CONTENTS
Shareholder Letter ........................................ 1
Special Feature:
Q&A with Municipal
Bond Department............................................ 3
Manager's Discussion....................................... 6
Performance Summaries
Class I................................................... 9
Class II.................................................. 11
Statement of
Investments................................................ 13
Financial Statements....................................... 36
Notes to
Financial Statements....................................... 38
Report of
Independent Auditors....................................... 42
SHAREHOLDER LETTER
Dear Shareholder:
It is a pleasure to bring you the Franklin Federal Tax-Free Income Fund's annual
report for the period ended April 30, 1997.
During the year under review, the U.S. economy continued its healthy expansion.
Although inflation remained under control throughout the year, investors feared
higher prices would result from the nation's strong growth. In a move they
termed a "pre-emptive strike" against potentially higher inflation, the Federal
Reserve Board (the Fed) raised the federal funds rate (the rate banks charge
each other for overnight loans) from 5.25% to 5.50% in March.
The Fed will likely continue to look for signs of increasing wage pressures and
other inflationary indicators to determine if additional action is necessary.
Many analysts anticipate further rate hikes, which could lead to increased
volatility in financial markets. However, any slowdown in economic activity
could reduce the risk of higher inflation. In such an environment, fixed-income
securities, including tax-free bonds, may respond well.
During this period, bond calls dominated the municipal market. Bonds issued in
the higher interest-rate environment of the late 1980s continued to be called or
refunded, returning cash to investors such as the Franklin Federal Tax-Free
Income Fund. Reinvestment of these proceeds in similar, high-quality or insured
issues meant investors received the lower yields of the current market
environment. Our investment strategy has not changed, however, and we still
manage our portfolios to generate the maximum, tax-free income available in
today's market.
Looking forward, we expect the supply of new issues in 1997 may be around
$170-$190 billion, close to the 1996 level. We also anticipate a continuation of
early bond redemptions, which should be around $150 billion. Such calls will
provide cash for reinvestment, and consequently should help sustain strong
demand for municipal bonds. Furthermore, at this point, we do not expect any
changes in tax codes that would negatively affect the value of municipal
securities.
As a Franklin Templeton fund shareholder, you receive the benefits of
professional management and dedicated service. If you have any questions
concerning the Franklin Federal Tax-Free Income Fund, we welcome the opportunity
to answer them. A more detailed report on your fund can be found in the
following pages.
Sincerely,
Charles B. Johnson
Chairman
Tom J. Kenny
Director, Municipal Bond Department
Q&A
SPECIAL FEATURE:
Q&A WITH THE MUNICIPAL BOND DEPARTMENT
Tom Kenny, director of Franklin's Municipal Bond Department, and portfolio
managers Don Duerson, Sheila Amoroso and Bernie Schroer discuss some issues
facing the municipal bond market.
Q: 1997 MARKS THE START OF A SECOND PRESIDENTIAL TERM FOR BILL CLINTON. DO YOU
THINK HIS RE-ELECTION WAS GOOD NEWS FOR THE MARKETS?
TOM KENNY: Market participants do not like uncertainty, so they appear
comfortable with the re-election of a Democratic president and a Republican
Congress. Alan Greenspan's reappointment as Federal Reserve Board Chairman was
also positive for the markets.
Q: WHY IS THAT?
TOM: His monetary policy is designed to encourage low inflation with moderate
growth, which he has been able to accomplish.
SHEILA AMOROSO: We expect at least the first two quarters of 1997 to be similar
to 1996 with regard to growth and inflation, though it is difficult to predict.
Q: ALAN GREENSPAN MAINTAINED A RELATIVELY NEUTRAL STANCE ON MONETARY POLICY
THROUGHOUT MOST OF 1996. DO YOU SEE THIS CARRYING OVER INTO 1997?
BERNIE SCHROER: Possibly. As you know, we do not try to predict where rates will
be in the future. But, I think Greenspan will continue to look for signs of
above-trend growth, and will probably focus on wages and commodity prices. At
this point, wage inflation is moderate and companies do not feel they can raise
prices.
DON DUERSON: The "threat" of higher rates seems to be sufficient to control
market expectations. Also, the recent strength of the dollar should have a
moderating effect on the economy by slowing export growth while keeping import
price inflation under control.
Q: FLOODS IN THE U.S.: WHAT IMPACT DO YOU SEE THIS HAVING ON STATE FINANCES,
BOND ISSUANCE, AND BOND RATINGS?
SHEILA: Historically, very few bond issues are affected negatively by natural
disasters. At worst, some types of issues may be called and paid off from
insurance proceeds. Bond ratings are generally long term in nature and are
usually not affected by such short-term events. Most of the repair costs are
covered by insurance companies, the Federal Emergency Management Agency, and
state disaster relief funds.
BERNIE: Generally, these disasters create an increase in construction activity,
however, which can contribute to increased economic growth in those affected
areas.
PHOTO
Portfolio managers, Don Duerson (left) and Sheila Amoroso (right) discuss
aspects of a new bond issue with Tom Kenny, director of Franklin's Municipal
Bond Department.
Q: WHAT KINDS OF BONDS ARE YOU PURCHASING FOR YOUR FUNDS?
DON: We try to choose bonds whose coupons provide higher income with lower
volatility than, for example, deep discount bonds with lower coupons. We feel
that the best relative value in the market today is in the insured sector. The
narrow quality spreads in the market are due to the low interest-rate
environment and the increase in volume of insured issues in the market. Close to
50% of new issues came to market insured, taking more spread out of the market.
Q: WHAT DO YOU MEAN BY "NARROW SPREAD?"
BERNIE: In a declining or low interest-rate environment, investors tend to
"reach for yield," trying to obtain the same yield level they had in an earlier,
higher interest-rate environment. To accomplish this, investors have to buy
lesser-quality bonds, which are usually higher yielding. Because interest rates
have been relatively low for most of the 1990s, investor demand has increased
for higher-yielding, lower-quality securities, which drives the prices of these
securities higher. This results in lower relative yield differentials between
lower-qualityissues and AAA-rated insured bonds. When this happens, it makes
more sense for us to buy insured bonds.
Q: DO YOU PLAN ON CHANGING YOUR INVESTMENT STRATEGY IN 1997?
TOM: Franklin employs a long-term "buy and hold" strategy, and our major
objective for the tax-free funds is to pay out high tax-free income. Our
portfolio managers don't speculate on the market by trying to predict future
interest rates. We use a consistent and disciplined long-term relative value
strategy toward meeting our objectives, and we plan on maintaining this
approach.
THANKS FOR SHARING YOUR THOUGHTS.
MANAGER'S DISCUSSION
YOUR FUND'S OBJECTIVE: THE FRANKLIN FEDERAL TAX-FREE INCOME FUND SEEKS TO
PROVIDE HIGH, CURRENT INCOME EXEMPT FROM REGULAR FEDERAL INCOME TAX THROUGH A
NATIONALLY DIVERSIFIED PORTFOLIO CONSISTING OF MUNICIPAL SECURITIES.*
MUNICIPAL OVERVIEW
During the 12-month reporting period, municipal bonds generally provided higher
total returns than U.S. government bonds of similar maturities. As fears of a
flat tax faded over the last year, investors' renewed interest in municipal
securities created strong demand and sent prices higher.
Demand also increased as "pre-refunded" bond calls continued. A bond is
"pre-refunded" when a new issue is sold and its proceeds are set aside to redeem
the original bond at its earliest call date. This is common practice in periods
of relatively low interest rates -- as issuers try to replace debt that had been
issued in a time of relatively higher interest rates. (In the late 1980s, for
instance, yields on insured and high-quality bonds ranged between 7.5% and 9.0%.
In comparison, for most of the 1990s, these bonds yielded at or below 6.0%.)
Early redemptions from pre-refunding returned large amounts of cash to
investors, such as the fund, who reinvested this cash.
As the Franklin Federal Tax-Free Income Fund received proceeds from redeemed
bonds and reinvested in the current environment of lower interest rates,
portfolio earnings were reduced. The general interest-rate decline is reflected
in the Bond Buyer Municipal 40 Index (an index of general obligation and revenue
bonds considered representative of the municipal market), which began this
reporting period yielding 6.06%, hit a low of 5.61% in December 1996, and stood
at 5.89% on April 30, 1997.
*For investors subject to the federal alternate minimum tax, a small portion of
this income may be subject to such tax. Distributions of capital gains and of
ordinary income from accrued market discount, if any, are generally taxable.
PORTFOLIO UPDATE
When investing in the municipal market, we strive to purchase securities
offering attractive long-term value. A key factor in our assessment of a
security's value is whether its yield compensates us adequately for any credit
risk. In other words, if we loan money to someone who might have trouble paying
us back, we expect to receive a higher yield than if we had loaned that money to
someone with minimal credit risk.
Of the municipal securities we purchase, bonds generally fall into two
categories -- general obligation and revenue bonds. General obligation (G.O.)
bonds carry less credit risk, because they are backed by the full taxing
authority of the issuing municipality or state. That means the issuer may have
the authority to raise or reallocate taxes to pay for its G.O. bonds. Revenue
bonds, on the other hand, are secured only by the revenues of a funded project,
such as a hospital or toll bridge. If the project doesn't raise enough money to
pay its bonds' interest, the issuer may default. Because they lack the security
features of G.O. bonds, revenue bonds also tend to provide higher yields as
compensation for the higher risk.
During the reporting period, however, BBB-rated G.O. bonds offered yields
similar to those of BBB-rated revenue bonds. As these yields converged, we
increased our exposure to G.O. securities. This strategy allowed us to add bonds
with stronger security features, which should provide value to the portfolio
over the long term. Many of our purchases during the period included New York
City G.O. bonds that we felt were undervalued in the market based on their
relatively strong bondholder security provisions and the city's improved
financial outlook. The fund's long-term investments in G.O. bonds increased from
9.2% of long-term investments on April 30, 1996, to 10.3% on April 30, 1997.
As illustrated by the chart above, nearly 50% of the fund's long-term
investments were invested in high-grade bonds at the close of the period.
High-grade bonds rated AAA or AA by Standard & Poor's(R), or Aaa or Aa by
Moody's, generally are considered
GRAPHIC MATERIAL 1 OMITTED - SEE APPENDIX AT END OF DOCUMENT
PORTFOLIO BREAKDOWN
ON APRIL 30, 1997
% TOTAL
LONG-TERM
SECTOR INVESTMENTS
Utilities 28.8%
Housing 13.7%
Transportation 13.2%
Pre-Refunded 11.1%
General Obligations 10.3%
Hospitals 6.5%
Industrial 4.7%
Other Revenue 4.1%
Education 2.9%
Certificates of Participation 2.7%
Health Care 1.2%
Tax-Allocation 0.5%
Sales Tax Revenue 0.3%
For a complete list of portfolio holdings, please see page 13 of this report.
GRAPHIC MATERIAL 2 OMITTED - SEE APPENDIX AT END OF DOCUMENT
to carry little credit risk. Increasing our emphasis on high-quality bonds can
help protect the fund against the risk of issuers defaulting on their interest
payments or principal repayments.
The chart to the left shows that the fund was invested across a broad range of
sectors on April 30, 1997. Plus, your fund held investments in all 50 states and
Puerto Rico. The fund had its largest holdings in securities issued in New York,
California and Texas.
Going forward, we believe the supply of municipal bonds will remain low, and
demand should be constant. This should enhance these securities' attractiveness,
especially given their current taxable-equivalent yields.
PERFORMANCE SUMMARY
CLASS I
The Franklin Federal Tax-Free Income Fund's Class I share price, as measured by
net asset value, increased 7.0 cents, from $11.83 on April 30, 1996, to $11.90
on April 30, 1997.
At the end of this reporting period, the fund's distribution rate was 5.60%,
based on an annualization of April's monthly dividend of 5.8 cents ($0.058) per
share and the maximum offering price of $12.43 on April 30, 1997. Distributions
may vary depending on the fund's income, and past distributions are not
predictive of future trends.
This tax-free rate is generally higher than the after-tax return on a comparable
taxable investment. For example, an investor in the maximum federal income tax
bracket of 39.6% would need to earn 9.27% from a taxable investment to match the
fund's tax-free distribution rate.
The chart on the following page illustrates that for the past 10 years, your
fund's performance has exceeded the rate of inflation, as measured by the
Consumer Price Index, maintaining your purchasing power -- a primary goal of any
investment. Although the fund's shares have slightly underperformed the Lehman
Brothers Municipal Bond Index, unmanaged market indices have inherent
performance differentials in comparison with any fund. They do not pay
management fees to cover salaries of security analysts or portfolio managers,
nor do they pay commissions to buy and sell bonds. Unlike unmanaged indices,
mutual funds are never 100% invested since they need to keep cash on hand to
redeem shares or pay for upcoming investments. The fund's performance figures
also include the maximum initial sales charge, all fund expenses and account
fees. If operating expenses such as the fund's had been applied to this index,
the index's performance would have been lower. Please remember that an index is
simply a measure of performance, and one cannot invest directly in an index.
Past performance is not predictive of future results.
CLASS I
DIVIDEND DISTRIBUTIONS
5/1/96 - 4/30/97
DIVIDEND
MONTH PER SHARE
May 6.20 cents
June 6.20 cents
July 5.90 cents
August 5.90 cents
September 5.90 cents
October 5.90 cents
November 5.90 cents
December 5.90 cents
January 5.90 cents
February 5.90 cents
March 5.90 cents
April 5.80 cents
- ------------------------------
TOTAL 71.30 CENTS
GRAPHIC MATERIAL 3 OMITTED - SEE APPENDIX AT END OF DOCUMENT
GRAPHIC MATERIAL 4 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Class I Shares
Periods ended April 30, 1997 From
Inception
1-Year 5-Year 10-Year (10/7/83)
Cumulative Total Return1 6.81% 40.49% 117.45% 227.57%
Average Annual Total Return2 2.23% 6.11% 7.61% 8.79%
Distribution Rate3 5.60%
Taxable Equivalent Distribution Rate4 9.27%
30-Day Standardized Yield5 5.10%
Taxable Equivalent Yield4 8.44%
*This performance graph assumes an initial $10,000 investment and includes the
current, maximum 4.25% initial sales charge, all fund expenses and account fees.
It also assumes that your dividends and capital gains were reinvested at net
asset value. The Lehman Brothers Municipal Bond Index includes price
appreciation or depreciation and distributions as a percentage of the original
investment. Past performance is not predictive of future results.
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include the sales charge. See Note below.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the current, maximum 4.25%
initial sales charge. See Note below.
3. Distribution rate is based on an annualization of April's 5.8-cent-per-share
monthly dividend and the maximum offering price of $12.43 on April 30, 1997.
4. Taxable equivalent distribution rate and yield assume the 1997 maximum
federal income tax rate of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended April 30, 1997.
Note: Prior to July 1, 1994, fund shares were offered at a lower initial sales
charge with dividends reinvested at the public offering price. Thus, actual
total returns for purchasers of shares during that period would have been
somewhat different than noted above. Effective May 1, 1994, the fund eliminated
the sales charge on reinvested dividends and implemented a Rule 12b-1 plan,
which affects subsequent performance.
All total return calculations assume reinvestment of dividends and capital
gains, if any, at net asset value. Your investment return and principal value
will fluctuate with market conditions, and you may have a gain or loss when you
sell your shares. Past performance is not predictive of future results.
Past performance is not predictive of future results.
CLASS II
The Franklin Federal Tax-Free Income Fund's Class II share price, as measured by
net asset value, increased 8.0 cents, from $11.82 on April 30, 1996, to $11.90
on April 30, 1997.
At the end of this reporting period, your fund's distribution rate was 5.20%,
based on an annualization of April's monthly dividend of 5.21 cents ($0.0521)
per share, plus an annual dividend adjustment of -.03 cent, and the offering
price of $12.02 on April 30, 1997. Distributions may vary depending on the
fund's income, and past distributions are not predictive of future trends.
This tax-free rate is generally higher than the after-tax return on a comparable
taxable investment. For example, an investor in the maximum federal income tax
bracket of 39.6% would need to earn 8.61% from a taxable investment to match the
fund's tax-free distribution rate.
The chart on the next page illustrates that since inception your fund's
performance has exceeded the rate of inflation, as measured by the Consumer
Price Index, maintaining your purchasing power -- a primary goal of any
investment. Although the fund's shares have slightly underperformed the Lehman
Brothers Municipal Bond Index, unmanaged market indices have inherent
performance differentials in comparison with any fund. They do not pay
management fees to cover salaries of security analysts or portfolio managers,
nor do they pay commissions to buy and sell bonds. Unlike unmanaged indices,
mutual funds are never 100% invested since they need to keep cash on hand to
redeem shares or pay for upcoming investments. The fund's performance figures
also include sales charges, all fund expenses and account fees. If operating
expenses such as the fund's had been applied to this index, the index's
performance would have been lower. Please remember that an index is simply a
measure of performance, and one cannot invest directly in an index. Past
performance is not predictive of future results.
CLASS II
DIVIDEND DISTRIBUTIONS
5/1/96 - 4/30/97
DIVIDEND
MONTH PER SHARE
May 5.60 cents
June 5.60 cents
July 5.32 cents
August 5.32 cents
September 5.32 cents
October 5.32 cents
November 5.32 cents
December 5.32 cents
January 5.35 cents
February 5.35 cents
March 5.35 cents
April 5.18 cents
- ----------------------------------
TOTAL 64.35 CENTS
GRAPHIC MATERIAL 5 OMITTED - SEE APPENDIX AT END OF DOCUMENT
GRAPHIC MATERIAL 6 OMITTED - SEE APPENDIX AT END OF DOCUMENT
CLASS II SHARES
PERIODS ENDED APRIL 30, 1997 FROM
INCEPTION
1-Year (5/1/95)
Cumulative Total Return1 6.28% 13.36%
Average Annual Total Return2 4.22% 5.93%
Distribution Rate3 5.20%
Taxable Equivalent Distribution Rate4 8.61%
30-Day Standardized Yield5 4.70%
Taxable Equivalent Yield4 7.78%
*This performance graph assumes an initial $10,000 investment and includes the
1.0% initial sales charge and the 1.0% contingent deferred sales charge (CDSC)
applicable to shares redeemed within the first 18 months of investment, all fund
expenses and account fees. It also assumes that your dividends and capital gains
were reinvested at net asset value. The Lehman Brothers Municipal Bond Index
includes price appreciation or depreciation and distributions as a percentage of
the original investment. The total value on 4/30/97 reflects the CDSC, assuming
the account is liquidated on that date. Purchasers who remain in the account for
longer than 18 months will not be assessed a CDSC; thus, actual total returns
may be higher. Past performance is not predictive of future results.
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include the sales charge.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the 1.0% initial sales
charge and 1.0% contingent deferred sales charge (CDSC), applicable to shares
redeemed within the first 18 months of investment.
3. Based on an annualization of April's 5.21-cent-per-share monthly dividend,
plus an anuual dividend adjustment of -.03 cent, and the offering price of
$12.02 on April 30, 1997.
4. Taxable equivalent distribution rate and yield assume the 1997 maximum
federal income tax rate of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended April 30, 1997.
All total return calculations assume reinvestment of dividends and capital gains
at net asset value. Your investment return and principal value will fluctuate
with market conditions, and you may have a gain or loss when you sell your
shares. Past performance is not predictive of future results.
Past performance is not predictive of future results.
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, APRIL 30, 1997
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE1)
_________________________________________________________________________________________________________________________
LONG TERM INVESTMENTS 97.6%
BONDS 96.0%
ALABAMA 1.0%
<S> <C> <C>
$6,400,000 Alabama Water Pollution Control Authority, Revolving Fund, Series B, 7.75%, 08/15/12 ....... $ 6,749,696
5,000,000 Birmingham GO, Street Improvement Warrants, Pre-Refunded, 8.00%, 07/01/13 .................. 5,307,000
1,000,000 Citronelle IDB, PCR, Stauffer Chemical Project, Guaranteed by Imperial Chemical,
Plc., Series 1982, 8.00%, 12/01/12 ........................................................ 1,104,870
12,000,000 Courtland IDB, IDR, Refunding, Champion International Corp., Series A, 7.20%, 12/01/13 ..... 12,978,360
5,000,000 Courtland IDB, PCR, Refunding, Champion International Corp. Project, 6.15%, 06/01/19 ....... 4,993,700
Jefferson County Sewer Revenue, Warrants, FGIC Insured,
4,000,000 Refunding, Series A, 5.625%, 02/01/22 ................................................... 3,882,680
15,995,000 Series D, 5.75%, 02/01/22 ............................................................... 15,785,466
10,850,000 Series D, 5.75%. 02/01/27 ............................................................... 10,651,771
5,385,000 Montgomery Medical Clinic Board, Health Care Facilities Revenue,
Refunding, Jackson Hospital and Clinic, AMBAC Insured,
6.00%, 03/01/26 ........................................................................... 5,431,365
-------------
66,884,908
-------------
ALASKA 2.0%
1,775,000 Alaska Industrial Development and Export Authority,
Revolving Fund, Series A, 7.95%, 04/01/10 ................................................. 1,907,593
Alaska State HFC,
4,120,000 Collateralized Home Mortgage, Series A-1, 6.75%, 12/01/32 ............................... 4,259,792
7,990,000 Refunding, Mortgage Insured, Program 1, Series 1990-B, 7.80%, 12/01/30 .................. 8,038,100
4,565,000 Refunding, Mortgage, Series A, MBIA Insured, 6.00%, 12/01/15 ............................ 4,544,503
34,000,000 Refunding, Mortgage, Series A, MBIA Insured, 6.10%, 12/01/37 ............................ 33,545,080
17,875,000 Refunding, Series A, MBIA Insured, 5.875%, 12/01/24 ..................................... 17,574,521
11,600,000 Refunding, Series A, MBIA Insured, 5.875%, 12/01/30 ..................................... 11,212,328
8,000,000 Series A, 6.60%, 12/01/23 ............................................................... 8,716,480
20,980,000 Veterans Mortgage Program, MBIA Insured, 6.75%, 12/01/25 ................................ 21,755,421
Anchorage Parking Authority Revenue, Refunding, 5th Avenue Garage Lease Project,
3,360,000 6.50%, 12/01/02 ......................................................................... 3,525,749
3,500,000 6.75%, 12/01/08 ......................................................................... 3,666,320
25,000,000 Valdez Marine Terminal Revenue, Refunding, BP Pipelines, Inc.
Project, Series A, 5.85%, 08/01/25 ........................................................ 24,193,000
------------
142,938,887
------------
ARIZONA 0.5%
Salt River Project, Agricultural Improvement and Power District,
Electrical Systems Revenue, Series D, Refunding,
15,000,000 5.50%, 01/01/25 ......................................................................... 14,303,100
14,000,000 5.00%, 01/01/30 ......................................................................... 12,292,560
5,620,000 Tempe IDA, Residential Care Facilities Revenue,
Volunteers of America Care Facilities, 9.00%, 06/01/18 .................................... 5,847,498
------------
32,443,158
------------
ARKANSAS 1.1%
2,550,000 Desha County Residential Housing Facilities Board, SFMR, Refunding, 7.50%, 04/01/11 ........ 2,683,340
3,115,000 Independence County Public Health and Education Facilities Board,
Capital Revenue, Refunding & Improvement, White River
Control Project, Pre-Refunded, 8.00%, 06/01/09 ............................................ 3,381,800
1,465,000 Jefferson County PCR, Refunding, Arkansas Power and Light Co. Project, 6.30%, 06/01/18 ..... 1,499,428
Pope County PCR, Refunding, Arkansas Power and Light Co. Project,
2,600,000 6.30%, 12/01/16 ......................................................................... 2,637,466
60,000,000 6.30%, 11/01/20 ......................................................................... 60,942,000
University of Central Arkansas, AMBAC Insured,
855,000 Academic Facilities Revenue, Series B, 5.875%, 04/01/16 ................................. 867,663
1,000,000 Academic Facilities Revenue, Series B, 6.00%, 04/01/21 .................................. 1,024,860
1,000,000 Athletic Facilities Revenue, Series C, 6.00%, 04/01/21 .................................. 1,024,860
825,000 Athletic Facilities Revenue, Series C, 6.125%, 04/01/26 ................................. 841,706
1,500,000 Refunding, Housing System Revenue, Series A, 5.875%, 04/01/16 ........................... 1,522,215
1,000,000 Refunding, Housing System Revenue, Series A, 6.00%, 04/01/21 ............................ 1,024,860
------------
77,450,198
------------
CALIFORNIA 6.7%
Alhambra COP, Clubhouse Facility Project,
$ 410,000 11.25%, 01/01/08 ........................................................................ $ 421,804
455,000 11.25%, 01/01/09 ........................................................................ 468,063
500,000 11.25%, 01/01/10 ........................................................................ 514,275
5,325,000 Burbank RDA, Refunding, Tax Allocation, Series A, 6.25%, 12/01/24 .......................... 5,391,563
2,800,000 California Health Facilities, Financing Authority Revenue, Refunding,
St. Francis Medical Center, Series H, AMBAC Insured,
6.30%, 10/01/15 ........................................................................... 2,946,020
California State Educational Facilities Authority Revenue,
3,580,000 National University, Connie Lee Insured, 6.00%, 05/01/09 ................................ 3,721,016
6,025,000 Pooled College and University Projects, Series B, 6.00%, 12/01/20 ....................... 5,825,693
California State GO,
11,000,000 FGIC Insured, 6.00%, 08/01/19 ........................................................... 11,170,170
3,070,000 Series 1994, 5.90%, 05/01/08 ............................................................ 3,215,979
7,000,000 Series 1994, 6.00%, 05/01/18 ............................................................ 7,126,350
12,500,000 Series 1994, FGIC Insured, 6.00%, 05/01/20 .............................................. 12,690,500
11,750,000 Various Purposes, 5.90%, 04/01/23 ....................................................... 11,778,553
California State GO, Veterans Bonds,
1,000,000 Series BC, 6.00%, 02/01/10 .............................................................. 1,027,310
33,195,000 Series BD, BE, and BF, 6.55%, 02/01/25 .................................................. 33,863,547
California State Public Works Board, Lease Revenue,
Various University of California Projects, Series A,
4,000,000 6.375%, 10/01/14 ........................................................................ 4,230,000
2,000,000 6.375%, 10/01/19 ........................................................................ 2,107,520
14,750,000 California Statewide Communities Development Authority Revenue,
COP, Sutter Health Obligation Group, MBIA Insured,
6.00%, 08/15/25 ........................................................................... 14,940,128
8,250,000 Chino USD, COP, Refunding, FSA Insured, 5.90%, 09/01/15 .................................... 8,325,323
1,020,000 Coalinga Public Finance Authority Revenue, Series B, 6.25%, 09/15/07 ....................... 1,027,864
1,000,000 Commerce, Refuse to Energy Authority Revenue, Refunding, Series 1994, 8.75%, 07/01/10 ...... 1,121,260
Foothill/Eastern Transportation Corridor Agency, Toll Road Revenue, Senior Lien,
59,240,000 Series A, 6.50%, 01/01/32 ............................................................... 60,726,332
3,000,000 Series B, 5.00%, 01/01/35 ............................................................... 2,458,860
Forty-Niner Shops, Inc., Auxiliary Organization, California State Long Beach Project,
1,090,000 6.875%, 04/01/07 ........................................................................ 1,143,813
1,565,000 6.875%, 04/01/12 ........................................................................ 1,616,395
3,000,000 Los Angeles County Transportation Commission, Sales Tax Revenue,
Proposition C, Series A, MBIA Insured, 6.00%, 07/01/23 .................................... 3,020,490
3,180,000 Los Angeles CRDA, Housing Revenue, Refunding, Series A,
AMBAC Insured, 6.55%, 01/01/27 ............................................................ 3,315,150
Los Angeles Department of Water and Power, Electric Plant Revenue,
14,925,000 Refunding, 6.40%, 11/01/31 .............................................................. 15,499,165
3,000,000 Refunding, MBIA Insured, 6.00%, 02/01/28 ................................................ 3,045,060
10,500,000 Second Issue, MBIA Insured, 6.40%, 11/01/31 ............................................. 11,023,005
8,100,000 Los Angeles GO, Series A, FGIC Insured, 6.20%, 09/01/14 .................................... 8,398,971
Los Angeles Regional Airport Improvements Corp., Lease Revenue, Refunding,
18,500,000 Facilities Sub-Lease, International Airport, 6.35%, 11/01/25 ............................ 18,645,225
8,400,000 United Airlines, Inc. Project, 6.875%, 11/15/12 ......................................... 8,844,948
4,000,000 Pomona Public Financing Authority Revenue, Series Q, MBIA Insured, 5.90%, 12/01/25 ......... 4,006,000
6,480,000 Sacramento County Airport Systems Revenue, Sub-Series D, MBIA Insured, 6.00%, 07/01/16 ..... 6,595,409
33,315,000 San Bernardino County COP, Medical Center Financing Project, Series A, 5.875%, 08/01/26 .... 33,288,015
7,080,000 San Francisco City and County RDA Revenue, George Moscone Convention
Center, Lease Revenue, 6.75%, 07/01/24 .................................................... 7,675,499
12,680,000 San Francisco City and County RDA Revenue,
Tax Allocation Redevelopment Project, 6.50%, 08/01/22 ..................................... 13,041,000
10,380,000 San Francisco City and County Sewer Revenue, Series A, FGIC Insured, 5.90%, 10/01/20 ....... 10,427,021
San Joaquin Hills Transportation Corridor Agency, Toll Road Revenue,
18,795,000 7.00%, 01/01/30 ......................................................................... 19,827,033
44,325,000 6.75%, 01/01/32 ......................................................................... 46,089,135
5,000,000 5.00%, 01/01/33 ......................................................................... 4,147,700
CALIFORNIA (CONT.)
University of California Revenues,
$25,000,000 Hospital Facilities, U.C. Davis Medical Center, AMBAC Insured, 5.75%, 07/01/24 ..........$ 24,559,500
26,780,000 Research Facilities, Series B, 6.55%, 09/01/24 .......................................... 27,554,210
2,405,000 Windsor RDA Revenue, Tax Allocation, Windsor Project, 7.00%, 09/01/24 ...................... 2,503,124
------------
469,363,998
------------
COLORADO 4.5%
Colorado GO, HFA, Series A,
1,595,000 7.50%, 05/01/29 ......................................................................... 1,661,846
2,700,000 Pre-Refunded, 8.375%, 01/01/30 .......................................................... 2,828,061
Denver City and County Airport System Revenue,
12,405,000 Refunding, Series D, MBIA Insured, 5.875%, 11/15/16 ..................................... 12,383,291
16,645,000 Series A, 8.875%, 11/15/12 .............................................................. 19,539,898
5,000,000 Series A, 8.00%, 11/15/17 ............................................................... 5,184,050
11,460,000 Series A, 7.75%, 11/15/21 ............................................................... 12,572,995
2,650,000 Series A, 7.25%, 11/15/23 ............................................................... 2,860,225
16,520,000 Series A, 7.50%, 11/15/23 ............................................................... 18,151,185
79,945,000 Series A, 8.50%, 11/15/23 ............................................................... 90,678,416
24,325,000 Series A, 8.00%, 11/15/25 ............................................................... 27,196,942
11,200,000 Series A, Pre-Refunded, 7.50%, 11/15/12 ................................................. 12,766,320
24,525,000 Series A, Pre-Refunded, 7.25%, 11/15/25 ................................................. 27,661,257
10,010,000 Series D, 7.00%, 11/15/25 ............................................................... 10,397,487
47,980,000 Denver City and County Special Facilities, Airport Revenue,
United Airlines, Inc. Project, Series A, 6.875%, 10/01/32 ................................. 49,645,866
16,310,000 Littleton MFR, Rental Housing, Riverpointe Project I, Series 1985, 8.00%, 12/01/22 ......... 16,578,789
6,500,000 University of Colorado Hospital Authority Revenue, Series A, AMBAC Insured, 6.40%, 11/15/22 6,759,090
------------
316,865,718
------------
DELAWARE 0.1%
1,160,000 Delaware State EDA Revenue, Refunding, Water Development,
Wilmington, Series B, 6.45%, 12/01/07 ..................................................... 1,272,764
2,000,000 Delaware State Housing Authority, Refunding, MFMR, Series D, 6.75%, 07/01/06 ............... 2,123,080
------------
3,395,844
------------
DISTRICT OF COLUMBIA 0.6%
District of Columbia GO,
6,500,000 Series A, Pre-Refunded, 8.00%, 06/01/07 ................................................. 6,615,050
4,000,000 Series E, MBIA Insured, 6.00%, 06/01/13 ................................................. 4,045,640
District of Columbia HFA, MFHR, FHA Insured,
6,110,000 Mayfair Mansions Apartments, 8.85%, 02/01/31 ............................................ 6,323,667
1,830,000 Refunding, Series A, 7.10%, 09/01/12 .................................................... 1,909,239
6,575,000 Refunding, Series A, 7.15%, 03/01/24 .................................................... 6,826,823
4,220,000 District of Columbia Hospital Revenue, Washington Hospital Center Corp.,
Series A, Pre-Refunded, 9.00%, 01/01/08 ................................................... 4,839,918
1,430,000 District of Columbia Redevelopment Land Agency, Sports Arena,
Special Tax Revenue, 5.625%, 11/01/10 ..................................................... 1,378,306
District of Columbia Revenue,
5,685,000 Association of American Medical Colleges, 7.50%, 02/15/20 ............................... 6,078,857
5,265,000 Catholic University of America, 6.45%, 10/01/23 ......................................... 5,518,299
------------
43,535,799
------------
FLORIDA 2.8%
Bay County Resource Recovery Revenue, Refunding, MBIA Insured,
2,100,000 Series A, 6.50%, 07/01/07 ............................................................... 2,285,997
11,020,000 Series B, 6.50%, 07/01/07 ............................................................... 11,996,041
40,950,000 Broward County Resource Recovery Revenue, Broward Waste Energy Co., L.P.,
North Project, Series 1984, 7.95%, 12/01/08 ............................................... 44,546,639
1,000,000 Callaway/Bay County Waste Water Systems Revenue, Series A,
FGIC Insured, 6.00%, 09/01/26 ............................................................. 1,016,330
3,800,000 Dunes Community Development District Revenue, Water and Sewer Project,
Pre-Refunded, 8.25%, 10/01/18 ............................................................. 4,079,376
22,475,000 Florida State Board Of Education, Capital Outlay, Public Education,
Refunding, Series 1992, 6.40%, 06/01/19 ................................................... 23,733,151
2,000,000 Florida State Department of General Services, Division of Facilities
Management Revenue, Florida Facilities Pool, Pre-Refunded,
8.125%, 09/01/17 .......................................................................... 2,140,300
Florida (cont.)
$ 7,125,000 Florida State Department of Transportation, Turnpike Revenue,
Series A, Pre-Refunded, 7.75%, 07/01/09 ................................................... $ 7,732,121
3,850,000 Lakeland Retirement Community, First Mortgage Revenue,
Carpenters Home Estate Project, 9.50%, 09/01/06 ........................................... 3,875,911
6,500,000 Manatee County IDR, Manatee Hospital and Health Systems, Inc.,
Pre-Refunded, 9.25%, 03/01/21 ............................................................. 7,581,925
5,000,000 Manatee County School Board COP, MBIA Insured, 6.125%, 07/01/16 ............................ 5,144,050
Orange County Health Facilities Authority Revenue, Pooled Hospital Loan Program,
5,880,000 Refunding, Series 1985-A, FGIC Insured, 7.875%, 12/01/25 ................................ 6,013,535
4,750,000 Series B, MBIA Insured, 7.875%, 12/01/25 ................................................ 4,856,970
2,500,000 Santa Rosa County Health Facilities Authority Revenue, Refunding,
Gulf Breeze Hospital, Inc., Pre-Refunded, 8.70%, 10/01/14 ................................. 2,700,775
St. Augustine Water and Sewer Revenue, Refunding, Series A, MBIA Insured,
840,000 6.20%, 10/01/00 ......................................................................... 881,336
890,000 6.20%, 10/01/01 ......................................................................... 939,982
940,000 6.20%, 10/01/02 ......................................................................... 998,731
1,005,000 6.20%, 10/01/03 ......................................................................... 1,074,888
1,065,000 6.20%, 10/01/04 ......................................................................... 1,141,861
1,130,000 6.20%, 10/01/05 ......................................................................... 1,216,445
1,200,000 6.20%, 10/01/06 ......................................................................... 1,295,712
1,275,000 6.20%, 10/01/07 ......................................................................... 1,379,588
1,355,000 6.20%, 10/01/08 ......................................................................... 1,454,864
6,300,000 6.20%, 10/01/12 ......................................................................... 6,614,874
Tampa Capital Improvement Program Revenue,
11,010,000 Series A, 8.25%, 10/01/18 ............................................................... 11,481,338
37,250,000 Series B, 8.375%, 10/01/18 .............................................................. 38,969,088
------------
195,151,828
------------
GEORGIA 3.0%
Burke County Development Authority, PCR, Georgia Power Co.,
Plant Vogle Project, MBIA Insured,
105,000,000 Series 1984-1, 6.60%, 07/01/24 .......................................................... 110,116,650
8,025,000 Series 1984-7, 6.625%, 10/01/24 ......................................................... 8,445,992
Fulton County Development Authority, Special Facilities Revenue,
Refunding, Delta Air Lines, Inc. Project,
3,400,000 6.85%, 11/01/07 ......................................................................... 3,574,352
5,500,000 6.95%, 11/01/12 ......................................................................... 5,797,880
7,975,000 Gainsville and Hall County Hospital Authority Revenue,
Anticipation Certificates, Refunding, Northeast Georgia Healthcare
Project, MBIA Insured, 6.00%, 10/01/25 .................................................... 8,072,933
Georgia Municipal Electric Authority Power Revenue,
14,000,000 Series B, 6.375%, 01/01/16 .............................................................. 14,316,960
6,325,000 Series EE, 6.40%, 01/01/23 .............................................................. 6,788,559
18,500,000 Series O, 8.125%, 01/01/17 .............................................................. 19,332,870
4,030,000 Georgia State HFA Revenue, Homeownership Opportunity Program, Series C, 6.60%, 12/01/23 .... 4,187,573
Monroe County Development Authority, PCR, Georgia Power Co.,
4,300,000 AMBAC Insured, 6.25%, 07/01/19 .......................................................... 4,434,117
16,000,000 Plant Scherer Project, 8.375%, 07/01/17 ................................................. 16,396,800
10,000,000 Putnam County Development Authority, PCR, Refunding,
Georgia Power Co., Plant Branch Project, 8.375%, 07/01/17.................................. 10,267,800
------------
211,732,486
------------
HAWAII 0.8%
Hawaii State Airports System Revenue,
1,000,000 FGIC Insured, 7.00%, 07/01/20 ........................................................... 1,081,770
12,000,000 Second Series, 7.00%, 07/01/07 .......................................................... 12,953,160
500,000 Second Series, 6.90%, 07/01/12 .......................................................... 559,215
2,830,000 Second Series, 7.00%, 07/01/18 .......................................................... 3,025,213
Hawaii State Department of Budget and Finance, Special Purposes Mortgage Revenue,
200,000 Hawaii Electric Light Co. Project, 7.20%, 12/01/14 ...................................... 212,346
1,000,000 Hawaii Electric Light Co. Project, Series A, 7.35%, 01/01/20 ............................ 1,058,260
900,000 Kaiser Hospital, 6.25%, 03/01/21 ........................................................ 924,588
2,600,000 Refunding, Kapiolani Health Care System, 6.00%, 07/01/19 ................................ 2,580,864
1,000,000 Wahiawa General Hospital Project, 7.50%, 07/01/12 ....................................... 1,057,540
HAWAII (CONT.)
Hawaii State Department of Budget and Finance, Special Purposes Revenue,
$1,000,000 6.00%, 07/01/11 ......................................................................... $ 1,015,340
2,000,000 6.20%, 07/01/16 ......................................................................... 2,025,500
6,250,000 6.25%, 07/01/21 ......................................................................... 6,329,438
5,800,000 Refunding, The Queens Health System, Series A, 5.75%, 07/01/26 .......................... 5,647,576
Hawaii State HFC, SFMR,
230,000 Series A, 7.00%, 07/01/11 ............................................................... 241,065
3,350,000 Series A, 7.10%, 07/01/24 ............................................................... 3,493,246
360,000 Series B, 6.90%, 07/01/16 ............................................................... 375,491
11,880,000 Series B, 7.00%, 07/01/31 ............................................................... 12,389,652
Honolulu City and County GO, Series A,
415,000 6.30%, 03/01/08 ......................................................................... 439,435
1,000,000 6.30%, 03/01/12 ......................................................................... 1,044,320
------------
56,454,019
IDAHO 0.1%
2,260,000 Idaho Housing Agency, Refunding, Series D-1, 6.45%, 07/01/19 ............................... 2,335,416
Idaho Housing Agency, SFMR, Senior Bond, Series B-1, FGIC Insured,
1,135,000 7.85%, 07/01/09 ......................................................................... 1,183,113
1,745,000 7.90%, 01/01/21 ......................................................................... 1,797,996
------------
5,316,525
------------
ILLINOIS 5.6%
Bryant PCR, Refunding, Central Illinois Light Co. Project,
7,200,000 Series A, 6.50%, 02/01/18 ............................................................... 7,583,544
5,000,000 Series C, 6.50%, 01/01/10 ............................................................... 5,322,450
Chicago Board of Education, Chicago School Reform, MBIA Insured,
9,700,000 6.00%, 12/01/16 ......................................................................... 9,853,163
7,600,000 6.00%, 12/01/26 ......................................................................... 7,637,316
21,300,000 Chicago COP, AMBAC Insured, 7.75%, 07/15/11 ................................................ 24,296,484
12,000,000 Chicago Gas Supply Revenue, Refunding, The Peoples Gas Light, Series A, 6.10%, 06/01/25 .... 12,089,040
Chicago-O'Hare International Airport Revenue, Special Facilities,
11,720,000 American Airlines, Inc. Project, 8.20%, 12/01/24 ........................................ 13,638,212
4,300,000 United Airlines, Inc. Project, 8.45%, 05/01/07 .......................................... 4,687,215
12,305,000 United Airlines, Inc. Project, 8.50%, 05/01/18 .......................................... 13,412,081
460,000 United Airlines, Inc. Project, Series A, 8.40%, 05/01/18 ................................ 495,829
28,220,000 United Airlines, Inc. Project, Series C, 8.20%, 05/01/18 ................................ 30,313,360
4,000,000 Chicago SFMR, Collateralized, Series A, 7.25%, 09/01/28 .................................... 4,385,640
10,000,000 Cook County Capital Improvement, Refunding, FGIC Insured, 5.875%, 11/15/22 ................. 9,980,000
10,000,000 Cook County, Orland Park School District No. 135, Refunding, FGIC Insured, 5.90%, 12/01/14 . 10,085,500
8,750,000 Cook County School District No. 140, Tinley Park, Refunding, Series A,
AMBAC Insured, 6.00%, 12/01/15 ............................................................ 8,902,950
Illinois Development Finance Authority, PCR,
7,500,000 Commonwealth Edison Co. Project, Series 1991, 7.25%, 06/01/11 ........................... 7,982,475
15,200,000 Refunding, Central Illinois Public Services Co., Series A, 6.375%, 01/01/28 ............. 15,499,136
26,550,000 Refunding, Illinois Power Co. Project, Series A, 7.375%, 07/01/21 ....................... 29,618,649
6,000,000 Illinois Educational Facilities Authority Revenue, Shedd Aquarium
Society, Series 1987-A, 8.625%, 07/01/17 .................................................. 6,150,360
4,250,000 Illinois HDA, Homeowner Mortgage, Series A-1, 6.85%, 08/01/17 .............................. 4,509,760
Illinois HDA, MF Program,
20,000,000 Lawndale Redevelopment Project, 7.10%, 12/01/34 ......................................... 20,952,600
12,915,000 Refunding, Series A, 7.10%, 07/01/26 .................................................... 13,493,721
12,000,000 Series 1, 6.625%, 09/01/12 .............................................................. 12,431,160
7,550,000 Series 1, 6.75%, 09/01/21 ............................................................... 7,784,579
2,265,000 Series C, 7.35%, 07/01/11 ............................................................... 2,352,406
7,065,000 Illinois HDA, RMR, Series B, 7.25%, 08/01/17 ............................................... 7,379,958
Illinois Health Facilities Authority Revenue,
2,000,000 Refunding, Edwards Hospital Project, 7.00%, 02/15/22 .................................... 2,107,500
1,000,000 Refunding, Servantcor, Series A, Pre-Refunded, 7.875%, 08/15/19 ......................... 1,089,120
ILLINOIS (CONT.)
Illinois Health Facilities Authority Revenue, (cont.)
$3,000,000 Refunding, Servantcor, Series B, Pre-Refunded, 7.875%, 08/15/19 ......................... $ 3,267,360
6,200,000 Refunding, Westlake Community Hospital, 7.875%, 01/01/13 ................................ 6,514,340
4,200,000 South Suburban Hospital, ETM, 7.00%, 02/15/18 ........................................... 4,831,344
2,800,000 South Suburban Hospital, Pre-Refunded, 7.00%, 02/15/18 .................................. 3,085,600
2,600,000 Illinois State COP, FSA Insured, 6.875%, 07/01/07 .......................................... 2,833,168
2,950,000 Illinois State Dedicated Tax Revenue, Civic Center, Series A, AMBAC Insured, 6.00%, 12/15/15 2,966,845
3,825,000 Lombard, Village of, Revenue, Refunding, Beacon Hill Project, 9.00%, 02/15/08 .............. 3,928,046
Metropolitan Pier and Exposition Authority, Dedicated State Tax Revenue,
McCormick Place Expansion Project, Series A,
5,000 6.50%, 06/15/22 ......................................................................... 5,145
555,000 6.50%, 06/15/27 ......................................................................... 590,881
Metropolitan Pier and Exposition Authority, Hospitality Facilities Revenue,
McCormick Place Convention Center,
1,645,000 5.75%, 07/01/06 ......................................................................... 1,637,795
9,500,000 6.25%, 07/01/17 ......................................................................... 9,434,450
12,000,000 7.00%, 07/01/26 ......................................................................... 13,285,920
4,350,000 Onterie Center HFC, Mortgage Revenue, Refunding, Series 1989-A,
MBIA Insured, 7.05%, 07/01/27 ............................................................. 4,572,068
3,970,000 Regional Transportation Authority, Series A, AMBAC Insured, 6.125%, 06/01/22 ............... 4,024,032
Southwestern Illinois Development Authority,
6,200,000 Anderson Hospital Project, Series A, 7.00%, 08/15/22 .................................... 6,401,996
1,825,000 IDR, Spectrulite Consortium, Inc. Project, 6.20%, 02/01/05 .............................. 1,896,285
3,050,000 IDR, Spectrulite Consortium, Inc. Project, 6.625%, 02/01/10 ............................. 3,175,691
2,925,000 Private Activity Revenue, Glenmark Recovery, 8.50%, 08/01/10 ............................ 3,207,877
5,255,000 Solid Waste Disposal Revenue, LaCede Steel Co., 8.375%, 08/01/08 ........................ 5,756,642
5,390,000 Solid Waste Disposal Revenue, LaCede Steel Co., 8.50%, 08/01/20 ......................... 5,898,924
7,130,000 Will County Exempt Facilities Revenue, Mobil Oil Refining Corp. Project, 6.00%, 02/01/27 ... 6,955,458
------------
388,304,075
------------
INDIANA 1.0%
17,000,000 Hammond Industrial Sewer and Solid Waste Disposal Revenue,
American Maize-Products Co. Project A, 8.00%, 12/01/24 .................................... 18,746,410
2,355,000 Hammond PCR, Stauffer Chemical Project, Guaranteed by Imperial
Chemical, Plc., Series 1982, 8.00%, 11/01/12 .............................................. 2,597,282
1,155,000 Indiana Bond Bank, Special Program, Series 1988-A, 8.375%, 02/01/18 ........................ 1,198,266
3,500,000 Indiana Health Facility Financing Authority, Hospital Revenue, Hancock
Memorial Hospital Project, Series 1990, Pre-Refunded,
8.30%, 08/15/20 ........................................................................... 3,926,965
3,240,000 Indiana State Educational Facilities Authority Revenue,
Manchester College Project, 6.85%, 10/01/18 ............................................... 3,340,051
Indiana State Housing Financing Authority, SFMR, Refunding, Series A,
2,940,000 6.75%, 01/01/10 ......................................................................... 3,071,653
12,835,000 6.80%, 01/01/17 ......................................................................... 13,280,631
Indianapolis Local Public Improvement, Series D,
13,075,000 6.75%, 02/01/20 ......................................................................... 13,855,839
4,625,000 Refunding, 6.50%, 02/01/22 .............................................................. 4,673,239
2,000,000 Muncies Edit Building Corp., First Mortgage, Series A, AMBAC Insured, 6.60%, 12/01/17 ...... 2,111,520
6,000,000 Sullivan PCR, Refunding, Indiana-Michigan Power Co. Project, Series C, 5.95%, 05/01/09 ..... 6,018,780
------------
72,820,636
------------
IOWA
2,260,000 Carroll Retirement Facility Revenue, Orchard View, Inc.
Project, Pre-Refunded, 8.25%, 02/01/13 .................................................... 2,360,141
------------
KENTUCKY 2.0%
3,900,000 Ashland PCR, Refunding, Ashland Oil, Inc. Project, 6.65%, 08/01/09 ......................... 4,121,520
10,000,000 Henderson County Solid Waste Disposal Revenue, MacMillan Bloedel Project, 7.00%, 03/01/25 .. 10,520,600
4,965,000 Jefferson County MFHR, Watterson Park Apartments Project, Series A, 6.35%, 11/15/11 ........ 5,043,149
Kenton County Airport Board, Airport Revenue, Special Facilities, Delta Air Lines, Inc.,
20,000,000 7.80%, 12/01/15 ......................................................................... 21,421,000
10,000,000 Project A, 7.50%, 02/01/20 .............................................................. 10,722,000
9,330,000 Project A, 7.125%, 02/01/21 ............................................................. 9,856,025
3,350,000 Project B, 7.25%, 02/01/22 .............................................................. 3,576,427
KENTUCKY (CONT.)
Kentucky Housing Corp., Housing Revenue,
$ 1,245,000 Series A, 6.70%, 07/01/17 ............................................................... $ 1,290,567
4,910,000 Series B, 6.625%, 07/01/14 .............................................................. 5,051,408
700,000 Kentucky State Development Financial Authority, Hospital Revenue,
Claire Medical Center Project, Pre-Refunded, 7.125%, 09/01/21 ............................ 772,737
4,500,000 Kentucky State Property and Buildings Commission Revenue, Project No. 48,
Pre-Refunded, 8.00%, 08/01/08 ............................................................. 4,789,350
Mount Sterling Lease Revenue, Kentucky League Cities, Series A,
20,375,000 6.10%, 03/01/08 ......................................................................... 20,946,111
11,765,000 6.20%, 03/01/18 ......................................................................... 11,836,061
27,160,000 Pendleton County, Multi-County Lease Revenue, Kentucky Association
of Counties Leasing Trust, Series A, 6.50%, 03/01/19 ...................................... 28,012,009
------------
137,958,964
------------
LOUISIANA 2.0%
2,000,000 Bastrop PCR, Refunding, International Paper Co. Project, 6.90%, 03/01/07 ................... 2,147,760
14,285,000 Calcasieu Parish IDB, PCR, Refunding, Gulf States Utilities Co. Project, 6.75%, 10/01/12 ... 14,552,558
Calcasieu Parish Memorial Hospital Service District Revenue,
Lake Charles Parish Memorial Hospital Project, Series A, FSA Insured,
4,310,000 6.375%, 12/01/12 ........................................................................ 4,584,418
5,530,000 6.50%, 12/01/18 ......................................................................... 5,938,667
3,145,000 6.65%, 12/01/21 ......................................................................... 3,318,573
Calcasieu Parish Public Transportation Authority Mortgage Revenue, Refunding,
3,740,000 Series 1991-A, 7.75%, 06/01/12 .......................................................... 3,947,271
425,000 Series 1992-B, 6.375%, 11/01/02 ......................................................... 442,612
705,000 Series 1992-B, 6.875%, 11/01/12 ......................................................... 730,577
2,500,000 De Soto Parish Environmental Improvement Revenue,
International Paper Co. Project, Series A, 7.70%, 11/01/18................................. 2,821,050
East Baton Rouge Mortgage Financing Authority, SFM,
6,275,000 MBS, Series A, 6.80%, 10/01/28 .......................................................... 6,485,589
2,810,000 Series C, 7.00%, 04/01/32 ............................................................... 2,923,299
4,315,000 Series D, 7.10%, 04/01/32 ............................................................... 4,481,084
1,762,661 Lafayette Public Trust Finance Authority, SFMR, Refunding, Series 1990-A, 8.50%, 11/15/12 .. 1,851,270
1,730,000 Louisiana HFA, HMR, Refunding, 7.375%, 09/01/13 ............................................ 1,768,406
3,400,000 Louisiana Office Facility Corp., Capital Facility Bonds, Statewide Lease, 7.75%, 12/01/10 .. 3,725,380
3,500,000 Louisiana Public Facilities Authority Revenue, Refunding, Series B,
Alton Ochsner Medical Foundation Project, MBIA Insured,
6.50%, 05/15/22 ........................................................................... 3,649,905
New Orleans GO, Refunding, AMBAC Insured,
10,275,000 6.125%, 10/01/16 ........................................................................ 10,710,352
8,050,000 6.20%, 10/01/21 ......................................................................... 8,374,979
2,200,000 Pointe Coupee Parish PCR, Refunding, Gulf States Utilities Co. Project, 6.70%, 03/01/13 .... 2,255,220
4,000,000 Quachita Parish Hospital Service District No. 1 Revenue,
Glenwood Regional Medical Center, Pre-Refunded, 7.50%, 07/01/21 ........................... 4,451,760
West Feliciana Parish PCR, Gulf Systems Utilities Co. Project,
2,000,000 7.70%, 12/01/14 ......................................................................... 2,186,600
3,050,000 7.00%, 11/01/15 ......................................................................... 3,192,740
41,050,000 8.00%, 12/01/24 ......................................................................... 43,813,897
------------
138,353,967
------------
MAINE 0.9%
5,000,000 Bucksport Solid Waste Disposal Revenue, Champion International Corp.
Project, 6.25%, 05/01/10 .................................................................. 5,127,700
29,300,000 Maine Financial Authority, Solid Waste Recycling Facilities Revenue,
Great Northern Paper Co., Bowater Project, 7.75%, 10/01/22 ................................ 31,918,834
2,445,000 Maine State Health and Higher Education Facilities Authority Revenue,
FSA Insured, Series B, 7.00%, 07/01/24 .................................................... 2,677,226
Maine State Housing Authority, Mortgage Purchase,
2,500,000 Series A-5, 6.20%, 11/15/16 ............................................................. 2,526,650
3,700,000 Series C, 6.55%, 11/15/12 ............................................................... 3,849,554
3,500,000 Series C, 6.65%, 11/15/24 ............................................................... 3,630,830
3,540,000 Series D, 6.45%, 11/15/07 ............................................................... 3,609,030
5,800,000 Series D, 6.70%, 11/15/15 ............................................................... 6,044,818
4,800,000 Rumford PCR, Refunding, Boise Cascade Corp. Project, 6.625%, 07/01/20 ...................... 4,984,464
------------
64,369,106
------------
MARYLAND 2.0%
Gaithersburg Hospital Facilities Improvement Revenue, Shady Grove Hospital,
$ 10,110,000 Refunding & Improvement, FSA Insured, 6.00%, 09/01/21 ...................................$ 10,233,039
43,225,000 Series A, Pre-Refunded, 8.25%, 09/01/21 ................................................. 49,500,406
Maryland State Community Development Administration,
Department of Housing and Community Development,
5,705,000 MFHR, Insured Mortgage, Series G, 6.55%, 05/15/19 ....................................... 5,866,166
965,000 SF, 7.25%, 04/01/27 ..................................................................... 1,001,853
4,900,000 Maryland State Health and Higher Educational Facilities Authority Revenue,
Hartford Memorial Hospital and Fallston General
Hospital, 8.50%, 07/01/14 ................................................................. 5,021,961
6,500,000 Montgomery County Housing Opportunity Community, SFMR,
Refunding, Series B, 6.625%, 07/01/28 ..................................................... 6,672,055
Takoma Park Hospital Facilities Revenue, Refunding, Washington Adventist Hospital, Series A,
20,125,000 Sub-Series 1, 8.25%, 09/01/21 ........................................................... 21,958,589
10,930,000 Sub-Series 1, Pre-Refunded, 8.25%, 09/01/21 ............................................. 12,539,880
23,210,000 Sub-Series 2, Pre-Refunded, 8.25%, 09/01/21 ............................................. 26,579,628
------------
139,373,577
------------
MASSACHUSETTS 2.7%
10,900,000 Agawam Resource Recovery Revenue, Springfield Resource Recovery Project,
Series 1986, 8.50%, 12/01/08 .............................................................. 11,249,236
2,310,000 Massachusetts Health and Educational Facilities Authority Revenue,
Notre Dame Health Care Center, Series A, 7.875%, 10/01/22 ................................. 2,391,035
Massachusetts State Consolidated Loan,
7,500,000 Series A, 7.50%, 06/01/04 ............................................................... 8,580,975
1,325,000 Series D, 7.00%, 07/01/07 ............................................................... 1,440,090
3,675,000 Series D, Pre-Refunded, 7.00%, 07/01/07 ................................................. 4,036,326
21,720,000 Massachusetts State Dedicated Income Tax, Fiscal Recovery Loan, Series A, 7.875%, 06/01/97 . 21,779,947
5,900,000 Massachusetts State GO, Refunding, Series B, 6.50%, 08/01/08 ............................... 6,530,061
Massachusetts State Health and Educational Facilities Authority Revenue,
9,020,000 Framingham Union Hospital, Series B, Pre-Refunded, 8.50%, 07/01/20 ...................... 10,154,987
1,100,000 Melrose-Wakefield Hospital, Series B, Refunding, 6.35%, 07/01/06 ........................ 1,148,642
1,000,000 Sisters Providence Health System, Series A, 6.50%, 11/15/08 ............................. 1,004,690
12,050,000 Sisters Providence Health System, Series A, 6.625%, 11/15/22 ............................ 12,060,243
5,250,000 Massachusetts State HFA, HDA, Series D, FGIC Insured, 6.875%, 11/15/21 ..................... 5,553,240
Massachusetts State HFA, Housing Projects, Refunding, Series A,
25,635,000 6.30%, 10/01/13 ......................................................................... 26,568,114
24,750,000 6.375%, 04/01/21 ........................................................................ 25,450,920
Massachusetts State HFA, Housing Revenue, SF, Series 41,
6,250,000 6.30%, 12/01/14 ......................................................................... 6,366,188
5,750,000 6.35%, 06/01/17 ......................................................................... 5,869,658
2,410,000 Massachusetts State HFA Revenue, SFMR, Series G, 8.10%, 12/01/14 ........................... 2,507,870
Massachusetts State Housing Facilities Authority, FGIC Insured,
9,715,000 Series C, 6.90%, 11/15/21 ............................................................... 10,289,934
250,000 Series D, 6.80%, 11/15/12 ............................................................... 266,090
6,000,000 Massachusetts State Industrial Finance Agency, First Mortgage Revenue,
Brookhaven at Lexington Retirement Project,
Pre-Refunded, 10.25%, 01/01/18 ............................................................ 6,412,920
Plymouth County COP, Series A,
10,000,000 7.00%, 04/01/12 ......................................................................... 10,900,500
5,000,000 7.00%, 04/01/22 ......................................................................... 5,435,500
------------
185,997,166
------------
MICHIGAN 0.9%
2,000,000 Battle Creek Tax Increment Finance Authority, 7.40%, 05/01/16 .............................. 2,275,420
3,805,000 Belding Area Schools, Refunding, FGIC Insured, 6.10%, 05/01/26 ............................. 3,946,850
2,445,000 Climax-Scotts Community Schools, 6.35%, 05/01/23 ........................................... 2,541,602
Detroit GO,
7,265,000 Refunding, Series B, 6.375%, 04/01/06 ................................................... 7,649,900
625,000 Refunding, Series B, 6.25%, 04/01/09 .................................................... 645,444
4,550,000 Series A, 6.70%, 04/01/10 ............................................................... 4,877,191
2,250,000 Detroit GO, Self-Insurance, Series A, 5.70%, 05/01/02 ...................................... 2,279,160
4,960,000 Detroit GO, Unlimited Tax, Series A, Pre-Refunded, 7.875%, 04/01/08 ........................ 5,229,229
MICHIGAN (CONT.)
$15,650,000 Michigan State Building Authority Revenue, Series II, 6.25%, 10/01/20 ......................$ 15,771,757
Michigan State HDA,
2,500,000 Limited Obligation Revenue, Fraser Woods Project, FSA Insured, 6.625%, 09/15/19 ......... 2,596,325
5,000,000 Rental Housing Revenue, Refunding, Series A, 6.60%, 04/01/12 ............................ 5,134,800
Michigan State HFA, SFMR, Series A,
2,000,000 6.45%, 12/01/14 ......................................................................... 2,060,720
3,055,000 6.875%, 06/01/23 ........................................................................ 3,173,198
Michigan State Hospital Finance Authority Revenue, Presbyterian Villages Obligation Group,
200,000 5.30%, 01/01/99 ......................................................................... 200,580
310,000 5.40%, 01/01/00 ......................................................................... 311,113
310,000 5.70%, 01/01/01 ......................................................................... 311,491
355,000 5.80%, 01/01/02 ......................................................................... 357,119
325,000 5.90%, 01/01/03 ......................................................................... 328,075
390,000 6.00%, 01/01/04 ......................................................................... 394,220
1,000,000 6.40%, 01/01/15 ......................................................................... 1,011,430
3,500,000 6.50%, 01/01/25 .......................................................................... 3,539,795
------------
64,635,419
------------
MINNESOTA 1.9%
9,100,000 Cloquet PCR, Refunding, Potlach Corp. Projects, 5.90%, 10/01/26 ............................ 9,099,363
Dakota County Housing, RDA, Limited Annual Appropriation Tax and Revenue,
Development Housing Facilities Project,
555,000 7.25%, 01/01/98 ......................................................................... 557,631
600,000 7.25%, 01/01/99 ......................................................................... 605,664
645,000 7.25%, 01/01/00 ......................................................................... 652,946
695,000 7.25%, 01/01/01 ......................................................................... 704,209
3,930,000 7.50%, 01/01/06 ......................................................................... 3,996,142
2,300,000 8.00%, 01/01/07 ......................................................................... 2,363,043
Minneapolis CDA, Commercial Supported Development Revenue, Refunding,
2,500,000 Limited Tax, Series 1987-3, 8.625%, 12/01/27 ............................................ 2,609,400
1,000,000 Series 1987-1, 8.625%, 12/01/12 ......................................................... 1,035,140
5,000 Minneapolis CDA and St. Paul Housing RDA, Homeownership Mortgage Revenue,
Joint Housing Program, FGIC Insured,
9.875%, 12/01/15 .......................................................................... 5,030
20,000,000 bMinnesota Agricultural and Economic Development Board Revenue,
Refunding, Health Care System, Fairview Hospital, Series A,
MBIA Insured, 5.75%, 11/15/26 ............................................................. 19,527,800
Minnesota State HFA, SFM, Series D-1,
3,655,000 6.45%, 07/01/11 ......................................................................... 3,802,114
1,440,000 6.50%, 01/01/17 ......................................................................... 1,487,088
11,370,000 Minnetonka MFR, Rental Housing, Ridgepointe Housing Project, Phase II, 8.00%, 05/15/22 ..... 11,562,722
1,500,000 Red Wing Housing, RDA, Jordan Tower II Project, 7.00%, 01/01/19 ............................ 1,561,140
14,040,000 Roseville MFR, Rental Housing, Rosepointe No. 1 Project, 8.00%, 10/01/18 ................... 14,271,379
6,000,000 St. Louis Park EDA, Tax Increment Revenue, Refunding,
FGIC Insured, Pre-Refunded, 8.40%, 09/01/09 ............................................... 6,918,480
St. Paul Port Authority,
3,730,000 Energy Park, Tax Increment Revenue, Refunding, Pre-Refunded, 8.00%, 12/01/07 ............ 4,016,128
3,465,000 IDR, Bandana Square, Series 1989-C, 7.80%, 12/01/12 ..................................... 2,792,755
230,000 IDR, Bandana Square, Series C, 7.70%, 12/01/00 .......................................... 224,931
255,000 IDR, Bandana Square, Series C, 7.70%, 12/01/01 .......................................... 247,404
270,000 IDR, Bandana Square, Series C, 7.70%, 12/01/02 .......................................... 262,243
1,690,000 IDR, Bandana Square, Series C, 7.70%, 12/01/07 .......................................... 1,431,853
415,000 IDR, Brown and Bigelow Co., Series 1979-2, 7.50%, 10/01/97 .............................. 414,091
445,000 IDR, Brown and Bigelow Co., Series 1979-2, 7.50%, 10/01/98 .............................. 442,045
480,000 IDR, Brown and Bigelow Co., Series 1979-2, 7.50%, 10/01/99 .............................. 474,787
515,000 IDR, Brown and Bigelow Co., Series 1979-2, 7.50%, 10/01/00 .............................. 507,393
550,000 IDR, Brown and Bigelow Co., Series 1979-2, 7.50%, 10/01/01 .............................. 539,891
595,000 IDR, Brown and Bigelow Co., Series 1979-2, 7.50%, 10/01/02 .............................. 582,077
640,000 IDR, Brown and Bigelow Co., Series 1979-2, 7.50%, 10/01/03 .............................. 624,128
685,000 IDR, Brown and Bigelow Co., Series 1979-2, 7.50%, 10/01/04 .............................. 666,053
MINNESOTA (CONT.)
St. Paul Port Authority, (cont.)
$ 740,000 IDR, Brown and Bigelow Co., Series 1979-2, 7.50%, 10/01/05 .............................. $ 722,862
795,000 IDR, Brown and Bigelow Co., Series 1979-2, 7.50%, 10/01/06 .............................. 775,101
855,000 IDR, Brown and Bigelow Co., Series 1979-2, 7.50%, 10/01/07 .............................. 832,120
915,000 IDR, Brown and Bigelow Co., Series 1979-2, 7.50%, 10/01/08 .............................. 889,041
670,000 IDR, Brown and Bigelow Co., Series 1979-2, 7.50%, 10/01/09 .............................. 650,001
140,000 IDR, Refunding, Common Bond Fund, Series C, Fort Road Medical Center, 7.95%, 09/01/01 ... 135,793
155,000 IDR, Refunding, Common Bond Fund, Series C, Fort Road Medical Center, 7.95%, 09/01/02 ... 150,496
1,705,000 IDR, Refunding, Common Bond Fund, Series C, Fort Road Medical Center, 7.95%, 09/01/10 ... 1,414,451
105,000 IDR, Refunding, Common Bond Fund, Series F, Ideal Security Hardware Corp., 8.00%, 12/01/01 101,854
115,000 IDR, Refunding, Common Bond Fund, Series F, Ideal Security Hardware Corp., 8.00%, 12/01/02 111,673
1,790,000 IDR, Refunding, Common Bond Fund, Series F, Ideal Security Hardware Corp., 8.00%, 12/01/12 1,470,145
9,750,000 Southern Minnesota Municipal Power Agency, Supply System Revenue,
Series A, Pre-Refunded, 8.125%, 01/01/18................................................... 10,200,060
Washington County Housing RDA,
3,000,000 Housing Development Revenue, Orleans Apartments, Project A, 8.25%, 07/01/21 ............. 3,021,360
5,210,000 Housing Development Revenue, Raymie Johnson Apartments, Pre-Refunded, 7.70%, 12/01/19 ... 5,907,254
10,000,000 Pooled Housing and Redevelopment, 7.20%, 01/01/22 ....................................... 10,421,800
------------
130,789,081
------------
MISSISSIPPI 0.7%
Claiborne County PCR, Refunding, Systems Energy Resources, Inc.,
5,700,000 7.30%, 05/01/25 ......................................................................... 5,965,164
36,500,000 6.20%, 02/01/26 ......................................................................... 35,541,145
1,805,000 Mississippi Home Corp., SFR, Refunding, Senior Series A, FGIC Insured, 9.25%, 03/01/12 ..... 1,932,361
2,440,000 Mississippi State Educational Facilities Authority Revenue,
Private Nonprofit Institutions of Higher Learning, Tougaloo College
Project, Series A, 6.50%, 06/01/18 ........................................................ 2,377,097
------------
45,815,767
------------
MISSOURI 1.0%
3,000,000 Hazelwood IDA, MFHR, Refunding, Lakes Apartments Project, Series A, 6.10%, 09/20/26 ........ 3,039,030
10,000,000 Kansas City School District Building Corp., Leasehold Revenue,
Capital Improvement Project, Series A, FGIC Insured,
Pre-Refunded, 7.90%, 02/01/08 ............................................................. 10,485,700
1,415,000 Marion County Nursing Home District Revenue, Refunding, Pre-Refunded, 9.00%, 08/01/03 ...... 1,479,609
Missouri State Health and Educational Facilities Authority Revenue,
5,000,000 Series B, MBIA Insured, 6.25%, 02/15/12 ................................................. 5,212,100
3,750,000 Sisters of St. Mary's Health Care Project, MBIA Insured, Pre-Refunded, 7.75%, 06/01/16 .. 3,967,838
Moberly IDA, Hospital Revenue, Refunding, Moberly Regional Medical Center, Inc. Project,
3,530,000 8.625%, 03/01/02 ........................................................................ 3,671,694
8,955,000 Pre-Refunded, 8.75%, 03/01/16 ........................................................... 9,515,314
4,315,000 Newton County IDA, Hospital Revenue, Refunding, Sale Hospital, Inc. Project,
Pre-Refunded, 9.00%, 01/01/05.............................................................. 4,493,641
16,250,000 St. Louis County IDA, Health Facilities Revenue, Refunding & Improvement,
First Mortgage, Normandy Osteopathic Hospitals
Project, 9.125%, 08/01/13 ................................................................. 16,927,788
6,000,000 St. Louis Parking Facilities Revenue, Pre-Refunded, 6.625%, 12/15/21 ....................... 6,609,000
3,600,000 West Plains IDA, Hospital Revenue, Ozarks Medical Center Project, Series A, 8.625%, 09/15/20 3,846,960
------------
69,248,674
------------
MONTANA 0.7%
Forsyth County PCR,
10,000,000 Puget Sound Power and Light Co. Project, AMBAC Insured, 6.80%, 03/01/22 ................. 10,736,600
3,250,000 Refunding, The Montana Power Co. Colstrip Project, Series A, 6.125%, 05/01/23 ........... 3,252,990
4,225,000 Refunding, The Montana Power Co., Series B, AMBAC Insured, 5.90%, 12/01/23 .............. 4,227,577
20,385,000 Refunding, The Montana Power Co., Series B, MBIA Insured, 5.90%, 12/01/23 ............... 20,397,435
2,000,000 Montana State Health Facilities Authority Revenue,
Montana Developmental Center Project, 6.40%, 06/01/19 ..................................... 2,070,780
Montana State Housing Board, Refunding, SF Program,
2,835,000 Series A, 6.50%, 12/01/22 ............................................................... 2,892,437
6,800,000 Series B-1, 6.25%, 12/01/21 ............................................................. 6,888,740
------------
50,466,559
------------
NEBRASKA 0.1%
$6,160,000 Nebraska Investment Financial Authority, 7.00%, 11/01/09 ................................... $ 6,348,003
------------
NEVADA 3.6%
2,000,000 Churchill County Health Care Facilities Revenue, Western Health Network, Series A,
MBIA Insured, 6.25%, 01/01/14.............................................................. 2,078,300
17,500,000 Clark County Airport System Improvement Revenue, 8.25%, 07/01/15 ........................... 18,484,025
5,095,000 Clark County HFC, MFHR, FHA Insured, 7.75%, 07/01/23 ....................................... 5,206,581
Clark County IDR,
12,500,000 Refunding, Nevada Power Co. Project, Series C, 7.20%, 10/01/22 .......................... 13,201,875
18,080,000 Southwest Gas Corp., Series A, 7.30%, 09/01/27 .......................................... 19,146,901
10,000,000 Southwest Gas Corp., Series A, 6.50%, 12/01/33 .......................................... 10,044,900
62,470,000 Southwest Gas Corp., Series B, 7.50%, 09/01/32 .......................................... 66,529,925
4,500,000 Humboldt County PCR, Refunding, Sierra Pacific Power Co., Series A,
AMBAC Insured, 6.30%, 07/01/22 ............................................................. 4,657,635
5,405,000 Nevada Housing Division, Multi-Unit Housing Revenue, Issue B, 6.55%, 10/01/25 .............. 5,585,743
8,190,000 Nevada Housing Division, Refunding, Issue C-2, 6.75%, 10/01/26 ............................. 8,477,060
Nevada Housing Division, SF Program,
3,430,000 Issue 1988-A, FI/GML, 8.30%, 10/01/19 ................................................... 3,565,245
3,110,000 Issue 1988 A-2, FI/GML, 8.375%, 10/01/19 ................................................ 3,230,233
3,900,000 Refunding, Program A-1, 6.25%, 10/01/26 ................................................. 3,963,531
Nevada State Colorado River, Series 1994,
31,345,000 5.50%, 07/01/27 ......................................................................... 30,052,959
15,915,000 Pre-Refunded, 6.50%, 07/01/24 ........................................................... 17,396,368
10,275,000 Nevada State Municipal Bond Bank Project No. 40-41-A, ETM, 6.375%, 12/01/17 ................ 11,188,961
Reno RDA, Tax Allocation,
2,695,000 Downtown Redevelopment Project, Series C, Pre-Refunded, 7.75%, 09/01/05 ................. 2,982,233
4,255,000 Downtown Redevelopment Project, Series D, 7.625%, 09/01/16 .............................. 4,589,273
4,035,000 Downtown Redevelopment Project, Series D, Pre-Refunded, 7.625%, 09/01/16 ................ 4,490,955
3,000,000 Refunding, Series A, 6.20%, 06/01/18 .................................................... 2,965,080
5,000,000 Washoe County Gas and Water Facilities Revenue, Refunding, AMBAC Insured, 6.30%, 12/01/14 .. 5,202,200
9,295,000 Washoe County Hospital Facility Revenue, Washoe Medical Center, Inc.
Project, Series A, AMBAC Insured, 6.25%, 06/01/13 ......................................... 9,639,380
------------
252,679,363
------------
NEW HAMPSHIRE 1.7%
6,198,000 Nashua Housing Authority, MFR, Refunding, Clocktower Project, FGIC Insured, 6.25%, 06/20/33
6,162,176
New Hampshire Higher Education and Health Facilities Authority Revenue,
9,580,000 Kendal at Hanover Project, Pre-Refunded, 8.00%, 10/01/19 ................................ 10,473,335
2,300,000 St. Joseph Hospital, 7.50%, 01/01/16 .................................................... 2,416,771
4,275,000 The Hitchcock Clinic, MBIA Insured, 6.00%, 07/01/27 ..................................... 4,278,206
New Hampshire State HFA,
4,920,000 MFHR, Series 1, 7.10%, 01/01/14 ......................................................... 5,117,686
4,310,000 SF Residential, Series A, 8.50%, 07/01/14 ............................................... 4,485,589
6,810,000 SFMR, Series E, 6.75%, 07/01/19 ......................................................... 7,108,482
5,105,000 SFMR, Series E, 6.80%, 07/01/25 ......................................................... 5,328,242
New Hampshire State IDA,
6,870,000 Pollution Control Public Service Co., Project A, 7.65%, 05/01/21 ........................ 7,002,728
50,690,000 Pollution Control Public Service Co., Project B, 7.50%, 05/01/21 ........................ 51,668,317
7,450,000 Pollution Control Public Service Co., Project C, 7.65%, 05/01/21 ........................ 7,593,934
1,820,000 Resource Recovery Revenue, SES Concord Co. Project, 8.15%, 01/01/00 ..................... 1,886,994
5,000,000 Resource Recovery Revenue, SES Concord Co. Project, 8.50%, 01/01/09 ..................... 5,191,150
------------
118,713,610
------------
NEW JERSEY 0.2%
2,500,000 Mercer County Improvement Authority, Refunding, Solid Waste, 5.75%, 09/15/16 ............... 2,491,100
4,425,000 New Jersey EDA, First Mortgage, Gross Revenue, Mega Care, Inc. Project,
Pre-Refunded, 8.625%, 08/01/07 ............................................................ 4,562,352
NEW JERSEY (CONT.)
New Jersey Health Care Facilities, Financing Authority Revenue,
$3,975,000 Cathedral Health Service, 7.25%, 02/15/21 ............................................... $ 4,255,357
900,000 Community Memorial Hospital Association, Series C, 8.00%, 07/01/14 ...................... 948,105
4,150,000 Zurbrugg Memorial Hospital Issue, Series C, 8.50%, 07/01/12 ............................. 4,251,343
------------
16,508,257
------------
NEW MEXICO 1.0%
5,000,000 Albuquerque Airport Revenue, Series A, Pre-Refunded, 9.25%, 07/01/19 ....................... 5,115,750
10,435,000 Farmington PCR, Refunding, Public Service Co. of New Mexico, Series A,
AMBAC Insured, 6.375%, 12/15/22 ........................................................... 10,864,192
17,000,000 Lordsburg PCR, Refunding, Phelps Dodge Corp. Project, 6.50%, 04/01/13 ...................... 17,821,610
16,615,000 New Mexico State Mortgage Financal Authority, SFM, Refunding, Series A, 6.85%, 07/01/10 .... 17,375,967
17,000,000 University of New Mexico Revenue, Series 1989, Pre-Refunded, 7.90%, 06/01/19 ............... 18,422,900
------------
69,600,419
------------
NEW YORK 14.0%
Metropolitan Transportation Authority Revenue,
8,950,000 Commuter Facilities, Series A, FGIC Insured, 6.00%, 07/01/16 ............................ 9,183,416
9,225,000 Commuter Facilities, Series A, FGIC Insured, 6.00%, 07/01/21 ............................ 9,427,304
11,050,000 Commuter Facilities, Series A, FGIC Insured, 6.10%, 07/01/26 ............................ 11,336,748
18,210,000 Refunding, Transit Facilities, Series M, 6.00%, 07/01/14 ................................ 17,789,167
3,000,000 Service Contract, Transit Facilities, Series 6, 7.00%, 07/01/09 ......................... 3,220,830
3,630,000 Transit Facilities, Series A, FSA Insured, 6.00%, 07/01/16 .............................. 3,706,629
6,260,000 Transit Facilities, Series A, FSA Insured, 6.10%, 07/01/21 .............................. 6,417,251
1,245,000 New Rochelle IDA, Civic Facilities Revenue, College of New Rochelle Project, 6.625%, 07/01/12 1,279,399
New York City GO,
5,000,000 Refunding, Series A, 6.25%, 08/01/16 .................................................... 5,028,250
1,500,000 Refunding, Series B, 6.20%, 08/15/06 .................................................... 1,554,390
26,875,000 Refunding, Series B, 6.30%, 08/15/08 .................................................... 27,712,425
21,740,000 Refunding, Series B, 6.375%, 08/15/10 ................................................... 22,288,935
8,500,000 Refunding, Series E, 5.75%, 02/15/09 .................................................... 8,328,470
14,000,000 Refunding, Series F, 6.00%, 08/01/13 .................................................... 13,644,400
13,035,000 Refunding, Series H, 6.25%, 08/01/15 .................................................... 13,166,654
60,685,000 Refunding, Series H, 6.125%, 08/01/25 ................................................... 59,519,848
5,000,000 Refunding, Series H, Subseries H-1, 6.125%, 08/01/11 .................................... 5,011,650
1,180,000 Series 1987-A, Pre-Refunded, 8.50%, 11/01/12 ............................................ 1,223,967
3,355,000 Series 1987-A, Pre-Refunded, 8.50%, 11/01/13 ............................................ 3,480,007
2,805,000 Series 1987-A, Pre-Refunded, 8.75%, 11/01/14 ............................................ 2,912,880
2,040,000 Series 1987-D, Pre-Refunded, 8.50%, 08/01/09 ............................................ 2,102,975
2,610,000 Series 1989-E, 6.50%, 12/01/12 .......................................................... 2,634,351
3,000,000 Series 1990-B, ETM, 8.00%, 06/01/01 ..................................................... 3,351,120
6,810,000 Series 1990-B, Pre-Refunded, 7.50%, 10/01/11 ............................................ 7,362,223
3,285,000 Series 1991-A, 7.75%, 08/15/17 .......................................................... 3,628,447
5,000 Series 1991-A, 8.00%, 08/15/20 .......................................................... 5,605
15,000 Series 1991-A, 8.00%, 08/15/21 .......................................................... 16,783
1,000,000 Series 1991-A, Pre-Refunded, 8.00%, 03/15/12 ............................................ 1,101,840
13,400,000 Series 1991-A, Pre-Refunded, 8.00%, 03/15/14 ............................................ 14,764,656
1,115,000 Series 1991-A, Pre-Refunded, 8.00%, 03/15/15 ............................................ 1,228,552
3,000,000 Series 1991-A, Pre-Refunded, 8.00%, 03/15/16 ............................................ 3,301,260
1,000,000 Series 1991-B, 8.25%, 06/01/05 .......................................................... 1,166,610
15,000,000 Series 1991-B, 7.00%, 02/01/19 .......................................................... 15,867,900
1,760,000 Series 1991-D, 8.00%, 08/01/99 .......................................................... 1,890,768
145,000 Series 1991-D, 8.25%, 08/01/13 .......................................................... 163,775
85,000 Series 1991-D, 8.25%, 08/01/14 .......................................................... 96,006
50,000 Series 1991-D, 8.00%, 08/01/16 .......................................................... 56,289
100,000 Series 1991-D, 8.00%, 08/01/17 .......................................................... 111,967
50,000 Series 1991-D, 8.00%, 08/01/18 .......................................................... 56,065
30,000 Series 1991-D, 8.00%, 08/01/19 .......................................................... 33,614
NEW YORK (CONT.)
NEW YORK CITY GO, (CONT.)
$ 240,000 Series 1991-D, ETM, 8.00%, 08/01/99 ..................................................... $ 257,410
10,880,000 Series 1991-D, Pre-Refunded, 8.25%, 08/01/12 ............................................ 12,436,384
7,605,000 Series 1991-D, Pre-Refunded, 8.25%, 08/01/13 ............................................ 8,692,895
4,255,000 Series 1991-D, Pre-Refunded, 8.25%, 08/01/14 ............................................ 4,854,870
160,000 Series 1991-F, 8.25%, 11/15/15 .......................................................... 181,707
200,000 Series 1991-F, 8.25%, 11/15/17 .......................................................... 227,220
1,840,000 Series 1991-F, Pre-Refunded, 8.25%, 11/15/15 ............................................ 2,117,803
2,300,000 Series 1991-F, Pre-Refunded, 8.25%, 11/15/17 ............................................ 2,642,194
10,000,000 Series 1992-B, 7.50%, 02/01/04 .......................................................... 10,926,000
9,300,000 Series 1992-B, 6.75%, 10/01/15 .......................................................... 9,543,846
5,000,000 Series 1992-D, 7.30%, 02/01/01 .......................................................... 5,401,350
3,000,000 Series 1992-H, 7.10%, 02/01/12 .......................................................... 3,199,950
10,000,000 Series 1992-H, 7.20%, 02/01/14 .......................................................... 10,819,900
1,850,000 Series 1993-A, Pre-Refunded, 8.00%, 03/15/13 ............................................ 2,038,404
460,000 Series 1993-B, 8.50%, 08/01/09 .......................................................... 473,616
11,660,000 Series 1993-B, Pre-Refunded, 8.00%, 03/15/17 ............................................ 12,847,454
14,500,000 Series 1994-A, 6.125%, 08/01/06 ......................................................... 14,946,745
21,810,000 Series 1994-A, 6.20%, 08/01/07 .......................................................... 22,440,309
4,390,000 Series 1994-A, 6.25%, 08/01/08 .......................................................... 4,500,848
8,000,000 Series 1994-B, Sub-Series B-1, 7.30%, 08/15/11 .......................................... 8,706,320
11,750,000 Series 1994-H, Sub-Series H-1, 6.125%, 08/01/09 ......................................... 11,859,980
8,050,000 Series 1995-F, 6.50%, 02/15/07 .......................................................... 8,423,681
7,540,000 Series 1995-F, 6.50%, 02/15/08 .......................................................... 7,870,780
16,000,000 Series 1995-F, 6.60%, 02/15/10 .......................................................... 16,580,640
4,810,000 Series A, 7.75%, 08/15/13 ............................................................... 5,410,829
245,000 Series A, 7.75%, 08/15/14 ............................................................... 270,316
15,000 Series B, 8.00%, 06/01/98 ............................................................... 15,592
205,000 Series B, 8.25%, 06/01/02 ............................................................... 230,967
190,000 Series B, 7.50%, 10/01/11 ............................................................... 202,044
630,000 Series B, 7.50%, 10/01/12 ............................................................... 669,495
1,300,000 Series B, 6.75%, 10/01/17 ............................................................... 1,339,507
1,420,000 Series B, ETM, 8.00%, 06/01/98 .......................................................... 1,477,439
4,295,000 Series B, Pre-Refunded, 8.25%, 06/01/02 ................................................. 4,890,072
10,355,000 Series B, Pre-Refunded, 7.50%, 10/01/12 ................................................. 11,194,687
2,960,000 Series B, Sub-Series B-1, 7.00%, 08/15/16 ............................................... 3,200,411
40,000 Series B, Sub-Series B-1, Pre-Refunded, 7.00%, 08/15/16 ................................. 44,846
3,550,000 Series C, 7.25%, 08/15/24 ............................................................... 3,743,475
1,295,000 Series C, Pre-Refunded, 7.25%, 08/15/24 ................................................. 1,418,867
1,860,000 Series C, Sub-Series C-1, 7.00%, 08/01/17 ............................................... 1,972,251
14,275,000 Series C, Sub-Series C-1, 7.00%, 08/01/18 ............................................... 15,169,757
70,000 Series C, Sub-Series C-1, Pre-Refunded, 7.00%, 08/01/17 ................................. 77,699
5,725,000 Series C, Sub-Series C-1, Pre-Refunded, 7.00%, 08/01/18 ................................. 6,326,640
700,000 Series D, 7.625%, 02/01/15 .............................................................. 771,190
255,000 Series D, 7.50%, 02/01/16 ............................................................... 280,067
5,000 Series D, 8.50%, 08/01/16 ............................................................... 5,118
865,000 Series D, 7.50%, 02/01/17 ............................................................... 950,029
31,300,000 Series D, 6.00%, 02/15/25 ............................................................... 30,270,856
160,000 Series D, Group B, 8.25%, 08/01/11 ...................................................... 180,653
245,000 Series D, Group B, 8.25%, 08/01/12 ...................................................... 278,430
8,300,000 Series D, Pre-Refunded, 7.625%, 02/01/15 ................................................ 9,362,981
4,745,000 Series D, Pre-Refunded, 7.50%, 02/01/16 ................................................. 5,327,876
11,135,000 Series D, Pre-Refunded, 7.50%, 02/01/17 ................................................. 12,502,823
835,000 Series F, 8.20%, 11/15/04 ............................................................... 936,553
4,500,000 Series F, Pre-Refunded, 8.20%, 11/15/04 ................................................. 5,170,365
4,500,000 Series G, 6.00%, 10/15/26 ............................................................... 4,360,950
NEW YORK (CONT.)
NEW YORK CITY GO, (CONT.)
$4,000,000 Series H, 7.00%, 02/01/16 ............................................................... $ 4,293,240
36,610,000 Series I, 6.25%, 04/15/13 ............................................................... 36,976,466
New York City Health and Hospital Authority Local Government Revenue, Series A,
5,010,000 6.00%, 02/15/07 ......................................................................... 5,024,830
17,735,000 6.30%, 02/15/20 ......................................................................... 17,563,503
New York City Municipal Water Finance Authority, Water and Sewer System Revenue,
8,500,000 Series 1987-A, Pre-Refunded, 9.00%, 06/15/17 ............................................ 8,717,430
2,965,000 Series 1989-B, Pre-Refunded, 7.00%, 06/15/19 ............................................ 3,101,449
2,455,000 Series 1994-A, 7.10%, 06/15/12 .......................................................... 2,671,924
4,980,000 Series 1994-A, 7.00%, 06/15/15 .......................................................... 5,392,045
4,000,000 Series B, 5.875%, 06/15/26 .............................................................. 3,920,480
3,000,000 Series B, MBIA Insured, 5.75%, 06/15/26 ................................................. 2,941,620
New York State Dormitory Authority Revenue,
4,000,000 City University General Resources, Series 2, MBIA Insured, 6.25%, 07/01/19 .............. 4,127,400
16,860,000 City University System, Third Generation Resources, Series 2, 6.00%, 07/01/20 ........... 16,774,857
15,000,000 Mental Health Services Facilities, Series A, 6.00%, 08/15/17 ............................ 14,756,550
5,000,000 Mental Health Services Facilities, Series A, 5.75%, 02/15/27 ............................ 4,721,300
6,750,000 Our Lady Nursing Home, FHA Insured, 5.90%, 08/01/20 ..................................... 6,707,070
19,650,000 Refunding, City University System, Third Generation Resources, Series 2, 6.00%, 07/01/26
19,276,847
4,240,000 Refunding, State University Educational Facilities, Series B, 7.375%, 05/15/14 .......... 4,573,942
2,000,000 Refunding, State University Educational Facilities, Series B, 7.00%, 05/15/16 ........... 2,113,640
5,000,000 State University Educational Facilities, 6.00%, 05/15/18 ................................ 4,929,400
New York State Energy Research and Development Authority, Electric Facilities Revenue,
5,000,000 Consolidated Edison Co., Inc., Project B, 9.25%, 09/15/22 ............................... 5,175,600
17,500,000 Long Island Light, Series A, 7.15%, 06/01/20 ............................................ 18,480,000
1,500,000 Long Island Light, Series A, 7.15%, 02/01/22 ............................................ 1,584,000
8,500,000 Refunding, Consolidated Edison Co., Inc., Series A, 6.10%, 08/15/20 ..................... 8,640,930
14,070,000 New York State HFA, Refunding, Health Facilities, New York City, Series A, 5.90%, 05/01/05 . 14,239,403
New York State HFA, Refunding, Housing Project Mortgage, Series A, FSA Insured,
5,550,000 6.10%, 11/01/15 ......................................................................... 5,598,563
4,250,000 6.125%, 11/01/20 ........................................................................ 4,278,645
New York State HFA, Service Contract Revenue,
4,675,000 Refunding, Series C, 5.875%, 09/15/14 ................................................... 4,538,537
25,500,000 Refunding, Series C, 6.125%, 03/15/20 ................................................... 25,357,965
3,155,000 Series A, 6.375%, 09/15/14 .............................................................. 3,204,628
3,785,000 Series A, 6.375%, 09/15/16 .............................................................. 3,831,139
10,000,000 Series A, 6.50%, 03/15/25 ............................................................... 10,248,800
New York State Local Government Assistance Corp.,
6,000,000 Series A, 6.50%, 04/01/20 ............................................................... 6,301,740
13,715,000 Series C, 5.50%, 04/01/22 ............................................................... 12,900,740
New York State Medical Care Facilities, Financial Agency Revenue,
7,190,000 Hospital and Nursing Home, FSA Mortgage Insured, 6.50%, 02/15/34 ........................ 7,421,806
7,600,000 Hospital Mortgage, Series A, AMBAC Insured, 6.50%, 08/15/29 ............................. 8,102,892
11,015,000 Refunding, Hospital and Nursing Home, FSA Mortgage Insured, 6.40%, 08/15/14 ............. 11,620,164
12,500,000 The Hospital for Special Surgery, Series A, 6.375%, 08/15/24 ............................ 12,972,375
New York State Tollway Authority, Service Contract Revenue, Local Highway and Bridge,
11,600,000 6.25%, 04/01/14 ......................................................................... 11,744,304
13,200,000 5.75%, 04/01/16 ......................................................................... 12,785,520
7,685,000 New York State Urban Development Corp., Correctional Capital Facilities, Series 5, 6.10%, 01/01/12
7,773,608
11,720,000 New York State Urban Development Corp. Revenue, Youth Facilities, 6.00%, 04/01/17 .......... 11,665,268
4,800,000 Warren and Washington Counties IDA Revenue, Refunding,
Adirondack Resource Recovery Project, Series A, 7.90%, 12/15/07 ........................... 4,912,224
------------
977,179,361
------------
NORTH CAROLINA 3.0%
Charlotte-Mecklenberg Hospital Authority, Health Care System Revenue, Series A,
$9,900,000 5.90%, 01/15/16 ......................................................................... $ 9,977,022
5,000,000 5.875%, 01/15/26 ........................................................................ 4,948,150
North Carolina Eastern Municipal Power Agency, Power System Revenue,
20,000,000 Refunding, Series 1988-A, Pre-Refunded, 8.00%, 01/01/21 ................................. 20,907,200
3,250,000 Refunding, Series 1989-A, 6.50%, 01/01/24 ............................................... 3,260,205
25,700,000 Refunding, Series 1991-A, 6.50%, 01/01/17 ............................................... 26,084,472
6,875,000 Refunding, Series 1993-B, 6.25%, 01/01/12 ............................................... 6,886,688
39,030,000 Refunding, Series 1993-B, 6.25%, 01/01/23 ............................................... 39,831,286
4,000,000 Refunding, Series 1993-B, FGIC Insured, 6.25%, 01/01/23 ................................. 4,099,680
1,250,000 Refunding, Series B, 6.00%, 01/01/22 .................................................... 1,235,613
11,175,000 Refunding, Series B, MBIA Insured, 5.80%, 01/01/16 ...................................... 11,211,542
13,325,000 Refunding, Series B, MBIA Insured, 5.875%, 01/01/21 ..................................... 13,396,289
24,420,000 Series 1993-G, 5.75%, 12/01/16 .......................................................... 23,129,647
1,355,000 Series B, 6.00%, 01/01/05 ............................................................... 1,380,650
7,440,000 Series D, 5.875%, 01/01/13 .............................................................. 7,220,892
North Carolina Municipal Power Agency No. 1, Catawba Electric Revenue, Refunding,
12,435,000 5.75%, 01/01/15 ......................................................................... 11,863,985
15,620,000 Series 1982, 6.25%, 01/01/17 ............................................................ 15,637,182
5,000,000 Wake County IPC, Financing Authority Revenue, Carolina Power and Light, 6.90%, 04/01/09 .... 5,348,700
------------
206,419,203
------------
NORTH DAKOTA 0.4%
7,750,000 Dickinson Health Care Facilities Revenue, BHS Long-Term Care, Inc., 7.625%, 02/15/20 ....... 8,188,108
358,000 Ellendale MFHR, Ellendale Manor Apartments Project, 9.75%, 07/01/16 ........................ 362,121
Mercer County PCR, Basin Power Corp.,
9,130,000 Second Series, AMBAC Insured, 6.05%, 01/01/19 ........................................... 9,377,514
11,675,000 Series 1984-E, 7.00%, 01/01/19 .......................................................... 12,204,812
800,000 Wahpeton MFHR, Evergreen Apartments Project, 9.75%, 07/01/16 ............................... 809,208
------------
30,941,763
------------
OHIO 1.2%
Dayton Special Facilities Revenue, Refunding, Emery Air Freight Corp., Emery Worldwide Air, Inc.,
4,000,000 Series E, 6.05%, 10/01/09 ............................................................... 4,055,480
2,750,000 Series F, 6.05%, 10/01/09 ............................................................... 2,788,143
6,740,000 Franklin County Hospital Facility Mortgage Revenue, Refunding,
Presbyterian Retirement Services, Series 1987-A, 9.00%, 07/01/10 .......................... 6,969,834
2,820,000 Franklin County Nursing Home, First Mortgage Revenue,
Volunteers of America Care Facilities Project, 8.75%, 11/01/18 ............................ 2,945,998
Montgomery County Health Systems Revenue, Franciscan Facility, Series B-2,
2,200,000 8.10%, 07/01/01 ......................................................................... 2,333,474
12,000,000 8.10%, 07/01/18 ......................................................................... 13,893,600
Ohio State Air Quality Development Authority Revenue,
12,000,000 Refunding, Dayton Power and Light Co. Project, 6.10%, 09/01/30 .......................... 12,173,040
6,325,000 Toledo Edison, Series B, 8.00%, 05/15/19 ................................................ 6,694,949
1,615,000 Ohio State EDR, Good Samaritan Medical Center, Series 1990-3, 7.875%, 12/01/10 ............. 1,706,118
3,250,000 Ohio State Water Development Authority Revenue, Refunding,
Water Development Dayton Power, Series A, 6.40%, 08/15/27 ................................. 3,419,163
Ohio State Water Development Facilities Authority, PCR,
4,000,000 Cleveland Electric Illumination Co. Project, Series A-1, 9.75%, 11/01/22 ................ 4,074,600
10,000,000 Cleveland Electric Illumination Co. Project, Series A-2, 9.75%, 11/01/22 ................ 10,186,500
10,000,000 Toledo Edison, Series A, 8.00%, 05/15/19 ................................................ 10,584,900
------------
81,825,799
------------
OKLAHOMA 1.3%
Canadian County HFA, SFMR, Series 1990-A,
1,680,000 7.70%, 09/01/05 ......................................................................... 1,738,766
3,500,000 7.80%, 09/01/12 ......................................................................... 3,637,795
6,000,000 Jackson County Memorial Hospital Authority Revenue, Refunding,
Jackson Memorial Hospital Project, Pre-Refunded,
9.00%, 08/01/15 ........................................................................... 6,192,240
OKLAHOMA (CONT.)
$19,700,000 Oklahoma State Turnpike System Authority, First Senior Revenue,
Pre-Refunded, 7.875%, 01/01/21 ............................................................$ 21,139,396
610,000 Tulsa County Home Financial Authority, Mortgage Revenue,
Series D, GNMA Insured, 6.95%, 12/01/22 ................................................... 630,203
Tulsa County Municipal Airport Revenue,
4,000,000 American Airlines-AMR Corp., 7.35%, 12/01/11 ............................................ 4,325,680
18,530,000 American Airlines, Inc. Project, 6.25%, 06/01/20 ........................................ 18,597,449
11,000,000 American Airlines, Inc. Project, 7.375%, 12/01/20 ....................................... 11,712,030
Tulsa County Parking Authority, Series B,
3,000,000 6.90%, 12/01/07 ......................................................................... 3,270,600
5,500,000 7.00%, 12/01/14 ......................................................................... 5,898,255
Tulsa County Public Facilities Authority, Recreation Facility Revenue, Pre-Refunded,
2,000,000 8.875%, 02/01/03 ........................................................................ 2,108,920
2,000,000 9.00%, 02/01/08 ......................................................................... 2,110,720
2,740,000 Tulsa Housing Assistance Corp. Revenue, First Lien, Refunding, 6.80%, 07/01/11 ............. 2,839,928
2,000,000 Tulsa Industrial Authority, Hospital Revenue, St. John Medical Center Project,
Series A, 6.25%, 02/15/14 ................................................................. 2,062,380
4,000,000 Valley View Hospital Authority Revenue, Refunding, Valley View Regional
Medical Center, 6.00%, 08/15/14 ........................................................... 3,758,200
------------
90,022,562
------------
OREGON 0.2%
5,000,000 bOregon State Department of Administrative Services COP, Series A,
AMBAC Insured, 5.80%, 05/01/24 ............................................................ 4,972,950
5,500,000 Oregon State EDR, Georgia Pacific Corp., Series CLVII, 6.35%, 08/01/25 ..................... 5,543,285
------------
10,516,235
------------
PENNSYLVANIA 3.6%
5,250,000 Allegheny County IDA Revenue, Environmental Improvement, 6.70%, 12/01/20 ................... 5,477,798
14,250,000 Beaver County IDA, PCR, Ohio Edison Co., Beaver Valley Project, Series A, 7.75%, 09/01/24 .. 14,875,005
Cambria County HDA, Hospital Revenue, Conemaugh Valley
Memorial Hospital, Refunding, Series B,
9,600,000 6.30%, 07/01/08 ......................................................................... 10,170,528
10,740,000 6.375%, 07/01/18 ........................................................................ 11,090,017
3,000,000 Pre-Refunded, 8.875%, 07/01/18 .......................................................... 3,213,480
Delaware County IDA Revenue, Refunding,
6,500,000 Philadelphia Electric, Series 1991, 7.375%, 04/01/21 .................................... 7,008,755
41,300,000 Resource Recovery Project, Series A, 8.10%, 12/01/13 .................................... 42,861,966
22,500,000 Lancaster County Solid Waste Management Authority, Resource Recovery
System Revenue, Series A, 8.50%, 12/15/10 ................................................. 23,609,475
4,000,000 Lehigh County IDA, PCR, Refunding, Pennsylvania Power and Light Co. Project,
Series A, MBIA Insured, 6.15%, 08/01/29 ................................................... 4,094,080
5,500,000 Montgomery County Higher Education and Health Authority, Hospital Revenue,
Pre-Refunded, Jeanes Health System Project,
8.75%, 07/01/20 ........................................................................... 6,223,250
5,000,000 Pennsylvania EDA, Financing Authority Revenue, Macmillan, L.P. Project, 7.60%, 12/01/20 .... 5,561,400
13,500,000 Pennsylvania EDA, Financing Resources Recovery Revenue,
Colver Project, Series D, 7.125%, 12/01/15 ................................................ 14,132,475
33,280,000 Pennsylvania State Financial Authority Revenue, Refunding, Municipal
Capital Improvements Program, 6.60%, 11/01/09 ............................................. 35,406,592
Pennsylvania State HFA,
10,590,000 Refunding, Rental Housing, FGIC Insured, 6.40%, 07/01/12 ................................ 10,869,470
3,635,000 SFM, Series 1991, 7.15%, 04/01/15 ....................................................... 3,806,936
2,000,000 Pennsylvania State Higher Educational Facilities Authority, College and
University Revenues, Lycoming College, Pre-Refunded,
8.375%, 10/01/18 .......................................................................... 2,148,980
4,445,000 Pennsylvania State Pooled Finance Authority, Lease Revenue,
Capital Improvement, Series B, MBIA Insured, 8.00%, 11/01/09 .............................. 4,660,627
Philadelphia Gas Works Revenue,
2,850,000 Series 13, Pre-Refunded, 7.70%, 06/15/21 ................................................ 3,201,719
3,950,000 Series A, 6.375%, 07/01/26 .............................................................. 4,023,628
Philadelphia GO, Refunding, Series 1987-A,
1,000,000 11.50%, 08/01/97 ........................................................................ 1,015,780
1,545,000 11.50%, 08/01/98 ........................................................................ 1,670,531
2,400,000 11.50%, 08/01/99 ........................................................................ 2,721,792
1,000,000 11.50%, 08/01/00 ........................................................................ 1,180,820
7,635,000 Philadelphia Hospital and Higher Education Facilities Authority, Hospital Revenue,
Albert Einstein Medical Center, 7.50%, 04/01/99 ........................................... 7,935,056
3,995,000 Philadelphia Housing RDA Revenue, Sub-Series 2-B, 8.625%, 08/01/26 ......................... 4,033,712
1,000,000 Philadelphia Municipal Authority, Gas Works Lease Revenue, 7.50%, 05/01/01 ................. 1,062,930
10,845,000 Philadelphia Water and Sewer Revenue, Series 10, ETM, 7.35%, 09/01/04 ...................... 12,178,501
PENNSYLVANIA (CONT.)
$5,000,000 South Fork Municipal Authority, Hospital Revenue, Conemaugh Valley Memorial
Hospital Project, Series A, MBIA Insured,
5.75%, 07/01/26 ........................................................................... $ 4,902,550
3,000,000 Westmoreland County IDA Revenue, Refunding, Citizens General
Hospital Project, Series A, 8.25%, 07/01/13 ............................................... 3,068,910
------------
252,206,763
------------
PUERTO RICO 1.0%
Puerto Rico Commonwealth Highway and Transportation Authority Revenue, Series Y,
59,000,000 5.00%, 07/01/36 ......................................................................... 51,158,310
7,000,000 5.50%, 07/01/36 ......................................................................... 6,583,640
3,200,000 Puerto Rico Commonwealth Urban Renewal and Housing Corp., Refunding, 7.875%, 10/01/04 ...... 3,460,416
Puerto Rico Electric Power Authority Revenue, Refunding, Pre-Refunded,
4,000,000 Series 1987-K, 9.375%, 07/01/17 ......................................................... 4,114,240
2,000,000 Series 1988-M, 8.00%, 07/01/08 .......................................................... 2,127,500
5,000,000 Puerto Rico Municipal Finance Agency, Series 1988-A, Pre-Refunded, 8.25%, 07/01/08 ......... 5,329,750
------------
72,773,856
------------
RHODE ISLAND 1.4%
9,900,000 Providence Special Obligation Tax Increment, Series A, 7.65%, 06/01/16 ..................... 10,756,350
2,200,000 Rhode Island Clean Water Financial Agency Revenue, Drinking Water Providence,
Series A, AMBAC Insured, 6.70%, 01/01/15 .................................................. 2,379,036
Rhode Island Housing and Mortgage Finance Corp., Homeownership Opportunity,
1,895,000 Series 2, 7.75%, 04/01/22 ............................................................... 1,979,252
20,200,000 Series 10-A, 6.50%, 10/01/22 ............................................................ 20,819,534
13,085,000 Series 10-A, 6.50%, 04/01/27 ............................................................ 13,454,782
7,400,000 Series 13, 6.70%, 10/01/15 .............................................................. 7,702,882
4,030,000 Series 13, 6.85%, 04/01/27 .............................................................. 4,208,408
15,000,000 Series 15-A, 6.85%, 10/01/24 ............................................................ 15,773,550
2,720,000 Series 16-A, 6.375%, 10/01/26 ........................................................... 2,723,454
2,320,000 Series 17-A, 6.25%, 04/01/17 ............................................................ 2,320,626
3,000,000 Rhode Island Port Authority and Economic Development Corp., Refunding,
Shepard Building Project, Series B, AMBAC Insured,
6.75%, 06/01/25 ........................................................................... 3,235,950
Rhode Island State Health and Educational Building Corp. Revenue,
3,000,000 Health Facilities, Tockwotton Home, Pre-Refunded, 7.25%, 04/15/17 ....................... 3,346,350
940,000 Roger Williams Realty, Elmhurst Nursing Home, FHA Insured, 7.50%, 08/01/29 .............. 978,437
2,320,000 St. Antoine Medical Center, 6.70%, 11/15/12 ............................................. 2,444,491
2,750,000 St. Antoine Medical Center, 6.75%, 11/15/18 ............................................. 2,887,913
------------
95,011,015
------------
SOUTH CAROLINA 1.7%
1,800,000 Berkeley County School District COP, Berkeley School Facilities Group, Inc.,
AMBAC Insured, 6.30%, 02/01/16 ............................................................ 1,891,008
24,000,000 Charleston County Resource Recovery Revenue, Foster Wheeler, Inc. Project,
Series A, 9.25%, 01/01/10 ................................................................. 25,337,520
5,000,000 Myrtle Beach COP, Myrtle Beach Convention Center Project, 6.875%, 07/01/17 ................. 5,174,600
Piedmont Municipal Power Agency, South Carolina Electric Revenue, Refunding,
18,115,000 6.55%, 01/01/16 ......................................................................... 18,156,483
25,505,000 6.60%, 01/01/21 ......................................................................... 25,563,406
5,500,000 6.375%, 01/01/25 ........................................................................ 5,550,710
3,150,000 Series A, 5.75%, 01/01/24 ............................................................... 2,958,165
5,050,000 Series A, AMBAC Insured, 5.75%, 01/01/24 ................................................ 4,895,672
3,000,000 Richland County PCR, Refunding, Union Camp Corp. Project, Series C, 6.55%, 11/01/20 ........ 3,166,740
South Carolina State Public Service Authority Revenue, Refunding,
12,765,000 Series A, AMBAC Insured, 6.375%, 07/01/21 ............................................... 13,241,517
10,000,000 Series B, 6.00%, 07/01/31 ............................................................... 10,009,900
------------
115,945,721
------------
SOUTH DAKOTA 0.4%
$5,000,000 Lawrence County PCR, Refunding, Black Hills Power and Light Co. Project, 6.70%, 06/01/10 ... $ 5,347,250
South Dakota State HDA, Homeownership Mortgage,
4,130,000 Series A, 6.30%, 05/01/17 ............................................................... 4,172,580
10,580,000 Series A, 7.15%, 05/01/27 ............................................................... 10,985,426
3,115,000 Series B, 7.10%, 05/01/17 ............................................................... 3,242,404
3,480,000 Series D, 6.65%, 05/01/14 ............................................................... 3,652,608
3,435,000 Series G, 7.125%, 05/01/14 .............................................................. 3,670,916
------------
31,071,184
------------
TENNESSEE 0.9%
2,000,000 Franklin IDB, MFHR, Refunding, Landings Apartment Project, Series A,
FSA Insured, 6.00%, 10/01/26 .............................................................. 1,978,060
6,690,000 Gatlinburg COP, Gatlinburg Convention Center, Inc., Pre-Refunded, 9.25%, 12/01/12 .......... 7,088,523
Hamilton County IDB, MFHR, Patten Towers Apartments, Series A,
2,515,000 6.125%, 08/01/05 ........................................................................ 2,525,186
1,000,000 6.30%, 08/01/07 ......................................................................... 1,002,860
4,785,000 Knox County Health, Educational and Housing Facilities Board, MFHR, GNMA
Secured, East Towne Village Project, 8.20%, 07/01/28 ..................................... 4,968,266
Memphis-Shelby County Airport Authority, Special Facilities and Project Revenue, Federal Express Corp.
14,690,000 7.875%, 09/01/09 ........................................................................ 16,338,659
6,520,000 6.75%, 09/01/12 ......................................................................... 6,884,533
1,940,000 Metropolitan Nashville Airport Authority Revenue, Series C, FGIC Insured, 6.60%, 07/01/15 .. 2,069,999
1,990,000 Mount Pleasant IDR, PCR, Stauffer Chemical Co. Project, 8.00%, 12/01/12 .................... 2,195,607
5,000,000 Nashville and Davidson County Revenue, IDB, Refunding & Improvement,
Oslo Treatment, Inc., 6.00%, 05/01/03...................................................... 5,072,600
Tennessee HDA, Homeownership Program,
2,360,000 Series 1992, 6.80%, 07/01/17 ............................................................ 2,437,809
4,580,000 Series P, 7.70%, 07/01/16 ............................................................... 4,642,196
2,275,000 Tennessee State Local Development Authority Revenue, Community Provider
Pooled Loan Program, 6.45%, 10/01/14 ...................................................... 2,354,216
------------
59,558,514
------------
TEXAS 7.2%
18,100,000 Austin Combined Utility System Revenue, Series A, Pre-Refunded, 8.00%, 11/15/16 ............ 20,162,857
11,310,000 Austin Utility System Revenue, Refunding, FGIC Insured, 6.25%, 05/15/16 .................... 11,804,360
Bexar County Health Facilities Development Corp. Revenue,
4,500,000 Incarnate Word Facility, FSA Insured, 6.00%, 11/15/15 ................................... 4,559,445
8,300,000 Refunding, Incarnate Word Health Services, FSA Insured, 6.10%, 11/15/23 ................. 8,389,640
1,740,000 Bexar County HFC, MFHR, Sunpark Apartments Project, 6.875%, 12/01/12 ....................... 1,778,106
5,000,000 Bexar Metropolitan Water District, Water Works Systems Revenue, Refunding,
MBIA Insured, 5.875%, 05/01/22............................................................. 5,035,600
6,100,000 Brazos County Health Facilities Development Corp., Hospital Revenue,
St. Joseph Hospital Project, Pre-Refunded,
10.25%, 10/01/15 .......................................................................... 6,373,768
Brazos River Authority, Collateralized, PCR, Texas Utilities Electric Co. Project,
2,500,000 Series 1987-A, 9.875%, 10/01/17 ......................................................... 2,600,950
17,550,000 Series 1988-A, 9.25%, 03/01/18 .......................................................... 18,519,462
15,000,000 Series 1989-A, 8.25%, 01/01/19 .......................................................... 15,985,650
Brazos River Authority, Johnson County, Surface Water and Treatment Revenue,
480,000 8.75%, 09/01/97 ......................................................................... 480,058
520,000 8.90%, 09/01/98 ......................................................................... 520,062
560,000 9.00%, 09/01/99 ......................................................................... 560,073
605,000 9.00%, 09/01/00 ......................................................................... 605,079
655,000 9.00%, 09/01/01 ......................................................................... 655,000
705,000 9.10%, 09/01/02 ......................................................................... 705,092
765,000 9.10%, 09/01/03 ......................................................................... 765,099
825,000 9.10%, 09/01/04 ......................................................................... 825,107
890,000 9.20%, 09/01/05 ......................................................................... 890,116
960,000 9.20%, 09/01/06 ......................................................................... 960,125
1,040,000 9.20%, 09/01/07 ......................................................................... 1,040,135
1,120,000 9.20%, 09/01/08 ......................................................................... 1,120,146
1,210,000 9.25%, 09/01/09 ......................................................................... 1,210,157
TEXAS (CONT.)
Brazos River Authority, Johnson County, Surface Water and Treatment Revenue, (cont.)
$1,310,000 9.25%, 09/01/10 ......................................................................... $ 1,310,170
1,415,000 9.25%, 09/01/11 ......................................................................... 1,415,184
1,525,000 9.25%, 09/01/12 ......................................................................... 1,525,198
1,650,000 9.25%, 09/01/13 ......................................................................... 1,650,215
1,780,000 9.25%, 09/01/14 ......................................................................... 1,780,231
1,670,000 9.25%, 09/01/15 ......................................................................... 1,670,234
Dallas-Fort Worth International Airport Facilities, Improvement Corp. Revenue,
American Airlines, Inc.,
99,000,000 8.00%, 11/01/24 ......................................................................... 107,280,360
29,400,000 Refunding, 6.00%, 11/01/14 .............................................................. 29,023,974
5,000,000 El Paso HFC, SFMR, Series 1991-A, 8.75%, 10/01/11 .......................................... 5,385,450
2,700,000 Grand Prairie Health Facilities Development Corp., Hospital Revenue, Refunding,
Dallas/Ft. Worth Medical Center Project, AMBAC
Insured, 6.875%, 11/01/10 ................................................................. 2,996,514
1,085,000 Grand Prairie HFC, SFMR, 10.75%, 09/01/14 .................................................. 1,105,550
20,250,000 Harris County IDR, Marine Terminal Revenue, Refunding, 6.95%, 02/01/22 ..................... 21,415,590
Harris County Toll Road Revenue, Multiple Mode, Senior Lien, Pre-Refunded,
2,100,000 Refunding, Series 1987, 8.70%, 08/15/17 ................................................. 2,190,195
9,000,000 Series B, 8.625%, 08/15/07 .............................................................. 9,384,660
18,710,000 Series B, 8.70%, 08/15/17 ............................................................... 19,513,595
3,500,000 Series C, 8.125%, 08/15/17 .............................................................. 3,710,945
4,000,000 Series D, 8.25%, 08/15/07 ............................................................... 4,315,480
5,000,000 Series D, 8.30%, 08/15/17 ............................................................... 5,397,450
Houston Water and Sewer System Revenue, Refunding,
22,500,000 Junior Lien, Series A, MBIA Insured, 6.20%, 12/01/20 .................................... 23,253,300
21,000,000 Series B, 6.375%, 12/01/14 .............................................................. 21,860,790
20,000 Joshua ISD, Refunding, Series B, 6.125%, 02/15/26 .......................................... 20,285
Matagorda County Navigation District No. 1, PCR, Collateralized, Refunding,
25,300,000 Central Power and Light Co. Project, MBIA Insured, 6.10%, 07/01/28 ...................... 25,766,785
19,200,000 Houston Lighting and Power Co., 6.00%, 07/01/28 ......................................... 19,320,960
5,500,000 Houston Lighting and Power Co., Series A, AMBAC Insured, 6.70%, 03/01/27 ................ 5,901,500
40,975,000 Houston Lighting and Power Co., Series B, 7.70%, 02/01/19 ............................... 42,586,547
1,125,000 Mesquite HFC, SFMR, Series 1983, 10.75%, 09/01/14 .......................................... 1,149,863
5,000,000 Red River Pollution Control Authority, Refunding, West Texas Utilities Co. Project,
MBIA Insured, 6.00%, 06/01/20 ............................................................. 5,031,850
Sabine River Authority PCR, Refunding,
4,000,000 Southwestern Electric Power Co., MBIA Insured, 6.10%, 04/01/18 .......................... 4,082,720
7,700,000 Texas Utilities Electric Co. Project, 6.55%, 10/01/22 ................................... 8,157,072
5,000,000 San Antonio Water Revenue, Refunding, MBIA Insured, 6.50%, 05/15/10 ........................ 5,358,500
Texas Housing Agency, Residential Development Mortgage Revenue, Series D,
1,525,000 8.35%, 01/01/08 ......................................................................... 1,574,593
3,095,000 8.35%, 07/01/08 ......................................................................... 3,195,649
2,465,000 Texas Housing Agency, SFMR, Series 1986-B, 8.20%, 03/01/16 ................................. 2,524,283
2,500,000 Texas Water Development Board Revenue, State Revolving Fund, 6.00%, 07/15/13 ............... 2,558,300
2,480,000 Texas Water Resources Finance Authority Revenue, 7.625%, 08/15/08 .......................... 2,630,834
3,735,000 Travis County HFC, SFMR, Refunding, Series A, 6.95%, 10/01/27 .............................. 3,951,070
------------
505,541,983
------------
U.S. TERRITORIES
690,000 Virgin Islands HFA, HMR, Series B, GNMA Secured, Pre-Refunded, 8.10%, 12/01/18 ............. 743,420
------------
UTAH 1.8%
5,050,000 Carbon County Solid Waste Disposal Revenue, Refunding, Laidlaw,
Inc. Project, Series A, 7.50%, 02/01/10 ................................................... 5,530,609
Intermountain Power Agency, Power Supply Revenue,
25,000,000 Refunding, Series A, 6.15%, 07/01/14 .................................................... 25,791,750
34,805,000 Refunding, Series B, 7.75%, 07/01/20 .................................................... 36,621,473
5,500,000 Second Crossover, Series 86-C, 5.75%, 07/01/20 .......................................... 5,416,510
9,500,000 Intermountain Power Agency, Special Obligation, Refunding, Fifth Crossover,
Series 87-B, Pre-Refunded, 7.20%, 07/01/19 ................................................ 9,737,405
2,945,000 Utah State HFA, Refunding, Series A, 6.50%, 05/01/19 ....................................... 2,987,791
UTAH (CONT.)
Utah State HFA, SFM,
$2,120,000 Refunding, 6.80%, 01/01/12 .............................................................. $ 2,206,030
615,000 Series A, 8.50%, 07/01/19 ............................................................... 636,156
4,235,000 Series B, 6.55%, 07/01/19 ............................................................... 4,325,036
4,190,000 Series B, 6.55%, 07/01/26 ............................................................... 4,305,560
325,000 Series C-1, 6.80%, 07/01/12 ............................................................. 338,189
2,950,000 Series C-1, 8.375%, 07/01/19 ............................................................ 3,176,088
540,000 Series D, 8.60%, 07/01/19 ............................................................... 573,275
3,135,000 Series E-1, 6.65%, 07/01/20 ............................................................. 3,223,282
1,160,000 Series G-1, 8.10%, 07/01/16 ............................................................. 1,210,530
Utah State School District Finance, Cooperative Revenue, Financing Pool, Series 1988,
1,435,000 8.375%, 02/15/10......................................................................... 1,486,832
1,040,000 Mandatory Redemption 02/15/98, 8.375%, 02/15/10.......................................... 1,069,942
1,190,000 Mandatory Redemption 02/15/99, 8.375%, 02/15/10.......................................... 1,244,990
1,195,000 Mandatory Redemption 02/15/00, 8.375%, 02/15/10.......................................... 1,249,456
1,245,000 Mandatory Redemption 02/15/01, 8.375%, 02/15/10.......................................... 1,300,166
1,340,000 Mandatory Redemption 02/15/02, 8.375%, 02/15/10.......................................... 1,397,674
1,420,000 Mandatory Redemption 02/15/03, 8.375%, 02/15/10.......................................... 1,479,328
1,730,000 Mandatory Redemption 02/15/04, 8.375%, 02/15/10.......................................... 1,800,100
2,450,000 Mandatory Redemption 02/15/05, 8.375%, 02/15/10.......................................... 2,546,187
1,030,000 Mandatory Redemption 02/15/06, 8.375%, 02/15/10.......................................... 1,069,140
1,065,000 Mandatory Redemption 02/15/07, 8.375%, 02/15/10.......................................... 1,104,799
1,160,000 Mandatory Redemption 02/15/08, 8.375%, 02/15/10.......................................... 1,202,630
1,210,000 Mandatory Redemption 02/15/09, 8.375%, 02/15/10.......................................... 1,253,705
------------
124,284,633
------------
VERMONT 0.1%
9,400,000 Vermont HFA, SF, Series 5, 7.00%, 11/01/27 ................................................. 9,715,370
------------
VIRGINIA 0.5%
Danville IDA Revenue, Regional Medical Center, FGIC Insured,
5,885,000 6.50%, 10/01/19 ......................................................................... 6,233,804
5,840,000 6.50%, 10/01/24 ......................................................................... 6,182,516
7,250,000 Henrico County IDA, Public Facilities Lease Revenue, Henrico County
Regional Jail Project, 6.00%, 08/01/15 .................................................... 7,371,583
Virginia State HDA, Commonwealth Mortgage,
5,120,000 Series 1994-C, Sub-Series C-6, 6.25%, 01/01/15 .......................................... 5,197,261
5,500,000 Series B, Sub-Series B-1, 7.20%, 07/01/17 ............................................... 5,896,990
4,755,000 Series H, Sub-Series H-2, 6.55%, 01/01/17 ............................................... 4,937,021
------------
35,819,175
------------
WASHINGTON 4.0%
5,000,000 Chelan County PUD No. 1, Cheland Hydro Consolidated System Revenue,
Pre-Refunded, 9.30%, 07/01/62 ............................................................. 5,265,050
32,480,000 Pierce County EDC, Refunding, Solid Waste-Steilacoom Revenue, 6.60%, 08/01/22 .............. 33,587,568
Port Moses Lake Public Corp., Washington PCR, Union Carbide Corp.,
2,100,000 7.50%, 08/01/04 ......................................................................... 2,112,054
1,000,000 7.875%, 08/01/06 ........................................................................ 1,031,840
2,760,000 SeaTac GO, Series 1994, 6.50%, 12/01/13 .................................................... 2,934,846
Seattle Municipality, Metropolitan Seattle Sewer Revenue,
9,680,000 Refunding, Series V, 6.20%, 01/01/32 .................................................... 9,731,304
2,500,000 Series W, MBIA Insured, 6.25%, 01/01/21 ................................................. 2,577,850
4,810,000 Seattle Special Obligation, Chinatown International District, 5.90%, 08/01/26 .............. 4,678,976
7,000,000 Snohomish County USD No. 6, 6.50%, 12/01/11 ................................................ 7,599,620
4,000,000 University of Washington Alumni Association Lease Revenue, Medical
Center Roosevelt II, 6.30%, 08/15/14 ...................................................... 4,193,800
4,810,000 Washington State Housing Finance Commission, MFMR, Refunding, Series A, 7.90%, 07/01/30 .... 4,969,788
Washington State Public Power Supply System Revenue, Nuclear Project No. 1, Refunding,
18,330,000 Series A, 6.00%, 07/01/09 ............................................................... 18,694,950
22,400,000 Series A, 6.00%, 07/01/12 ............................................................... 22,397,760
WASHINGTON (CONT.)
Washington State Public Power Supply System Revenue,
Nuclear Project No. 1, Refunding, (cont.)
$35,355,000 Series A, 6.05%, 07/01/12 ...............................................................$ 35,464,247
16,150,000 Series A, 6.25%, 07/01/12 ............................................................... 16,380,461
34,070,000 Series A, 6.50%, 07/01/15 ............................................................... 35,245,756
21,250,000 Series A, 6.00%, 07/01/17 ............................................................... 20,882,375
23,205,000 Series A, 6.25%, 07/01/17 ............................................................... 23,563,053
7,700,000 Washington State Public Power Supply System Revenue, Nuclear Project No. 2,
Refunding, Series A, 6.30%, 07/01/12 ...................................................... 8,123,808
Washington State Public Power Supply System Revenue, Nuclear Project No. 3, Refunding,
13,350,000 Series A, 6.50%, 07/01/18 ............................................................... 13,861,572
3,500,000 Series A, MBIA Insured, 6.00%, 07/01/18 ................................................. 3,470,670
------------
276,767,348
------------
WEST VIRGINIA 0.6%
3,500,000 Braxton County Solid Waste Disposal Revenue, Weyerhaeuser Co. Project, 6.50%, 04/01/25 ..... 3,639,615
New Martinsville Building Commission Revenue, City of New Martinsville Project, Series A, Pre-Refunded,
2,435,000 8.50%, 11/01/03 ......................................................................... 2,555,995
4,250,000 8.75%, 11/01/09 ......................................................................... 4,494,757
2,400,000 Taylor County PCR, Union Carbide Corp., 7.625%, 08/01/05 ................................... 2,730,527
7,000,000 West Virginia State Hospital Financing Authority Revenue, Refunding & Improvement,
Logan General Hospital Project,
7.25%, 07/01/20 ........................................................................... 7,170,660
West Virginia State Housing Development Fund, Housing Finance, Series D,
3,680,000 7.00%, 05/01/17 ......................................................................... 3,855,498
9,000,000 7.05%, 11/01/24 ......................................................................... 9,454,410
5,000,000 West Virginia State Water Development Authority Revenue, Loan Program II, Series
1988-A, Pre-Refunded, 8.625%, 11/01/28 .................................................... 5,410,050
------------
39,311,512
------------
WISCONSIN 1.2%
2,200,000 Janesville IDR, Simmons Manufacturing Co., 7.00%, 10/15/17 ................................. 2,240,765
4,220,000 Madison Industrial Gas and Electric Co. Project, Series A, 6.75%, 04/01/27 ................. 4,406,143
Wisconsin Housing and EDA, Homeownership Revenue,
9,190,000 Refunding, Series A, 6.10%, 11/01/10 .................................................... 9,384,276
10,230,000 Series 1, 6.75%, 09/01/15 ............................................................... 10,712,241
3,000,000 Series 1, 6.75%, 09/01/17 ............................................................... 3,132,570
2,080,000 Series A, 6.90%, 03/01/16 ............................................................... 2,206,068
5,500,000 Series A, 6.45%, 03/01/17 ............................................................... 5,655,650
10,680,000 Series A, 7.10%, 03/01/23 ............................................................... 11,182,601
3,000,000 Series B, 7.05%, 11/01/22 ............................................................... 3,158,430
Wisconsin State Health and Educational Facilities Authority Revenue,
14,785,000 Lindengrove, Inc. Project, Pre-Refunded, 10.00%, 10/01/17 ............................... 15,718,672
6,500,000 Mercy Health Systems Corp., AMBAC Insured, 6.125%, 08/15/13 ............................. 6,666,140
7,500,000 Mercy Health Systems Corp., AMBAC Insured, 6.125%, 08/15/17 ............................. 7,645,200
------------
82,108,756
------------
</TABLE>
<TABLE>
<CAPTION>
WYOMING 0.3%
<S> <C> <C>
11,540,000 Wyoming CDA, Housing Revenue, Refunding, Series 6, 6.10%, 12/01/28 ......................... 11,443,410
Wyoming CDA, MF Mortgage, Series A,
1,490,000 6.90%, 06/01/12 ......................................................................... 1,513,154
3,530,000 6.95%, 06/01/24 ......................................................................... 3,600,671
Wyoming CDA, SFM,
2,500,000 Series A, 7.25%, 06/01/21 ............................................................... 2,659,950
1,730,000 Series G, 7.375%, 06/01/17 .............................................................. 1,813,645
------------
21,030,830
------------
Total Bonds (Cost $6,370,139,131).....................................................6,694,671,155
------------
ZERO COUPON BONDS 1.6%
$11,040,000 Calcasieu Parish, Louisiana, Memorial Hospital Service District Revenue,
Lake Charles Parish Memorial Hospital Hospital Project,
Series A, (original accretion rate 5.59%), 12/01/22 ....................................... $ 6,584,807
13,745,000 Chicago RMR, Refunding, Series B, MBIA Insured, (original accretion rate 7.30%), 10/01/09 .. 5,819,082
5,935,000 Coldwater, Michigan, Community Schools, MBIA Insured, (original accretion rate 6.794%), 05/01/181,606,782
Colorado Springs Airport Revenue, Series C,
1,660,000 (original accretion rate 6.86%), 01/01/03 ............................................... 1,206,653
1,610,000 (original accretion rate 6.966%), 01/01/05 .............................................. 1,030,045
1,675,000 (original accretion rate 7.07%), 01/01/07 ............................................... 940,294
800,000 (original accretion rate 7.07%), 01/01/08 ............................................... 418,671
1,450,000 (original accretion rate 7.176%), 01/01/11 .............................................. 607,767
Cook County, Illinois, Community Consolidated School District No. 54,
Schaumburg Township, Series B, FGIC Insured, Pre-Refunded,
3,505,000 (original accretion rate 6.50%), 01/01/07 ............................................... 2,061,535
4,800,000 (original accretion rate 6.55%), 01/01/08 ............................................... 2,641,871
4,380,000 (original accretion rate 6.60%), 01/01/09 ............................................... 2,253,684
5,760,000 (original accretion rate 6.60%), 01/01/10 ............................................... 2,777,413
6,000,000 Harrison, Michigan, Community Schools, AMBAC Insured, (original accretion rate 6.90%), 05/01/20 1,410,900
Jefferson County, Kentucky, Capital Projects Corp., Lease Revenue, Refunding, Series A,
1,640,000 (original accretion rate 6.75%), 08/15/07 ............................................... 934,291
4,505,000 (original accretion rate 6.80%), 08/15/08 ............................................... 2,416,436
4,580,000 (original accretion rate 6.87%), 08/15/09 ............................................... 2,297,098
4,620,000 (original accretion rate 6.85%), 08/15/10 ............................................... 2,176,435
6,825,000 (original accretion rate 6.95%), 08/15/13 ............................................... 2,669,734
6,860,000 (original accretion rate 6.95%), 08/15/14 ............................................... 2,511,925
7,005,000 (original accretion rate 7.00%), 08/15/16 ............................................... 2,241,040
7,115,000 (original accretion rate 7.00%), 08/15/17 ............................................... 2,091,382
Metropolitan Pier and Exposition Authority, Illinois, Dedicated State
Tax Revenue, McCormick Place Expansion Project,
Series A, FGIC Insured,
5,000 (original accretion rate 6.65%), 06/15/07 ............................................... 5,365
8,500,000 (original accretion rate 6.526%), 06/15/08 .............................................. 4,641,510
11,000,000 (original accretion rate 6.677%), 06/15/09 .............................................. 5,621,660
8,000,000 (original accretion rate 6.628%), 06/15/10 .............................................. 3,819,040
9,690,000 (original accretion rate 6.629%), 06/15/11 .............................................. 4,342,282
250,000 (original accretion rate 6.65%), 06/15/12 ............................................... 189,647
5,645,000 Pre-Refunded, (original accretion rate 6.50%), 06/15/07 ................................. 6,154,461
11,550,000 Pre-Refunded, (original accretion rate 6.50%), 06/15/12 ................................. 9,363,584
5,250,000 Owensboro, Kentucky, Electric Light and Power Revenue, Series B,
AMBAC Insured, (original accretion rate 6.85%), 01/01/08 .................................. 2,969,452
7,000,000 San Joaquin Hills, California, Transportation Corridor Agency,
Toll Road Revenue, Senior Lien, (original accretion rate 6.449%),
01/01/23 .................................................................................. 1,373,540
Shreveport, Louisiana, Water and Sewer Revenue, Series B, FGIC Insured,
490,000 (original accretion rate 7.05%), 12/01/07 ............................................... 264,947
2,530,000 (original accretion rate 7.05%), 12/01/08 ............................................... 1,269,502
4,080,000 (original accretion rate 7.05%), 12/01/09 ............................................... 1,899,892
5,630,000 (original accretion rate 7.05%), 12/01/10 ............................................... 2,432,947
7,000,000 Spring, Texas, ISD, Refunding, FGIC Insured, Pre-Refunded,
(original accretion rate 7.80%), 08/15/08 ................................................. 3,320,800
14,250,000 University of Illinois Revenues, AMBAC Insured, (original accretion rate 7.187%), 04/01/10 . 6,856,102
11,000,000 Washington State Public Power Supply System Revenue, Nuclear Project
No. 2, Refunding, Series A, (original accretion rate 7.33%),
07/01/13 .................................................................................. 4,095,520
Washington State Public Power Supply System Revenue,
Nuclear Project No. 3, Refunding, Series 1990-B,
6,400,000 (original accretion rate 6.751%), 07/01/12 .............................................. 2,551,807
15,000,000 (original accretion rate 7.25%), 07/01/14 ............................................... 5,253,450
--------------
Total Zero Coupon Bonds (Cost $101,410,300)........................................... 113,123,353
--------------
Total Long Term Investments (Cost $6,471,549,431) ....................................6,807,794,508
--------------
aSHORT TERM INVESTMENTS 0.8%
$5,700,000 Jackson County, Mississippi, PCR, Refunding, Chevron U.S.A., Inc. Project,
Daily VRDN and Put, 3.90%, 12/01/16 ....................................................... $ 5,700,000
New York City GO, Daily VRDN and Put,
5,800,000 Series B, Sub-Series B-4, MBIA Insured, 4.05%, 08/15/23 ................................. 5,800,000
5,000,000 Series C, 4.25%, 10/01/23 ............................................................... 5,000,000
2,600,000 Sub-Series A-7, 4.00%, 08/01/20 ......................................................... 2,600,000
New York City Municipal Water Financing Authority, Water and Sewer
System Revenue, Daily VRDN and Put, FGIC Insured,
21,880,000 Series 93-C, 4.05%, 06/15/22 ............................................................ 21,880,000
5,100,000 Series C, 4.05%, 06/15/23 ............................................................... 5,100,000
5,700,000 Phoenix, Arizona, Series 95-2, Bond Purchase Agreement, Daily VRDN and Put, 3.10%, 06/01/20 5,700,000
6,100,000 Uinta County, Wyoming, PCR, Refunding, Chevron U.S.A., Inc. Project, Daily
VRDN and Put, 3.35%, 12/01/22 ............................................................. 6,100,000
--------------
Total Short Term Investments (Cost $57,880,000) ...................................... 57,880,000
--------------
Total Investments (Cost $6,529,429,431)98.4% .....................................6,865,674,508
Other Assets and Liabilities, Net1.6% ............................................ 111,756,880
--------------
Net Assets 100.0% .................................................................$6,977,431,388
--------------
At April 30, 1997, the net unrealized appreciation based on the
cost of investments for income tax purposes of $6,529,429,431 was
as follows:
Aggregate gross unrealized appreciation for all investments in which there was
an excess of value over tax cost ..........................................................$ 343,043,008
Aggregate gross unrealized depreciation for all investments in which there was
an excess of tax cost over value .......................................................... (6,797,931)
--------------
Net unrealized appreciation ..............................................................$ 336,245,077
--------------
</TABLE>
PORTFOLIO ABBREVIATIONS :
AMBAC - American Municipal Bond Assurance Corp.
CDA - Community Development Authority/Agency
COP - Certificate of Participation
CRDA - Community Redevelopment Authority/Agency
EDA - Economic Development Authority/Agency
EDC - Economic Development Corp.
EDR - Economic Development Revenue
ETM - Escrow to Maturity
FGIC - Financial Guaranty Insurance Corp.
FHA - Federal Housing Authority
FI/GML - Federally Insured or Guaranteed Mortgage Loan
FSA - Financial Security Assistance
GNMA - Government National Mortgage Association
GO - General Obligation
HDA - Housing Development Authority
HFA - Housing Finance Agency
HFC - Housing Finance Corp.
HMR - Home Mortgage Revenue
IDA - Industrial Development Authority/Agency
IDB - Industrial Development Board
IDR - Industrial Development Revenue
IPC - Industrial Pollution Control
ISD - Independent School District
L.P. - Limited Partnership
MBIA - Municipal Bond Investors Assurance Corp.
MBS - Mortgage-Backed Securities
MF - Multi-Family
MFHR - Multi-Family Housing Revenue
MFMR - Multi-Family Mortgage Revenue
MFR - Multi-Family Revenue
PCR - Pollution Control Revenue
PUD - Public Utility District
RDA - Redevelopment Authority/Agency
RMR - Residential Mortgage Revenue
SF - Single Family
SFM - Single Family Mortgage
SFMR - Single Family Mortgage Revenue
SFR - Single Family Revenue
USD - Unified School District
aVariable 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 upon
short notice prior to specified dates. The interest rate may change on specified
dates in relationship with changes in a designated rate (such as the prime
interest rate or U.S. Treasury bills rate).
bSee Note 1(f) regarding securities purchased on a when-issued basis.
The accompanying notes are an integral part of these financial statements.
FRANKLIN FEDERAL TAX-FREE INCOME FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1997
Assets:
Investments in securities, at value
(identified cost $6,529,429,431) $6,865,674,508
Cash 2,982,374
Receivables:
Interest 136,723,038
Investment securities sold 6,783,647
Capital shares sold 5,499,591
-----------------
Total assets 7,017,663,158
-----------------
Liabilities:
Payables:
Investment securities purchased:
Regular delivery 1,373,330
When-issued basis (Note 1) 24,173,183
Management fees 2,636,050
Capital shares repurchased 2,993,877
Distribution fees 1,315,974
Shareholder servicing costs 228,437
Other payables to shareholders 7,280,151
Accrued expenses and other liabilities 230,768
-----------------
Total liabilities 40,231,770
-----------------
Net assets, at value $6,977,431,388
-----------------
Net assets consist of:
Undistributed net investment income 1,843,059
Net unrealized appreciation on investments 336,245,077
Net realized loss (68,611,717)
Class I capital shares 6,635,959,914
Class II capital shares 71,995,055
-----------------
Net assets, at value $6,977,431,388
-----------------
CLASS I SHARES:
Net assets, at value $6,905,487,870
-----------------
Shares outstanding 580,178,206
-----------------
Net asset value per share* $ 11.90
-----------------
Maximum offering price (100/95.75 of $11.90) $ 12.43
-----------------
CLASS II SHARES:
Net assets, at value $ 71,943,518
-----------------
Shares outstanding 6,045,053
-----------------
Net asset value per share* $ 11.90
-----------------
Maximum offering price (100/99 of $11.90) $ 12.02
-----------------
*Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED APRIL 30, 1997
Investment income:
Interest $463,579,641
--------------
Expenses:
Management fees (Note 5) 31,921,470
Distribution fees - Class I (Note 5) 4,878,836
Distribution fees - Class II (Note 5) 342,573
Shareholder servicing costs (Note 5) 2,125,004
Reports to shareholders 1,333,107
Registration and filing fees 153,003
Professional fees 134,624
Directors' fees and expenses 132,581
Custodian fees 66,503
Other 323,460
-----------
Total expenses 41,411,161
-------------
Net investment income 422,168,480
-------------
Realized and unrealized gain (loss) on investments:
Net realized loss (3,427,474)
Net unrealized appreciation 44,923,895
-------------
Net realized and unrealized gain
on investments 41,496,421
-------------
Net increase in net assets resulting
from operations $463,664,901
-------------
The accompanying notes are an integral part of these financial statements.
FRANKLIN FEDERAL TAX-FREE INCOME FUND
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED APRIL 30, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
------------------------------------
Increase (decrease) in net assets:
Operations:
<S> <C> <C>
Net investment income $ 422,168,480 $ 438,597,003
Net realized gain (loss) from security transactions (3,427,474) 72,837,068
Net unrealized appreciation (depreciation) on investments 44,923,895 (11,834,809)
----------------------------------
Net increase in net assets resulting from operations 463,664,901 499,599,262
----------------------------------
Distributions to shareholders:
From undistributed net investment income:
Class I (418,463,139) (438,791,296)
Class II (2,758,091) (780,115)
Increase (decrease) in net assets from capital share transactions (Note 2) (111,722,512) 99,741,632
----------------------------------
Net increase (decrease) in net assets (69,278,841) 159,769,483
Net assets:
Beginning of year 7,046,710,229 6,886,940,746
----------------------------------
End of year $6,977,431,388 $7,046,710,229
----------------------------------
Undistributed net investment income included in net assets:
Beginning of year $ -- $ 974,408
----------------------------------
End of year $ 1,843,059 $ --
----------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
FRANKLIN FEDERAL TAX-FREE INCOME FUND
Notes to Financial Statements
1. SIGNIFICANT ACCOUNTING POLICIES
Franklin Federal Tax-Free Income Fund (the Fund) is an open-end, diversified
management investment company (mutual fund), registered under the Investment
Company Act of 1940, as amended. The Fund seeks to provide tax-free income.
The Fund offers two classes of shares, Class I and Class II. Class I shares are
sold with a higher front-end sales charge than Class II shares. Each class of
shares may be subject to a contingent deferred sales charge and has the same
rights, except with respect to the effect of the respective sales charges, the
distribution fees borne by each class, voting rights on matters affecting a
single class and the exchange privilege of each class. The offering of Class II
shares began on May 1, 1995, at which time all previously outstanding shares
became Class I shares.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles for
investment companies.
A. SECURITY VALUATION:
Tax-free bonds generally trade in the over-the-counter market rather than on a
national securities exchange. In the absence of a sale or reported bid and asked
prices, information with respect to bond and note transactions, quotations from
bond dealers, market transactions in comparable securities, and various
relationships between securities are used to determine the value of the
security. The Fund may utilize a pricing service, bank or broker/dealer
experienced in such matters to perform any of the pricing functions under
procedures approved by the Board of Directors (the Board). Securities for which
market quotations are not available are valued in accordance with procedures
established by the Board.
B. MUNICIPAL BONDS OR NOTES WITH "PUTS":
The Fund has purchased municipal bonds or notes with the right to resell the
bonds or notes to the seller at an agreed upon price or yield on a specified
date or within a specified period (which will be prior to the maturity date of
the bonds or notes). Such a right to resell is commonly known as a "put".
C. INCOME TAXES:
The Fund intends to continue to qualify for the tax treatment applicable to
regulated investment companies under the Internal Revenue Code (the Code) and to
make the requisite distributions to its shareholders which will be sufficient to
relieve the Fund from income and excise taxes.
D. SECURITY TRANSACTIONS:
Security transactions are accounted for on the date the securities are purchased
or sold (trade date). Realized gains and losses on security transactions are
determined on the basis of specific identification.
E. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS:
Distributions to shareholders are recorded on the ex-dividend date. Interest
income and estimated expenses are accrued daily. Original issue discount and
premium are amortized as required by the Code. Realized and unrealized gains or
losses and net investment income, other than class specific expenses, are
allocated daily to each class of shares based upon the relative proportion of
net assets of each class.
F. SECURITIES PURCHASED ON A WHEN-ISSUED OR DELAYED DELIVERY BASIS:
The Fund may purchase securities on a when-issued or delayed delivery basis,
with payment and delivery scheduled for a future date. These transactions are
subject to market fluctuations and are subject to the risk that the value at
delivery may be more or less than the trade date purchase price. Although the
Fund will generally purchase these securities with the intention of holding the
securities, it may sell the securities before the settlement date. These
securities are identified on the accompanying Statement of Investments in
Securities and Net Assets. The Fund has set aside sufficient investment
securities as collateral for these purchase commitments.
1. SIGNIFICANT ACCOUNTING POLICIES (cont.)
G. ACCOUNTING ESTIMATES:
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the amounts of income and expense during the reporting
period. Actual results could differ from those estimates.
2. CAPITAL STOCK
At April 30, 1997, there were 10,000,000,000 shares of no par value capital
stock authorized, of which 3,000,000,000 each have been allocated to Class I and
II. Transactions in each of the Fund's shares were as follows:
<TABLE>
<CAPTION>
Year Ended April 30,
------------------------------------------------------------
1997 1996
------------------------------------------------------------
Shares Amount Shares Amount
------------------------------------------------------------
Class I Shares:
<S> <C> <C>
Shares sold 82,507,276$ 981,902,405 70,993,778$ 847,089,902
Shares issued in reinvestment of distributions 13,756,253 163,131,977 14,001,002 166,964,403
Shares redeemed (108,778,728)(1,294,264,916) (79,499,754)(948,799,706)
------------------------------------------------------------
Net increase (decrease) (12,515,199)$ (149,230,534) 5,495,026$ 65,254,599
------------------------------------------------------------
Class II Shares:
Shares sold 3,562,296 $ 42,300,025 3,046,996$ 36,418,313
Shares issued in reinvestment of distributions 144,321 1,713,499 38,262 458,678
Shares redeemed (546,174) (6,505,502) (200,657) (2,389,958)
------------------------------------------------------------
Net increase 3,160,443 $ 37,508,022 2,884,601$ 34,487,033
------------------------------------------------------------
</TABLE>
3. CAPITAL LOSS CARRYOVERS
At April 30, 1997, for tax purposes, the Fund had capital loss carryovers as
follows:
Capital loss carryovers expiring in: 2000 $ 2,238,745
2002 10,591,976
2003 52,353,522
2005 3,427,474
-------------
$68,611,717
-------------
For tax purposes, the aggregate cost of securities and unrealized appreciation
are the same as for financial reporting purposes at April 30, 1997.
4. PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities (excluding purchases and sales of short-term
securities) for the year ended April 30, 1997 aggregated $1,136,504,977 and
$1,323,427,894 respectively.
5. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
A. MANAGEMENT AGREEMENT:
Under the terms of a management agreement, Franklin Advisers, Inc. (Advisers)
provides investment advice, administrative services, office space and facilities
to the Fund, and receives fees computed monthly on the net assets of the Fund on
the last day of the month as follows:
Annualized Fee Rate Month End Net Assets
- ----------------------------------------------------------------------------
0.625% First $100 million
0.50% Over $100 million up to and including $250 million
0.45% Over $250 million up to and including $10 billion
Fees are further reduced on net assets over $10 billion.
Under an agreement with Advisers, Franklin Templeton Services, Inc. (FT
Services) provides administrative services and facilities for the Fund. The fee
is paid by Advisers and computed monthly based on average daily net assets. It
is not a separate expense of the Fund.
B. SHAREHOLDER SERVICES AGREEMENT:
Under the terms of a shareholder services agreement with Franklin/Templeton
Investor Services, Inc. (Investor Services), the Fund pays costs on a per
shareholder account basis. Shareholder servicing costs incurred by the Fund for
the year ended April 30, 1997 aggregated $2,125,004 of which $1,980,688 was paid
to Investor Services.
C. DISTRIBUTION PLANS AND UNDERWRITING AGREEMENT:
Under the terms of distribution plans pursuant to Rule 12b-1 of the Investment
Company Act of 1940 (the Plans), the Fund reimburses Franklin/Templeton
Distributors, Inc. (Distributors), in an amount up to a maximum of 0.10% per
annum for Class I and 0.65% per annum for Class II, of the average daily net
assets of such class for costs incurred in the promotion, offering and marketing
of the Fund's shares. The Plans do not permit nor require payments of excess
costs after termination. Fees incurred by the Fund under the Plans aggregated
$5,221,409 for the year ended April 30, 1997.
In its capacity as underwriter for the shares of the Fund, Distributors receives
commissions on sales of the Fund's capital stock. Commissions are deducted from
the gross proceeds received from the sale of the capital stock of the Fund, and
as such are not expenses of the Fund. Distributors may also make payments, out
of its own resources, to the dealers for certain sales of the Fund's shares.
Commissions received by Distributors, the amount paid to other dealers and any
applicable contingent deferred sales charges (CDSC) for the year ended April 30,
1997, were as follows:
Total commissions received, including CDSC $12,246,733
Paid to other dealers 12,328,641
CDSC 30,800
D. OTHER AFFILIATED PARTIES AND TRANSACTIONS:
Certain officers and directors of the Fund are also officers and/or directors of
Distributors, Advisers, FT Services and Investor Services, all wholly-owned
subsidiaries of Franklin Resources, Inc.
6. CREDIT RISK
Although the Fund has a diversified portfolio, it has investments in excess of
10% of its total net assets in the state of New York. Such concentration may
subject the Fund more significantly to economic changes occurring within that
state.
The Fund has 3.3% of its portfolio invested in lower rated and comparable
quality unrated high yield securities. Investments in high yield securities are
accompanied by a greater degree of credit risk and such lower quality securities
tend to be more sensitive to economic conditions than higher rated securities.
The risk of loss due to default by the issuer may be significantly greater for
the holders of high yield securities, because such securities are generally
unsecured and are often subordinated to other creditors of the issuer.
7. FINANCIAL HIGHLIGHTS
Selected data for a share of capital stock outstanding throughout each period
are as follows:
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
--------------------------------------------------------------
1997 1996 1995 1994 1993
--------------------------------------------------------------
CLASS I SHARES
PER SHARE OPERATING PERFORMANCE
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of period $11.83 $11.73 $11.81 $12.24 $11.68
--------------------------------------------------------------
Net investment income .71 .74 .75 .77 .80
Net realized and unrealized gain (loss) on securities .073 .104 (.053) (.415) .576
--------------------------------------------------------------
Total from investment operations .783 .844 .697 .355 1.376
Distributions from net investment income (.713) (.744) (.777) (.785) (.816)
--------------------------------------------------------------
Net asset value at end of period $11.90 $11.83 $11.73 $11.81 $12.24
--------------------------------------------------------------
TOTAL RETURN* 6.81% 7.33% 6.21% 2.58% 11.89%
RATIOS/SUPPLEMENTAL DATA
Net assets at end of period (in 000's) $6,905,488 $7,012,601 $6,886,941 $6,804,262 $6,414,739
Ratio of expenses to average net assets .58% .57% .59% .52% .51%
Ratio of net investment income to average net assets 6.00% 6.20% 6.47% 6.27% 6.68%
Portfolio turnover rate 16.43% 25.10% 19.88% 24.59% 13.30%
</TABLE>
<TABLE>
<CAPTION>
Year ended April 30,
---------------------------
1997 1996
---------------------------
CLASS II SHARES
PER SHARE OPERATING PERFORMANCE
<S> <C> <C>
Net asset value at beginning of period $11.82 $11.73+
---------------------------
Net investment income .66 .68
Net realized and unrealized gain (loss) on securities .064 .091
---------------------------
Total from investment operations .724 .771
Distributions from net investment income (.644) (.681)
---------------------------
Net asset value at end of period $11.90 $11.82
---------------------------
TOTAL RETURN* 6.28% 6.68%
RATIOS/SUPPLEMENTAL DATA
Net assets at end of period (in 000's) $71,944 $34,110
Ratio of expenses to average net assets 1.16% 1.15%
Ratio of net investment income to average net assets 5.42% 5.68%
Portfolio turnover rate 16.43% 25.10%
</TABLE>
*Total return measures the change in value of an investment over the periods
indicated. It is not annualized. It does not include the maximum front-end sales
charge or CDSC, and assumes reinvestment of dividends and capital gains at net
asset value. Prior to May 1, 1994, dividends were reinvested at the maximum
offering price, and capital gains at net asset value. Effective May 1, 1994,
with the implementation of the Rule 12b-1 distribution plan for Class I shares,
the sales charge on reinvested dividends was eliminated.
+The Fund paid a dividend to shareholders of record on the beginning of
business, May 1, 1995 in the amount of $0.062 per share. The net asset value per
share at beginning of period includes this dividend.
The Fund hereby designates 100% of the distributions paid from net investment
income for the taxable year ended April 30, 1997, as exempt-interest dividends
per Section 852(b)(5) of the Internal Revenue Code.
FRANKLIN FEDERAL TAX-FREE INCOME FUND
REPORT OF INDEPENDENT AUDITORS
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF
FRANKLIN FEDERAL TAX-FREE INCOME FUND:
We have audited the accompanying statement of assets and liabilities of the
Franklin Federal Tax-Free Income Fund (the Fund), including the statement of
investments in securities and net assets, as of April 30, 1997, and the related
statement of operations for the year then ended, the statements of changes in
net assets for each of the two years in the period then ended, and the financial
highlights for each of the periods presented. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of April
30, 1997, by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Franklin Federal Tax-Free Income Fund as of April 30, 1997, 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 its financial highlights of the
periods presented, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
San Francisco, California
May 29, 1997
Franklin Federal Tax-Free Income Fund Annual Report April 30, 1997.
APPENDIX
DESCRIPTION OF GRAPHIC MATERIAL OMITTED FROM EDGAR FILING (PURSUANT TO ITEM
304 (a)OF REGULATION S-T)
GRAPHIC MATERIAL (1)
This chart shows in pie format the asset allocation of the fund's securities
on April 30, 1997, based on total net assets.
AAA 30.2%
AA 15.1%
A 16.0%
BBB 35.4%
Below Investment Grade 3.3%
GRAPHIC MATERIAL (2)
This chart shows in map format the top three states of the fund's total
market value on 4/30/97: California (6.89%), Texas (7.47%), and New York
(14.61%).
GRAPHIC MATERIAL (3)
This bar chart shows the comparison between the fund's Class I distribution
rate of 5.60% and the taxable equivalent distribution rate of 9.27%.
GRAPHIC MATERIAL (4)
The following line graph hypothetically compares the performance of the
Franklin Federal Tax-Free Income Fund Class I Shares to that of the Lehman
Brothers Municipal Bond Index and the Consumer Price Index (CPI), based on a
$10,000 investment from 5/1/87 to 4/30/97.
Period Ending Fed Tax-Free LBMuni CPI
5/1/87 9571 10000 10000
5/29/87 9422 9,950 10,035
6/30/87 9611 10,243 10,070
7/31/87 9687 10,347 10,096
8/31/87 9773 10,370 10,150
9/30/87 9301 9,987 10,203
10/30/87 9307 10,022 10,229
11/30/87 9600 10,284 10,238
12/31/87 9815 10,433 10,238
1/29/88 10249 10,804 10,265
2/29/88 10449 10,919 10,292
3/31/88 10214 10,792 10,336
4/29/88 10249 10,874 10,390
5/31/88 10293 10,843 10,425
6/30/88 10498 11,001 10,470
7/29/88 10543 11,072 10,514
8/31/88 10617 11,082 10,558
9/30/88 10865 11,283 10,629
10/31/88 11115 11,481 10,664
11/30/88 10994 11,376 10,672
12/30/88 11179 11,492 10,690
1/31/89 11355 11,730 10,744
2/28/89 11282 11,596 10,788
3/31/89 11253 11,568 10,850
4/28/89 11487 11,842 10,921
5/31/89 11682 12,089 10,983
6/30/89 11816 12,253 11,010
7/31/89 11899 12,420 11,036
8/31/89 11859 12,298 11,054
9/29/89 11807 12,261 11,089
10/31/89 11913 12,411 11,142
11/30/89 12084 12,628 11,169
12/29/89 12191 12,731 11,187
1/31/90 12107 12,672 11,302
2/28/90 12248 12,784 11,355
3/30/90 12217 12,788 11,418
4/30/90 12108 12,696 11,436
5/31/90 12406 12,973 11,462
6/29/90 12518 13,087 11,524
7/31/90 12730 13,281 11,568
8/31/90 12496 13,088 11,674
9/28/90 12463 13,096 11,772
10/31/90 12600 13,333 11,843
11/30/90 12853 13,601 11,869
12/31/90 12865 13,661 11,869
1/31/91 13074 13,844 11,940
2/28/91 13133 13,964 11,958
3/29/91 13204 13,970 11,976
4/30/91 13441 14,157 11,994
5/31/91 13537 14,283 12,030
6/28/91 13562 14,269 12,065
7/31/91 13779 14,443 12,083
8/30/91 13914 14,634 12,118
9/30/91 14121 14,824 12,172
10/31/91 14208 14,957 12,190
11/29/91 14283 14,999 12,225
12/31/91 14567 15,322 12,234
1/31/92 14603 15,357 12,252
2/28/92 14614 15,362 12,296
3/31/92 14676 15,368 12,359
4/30/92 14814 15,504 12,376
5/29/92 15029 15,687 12,393
6/30/92 15247 15,951 12,438
7/31/92 15761 16,429 12,464
8/31/92 15552 16,268 12,499
9/30/92 15564 16,374 12,534
10/30/92 15352 16,214 12,578
11/30/92 15721 16,504 12,596
12/31/92 15958 16,672 12,587
1/29/93 16153 16,866 12,648
2/26/93 16564 17,476 12,693
3/31/93 16491 17,291 12,737
4/30/93 16621 17,466 12,773
5/31/93 16725 17,563 12,791
6/30/93 16994 17,857 12,809
7/30/93 17016 17,880 12,809
8/31/93 17301 18,252 12,844
9/30/93 17477 18,460 12,871
10/29/93 17512 18,495 12,924
11/30/93 17435 18,332 12,933
12/31/93 17753 18,719 12,933
1/31/94 17903 18,932 12,968
2/28/94 17595 18,442 13,012
3/31/94 17057 17,692 13,056
4/29/94 17094 17,842 13,075
5/31/94 17218 17,997 13,084
6/30/94 17151 17,887 13,128
7/29/94 17394 18,215 13,164
8/31/94 17460 18,278 13,217
9/30/94 17289 18,010 13,252
10/31/94 17043 17,689 13,261
11/30/94 16751 17,369 13,279
12/30/94 17090 17,751 13,279
1/31/95 17524 18,259 13,332
2/28/95 17945 18,790 13,385
3/31/95 18091 19,006 13,429
4/28/95 18156 19,029 13,474
5/31/95 18579 19,636 13,501
6/30/95 18519 19,465 13,528
7/31/95 18664 19,650 13,528
8/31/95 18841 19,900 13,563
9/29/95 18939 20,025 13,590
10/31/95 19182 20,315 13,635
11/30/95 19474 20,653 13,625
12/29/95 19671 20,851 13,616
1/31/96 19755 21,009 13,696
2/29/96 19677 20,867 13,740
3/29/96 19499 20,599 13,811
4/30/96 19486 20,542 13,865
5/31/96 19506 20,534 13,891
6/28/96 19709 20,757 13,900
7/31/96 19858 20,946 13,926
8/30/96 19873 20,942 13,953
9/30/96 20125 21,235 13,997
10/31/96 20326 21,475 14,042
11/29/96 20632 21,868 14,069
12/31/96 20596 21,776 14,069
1/31/97 20646 21,818 14,114
2/28/97 20835 22,018 14,158
3/31/97 20642 21,726 14,193
4/30/97 20813 21,908 14,211
Total Return: 108.13% 119.08% 42.11%
GRAPHIC MATERIAL (5)
This bar chart shows the comparison between the fund's Class II distribution
rate of 5.20% and the taxable equivalent distribution rate of 8.61%.
GRAPHIC MATERIAL (6)
The following line graph hypothetically compares the performance of the
Franklin Federal Tax-Free Income Fund Class II Shares to that of the Lehman
Brothers Municipal Bond Index and the Consumer Price Index (CPI), based on a
$10,000 investment from 5/1/95 to 4/30/97.
Period Ending Fed Tax-Free LBMuni CPI
5/1/95 9898 $10,000$10,000
5/31/95 10127 10,319 10,020
6/30/95 10090 10,229 10,040
7/31/95 10163 10,326 10,040
8/31/95 10254 10,458 10,066
9/30/95 10303 10,523 10,086
10/31/95 10430 10,676 10,120
11/30/95 10574 10,853 10,112
12/31/95 10685 10,957 10,105
1/31/96 10725 11,041 10,165
2/29/96 10677 10,966 10,198
3/31/96 10576 10,825 10,251
4/30/96 10557 10,795 10,291
5/31/96 10563 10,791 10,310
6/28/96 10667 10,908 10,316
7/31/96 10743 11,008 10,336
8/30/96 10745 11,005 10,356
9/30/96 10885 11,159 10,389
10/31/96 10989 11,286 10,422
11/29/96 11140 11,492 10,442
12/31/96 11124 11,444 10,442
1/31/97 11146 11,466 10,475
2/28/97 11233 11,571 10,508
3/31/97 11134 11,417 10,534
4/30/97 11220 11,513 10,548
Total Return 12.20% 15.13% 5.48%
