161) $ (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

18 | Annual Report

Franklin Tax-Exempt Money Fund

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

3. TRANSACTIONS WITH AFFILIATES (CONTINUED)

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

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 year:

Contingent deferred sales charges retained .. $30,092

Annual Report | 19

Franklin Tax-Exempt Money Fund

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

3. TRANSACTIONS WITH AFFILIATES (CONTINUED)

D. TRANSFER AGENT FEES

For the year ended July 31, 2008, the Fund paid transfer agent fees of $220,942,
of which $104,486 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, 2008, the capital loss carryforwards were as follows:

Capital loss carryforwards expiring in:
2009 ............................... $26,572
2012 ............................... 17,134
2013 ............................... 932
2014 ............................... 282
2015 ............................... 11,574
2016 ............................... 395
-------
$56,889
=======

On July 31, 2008, the Fund had expired capital loss carryforwards of $8,419,
which were reclassified to paid-in capital.

The tax character of distributions paid during the years ended July 31, 2008 and
2007, was as follows:

2008 2007
---------- ----------

Distributions paid from tax exempt income ... $4,117,886 $5,107,950

At July 31, 2008, the cost of investments and undistributed tax exempt income
for income tax purposes were as follows:

Cost of investments ........................................ $173,845,279
------------
Distributable earnings - undistributed tax exempt income ... $ 42,521
------------

5. NEW ACCOUNTING PRONOUNCEMENT

In September 2006, the Financial Accounting Standards Board (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
Trust believes the adoption of SFAS 157 will have no material impact on its
financial statements.

20 | Annual Report

Franklin Tax-Exempt Money Fund

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

TO THE BOARD OF TRUSTEES 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, 2008, 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 audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at July
31, 2008 by correspondence with the custodian, provide a reasonable basis for
our opinion.

PricewaterhouseCoopers LLP

San Francisco, California
September 17, 2008

Annual Report | 21

Franklin Tax-Exempt Money Fund

TAX DESIGNATION (UNAUDITED)

Under Section 852(b)(5)(A) of the Internal Revenue Code, the Fund designates
100% of the distributions paid from net investment income as exempt-interest
dividends for the fiscal year ended July 31, 2008. A portion of the Fund's
exempt-interest dividends may be subject to the federal alternative minimum tax.
In January 2009, shareholders will be notified of amounts for use in preparing
their 2008 income tax returns.

22 | Annual Report

Franklin Tax-Exempt Money Fund

BOARD MEMBERS AND OFFICERS

The name, year of birth 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. Generally, each board member
serves until that person's successor is elected and qualified.

INDEPENDENT BOARD MEMBERS

NUMBER OF PORTFOLIOS IN
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ---------------------------- -------------- --------------- ----------------------- -------------------------------------

HARRIS J. ASHTON (1932) Trustee Since 1982 143 Bar-S Foods (meat packing company).
One Franklin Parkway
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).

ROBERT F. CARLSON (1928) Trustee Since 2007 122 None
One Franklin Parkway
San Mateo, CA 94403-1906

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:

Retired; and FORMERLY, Vice President, senior member and past President, Board of Administration, California Public Employees
Retirement Systems (CALPERS) (1971-January 2008); member and Chairman of the Board, Sutter Community Hospitals; member, Corporate
Board, Blue Shield of California; and Chief Counsel, California Department of Transportation.

SAM GINN (1937) Trustee Since 2007 122 Chevron Corporation (global energy
One Franklin Parkway company) and ICO Global
San Mateo, CA 94403-1906 Communications (Holdings) Limited
(satellite company).

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:

Private investor; and FORMERLY, Chairman of the Board, Vodafone AirTouch, PLC (wireless company); Chairman of the Board and Chief
Executive Officer, AirTouch Communications (cellular communications) (1993-1998) and Pacific Telesis Groups (telephone holding
company) (1988-1994).

EDITH E. HOLIDAY (1952) Trustee Since 2006 143 Hess Corporation (exploration and
One Franklin Parkway refining of oil and gas), H.J. Heinz
San Mateo, CA 94403-1906 Company (processed foods and allied
products), RTI International Metals,
Inc. (manufacture and distribution
of titanium), Canadian National
Railway (railroad) and White
Mountains Insurance Group, Ltd.
(holding company).
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:

Director or Trustee of various companies and trusts; and FORMERLY, Assistant to the President of the United States and Secretary
of the Cabinet (1990-1993); General Counsel to the United States Treasury Department (1989-1990); and Counselor to the Secretary
and Assistant Secretary for Public Affairs and Public Liaison-United States Treasury Department (1988-1989).

Annual Report | 23

FRANK W.T. LAHAYE (1929) Trustee Since 1980 122 Center for Creative Land Recycling
One Franklin Parkway (brownfield 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).

FRANK A. OLSON (1932) Trustee Since 2007 143 Hess Corporation (exploration and
One Franklin Parkway refining of oil and gas) and Sentient
San Mateo, CA 94403-1906 Jet (private jet service).

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:

Chairman Emeritus, The Hertz Corporation (car rental) (since 2000) (Chairman of the Board (1980-2000) and Chief Executive Officer
(1977-1999)); and FORMERLY, Chairman of the Board, President and Chief Executive Officer, UAL Corporation (airlines).

LARRY D. THOMPSON (1945) Trustee Since 2007 143 None
One Franklin Parkway
San Mateo, CA 94403-1906

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:

Senior Vice President - Government Affairs, General Counsel and Secretary, PepsiCo, Inc. (consumer products); and FORMERLY,
Director, Delta Airlines (aviation) (2003-2005) and Providian Financial Corp. (credit card provider) (1997-2001); Senior Fellow
of The Brookings Institution (2003-2004); Visiting Professor, University of Georgia School of Law (2004); and Deputy Attorney
General, U.S. Department of Justice (2001-2003).

JOHN B. WILSON (1959) Lead Trustee since 122 None
One Franklin Parkway Independent 2006 and Lead
San Mateo, CA 94403-1906 Trustee Independent
Trustee since
January 2008

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:

President and Founder, Hyannis Port Capital, Inc. (real estate and private equity investing); serves on private and non-profit
boards; and FORMERLY, Chief Operating Officer and Executive Vice President, Gap, Inc. (retail) (1996-2000); Chief Financial
Officer and Executive Vice President - Finance Strategy, Staples, Inc. (office supplies) (1992-1996); Executive Vice President -
Corporate Planning, Northwest Airlines, Inc. (airlines) (1990-1992); and Vice President and Partner, Bain & Company (consulting
firm) (1986-1990).

INTERESTED BOARD MEMBERS AND OFFICERS

**CHARLES B. JOHNSON (1933) Trustee and Trustee since 143 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.; Director, Templeton Worldwide,
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 42 of the investment companies in Franklin Templeton Investments.

24 | Annual Report

**GREGORY E. JOHNSON (1961) Trustee Since 2007 94 None
One Franklin Parkway
San Mateo, CA 94403-1906

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:

Director, President and Chief Executive Officer, Franklin Resources, Inc.; President, Templeton Worldwide, Inc.; Director,
Templeton Asset Management Ltd.; and officer and/or director or trustee, as the case may be, of some of the other subsidiaries of
Franklin Resources, Inc. and of 33 of the investment companies in Franklin Templeton Investments.

SHEILA AMOROSO (1959) Vice President Since 1999 Not Applicable Not Applicable
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.

RAFAEL R. COSTAS, JR. (1965) Vice President Since 1999 Not Applicable Not Applicable
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 (1952) Chief Chief Not Applicable Not Applicable
One Franklin Parkway Compliance Compliance
San Mateo, CA 94403-1906 Officer and Officer since
Vice President 2004 and Vice
- AML President - AML
Compliance Compliance
since 2006

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:

Director, Global Compliance, Franklin Resources, Inc.; officer of some of the other subsidiaries of Franklin Resources, Inc. and
of 46 of the investment companies in Franklin Templeton Investments; and FORMERLY, Director of Compliance, Franklin Resources,
Inc. (1994-2001).

LAURA F. FERGERSON (1962) Treasurer, Treasurer since Not Applicable Not Applicable
One Franklin Parkway Chief 2004, Chief
San Mateo, CA 94403-1906 Financial Financial
Officer and Officer
Chief and Chief
Accounting Accounting
Officer Officer
since February
2008

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:

Vice President, Franklin Templeton Services, LLC; officer of 46 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).

Annual Report | 25

JIMMY D. GAMBILL (1947) Vice President Since February Not Applicable Not Applicable
500 East Broward Blvd. 2008
Suite 2100
Fort Lauderdale,
FL 33394-3091

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:

President, Franklin Templeton Services, LLC; Senior Vice President, Templeton Worldwide, Inc.; and officer of some of the other
subsidiaries of Franklin Resources, Inc. and of 46 of the investment companies in Franklin Templeton Investments.

DAVID P. GOSS (1947) Vice President Since 2000 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:

Senior Associate General Counsel, Franklin Templeton Investments; officer and director of one of the subsidiaries of Franklin
Resources, Inc.; and officer of 46 of the investment companies in Franklin Templeton Investments.

RUPERT H. JOHNSON, JR.(1940) President and President since Not Applicable Not Applicable
One Franklin Parkway Chief 1993 and Chief
San Mateo, CA 94403-1906 Executive 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.; Director, Franklin Advisers, Inc. and
Templeton Worldwide, 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 44 of the investment companies in Franklin
Templeton Investments.

KAREN L. SKIDMORE (1952) Vice President Since 2006 Not Applicable Not Applicable
One Franklin Parkway and Secretary
San Mateo, CA 94403-1906

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:

Senior Associate General Counsel, Franklin Templeton Investments; and officer of 30 of the investment companies in Franklin
Templeton Investments.

CRAIG S. TYLE (1960) Vice President Since 2005 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:

General Counsel and Executive Vice President, Franklin Resources, Inc.; officer of some of the other subsidiaries of Franklin
Resources, Inc. and of 46 of the investment companies in Franklin Templeton Investments; and FORMERLY, Partner, Shearman &
Sterling, LLP (2004-2005); and General Counsel, Investment Company Institute (ICI) (1997-2004).

26 | Annual Report

GALEN G. VETTER (1951) Senior Vice Since February Not Applicable Not Applicable
500 East Broward Blvd. President and 2008
Suite 2100 Chief
Fort Lauderdale, Executive
FL 33394-3091 Officer -
Finance and
Administration

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:

Senior Vice President, Franklin Templeton Services, LLC; officer of 46 of the investment companies in Franklin Templeton
Investments; and FORMERLY, Managing Director, RSM McGladrey, Inc. (1999-2004); and Partner, McGladrey & Pullen, LLP (1979-1987
and 1991-2004).

THOMAS WALSH (1961) Vice President Since 1999 Not Applicable Not Applicable
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 manager or
affiliated investment managers.

** Charles B. Johnson is considered to be an interested person of the Fund
under the federal securities laws due to his position as officer and
director and major shareholder of Franklin Resources, Inc. (Resources),
which is the parent company of the Fund's investment manager and
distributor. Gregory E. Johnson is considered to be an interested person of
the Fund under the federal securities laws due to his position as an
officer and director of Resources.

Note 1: Charles B. Johnson and Rupert H. Johnson, Jr. are brothers and the
father and uncle, respectively, of Gregory E. Johnson.

Note 2: Officer information is current as of the date of this report. It is
possible that after this date, information about officers may change.

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 HAS DETERMINED THAT THERE IS
AT LEAST ONE SUCH FINANCIAL EXPERT ON THE AUDIT COMMITTEE AND HAS DESIGNATED
JOHN B. WILSON AS ITS AUDIT COMMITTEE FINANCIAL EXPERT. THE BOARD BELIEVES THAT
MR. WILSON QUALIFIES AS SUCH AN EXPERT IN VIEW OF HIS EXTENSIVE BUSINESS
BACKGROUND AND EXPERIENCE, INCLUDING SERVICE AS CHIEF FINANCIAL OFFICER OF
STAPLES, INC. FROM 1992 TO 1996. MR. WILSON HAS BEEN A MEMBER AND CHAIRMAN OF
THE FUND'S AUDIT COMMITTEE SINCE 2006. AS A RESULT OF SUCH BACKGROUND AND
EXPERIENCE, THE BOARD BELIEVES THAT MR. WILSON 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. WILSON IS AN INDEPENDENT BOARD MEMBER 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 | 27

Franklin Tax-Exempt Money Fund

SHAREHOLDER INFORMATION

BOARD REVIEW OF INVESTMENT MANAGEMENT AGREEMENT

At a meeting held February 25, 2008, the Board of Directors (Board), including a
majority of non-interested or independent Directors, approved renewal of the
investment management agreement for the Fund. In reaching this decision, the
Board took into account information furnished throughout the year at regular
Board meetings, as well as information prepared specifically in connection with
the annual renewal review process. Information furnished and discussed
throughout the year included investment performance reports and related
financial information for the Fund, as well as periodic reports on shareholder
services, legal, compliance, and other services provided by the Investment
Manager (Manager) and its affiliates. Information furnished specifically in
connection with the renewal process included a report for the Fund prepared by
Lipper, Inc. (Lipper), an independent organization, as well as a Fund
profitability analysis report prepared by management. The Lipper report compared
the Fund's investment performance and expenses with those of other mutual funds
deemed comparable to the Fund as selected by Lipper. The Fund profitability
analysis report discussed the profitability to Franklin Templeton Investments
from its overall U.S. fund operations, as well as on an individual fund-by-fund
basis. Included with such profitability analysis report was information on a
fund-by-fund basis listing portfolio managers and other accounts they manage, as
well as information on management fees charged by the Manager and its affiliates
including management's explanation of differences where relevant and a
three-year expense analysis with an explanation for any increase in expense
ratios. Additional material accompanying such report was a memorandum prepared
by management describing project initiatives and capital investments relating to
the services provided to the Fund by the Franklin Templeton Investments
organization, as well as a memorandum relating to economies of scale and a
comparative analysis concerning transfer agent fees charged the Fund.

In considering such materials, the independent Directors received assistance and
advice from and met separately with independent counsel. In approving
continuance of the investment management agreement for the Fund, the Board,
including a majority of independent Directors, determined that the existing
management fee structure was fair and reasonable and that continuance of the
investment management agreement was in the best interests of the Fund and its
shareholders. While attention was given to all information furnished, the
following discusses some primary factors relevant to the Board's decision.

NATURE, EXTENT AND QUALITY OF SERVICES. The Board was satisfied with the nature
and quality of the overall services provided by the Manager and its affiliates
to the Fund and its shareholders. In addition to investment performance and
expenses discussed later, the Board's opinion was based, in part, upon periodic
reports furnished them showing that the investment policies and restrictions for
the Fund were consistently complied with as well as other reports periodically
furnished the Board covering matters such as the compliance of portfolio
managers and other management personnel with the code of ethics adopted
throughout the Franklin Templeton fund complex, the adherence to fair value
pricing procedures established by the Board, and the accuracy of net asset value
calculations. The Board also noted the extent of benefits provided Fund
shareholders from being part of the Franklin Templeton family of funds,
including the right to exchange

28 | Annual Report

Franklin Tax-Exempt Money Fund

SHAREHOLDER INFORMATION (CONTINUED)

BOARD REVIEW OF INVESTMENT MANAGEMENT AGREEMENT (CONTINUED)

investments between the same class of funds without a sales charge, the ability
to reinvest Fund dividends into other funds and the right to combine holdings in
other funds to obtain a reduced sales charge. Favorable consideration was given
to management's continuous efforts and expenditures in establishing back-up
systems and recovery procedures to function in the event of a natural disaster,
it being noted that such systems and procedures had functioned smoothly during
the Florida hurricanes and blackouts experienced in recent years. Consideration
was also given to the experience of the Fund's portfolio management team, the
number of accounts managed and general method of compensation. In this latter
respect, the Board noted that a primary factor in management's determination of
a portfolio manager's bonus compensation was the relative investment performance
of the funds he or she managed and that a portion of such bonus was required to
be invested in a predesignated list of funds within such person's fund
management area so as to be aligned with the interests of Fund shareholders. The
Board also took into account the quality of transfer agent and shareholder
services provided Fund shareholders by an affiliate of the Manager, noting
continuing expenditures by management to increase and improve the scope of such
services, periodic favorable reports on such service conducted by third parties,
the high industry ranking given to the Franklin Templeton website, and the
firsthand experience of individual Board members who deal with the shareholder
services department in their capacities as shareholders in one or more of the
various Franklin Templeton funds.

INVESTMENT PERFORMANCE. The Board placed significant emphasis on the investment
performance of the Fund in view of its importance to shareholders. While
consideration was given to performance reports and discussions with portfolio
managers at Board meetings during the year, particular attention in assessing
such performance was given to the Lipper report furnished for the agreement
renewal. The Lipper report prepared for the Fund showed its investment
performance for the year ended December 31, 2007, as well as the previous 10
years ended that date in comparison to a performance universe consisting of the
Fund and all retail tax-exempt money market funds as selected by Lipper. The
Lipper report showed that the Fund's total return for the one-year period, as
well as for the previous three- and five-year periods on an annualized basis was
in the second-lowest quintile of such universe, and was in the lowest quintile
for the previous 10-year period on an annualized basis. In discussing this
comparative performance, management pointed out that the Fund follows a very
conservative investment approach with no investments in derivative products or
non-rated tier 2 securities, and no investments in securities subject to the
alternative minimum tax. Management further pointed out that its total return
was close to the median of its performance universe, being within 17 basis
points of such median for the annualized 10-year period as shown in the Lipper
report. The Board found such performance to be acceptable, noting the points
raised by management.

COMPARATIVE EXPENSES. Consideration was given to a comparative analysis of the
management fees and total expense ratios of the Fund compared with those of a
group of other funds selected by Lipper as its appropriate Lipper expense group
under the Lipper report. Prior to making such comparison, the Board relied upon
a survey showing that the scope of management advisory

Annual Report | 29

Franklin Tax-Exempt Money Fund

SHAREHOLDER INFORMATION (CONTINUED)

BOARD REVIEW OF INVESTMENT MANAGEMENT AGREEMENT (CONTINUED)

services covered under the Fund's investment management agreement was similar to
those provided by fund managers to other mutual fund groups. In reviewing
comparative costs, emphasis was given to the Fund's management fee in comparison
with the contractual investment management fee that would have been charged by
other funds within its Lipper expense group assuming they were similar in size
to the Fund, as well as the actual total expenses of the Fund in comparison with
those of its Lipper expense group. The Lipper contractual investment management
fee analysis includes administrative charges as being part of a management fee.
The results of such comparisons showed the Fund's contractual investment
management fee to be in the most expensive quintile of its Lipper expense group,
and its actual total expenses to be in the second-highest quintile of such
group. In discussing the expense comparisons, management pointed out that this
Fund is not actively marketed and largely serves as an alternative investment
vehicle for shareholders of the various Franklin/Templeton/Mutual Series Fund
families and provides a number of courtesy services to shareholders, including
check writing in addition to exchange privileges. The Board found such
comparative expenses to be acceptable, noting the points raised by management.

MANAGEMENT PROFITABILITY. The Board also considered the level of profits
realized by the Manager and its affiliates in connection with the operation of
the Fund. In this respect, the Board reviewed the Fund profitability analysis
that addresses the overall profitability of Franklin Templeton's U.S. fund
business, as well as its profits in providing management and other services to
the Fund. Specific attention was given to the methodology followed in allocating
costs to the Fund, it being recognized that allocation methodologies are
inherently subjective and various allocation methodologies may each be
reasonable while producing different results. In this respect, the Board noted
that, while being continuously refined and reflecting changes in the Manager's
own cost accounting, the allocation methodology was consistent with that
followed in profitability report presentations for the Fund made in prior years
and that the Fund's independent registered public accounting firm had been
engaged by the Manager to perform certain procedures on a biennial basis,
specified and approved by the Manager and the Fund's Board solely for their
purposes and use in reference to the profitability analysis. In reviewing and
discussing such analysis, management discussed with the Board its belief that
costs incurred in establishing the infrastructure necessary for the type of
mutual fund operations conducted by the Manager and its affiliates may not be
fully reflected in the expenses allocated to the Fund in determining its
profitability, as well as the fact that the level of profits, to a certain
extent, reflected operational cost savings and efficiencies initiated by
management. The Board also took into account management's expenditures in
improving shareholder services provided the Fund, as well as the need to meet
additional regulatory and compliance requirements resulting from the
Sarbanes-Oxley Act and recent SEC and other regulatory requirements. In
addition, the Board considered a third-party study comparing the profitability
of the Manager's parent on an overall basis as compared to other publicly held
managers broken down to show profitability from management operations exclusive
of distribution expenses, as well as profitability including distribution
expenses. Based upon its consideration

30 | Annual Report

Franklin Tax-Exempt Money Fund

SHAREHOLDER INFORMATION (CONTINUED)

BOARD REVIEW OF INVESTMENT MANAGEMENT AGREEMENT (CONTINUED)

of all these factors, the Board determined that the level of profits realized by
the Manager and its affiliates from providing services to the Fund was not
excessive in view of the nature, quality and extent of services provided.

ECONOMIES OF SCALE. The Board also considered whether economies of scale are
realized by the Manager as the Fund grows larger and the extent to which this is
reflected in the level of management fees charged. While recognizing that any
precise determination is inherently subjective, the Board noted that based upon
the Fund profitability analysis, it appears that as some funds get larger, at
some point economies of scale do result in the Manager realizing a larger profit
margin on management services provided such a fund. The Board also noted that
economies of scale are shared with a fund and its shareholders through
management fee breakpoints so that as a fund grows in size, its effective
management fee rate declines. The fee structure under the Fund's investment
management agreement provides an initial fee of 0.625% on the first $100 million
of net assets; 0.50% on the next $150 million of net assets; and 0.45% of net
assets in excess of $250 million with breakpoints thereafter beginning at the
$7.5 billion net asset level. The Fund's net assets were approximately $209
million at December 31, 2007, and the Board believed that to the extent any
economies of scale may be realized by the Manager and its affiliates, the
schedule of fees under the investment management agreement provides a sharing of
benefits with the Fund and its shareholders.

PROXY VOTING POLICIES AND PROCEDURES

The Fund's investment manager 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's 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.

Annual Report | 31

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(FRANKLIN TEMPLETON INVESTMENTS LOGO)

One Franklin Parkway
San Mateo, CA 94403-1906

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.

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.

(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.

(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 $20,315 for the fiscal year ended July 31, 2008 and $18,086 for the fiscal
year ended July 31, 2007.

(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.

There were no 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 their financial
statements.

(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 planning.

The aggregate 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 were $0 for the fiscal year ended July
31, 2008 and $46,000 for the fiscal year ended July 31, 2007. The services for
which these fees were paid included tax compliance and advice.

(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 $155 for the fiscal year ended July 31, 2008
and $0 for the fiscal year ended July 31, 2007. The services for which these
fees were paid include 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 other than
services reported in paragraphs (a)-(c) of Item 4 were $283,922 for the fiscal
year ended July 31, 2008 and $0 for the fiscal year ended July 31, 2007. The
services for which these fees were paid include review of materials provided to
the fund Board in connection with the investment management contract renewal
process.

(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 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 $284,077 for the fiscal year ended July 31, 2008 and $46,000 for
the fiscal year ended July 31, 2007.

(h) The registrant's audit committee of the board has considered whether the
provision of non-audit services that were rendered to the registrant's
investment adviser (not including any sub-adviser whose role is primarily
portfolio management and is subcontracted with or overseen by another investment
adviser), and any entity controlling, controlled by, or under common control
with the investment adviser that provides ongoing services to the registrant
that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of
Regulation S-X is compatible with maintaining the principal accountant's
independence.

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 September 26, 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 September 26, 2008

By /s/LAURA F. FERGERSON
---------------------------------
Laura F. Fergerson
Chief Financial Officer and
Chief Accounting Officer
Date September 26, 2008