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: 7/31/09
-------

ITEM 1. REPORTS TO STOCKHOLDERS.

JULY 31, 2009

ANNUAL REPORT AND SHAREHOLDER LETTER

TAX-FREE INCOME

FRANKLIN
TAX-EXEMPT MONEY FUND

(GRAPHIC)

(FRANKLIN TEMPLETON INVESTMENTS(R) LOGO)

FRANKLIN - Templeton - 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.

MUTUAL FUNDS | RETIREMENT PLANS | 529 COLLEGE SAVINGS PLANS | SEPARATE ACCOUNTS

(GRAPHIC)

Not part of the annual report

Contents

SHAREHOLDER LETTER ........................................................ 1
ANNUAL REPORT
Franklin Tax-Exempt Money Fund ............................................ 3
Performance Summary ....................................................... 4
Your Fund's Expenses ...................................................... 6
Financial Highlights and Statement of Investments ......................... 8
Financial Statements ...................................................... 13
Notes to Financial Statements ............................................. 16
Report of Independent Registered Public Accounting Firm ................... 22
Tax Designation ........................................................... 23
Board Members and Officers ................................................ 24
Shareholder Information ................................................... 29

Shareholder Letter

Dear Shareholder:

The one-year period ended July 31, 2009, was an extraordinary and stressful time
for investors and those of us who have worked in financial markets for many
years. During much of this turbulent period, the U.S. recession deepened, the
unemployment rate surged and consumer spending fell. In the past four months,
the U.S. economy, while still in a downturn, became marginally "less worse" as
the recession seemed to loosen its grip. The results of government "stress
tests" of major financial institutions were generally positive, enabling those
institutions to raise capital in the public markets and avoid a worst-case
scenario of government takeovers and/or failures of major banks. For most of the
reporting period, stocks suffered major losses as investors worried about an
uncertain future. After reaching cyclical lows in March, the stock indexes began
a rally as many investors reentered the market. At the same time, U.S. Treasury
yields rose from multi-year lows as investor risk aversion waned.

Amid recent events, we think it is important to put short-term market
developments in perspective. Keep in mind that we have navigated through past
periods of high market volatility by remaining committed to our long-term
perspective and disciplined investment philosophy. During such times, we search
for bargains that we believe may be well positioned to become eventual winners.
Although conditions remain challenging, our experience gives us ample reason to
be optimistic about future market stabilization and recovery.

In the enclosed annual 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

NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE

Not part of the annual report | 1

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.(1) 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
Chairman
Franklin Tax-Exempt Money Fund

THIS LETTER REFLECTS OUR ANALYSIS AND OPINIONS AS OF JULY 31, 2009. 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.

(1.) Check minimum of $500 ($10 charge for writing a check under $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.
Other terms apply. For more information, please call Franklin Templeton
Shareholder Services at (800) 632-2301.

2 | Not part of the annual report

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.

This annual report for Franklin Tax-Exempt Money Fund covers the fiscal year
ended July 31, 2009.

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 (800) 342-5236 FOR
MOST RECENT MONTH-END PERFORMANCE.

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.

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 1.15% at the beginning of the period to 0.00% on
July 31, 2009.

ECONOMIC AND MARKET OVERVIEW

During the 12-month period ended July 31, 2009, economic conditions weakened
before showing signs of stabilization. Early in the period, several blue chip
banks and financial institutions failed or sought government assistance, credit
markets seized up and housing prices plummeted. In February 2009, The Conference
Board's Consumer Confidence Index fell to an all-time low since it began in 1967
as the U.S. economy faltered and as stock markets declined. Despite far-reaching
government interventions, the nation's economic troubles worsened as
manufacturing activity weakened at its fastest pace in nearly 30 years. Jobless
claims mounted and the unemployment rate rose to 9.4% by period-end.(2) The
financial system, however, avoided collapse and later in the period, government
stress tests of banks were generally positive. Many observers noted the
recession was nearing an end. Consumer confidence rebounded in

(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.

(2.) Source: Bureau of Labor Statistics.

THE DOLLAR VALUE, NUMBER OF SHARES OR PRINCIPAL AMOUNT, AND NAMES OF ALL
PORTFOLIO HOLDINGS ARE LISTED IN THE FUND'S STATEMENT OF INVESTMENTS (SOI). THE
SOI BEGINS ON PAGE 9.

Annual Report | 3

the second quarter of 2009 due to improved expectations. Economic activity as
measured by gross domestic product (GDP) fell, but the rate of contraction
slowed near period-end. In 2008's third quarter, GDP was an annualized -2.7%,
followed by annualized rates of -5.4%, -6.4% and an estimated -1.0% in each of
the subsequent three quarters.

PERFORMANCE SUMMARY
SYMBOL: FTMXX
7/31/09

Seven-day effective yield(1) 0.00%
Seven-day annualized yield 0.00%
Taxable equivalent yield(2) 0.00%
Total annual operating
expenses(3) 0.81%

(1.) Seven-day effective yield assumes the compounding of daily dividends, if
any.

(2.) Taxable equivalent yield assumes the 2009 maximum regular federal income
tax rate of 35.00%.

(3.) Figures are as stated in the Fund's prospectus current as of the date of
this report. In periods of market volatility, assets may decline
significantly, causing total annual Fund operating expenses to become
higher than the figure shown. To avoid a negative yield, the investment
manager, Fund administrator and Fund distributor have voluntarily agreed to
waive or limit their respective fees, assume as their own expense certain
expenses otherwise payable by the Fund, and if necessary, make a capital
infusion into the Fund. These waivers, expense reimbursements and capital
infusions, which are not reflected in the table above, are voluntary and
may be modified or discontinued by the investment manager, Fund
administrator or distributor at any time. There is no guarantee the Fund
will be able to avoid a negative yield.

Annualized and effective yields are for the seven-day period ended 7/31/09. The
Fund's average weighted maturity was 26 days. Yields reflect Fund expenses and
fluctuations in interest rates on portfolio investments.

Oil prices were volatile, falling from $124 per barrel at the beginning of the
period to a $31 low in December. As economic conditions improved, oil prices
rebounded to end the period at $69. Many other commodity prices followed similar
trends; therefore, as prices fell in late 2008, inflation remained muted, and
July's inflation rate was an annualized -2.1%.(2) Core inflation, which excludes
food and energy costs, rose at a 1.5% annualized rate, which was within the
Federal Reserve Board's (Fed's) informal target range of 1.5% to 2.0%.(2) The
core personal consumption expenditures price index reported a 12-month increase
of 1.4%.(3)

A slowing economy and decelerating inflation prompted policymakers to lower
interest rates and enact stimulus plans. During the period under review, the Fed
lowered the federal funds target rate from 2.00% to a range of 0% to 0.25%. The
government implemented the American Recovery and Reinvestment Act, which
included tax breaks, money for ailing state governments, aid to the poor and
unemployed, and spending on infrastructure, renewable energy, health care and
education. The Fed and U.S. Treasury Department also continued programs designed
to shore up beleaguered banks' capital, enable freer lending to businesses and
consumers, and help struggling home buyers avoid foreclosure.

Most Treasury prices declined during the period, and fixed income spreads were
generally wide relative to Treasury yields due to heightened market turbulence
and risk aversion. The spread between two-year and 10-year Treasury yields rose
to 239 basis points (100 basis points equal one percentage point) at the end of
June from 147 basis points at the beginning of the reporting period. The
two-year Treasury bill yield fell from 2.52% to 1.13% over the 12-month period,
while the 10-year Treasury note yield fell from 3.99% to 3.52%.

(3.) Source: Bureau of Economic Analysis.

4 | Annual Report

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.

MANAGER'S DISCUSSION

Short-term municipal bond yields declined during the reporting period. The
Securities Industry and Financial Market Association (SIFMA) Municipal Swap
Index, a benchmark for variable rate securities, which make up a large portion
of Franklin Tax-Exempt Money Fund, had a rate as high as 7.96% on September 24,
2008.(4) Problems at several investment banks caused investors to become very
selective in both the credits and the credit enhancements they chose to
purchase. This "flight to quality" caused a lack of money fund eligible supply
and increased demand, which pushed yields to very low levels. As of July 31,
2009, the SIFMA Municipal Swap Index rate had fallen to 0.41%.(4)

During the period under review, the Fund participated in several issues
including Iowa School cash anticipation program notes, Idaho State tax
anticipation notes and Metropolitan Higher Education for University of Dallas
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.

THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS
AS OF JULY 31, 2009, 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.

(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.

PORTFOLIO BREAKDOWN
7/31/09

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

Variable Rate Notes 89.1%
Notes & Bonds 10.9%

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

- - 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 8.6X$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.
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 ENDING EXPENSES
ACCOUNT ACCOUNT PAID DURING
VALUE VALUE PERIOD*
2/1/09 7/31/09 2/1/09-7/31/09
--------- --------- --------------

Actual $1,000 $1,000.00 $2.28
Hypothetical (5% return
before expenses) $1,000 $1,022.51 $2.31

* Expenses are calculated using the most recent annualized six-month expense
ratio, net of voluntary expense waivers, of 0.46%, multiplied by the
average account value over the period, multiplied by 181/365 to reflect the
one-half year period.

Annual Report | 7

Franklin Tax-Exempt Money Fund

FINANCIAL HIGHLIGHTS

YEAR ENDED JULY 31,
-------------------------------------------------------
2009 2008 2007 2006 2005
-------- -------- -------- -------- --------

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 ............................ 0.005 0.021 0.029 0.023 0.011
Net realized and unrealized gains(losses) ........ --(a) -- --(a) --(a) --
-------- -------- -------- -------- --------
Total from investment operations .................... 0.005 0.021 0.029 0.023 0.011
-------- -------- -------- -------- --------
Less distributions from net investment income ....... (0.005) (0.021) (0.029) (0.023) (0.011)
-------- -------- -------- -------- --------
Net asset value, end of year ........................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
Total return(b) ..................................... 0.46% 2.07% 2.89% 2.36% 1.11%
RATIOS TO AVERAGE NET ASSETS
Expenses before waiver and payments by affiliates ... 0.76% 0.79% 0.77% 0.74% 0.73%
Expenses net of waiver and payments by affiliates ... 0.61% 0.79% 0.77% 0.74% 0.73%
Net investment income ............................... 0.45% 2.09% 2.84% 2.32% 1.10%
SUPPLEMENTAL DATA
Net assets, end of year (000's) ..................... $152,095 $175,902 $182,227 $183,282 $165,736

(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, 2009

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

INVESTMENTS 100.5%
MUNICIPAL BONDS 100.5%
CALIFORNIA 2.8%
(a) California Statewide CDA Revenue, John Muir Health, Refunding, Series C, Daily VRDN and Put,
0.22%, 8/15/27 .......................................................................... $ 1,200,000 $ 1,200,000
(a) San Jose RDAR, Merged Area Redevelopment Project, Series B, Weekly VRDN and Put, 0.33%,
8/01/32 ................................................................................. 2,700,000 2,700,000
(a) Santa Clara Electric Revenue, sub. bond, Refunding, Series A, Daily VRDN and Put, 0.32%,
7/01/34 ................................................................................. 400,000 400,000
------------
4,300,000
------------
COLORADO 12.8%
(a) Colorado Educational and Cultural Facilities Authority Revenue,
Clyford Still Museum Project, Weekly VRDN and Put, 0.34%, 12/01/38 ...................... 2,000,000 2,000,000
National Jewish Federation Bond Program, Refunding, Series A-8, Daily VRDN and Put,
0.38%, 9/01/35 ....................................................................... 4,400,000 4,400,000
National Jewish Federation Bond Program, Series A-4, Daily VRDN and Put, 0.38%,
2/01/34 .............................................................................. 1,075,000 1,075,000
National Jewish Federation Bond Program, Series A-12, Daily VRDN and Put, 0.38%,
2/01/38 .............................................................................. 1,045,000 1,045,000
National Jewish Federation Bond Program, Series C-4, Daily VRDN and Put, 0.38%,
6/01/37 .............................................................................. 1,200,000 1,200,000
(a) Colorado Health Facilities Authority Revenue, Exempla Inc., Series B, Weekly VRDN and Put,
0.35%, 1/01/33 .......................................................................... 1,800,000 1,800,000
(a) Colorado HFAR, MF,
Central Park, Refunding, Weekly VRDN and Put, 0.35%, 10/15/16 ........................... 2,000,000 2,000,000
St. Moritz, Refunding, Series H, Weekly VRDN and Put, 0.35%, 10/15/16 ................... 5,915,000 5,915,000
------------
19,435,000
------------
CONNECTICUT 4.6%
(a) Connecticut State Health and Educational Facilities Authority Revenue, Yale University,
Series V-1, Daily VRDN and Put, 0.25%, 7/01/36 .......................................... 7,000,000 7,000,000
------------
FLORIDA 1.8%
(a) Broward County Educational Facilities Authority Revenue, Nova Southeastern University,
Series A, Daily VRDN and Put, 0.35%, 4/01/38 ............................................ 1,800,000 1,800,000
(a) Lakeland Energy System Revenue, Refunding, Series A, Weekly VRDN and Put, 0.20%,
10/01/37 ................................................................................ 1,000,000 1,000,000
------------
2,800,000
------------
GEORGIA 3.3%
(a) Cobb County Housing Authority MFHR, Tamarron Apartments Project, Weekly VRDN and Put,
0.40%, 3/01/24 .......................................................................... 3,840,000 3,840,000
(a) Roswell Housing Authority MFR, Azalea Park Apartments, Refunding, Weekly VRDN and Put,
0.35%, 6/15/25 .......................................................................... 1,200,000 1,200,000
------------
5,040,000
------------
IDAHO 3.3%
Idaho State GO, TRAN, 2.50%, 6/30/10 ....................................................... 5,000,000 5,095,371
------------
ILLINOIS 4.0%
(a) Illinois Health Facilities Authority Revenue, Revolving Fund Pooled, Series C, Weekly VRDN
and Put, 0.38%, 8/01/15 ................................................................. 6,050,000 6,050,000
------------

Annual Report | 9

Franklin Tax-Exempt Money Fund

STATEMENT OF INVESTMENTS, JULY 31, 2009 (CONTINUED)

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

INVESTMENTS (CONTINUED)
MUNICIPAL BONDS (CONTINUED)
IOWA 4.5%
Iowa Finance Authority Revenue, Senior RAN, Iowa School, Series A, 2.50%, 6/23/10 .......... $ 5,000,000 $ 5,086,574
(a) Iowa State Finance Authority Health Care Facilities Revenue, Iowa Health Systems, Refunding,
Series A, Daily VRDN and Put, 0.33%, 2/15/35 ............................................ 1,800,000 1,800,000
------------
6,886,574
------------
KENTUCKY 0.3%
(a) Shelby County Lease Revenue, Series A, Daily VRDN and Put, 0.33%, 9/01/34 .................. 410,000 410,000
------------
LOUISIANA 3.2%
(a) Louisiana Public Facilities Authority Revenue, Christus Health, Refunding, Series D-2,
Weekly VRDN and Put, 0.30%, 7/01/31 ..................................................... 4,800,000 4,800,000
------------
MARYLAND 1.7%
(a) Frederick MFHR, Brookside Apartments, Refunding, Weekly VRDN and Put, 0.29%,
11/01/20 ................................................................................ 2,525,000 2,525,000
------------
MICHIGAN 1.4%
(a) Michigan State University Revenues, General, Refunding, Series B, Weekly VRDN and Put,
0.28%, 2/15/26 .......................................................................... 2,200,000 2,200,000
------------
MINNESOTA 2.7%
(a) Brown County Purchase Revenue, Martin Luther College Project, Weekly VRDN and Put,
0.29%, 9/01/24 .......................................................................... 2,040,000 2,040,000
(a) Mendota Heights Housing Mortgage Revenue, MF, Series A, Weekly VRDN and Put, 0.29%,
11/01/31 ................................................................................ 1,015,000 1,015,000
(a) Minneapolis MFR, Seven Corners Apartments Project, Weekly VRDN and Put, 0.29%,
11/01/31 ................................................................................ 145,000 145,000
(a) Minneapolis Revenue, Guthrie Theater Project, Series A, Weekly VRDN and Put, 0.29%,
10/01/23 ................................................................................ 900,000 900,000
------------
4,100,000
------------
MISSOURI 3.3%
(a) Missouri State Health and Educational Facilities Authority Health Facilities Revenue,
Sister Mercy Health, Series D, Weekly VRDN and Put, 0.26%, 6/01/39 ....................... 5,000,000 5,000,000
------------
NEW JERSEY 1.3%
(a) New Jersey Health Care Facilities Financing Authority Revenue, Virtua Health, Series D,
Weekly VRDN and Put, 0.29%, 7/01/43 ..................................................... 2,000,000 2,000,000
------------
NEW YORK 9.4%
(a) MTA Revenue, Transportation,
Refunding, Series G-1, Weekly VRDN and Put, 0.27%, 11/01/26 ................................ 2,500,000 2,500,000
Series G, Sub Series G-2, Daily VRDN and Put, 0.31%, 11/01/26 .............................. 900,000 900,000
(a) New York City Municipal Water Finance Authority Water and Sewer System Revenue, Second
General Resolution, Refunding, Series CC, Sub Series CC-1, Daily VRDN and Put,
0.33%, 6/15/38 .......................................................................... 4,900,000 4,900,000
(a) New York State Dormitory Authority Revenues,
Non-State Supported Debt, Columbia University, Series A, Weekly VRDN and Put,
0.23%, 9/01/39 ....................................................................... 2,000,000 2,000,000
State Supported Debt, City University of New York, Consolidated 5th, Refunding, Series D,
Weekly VRDN and Put, 0.25%, 7/01/31 .................................................. 1,000,000 1,000,000

10 | Annual Report

Franklin Tax-Exempt Money Fund

STATEMENT OF INVESTMENTS, JULY 31, 2009 (CONTINUED)

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

INVESTMENTS (CONTINUED)
MUNICIPAL BONDS (CONTINUED)
NEW YORK (CONTINUED)
(a) New York State Energy Research and Development Authority PCR, New York State Electric and
Gas Corp. Project, Refunding, Series D-2, Weekly VRDN and Put, 0.30%, 10/01/29 .......... $ 3,000,000 $ 3,000,000
------------
14,300,000
------------
NORTH CAROLINA 6.6%
(a) New Hanover County Hospital Revenue, New Hanover Regional Medical Center, Series A,
Weekly VRDN and Put, 0.50%, 10/01/38 .................................................... 5,000,000 5,000,000
(a) North Carolina State GO, Public Improvement,
Series D, Weekly VRDN and Put, 0.40%, 5/01/21 ........................................... 4,135,000 4,135,000
Series G, Weekly VRDN and Put, 0.14%, 5/01/21 ........................................... 900,000 900,000
------------
10,035,000
------------
OHIO 4.7%
(a) Cleveland-Cuyahoga County Port Authority Revenue, Carnegie, 89th Garage Project, Refunding,
Weekly VRDN and Put, 0.28%, 1/01/37 ..................................................... 5,755,000 5,755,000
(a) Ohio State Higher Educational Facility Revenue, Case Western Reserve, Refunding, Series B-1,
Daily VRDN and Put, 0.29%, 12/01/44 ..................................................... 1,400,000 1,400,000
------------
7,155,000
------------
OREGON 1.9%
(a) Medford Hospital Facilities Authority Revenue, Rogue Valley Manor Project, Daily VRDN and
Put, 0.38%, 8/15/37 ..................................................................... 1,500,000 1,500,000
Oregon State GO, State Board of Higher Education, Refunding, Series A, 5.00%, 8/01/09 ...... 1,445,000 1,445,000
------------
2,945,000
------------
PENNSYLVANIA 3.3%
(a) Bucks County IDA Hospital Revenue, Grand View Hospital, Series A, Weekly VRDN and Put,
0.29%, 7/01/34 .......................................................................... 2,000,000 2,000,000
(a) Emmaus General Authority Revenue, Local Government, Series B-29, Weekly VRDN and Put,
0.37%, 3/01/24 .......................................................................... 1,000,000 1,000,000
(a) Pennsylvania State Higher Educational Facilities Authority Revenue, Holy Family University
Project, Weekly VRDN and Put, 0.33%, 8/01/38 ............................................ 2,000,000 2,000,000
------------
5,000,000
------------
TEXAS 15.6%
(a) Bexar County HFA, MFR, Altamonte Apartments Project, Refunding, Weekly VRDN and Put,
0.35%, 9/15/26 .......................................................................... 5,300,000 5,300,000
(a) Harris County Cultural Education Facilities Finance Corp. Special Facilities Revenue, Texas
Medical Center, Refunding, Series B, Sub Series B-1, Daily VRDN and Put, 0.33%,
9/01/31 ................................................................................. 1,285,000 1,285,000
(a) Metropolitan Higher Education Authority Inc. Higher Education Revenue, University of Dallas
Project, Weekly VRDN and Put, 0.33%, 8/01/38 ............................................... 8,100,000 8,100,000
Texas State TRAN, 3.00%, 8/28/09 ........................................................... 5,000,000 5,005,023
(a) University of Texas Permanent University Fund Revenue, System, Series A, Weekly VRDN and
Put, 0.25%, 7/01/38 ..................................................................... 4,000,000 4,000,000
------------
23,690,023
------------

Annual Report | 11

Franklin Tax-Exempt Money Fund

STATEMENT OF INVESTMENTS, JULY 31, 2009 (CONTINUED)

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

INVESTMENTS (CONTINUED)
MUNICIPAL BONDS (CONTINUED)
VIRGINIA 0.7%
(a) Hanover County EDA Revenue, Bon Secours Health, Refunding, Series D-2, Weekly VRDN and
Put, 0.22%, 11/01/25 .................................................................... $ 1,055,000 $ 1,055,000
------------
WASHINGTON 3.4%
(a) Vancouver Housing Authority Revenue, Pooled Housing, Refunding, Weekly VRDN and Put,
0.39%, 12/01/38 ......................................................................... 2,900,000 2,900,000
(a) Washington State Housing Finance Commission Nonprofit Housing Revenue, Rockwood
Retirement Program, Series A, Daily VRDN and Put, 0.40%, 1/01/30 ........................ 1,000,000 1,000,000
(a) Washington State Housing Finance Commission Nonprofit Revenue, St. Vincent de Paul Project,
Series A, Weekly VRDN and Put, 0.32%, 2/01/31 ........................................... 1,200,000 1,200,000
------------
5,100,000
------------
WISCONSIN 3.9%
(a) Wisconsin State Health and Educational Facilities Authority Revenue, Meriter Hospital Inc.,
Series B, Daily VRDN and Put, 0.36%, 12/01/26 ........................................... 6,000,000 6,000,000
------------
TOTAL INVESTMENTS (COST $152,921,968) 100.5% ............................................... 152,921,968
OTHER ASSETS, LESS LIABILITIES (0.5)% ...................................................... (827,215)
------------
NET ASSETS 100.0% .......................................................................... $152,094,753
============

See Abbreviations on page 21.

(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

FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES
July 31, 2009

Assets:
Investments in securities, at amortized cost ................. $152,921,968
Cash ......................................................... 83,681
Receivables:
Capital shares sold ....................................... 375,162
Interest .................................................. 225,581
------------
Total assets ........................................... 153,606,392
------------
Liabilities:
Payables:
Capital shares redeemed ................................... 1,420,710
Affiliates ................................................ 37,739
Accrued expenses and other liabilities ....................... 53,190
------------
Total liabilities ...................................... 1,511,639
------------
Net assets, at value ................................ $152,094,753
============
Net assets consist of:
Paid-in capital .............................................. $152,149,173
Accumulated net realized gain (loss) ......................... (54,420)
------------
Net assets, at value ................................ $152,094,753
============
Shares outstanding .............................................. 152,178,903
============
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.

Annual Report | 13

Franklin Tax-Exempt Money Fund

FINANCIAL STATEMENTS (CONTINUED)

STATEMENT OF OPERATIONS
for the year ended July 31, 2009

Investment income:
Interest ......................................................... $2,035,364
----------
Expenses:
Management fees (Note 3a) ........................................ 1,083,570
Transfer agent fees (Note 3d) .................................... 118,631
Custodian fees ................................................... 3,146
Reports to shareholders .......................................... 31,037
Registration and filing fees ..................................... 93,063
Professional fees ................................................ 40,807
Trustees' fees and expenses ...................................... 6,859
Temporary Guarantee Program fee (Note 5) ......................... 45,987
Other ............................................................ 28,032
----------
Total expenses ................................................ 1,451,132
Expenses waived/paid by affiliates (Note 3e) .................. (282,578)
----------
Net expenses ............................................... 1,168,554
----------
Net investment income ................................... 866,810
----------
Net realized gain (loss) from investments ........................ (24,103)
----------
Net increase (decrease) in net assets resulting from operations .. $ 842,707
==========

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

14 | Annual Report

Franklin Tax-Exempt Money Fund

FINANCIAL STATEMENTS (CONTINUED)

STATEMENTS OF CHANGES IN NET ASSETS

YEAR ENDED JULY 31,
---------------------------
2009 2008
------------ ------------

Increase (decrease) in net assets:
Operations:
Net investment income ............................................................... $ 866,810 $ 4,117,886
Net realized gain (loss) from investments ........................................... (24,103) --
------------ ------------
Net increase (decrease) in net assets resulting from operations .................. 842,707 4,117,886
------------ ------------
Distributions to shareholders from net investment income ............................ (870,811) (4,117,886)
Capital share transactions (Note 2) ................................................. (23,779,200) (6,325,161)
------------ ------------
Net increase (decrease) in net assets ............................................ (23,807,304) (6,325,161)
Net assets(there is no undistributed net investment income at beginning or end of year):
Beginning of year ...................................................................... 175,902,057 182,227,218
------------ ------------
End of year ............................................................................ $152,094,753 $175,902,057
------------ ------------

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

Annual Report | 15

Franklin Tax-Exempt Money Fund

NOTES TO FINANCIAL STATEMENTS

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Franklin Tax-Exempt Money Fund (Fund) is registered under the Investment Company
Act of 1940, as amended, (1940 Act) as an open-end investment company.

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, 2009, 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.
Income and estimated expenses are accrued daily. Dividends from net investment
income are normally declared and distributed daily and paid monthly to
shareholders. 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.

16 | Annual Report

Franklin Tax-Exempt Money Fund

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

E. GUARANTEES AND INDEMNIFICATIONS

Under the Fund's organizational documents, its officers and trustees are
indemnified by the Fund against certain liabilities arising out of the
performance of their duties to the Fund. Additionally, in the normal course of
business, the Fund enters into contracts with service providers that contain
general indemnification clauses. The Fund's maximum exposure under these
arrangements is unknown as this would involve future claims that may be made
against the Fund that have not yet occurred. Currently, the Fund expects the
risk of loss to be remote.

2. SHARES OF BENEFICIAL INTEREST

At July 31, 2009, 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,
-----------------------------
2009 2008
------------- -------------

Shares sold ...................................... $ 389,089,760 $ 425,902,268
Shares issued in reinvestment of distributions ... 809,910 4,080,145
Shares redeemed .................................. (413,678,870) (436,307,574)
------------- -------------
Net increase (decrease) .......................... $ (23,779,200) $ (6,325,161)
============= =============

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

Annual Report | 17

Franklin Tax-Exempt Money Fund

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

3. TRANSACTIONS WITH AFFILIATES (CONTINUED)

A. MANAGEMENT FEES

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

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 ... $133,990

D. TRANSFER AGENT FEES

For the year ended July 31, 2009, the Fund paid transfer agent fees of $118,631,
of which $87,909 was retained by Investor Services.

E. WAIVER AND EXPENSE REIMBURSEMENTS

In order to avoid a negative yield, Advisers, FT Services and Distributors have
voluntarily agreed to waive or limit their respective fees, assume as their own
expense certain expenses otherwise payable by the Fund, and if necessary, make a
capital infusion into the Fund. These waivers, expense reimbursements and
capital infusions are voluntary and may be modified or discontinued by Advisers,
FT Services and Distributors at any time. There is no guarantee that the Fund
will be able to avoid a negative yield.

18| Annual Report

Franklin Tax-Exempt Money Fund

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

4. INCOME TAXES

For tax purposes, capital losses may be carried over to offset future capital
gains, if any. At July 31, 2009, the capital loss carryforwards were as follows:

Capital loss carryforwards expiring in:
2012 ....................................... $17,134
2013 ....................................... 932
2014 ....................................... 282
2015 ....................................... 11,574
2016 ....................................... 395
2017 ....................................... 24,103
-------
$54,420
=======

On July 31, 2009, the Fund had expired capital loss carryforwards of $26,572,
which were reclassified to paid-in capital.

The tax character of distributions paid during the years ended July 31, 2009 and
2008, was as follows:

2009 2008
-------- ----------

Distributions paid from tax exempt income ..... $870,811 $4,117,886
======== ==========

At July 31, 2009, the cost of investments and undistributed tax exempt income
for income tax purposes were as follows:

Cost of investments .......................................... $152,921,968
============
Distributable earnings - undistributed tax exempt income ..... $ 12,403
============

Net investment income differs for financial statement and tax purposes primarily
due to differing treatment of non-deductible expenses.

5. TEMPORARY GUARANTEE PROGRAM FOR MONEY MARKET FUNDS

On October 6, 2008, the Fund's Board of Trustees approved the participation in
the U.S. Department of the Treasury's Temporary Guarantee Program for Money
Market Funds ("Program") through December 18, 2008, which was subsequently
extended through April 30, 2009. Under the Program, shares held by the Fund as
of the close of business on September 19, 2008 ("Program Date") were insured
against loss in the event the Fund liquidated its holdings during the term of
the Program and the per share value at the time of liquidation dropped below
$0.995. For participation in the initial three months of the Program, the Fund
paid 0.01% of its net assets as of the Program Date, and paid an additional
0.015% of its net assets as of the Program Date to participate in the extension.
This expense was borne by the Fund. The fees were amortized over the term of the
Program. Although the U.S. Department of the Treasury extended the Program with
a third and final installment, through September 18, 2009, the Fund elected not
to participate in this extension. Thus, the Fund's participation in the Program
ended on April 30, 2009.

Annual Report | 19

Franklin Tax-Exempt Money Fund

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

6. FAIR VALUE MEASUREMENTS

The Fund adopted Financial Accounting Standards Board (FASB) Statement No. 157,
"Fair Value Measurement" (SFAS 157), on August 1, 2008. SFAS 157 defines fair
value, establishes a framework for measuring fair value, and expands disclosures
about fair value measurements. The Fund has determined that the implementation
of SFAS 157 did not have a material impact on the Fund's financial statements.

SFAS 157 establishes a fair value hierarchy that distinguishes between market
data obtained from independent sources (observable inputs) and the Fund's own
market assumptions (unobservable inputs). These inputs are used in determining
the value of the Fund's investments and are summarized in the following fair
value hierarchy:

- Level 1 - quoted prices in active markets for identical securities

- Level 2 - other significant observable inputs (including quoted prices
for similar securities, interest rates, prepayment speed, credit risk,
etc.)

- Level 3 - significant unobservable inputs (including the Fund's own
assumptions in determining the fair value of investments)

The inputs or methodology used for valuing securities are not an indication of
the risk associated with investing in those securities. Money market securities
may be valued using amortized cost, in accordance with the 1940 Act. Generally,
amortized cost reflects the current fair value of a security, but since the
value is not obtained from a quoted price in an active market, such securities
are reflected as a Level 2.

At July 31, 2009, all of the Fund's investments in securities carried at fair
value were in Level 2 inputs.

7. SUBSEQUENT EVENTS

The Fund has evaluated subsequent events through September 17, 2009, the
issuance date of the financial statements and determined disclosure of the
following is necessary:

On August 26, 2009, the Fund acquired the net assets of the Franklin New York
Tax-Exempt Money Fund pursuant to a plan of reorganization approved by the
Franklin New York Tax-Exempt Money Fund's shareholders. The merger was
accomplished by a tax-free exchange of 61,175,123 shares of the Fund (valued at
$1.00 per share) for the shares of the Franklin New York Tax-Exempt Money Fund
which aggregated $61,175,123. The combined net assets of the Fund immediately
after the merger were $205,496,512.

20 | Annual Report

Franklin Tax-Exempt Money Fund

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

ABBREVIATIONS

SELECTED PORTFOLIO

CDA - Community Development Authority/Agency
EDA - Economic Development Authority
GO - General Obligation
HFA - Housing Finance Authority/Agency
HFAR - Housing Finance Authority Revenue
IDA - Industrial Development Authority/Agency
MF - Multi-Family
MFHR - Multi-Family Housing Revenue
MFR - Multi-Family Revenue
MTA - Metropolitan Transit Authority
PCR - Pollution Control Revenue
RAN - Revenue Anticipation Note
RDAR - Redevelopment Agency Revenue
TRAN - Tax and Revenue Anticipation Note

Annual Report | 21

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, 2009, 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, 2009 by correspondence with the custodian and brokers, provide a reasonable
basis for our opinion.

PricewaterhouseCoopers LLP

San Francisco, California
September 17, 2009

22 | Annual Report

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, 2009. A portion of the Fund's
exempt-interest dividends may be subject to the federal alternative minimum tax.
In January 2010, shareholders will be notified of amounts for use in preparing
their 2009 income tax returns.

Annual Report | 23

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 135 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 112 None
One Franklin Parkway
San Mateo, CA 94403-1906

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:

Retired; and FORMERLY, Vice President, senior member and President, Board of Administration, California Public Employees
Retirement Systems (CALPERS) (1971-2008); 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 112 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 135 Hess Corporation (exploration and
One Franklin Parkway refining of oil and gas), H.J.
San Mateo, CA 94403-1906 Heinz 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).

24 | Annual Report

FRANK W.T. LAHAYE (1929) Trustee Since 1980 112 None
One Franklin Parkway
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 135 Hess Corporation (exploration and
One Franklin Parkway refining of oil and gas) and
San Mateo, CA 94403-1906 Sentient 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 112 None
One Franklin Parkway Independent 2006 and Lead
San Mateo, CA 94403-1906 Trustee Independent
Trustee since
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); Senior 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 135 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 41 of the investment companies in Franklin Templeton Investments.

Annual Report | 25

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

**GREGORY E. JOHNSON (1961) Trustee Since 2007 91 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 32 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 Compliance Not Applicable Not Applicable
One Franklin Parkway Compliance Officer since
San Mateo, CA 94403-1906 Officer and 2004 and Vice
Vice President President - AML
- AML Compliance since
Compliance 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 45 of the investment companies in Franklin Templeton Investments; and FORMERLY, Director of
Compliance, Franklin Resources, Inc. (1994-2001).

LAURA F. FERGERSON (1962) Chief Since March 2009 Not Applicable Not Applicable
One Franklin Parkway Executive
San Mateo, CA 94403-1906 Officer -
Finance and
Administration

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:

Vice President, Franklin Templeton Services, LLC; officer of 45 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).

GASTON GARDEY (1967) Treasurer, Since March 2009 Not Applicable Not Applicable
One Franklin Parkway Chief Financial
San Mateo, CA 94403-1906 Officer and
Chief
Accounting
Officer

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:

Director, Fund Accounting, Franklin Templeton Investments; and officer of 27 of the investment companies in Franklin
Templeton Investments.

26 | Annual Report

ALIYA S. GORDON (1973) Vice President Since March 2009 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:

Associate General Counsel, Franklin Templeton Investments; officer of 45 of the investment companies in Franklin
Templeton Investments; and FORMERLY, Litigation Associate, Steefel, Levitt & Weiss, LLP (2000-2004).

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/or director, as the case maybe, of
some of the other subsidiaries of Franklin Resources, Inc. and of 45 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 Executive 1993 and Chief
San Mateo, CA 94403-1906 Officer - Executive 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 43 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 29 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 45 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).

Annual Report | 27

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(800) DIAL BEN/(800) 342-5236 TO REQUEST THE SAI.

28 | Annual Report

Franklin Tax-Exempt Money Fund

SHAREHOLDER INFORMATION

BOARD REVIEW OF INVESTMENT MANAGEMENT AGREEMENT

At a meeting held February 24, 2009, 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 additional
material, including 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. Such material also discussed some of the actions taken by
management in coping with problems arising out of the past year's financial
upheaval.

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 SERVICE. 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 it 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

Annual Report | 29

Franklin Tax-Exempt Money Fund

SHAREHOLDER INFORMATION (CONTINUED)

BOARD REVIEW OF INVESTMENT MANAGEMENT AGREEMENT (CONTINUED)

shareholders from being part of the Franklin Templeton family of funds,
including the right to exchange 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, and the continuous enhancements to and
high industry ranking given the Franklin Templeton website. Particular attention
was given to the overall performance and actions taken by the Manager and its
affiliates in response to problems arising out of the market turmoil and
financial crisis experienced during the past year. In this respect, the Board
noted that management's independent credit analysis and diligent risk management
procedures had minimized exposure of funds within the Franklin Templeton complex
to subprime mortgages and that its continuous monitoring of counterparty credit
risk had limited fund exposure to firms experiencing financial difficulties like
Bear Stearns and AIG. The same type of conservative approach and attention to
risk had also prevented any structured investment products or other volatile
instruments from being held in the portfolio of the Fund or any of the other
money market funds within the Franklin Templeton complex. The Board also took
into account, among other things, management's efforts in establishing a $725
million global credit facility for the benefit of the funds and other accounts
managed by Franklin Templeton Investments to provide a source of cash for
temporary and emergency purposes or to meet unusual redemption requests as well
as the strong financial position of the Manager's parent company and its
commitment to the mutual fund business. The Board also noted that during the
past year Franklin Templeton Investments, like many other fund managers, had
announced a hiring freeze and implemented employee reductions, and the Board
discussed with management the nature of such reductions and steps being taken to
minimize any negative impact on the nature and quality of services being
provided the Fund.

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, 2008, as well as the previous 10
years ended that

30 | Annual Report

Franklin Tax-Exempt Money Fund

SHAREHOLDER INFORMATION (CONTINUED)

BOARD REVIEW OF INVESTMENT MANAGEMENT AGREEMENT (CONTINUED)

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-, five- and 10-year periods on an annualized basis, was in the
lowest quintile of such universe. 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 or tier 2
securities, and no investments in securities subject to the alternative minimum
tax. The Board also noted that the Fund's total return was within 20 basis
points of the median of its expense group 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 the Fund and eight other funds selected by Lipper as its appropriate
Lipper expense group. Lipper expense data is based upon historical information
taken from each fund's most recent annual report and, as a result of the severe
decline in mutual fund industry assets during the last quarter of 2008, is based
on asset levels that are higher than the level currently existing for most
funds. While recognizing the limitations inherent in Lipper's methodology and
recognizing that current expense ratios may increase as assets decline, the
Board believed that the independent analysis conducted by Lipper remained an
appropriate measure of comparative expenses. In reviewing comparative costs,
Lipper provides information on 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 rate to be the highest in its Lipper expense group, and its actual total
expense ratio to be the second-highest in 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 during the 12-month period ended September 30, 2008, being the most
recent fiscal year end for Franklin Resources, Inc., the Manager's parent.
During such period, the assets of the Franklin Templeton U.S. fund business were
significantly higher than currently existing, and to such extent the
profitability analysis does not reflect current fund operations. While taking
this

Annual Report | 31

Franklin Tax-Exempt Money Fund

SHAREHOLDER INFORMATION (CONTINUED)

BOARD REVIEW OF INVESTMENT MANAGEMENT AGREEMENT (CONTINUED)

into account in assessing the significance of the Fund profitability analysis,
the Board recognized such analysis was made at a given point in time and that
the decline in assets and effect on profitability would be reflected in the
profitability analysis covering Franklin Resources' 2009 fiscal year period. In
reviewing the analysis, 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 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 $221
million at December 31, 2008, 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.

32 | Annual Report

Franklin Tax-Exempt Money Fund

SHAREHOLDER INFORMATION (CONTINUED)

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 (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 (800)
SEC-0330.

Annual Report | 33

This page intentionally left blank.

Franklin Templeton Funds

LITERATURE REQUEST. TO RECEIVE A PROSPECTUS, PLEASE CALL US AT (800)DIAL
BEN/(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.

VALUE

Franklin All Cap Value Fund
Franklin Balance Sheet Investment Fund
Franklin Large Cap Value Fund
Franklin MicroCap Value Fund(1)
Franklin MidCap Value Fund
Franklin Small Cap Value Fund
Mutual Beacon Fund
Mutual Quest Fund
Mutual Recovery Fund(2)
Mutual Shares Fund

BLEND

Franklin Focused Core Equity Fund
Franklin Large Cap Equity Fund
Franklin Rising Dividends Fund

GROWTH

Franklin Flex Cap Growth Fund
Franklin Growth Fund
Franklin Growth Opportunities Fund
Franklin Small Cap Growth Fund
Franklin Small-Mid Cap Growth Fund

SECTOR

Franklin Biotechnology Discovery Fund
Franklin DynaTech Fund
Franklin Global Real Estate Fund
Franklin Gold & Precious Metals Fund
Franklin Natural Resources Fund
Franklin Real Estate Securities Fund
Franklin Utilities Fund
Mutual Financial Services Fund

GLOBAL

Mutual Global Discovery Fund
Templeton Global Long-Short Fund
Templeton Global Opportunities Trust
Templeton Global Smaller Companies Fund
Templeton Growth Fund
Templeton World Fund

INTERNATIONAL

Franklin India Growth Fund
Franklin International Growth Fund
Franklin International Small Cap Growth Fund
Mutual European Fund
Mutual International 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
Templeton Frontier Markets Fund

HYBRID

Franklin Balanced Fund
Franklin Convertible Securities Fund
Franklin Equity Income Fund
Franklin Income Fund
Templeton Income 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

FIXED INCOME

Franklin Adjustable U.S. Government Securities Fund(3)
Franklin Floating Rate Daily Access Fund
Franklin High Income Fund
Franklin Limited Maturity U.S. Government
Securities Fund(3)
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(3)
Templeton Global Bond Fund
Templeton Global Total Return Fund
Templeton International Bond Fund

TAX-FREE INCOME(4)

NATIONAL

Double Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund(5)

LIMITED-/INTERMEDIATE-TERM

California Intermediate-Term Tax-Free Income Fund
Federal Intermediate-Term Tax-Free Income Fund
Federal Limited-Term Tax-Free Income Fund
New York Intermediate-Term Tax-Free Income Fund

STATE-SPECIFIC
Alabama
Arizona
California(6)
Colorado
Connecticut
Florida
Georgia
Kentucky
Louisiana
Maryland
Massachusetts(7)
Michigan(7)
Minnesota(7)
Missouri
New Jersey
New York(6)
North Carolina
Ohio(7)
Oregon
Pennsylvania
Tennessee
Virginia

INSURANCE FUNDS

Franklin Templeton Variable Insurance
Products Trust(8)

(1.) The fund is closed to new investors. Existing shareholders and select
retirement plans can continue adding to their accounts.

(2.) 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.

(3.) An investment in the fund is neither insured nor guaranteed by the U.S.
government or by any other entity or institution.

(4.) For investors subject to the alternative minimum tax, a small portion of
fund dividends may be taxable. Distributions of capital gains are generally
taxable.

(5.) The fund invests primarily in insured municipal securities.

(6.) These funds are available in four or more variations, including long-term
portfolios, intermediate-term portfolios, portfolios of insured securities,
a high-yield portfolio (CA only) and money market portfolios.

(7.) The Board of Trustees approved the elimination of the non-fundamental
policy requiring the fund to invest at least 80% of net assets in insured
municipal securities and the removal of the word "Insured" from the fund
name. The changes became effective 2/17/09.

(8.) The funds of the Franklin Templeton Variable Insurance Products Trust are
generally available only through insurance company variable contracts.

04/09 Not part of the annual report

(FRANKLIN TEMPLETON INVESTMENTS(R) LOGO)

One Franklin Parkway
San Mateo, CA 94403-1906

ANNUAL REPORT AND SHAREHOLDER LETTER
FRANKLIN TAX-EXEMPT MONEY FUND

INVESTMENT MANAGER
Franklin Advisers, Inc.

DISTRIBUTOR
Franklin Templeton Distributors, Inc.
(800) DIAL BEN(R)
franklintempleton.com

SHAREHOLDER SERVICES
(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 A2009 09/09

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 $27,091 for the fiscal year ended July 31, 2009 and $20,315 for the fiscal
year ended July 31, 2008.

(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 $6,000 for the fiscal year ended
July 31, 2009 and $0 for the fiscal year ended July 31, 2008. 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 $0 for the fiscal year ended July 31, 2009 and
$155 for the fiscal year ended July 31, 2008. 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 $0 for the fiscal year
ended July 31, 2009 and $283,922 for the fiscal year ended July 31, 2008. 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 $6,000 for the fiscal year ended July 31, 2009 and $284,077 for
the fiscal year ended July 31, 2008.

(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 Laura F. Fergerson, Chief Executive Officer - Finance and Administration, and
Gaston Gardey, Chief Financial Officer and Chief Accounting Officer

(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of
Laura F. Fergerson, Chief Executive Officer - Finance and Administration, and
Gaston Gardey, 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/LAURA F. FERGERSON
---------------------------------------
Laura F. Fergerson
Chief Executive Officer - Finance
and Administration
Date September 25, 2009

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/LAURA F. FERGERSON
---------------------------------------
Laura F. Fergerson
Chief Executive Officer - Finance
and Administration
Date September 25, 2009

By /s/GASTON GARDEY
---------------------------------------
Gaston Gardey
Chief Financial Officer and
Chief Accounting Officer
Date September 25, 2009