SHAREHOLDER LETTER
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Your Fund's Goal: 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.(1)
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Dear Shareholder:
This annual report for Franklin Federal Tax-Free Income Fund covers the period
ended April 30, 2000. The year under review was marked by economic strength, as
U.S. gross domestic product (GDP) rose an estimated 6.0% for the one-year period
ended March 31, 2000, consumer confidence remained strong and unemployment hit a
30-year low. In fact, the domestic economy grew for a record 109 consecutive
months, and domestic stock markets surged to all-time highs. In the face of such
economic expansion, inflation as measured by the Consumer Price Index was 3.7%
for the reporting period.
Bond markets started the period in what looked to be a potentially positive year
due to interest-rate expectations. However, the Federal Reserve Board (the Fed)
proceeded to raise the federal funds target rate 0.25% on five separate
occasions due to inflation fears. This made 1999 and early 2000 one of the worst
periods that bond markets have ever experienced. In February, the government
announced it would sponsor 30-year Treasury buybacks and reduce future issuance
of long-term Treasuries. This, coupled with several signs that U.S. economic
growth might be slowing, caused a supply-demand imbalance. These circumstances
caused long-term Treasury bond prices to rise sharply, resulting in an inverted
yield curve. That is, rates on long-term bonds declined below those of
short-term bonds. None of the other domestic fixed-income markets, including
municipal bonds, experienced such an inversion.
(1.) These dividends are generally subject to state and local income taxes, if
any. For investors subject to federal or state alternative 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.
All portfolio holdings mentioned in the report are listed by their complete
legal titles in the fund's Statement of Investments (SOI), which is a complete
listing of the fund's portfolio holdings, including dollar value and number of
shares or principal amount. The SOI begins on page 15.
CONTENTS
Shareholder Letter ..... 1
Performance Summary .... 8
Financial Highlights &
Statement of Investments 12
Financial Statements ... 49
Notes to
Financial Statements ... 52
Independent
Auditors' Report ....... 56
Tax Designation ........ 57
[Fund Category Pyramid Graphic]
The yield on the 30-year Treasury rose from 5.66% at the beginning of the fund's
fiscal year, to 5.96% on April 30, 2000, after reaching a high of 6.75% on
January 20, 2000. The yield on the Bond Buyer Municipal Bond Index (Bond Buyer
40), an indicator of the municipal bond market, rose from 5.28% to 6.00% for the
same period, while its price declined 10.3%.(2) As interest rates and yields
increased, the dollar value of bonds decreased, meaning bond funds in general
declined in value.
Municipal bond supply in 1999 and first quarter 2000 added pressure to the
already volatile municipal bond market. Although less than in 1998, the $225
billion issuance in 1999 was the fourth-highest on record. Looking forward, we
anticipate decreased new issuance for the remainder of 2000. The near-record
volume did have some benefit, as it helped municipal bonds remain cheap relative
to Treasuries. During the year under review, municipal bonds, as measured by the
Bond Buyer 40, yielded as much as 103% of a comparable Treasury bond's yield.
Historically, this ratio is about 90%.(3) Because municipal bonds are
tax-exempt, they generally yield less than Treasuries, which are subject to
federal income tax. When municipals are yielding nearly the same as Treasuries,
investors are able to take advantage of the tax exemption at little extra cost.
We welcome our new shareholders who joined the fund during the reporting period
as a result of reorganizations involving Franklin Arkansas Municipal Bond Fund,
Franklin Hawaii Municipal Bond Fund, Franklin Indiana Tax-Free Income Fund, and
Franklin Washington Municipal Bond Fund.
(2.) The unmanaged Bond Buyer Municipal Bond Index is composed of the yield to
maturity of 40 bonds. The index attempts to track the new-issue market as
closely as possible, so it changes bonds twice a month, adding all new bonds
that meet certain requirements and deleting an equivalent number according to
their secondary market trading activity. As a result, the average par call date,
average maturity date and average coupon rate change over time. The average
maturity generally has been about 29-30 years.
Looking forward, we anticipate that the Fed will monitor inflationary tendencies
closely, probably raising interest rates again. If, as a result, the economy
slows toward the end of 2000, the bond markets could begin to experience less
volatility.
The last few times municipal bonds lost ground, they enjoyed sharp rebounds in
the following year. For example, in 1994, when the Fed raised interest rates six
times, the average general municipal bond fund lost 6.5% in total return. In the
following year, rates declined, and the average municipal bond fund gained
nearly 17%. Although there is no guarantee that bond markets and municipal bond
funds will repeat past behavior, markets do go through cycles. Predicting these
cycles is very difficult, even for professional economists -- which is why we
recommend investing for the long term. It is important to remember that over
time, the tax-free income received from municipal bond funds will ultimately
drive the fund's total return performance.
(3.) Source: The Bond Buyer 3/00.
PORTFOLIO NOTES
The general rise in interest rates during the year under review presented
challenges to the fund, pressuring the fund's share price. However, it should be
noted that the fund's share price decline was not a result of any change to our
investment philosophy or strategy, but instead representative of the decline in
market value of the portfolio's securities attributed to rising interest rates.
In fact, the fund's broad diversification, with 1,060 positions on April 30,
2000, and overall composition provided investors with some stability during this
period of interest-rate increases, as the fund held bonds ranging in maturity
across the yield curve. This diversification helped to maintain the fund's share
price during the period. For the 12 months ended April 30, 2000, the Bond Buyer
40's price was off 10.3% and the fund's benchmark, the Lehman Brothers Municipal
Bond Index, declined 7.1% in price. By comparison, your fund's Class A share
price, as measured by net asset value, declined 7.3%.(4)
In addition, your fund offers a notable tax advantage over a comparable taxable
investment. The Performance Summary beginning on page 8 shows that at the end of
this reporting period, the fund's Class A shares' distribution rate was 5.49%,
based on an annualization of the current 5.45 cent ($0.0545) per share dividend
and the maximum offering price of $11.92 on April 30, 2000. This tax-free rate
is generally higher than the after-tax return on a comparable taxable
investment. An investor in the maximum federal income tax bracket of 39.6% would
need to earn 9.09% from a taxable investment to match the fund's tax-free
distribution rate. The Performance Summary also shows distribution rates and
taxable equivalent distribution rates for Class B and C shares.
(4.) Sources: Lehman Brothers; The Bond Buyer. Treasuries, if held to maturity,
offer a fixed rate of return and fixed principal value; their interest payments
and principal are guaranteed. The fund's investment return and share price
fluctuate with market conditions. Index is unmanaged and includes reinvested
interest. One cannot invest directly in an index.
CREDIT QUALITY BREAKDOWN*
Based on Total Long-Term Investments
4/30/00
AAA - 39.0%
AA - 12.7%
A - 22.0%
BBB - 25.1%
Below Investment
Grade - 1.2%
*Quality breakdown may include internal ratings for bonds not rated by an
independent credit rating agency.
The rise in interest rates did provide the fund with some opportunities.
Primarily, the higher interest-rate environment helped protect its dividend, as
such rates can improve the fund's income-earning potential. Although most bonds
called over the period had coupons in the 7%-9% range, we reinvested the
proceeds in bonds with an average yield of 5.75%, which was substantially higher
than in the previous period when the average reinvestment yield was 5.17%. On
April 30, 2000, the fund's average coupon was 6.38%, higher than recent
investments offered, which allowed us to pay out an above-average income stream
relative to our peers.
During the period, we made only minor changes to the fund's composition. On
April 30, 2000, New York (17.3% of total net assets), Illinois (6.6%), Texas
(5.8%), Colorado (4.8%) and California (4.2%) represented the fund's largest
geographic weightings. New York and California are generally the largest
municipal debt issuers as their populations drive the need for infrastructure
financing. In addition, their credit ratings were upgraded in 1999 as their
finances have improved due to the strong economy.
We took the opportunity to sell bonds with shorter call protection such as
housing bonds, and reinvested the proceeds in securities with longer call
protection. As a result, housing bonds declined from 12.0% of total long-term
investments on May 1, 1999, to 10.5% at the end of the period. Elsewhere, we
added to our positions in Atlanta Airport Facilities Revenue and Massachusetts
State Turnpike Authority Metropolitan Highway System Revenue bonds, which are
insured and carry AAA ratings by all of the major rating agencies. Overall,
14.6% of the portfolio was invested in the transportation sector at the end of
the period, up from 11.8% on April 30, 1999.
PORTFOLIO BREAKDOWN
4/30/00
% OF TOTAL
LONG-TERM
INVESTMENTS
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Utilities ............ 20.9%
Prerefunded .......... 14.8%
Transportation ....... 14.6%
Hospital & Health Care 10.9%
Housing .............. 10.5%
Corporate-Backed ..... 9.0%
General Obligation ... 8.6%
Subject to Government
Appropriation ........ 6.1%
Tax-Supported Debt ... 2.1%
Other Revenue ........ 1.4%
Higher Education ..... 1.1%
DIVIDEND DISTRIBUTIONS
5/1/99 - 4/30/00
DIVIDEND PER SHARE
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MONTH CLASS A CLASS B CLASS C
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May 5.55 cents 5.07 cents 4.97 cents
June 5.50 cents 4.90 cents 4.93 cents
July 5.50 cents 4.90 cents 4.93 cents
August 5.50 cents 4.90 cents 4.93 cents
September 5.50 cents 4.92 cents 4.94 cents
October 5.50 cents 4.92 cents 4.94 cents
November 5.50 cents 4.92 cents 4.94 cents
December 5.45 cents 4.95 cents 4.92 cents
January 5.45 cents 4.95 cents 4.92 cents
February 5.45 cents 4.95 cents 4.92 cents
March 5.45 cents 4.91 cents 4.91 cents
April 5.45 cents 4.91 cents 4.91 cents
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TOTAL 65.80 CENTS 59.20 CENTS 59.16 CENTS
Looking forward, we believe the fund will continue to provide investors with
attractive, monthly tax-free income as we seek to provide a high level of
current income with a relatively stable share price. Municipal bonds recently
have been priced inexpensively on a historical basis relative to other
fixed-income opportunities. In our opinion, this makes municipal bond funds an
excellent opportunity for fixed-income investors.
Sincerely,
/s/ Charles B. Johnson
Charles B. Johnson
Chairman
Franklin Federal Tax-Free Income Fund
/s/ Sheila Amoroso
Sheila Amoroso
/s/ Rafael R. Costas Jr.
Rafael R. Costas Jr.
Senior Vice Presidents and Co-Directors
Franklin Municipal Bond Department
This discussion reflects our views, opinions and portfolio holdings as
of April 30, 2000, the end of the reporting period. The information provided is
not a complete analysis of every aspect of any industry, security or the fund.
Our strategies and the fund's portfolio composition will change depending on
market and economic conditions. Although historical performance is no guarantee
of future results, these insights may help you understand our investment and
management philosophy.
CLASS A: Subject to the current, maximum 4.25% initial sales charge. Prior to
July 1, 1994, fund shares were offered at a lower initial sales charge; thus
actual total returns may differ. Effective May 1, 1994, the fund eliminated the
sales charge on reinvested dividends and implemented a Rule 12b-1plan, which
affects subsequent performance.
CLASS B: Subject to no initial sales charge, but subject to a contingent
deferred sales charge (CDSC) declining from 4% to 0% over six years. These
shares have higher annual fees and expenses than Class A shares.
CLASS C: Subject to 1% initial sales charge and 1% CDSC for shares redeemed
within 18 months of investment. These shares have higher annual fees and
expenses than Class A shares.
ONE-YEAR PERFORMANCE SUMMARY
AS OF 4/30/00
One-year total return does not include sales charges. Distributions will vary
based on earnings of the fund's portfolio and any profits realized from the sale
of the portfolio's securities. Past distributions are not indicative of future
trends. All total returns include reinvested distributions at net asset value.
CLASS A
One-Year Total Return -1.87%
Net Asset Value (NAV) $11.41 (4/30/00) $12.31 (4/30/99)
Change in NAV -$0.90
Distributions (5/1/99-
4/30/00) Dividend Income $0.6580
Long-Term Capital Gain $0.0073
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Total $0.6653
CLASS B
One-Year Total Return -2.35%
Net Asset Value (NAV) $11.41 (4/30/00) $12.30 (4/30/99)
Change in NAV -$0.89
Distributions (5/1/99-
4/30/00) Dividend Income $0.5920
Long-Term Capital Gain $0.0073
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Total $0.5993
CLASS C
One-Year Total Return -2.43%
Net Asset Value (NAV) $11.41 (4/30/00) $12.31 (4/30/99)
Change in NAV -$0.90
Distributions (5/1/99-
4/30/00) Dividend Income $0.5916
Long-Term Capital Gain $0.0073
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Total $0.5989
Franklin Federal Tax-Free Income Fund paid distributions derived from long-term
capital gains of 0.73 cents ($0.0073) per share in June 1999. The fund hereby
designates such distributions as capital gain dividends per Internal Revenue
Code Section 852 (b)(3).
Past performance does not guarantee future results.
ADDITIONAL PERFORMANCE
AS OF 4/30/00
INCEPTION
CLASS A 1-YEAR 5-YEAR 10-YEAR (10/7/83)
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Cumulative Total Return(1) -1.87% +30.00% +94.93% +271.47%
Average Annual Total Return(2) -6.07% +4.48% +6.44% +7.96%
INCEPTION
CLASS B 1-YEAR (1/1/99)
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Cumulative Total Return(1) -2.35% -1.41%
Average Annual Total Return(2) -6.06% -3.86%
INCEPTION
CLASS C 1-YEAR 5-YEAR (5/1/95)
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Cumulative Total Return(1) -2.43% +26.39% +26.39%
Average Annual Total Return(2) -4.29% +4.58% +4.58%
SHARE CLASS A B C
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Distribution Rate(3) 5.49% 5.16% 5.11%
Taxable Equivalent Distribution Rate(4) 9.09% 8.54% 8.46%
30-Day Standardized Yield(5) 5.11% 4.77% 4.73%
Taxable Equivalent Yield(4) 8.46% 7.90% 7.83%
For updated performance figures, see "Prices and Performance" at
franklintempleton.com, or call Franklin Templeton at 1-800/342-5236.
(1.) Cumulative total return represents the change in value of an investment
over the periods indicated and does not include sales charges.
(2.) Average annual total return represents the average annual change in value
of an investment over the periods indicated and includes the current,
applicable, maximum sales charge(s) for that class.
(3.) Distribution rate is based on an annualization of the respective class's
April dividend and the maximum offering price (net asset value for Class B) per
share on April 30, 2000.
(4.) Taxable equivalent distribution rate and yield assume the 2000 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, 2000.
Bond prices, and thus the fund's share price, generally move in the opposite
direction from interest rates. Since markets can go down as well as up,
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 does not guarantee future results.
TOTAL RETURN INDEX COMPARISON
FOR HYPOTHETICAL $10,000 INVESTMENT
Total return represents the change in value of an investment over the periods
shown. It includes the current, applicable, maximum sales charge(s), fund
expenses, account fees and reinvested distributions. The unmanaged index, which
includes approximately 38,000 municipal securities from across the country,
differs from the fund in composition, does not pay management fees or expenses
and includes reinvested interest. One cannot invest directly in an index.
AVERAGE ANNUAL TOTAL RETURN
4/30/00
CLASS A
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1-Year -6.07%
5-Year +4.48%
10-Year +6.44%
Since Inception (10/7/83) +7.96%
AVERAGE ANNUAL TOTAL RETURN
4/30/00
CLASS B
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1-Year -6.06%
Since Inception (1/1/99) -3.86%
CLASS A (5/1/90 - 4/30/00)
GRAPHIC MATERIAL (4)
The following line graph compares the performance of Franklin Federal Tax-Free
Income Fund's Class A shares to that of the Lehman Brothers Municipal Bond
Index, and to the Consumer Price Index based on a $10,000 investment from 5/1/90
to 4/30/00.*
<TABLE>
<CAPTION>
Date Franklin Federal Tax-Free Income Lehman Brothers Municipal CPI
Fund-Class A Bond Index
<S> <C> <C> <C> <C> <C>
05/01/1990 9,576 10,000 10,000
05/31/1990 9,812 2.18% 10,218 0.23% 10,023
06/30/1990 9,900 0.88% 10,308 0.54% 10,077
07/31/1990 10,068 1.47% 10,459 0.38% 10,115
08/31/1990 9,883 -1.45% 10,308 0.92% 10,208
09/30/1990 9,857 0.06% 10,314 0.84% 10,294
10/31/1990 9,966 1.82% 10,502 0.60% 10,356
11/30/1990 10,165 2.01% 10,713 0.22% 10,379
12/31/1990 10,175 0.43% 10,759 0.00% 10,379
01/31/1991 10,340 1.34% 10,903 0.60% 10,441
02/28/1991 10,387 0.87% 10,998 0.15% 10,457
03/31/1991 10,443 0.03% 11,001 0.15% 10,472
04/30/1991 10,631 1.34% 11,149 0.15% 10,488
05/31/1991 10,706 0.89% 11,248 0.30% 10,520
06/30/1991 10,726 -0.10% 11,237 0.29% 10,550
07/31/1991 10,898 1.22% 11,374 0.15% 10,566
08/31/1991 11,004 1.32% 11,524 0.29% 10,597
09/30/1991 11,169 1.30% 11,674 0.44% 10,643
10/31/1991 11,237 0.90% 11,779 0.15% 10,659
11/30/1991 11,297 0.28% 11,812 0.29% 10,690
12/31/1991 11,521 2.15% 12,066 0.07% 10,698
01/31/1992 11,549 0.23% 12,093 0.15% 10,714
02/29/1992 11,558 0.03% 12,097 0.36% 10,752
03/31/1992 11,607 0.03% 12,101 0.51% 10,807
04/30/1992 11,717 0.89% 12,208 0.14% 10,822
05/31/1992 11,887 1.18% 12,352 0.14% 10,837
06/30/1992 12,059 1.68% 12,560 0.36% 10,876
07/31/1992 12,466 3.00% 12,937 0.21% 10,899
08/31/1992 12,300 -0.97% 12,811 0.28% 10,930
09/30/1992 12,310 0.65% 12,894 0.28% 10,960
10/31/1992 12,142 -0.98% 12,768 0.35% 10,999
11/30/1992 12,433 1.79% 12,997 0.14% 11,014
12/31/1992 12,621 1.02% 13,129 -0.07% 11,006
01/31/1993 12,776 1.16% 13,281 0.49% 11,060
02/28/1993 13,101 3.62% 13,762 0.35% 11,099
03/31/1993 13,043 -1.06% 13,616 0.35% 11,138
04/30/1993 13,146 1.01% 13,754 0.28% 11,169
05/31/1993 13,228 0.56% 13,831 0.14% 11,185
06/30/1993 13,440 1.67% 14,062 0.14% 11,200
07/31/1993 13,458 0.13% 14,080 0.00% 11,200
08/31/1993 13,684 2.08% 14,373 0.28% 11,232
09/30/1993 13,822 1.14% 14,537 0.21% 11,255
10/31/1993 13,850 0.19% 14,565 0.41% 11,301
11/30/1993 13,789 -0.88% 14,436 0.07% 11,309
12/31/1993 14,041 2.11% 14,741 0.00% 11,309
01/31/1994 14,159 1.14% 14,909 0.27% 11,340
02/28/1994 13,916 -2.59% 14,523 0.34% 11,378
03/31/1994 13,490 -4.07% 13,932 0.34% 11,417
04/30/1994 13,520 0.85% 14,050 0.14% 11,433
05/31/1994 13,618 0.87% 14,172 0.07% 11,441
06/30/1994 13,565 -0.61% 14,086 0.34% 11,480
07/31/1994 13,757 1.83% 14,344 0.27% 11,511
08/31/1994 13,809 0.35% 14,394 0.40% 11,557
09/30/1994 13,674 -1.47% 14,182 0.27% 11,588
10/31/1994 13,479 -1.78% 13,930 0.07% 11,596
11/30/1994 13,248 -1.81% 13,678 0.13% 11,611
12/31/1994 13,517 2.20% 13,979 0.00% 11,611
01/31/1995 13,860 2.86% 14,379 0.40% 11,658
02/28/1995 14,193 2.91% 14,797 0.40% 11,704
03/31/1995 14,308 1.15% 14,967 0.33% 11,743
04/30/1995 14,359 0.12% 14,985 0.33% 11,782
05/31/1995 14,694 3.19% 15,463 0.20% 11,805
06/30/1995 14,647 -0.87% 15,329 0.20% 11,829
07/31/1995 14,761 0.95% 15,474 0.00% 11,829
08/31/1995 14,901 1.27% 15,671 0.26% 11,860
09/30/1995 14,979 0.63% 15,769 0.20% 11,883
10/31/1995 15,171 1.45% 15,998 0.33% 11,923
11/30/1995 15,402 1.66% 16,264 -0.07% 11,914
12/31/1995 15,558 0.96% 16,420 -0.07% 11,906
01/31/1996 15,624 0.76% 16,545 0.59% 11,976
02/29/1996 15,562 -0.68% 16,432 0.32% 12,015
03/31/1996 15,422 -1.28% 16,222 0.52% 12,077
04/30/1996 15,412 -0.28% 16,176 0.39% 12,124
05/31/1996 15,427 -0.04% 16,170 0.19% 12,147
06/30/1996 15,588 1.09% 16,346 0.06% 12,154
07/31/1996 15,706 0.90% 16,493 0.19% 12,178
08/31/1996 15,717 -0.02% 16,490 0.19% 12,201
09/30/1996 15,917 1.40% 16,721 0.32% 12,240
10/31/1996 16,076 1.13% 16,910 0.32% 12,279
11/30/1996 16,318 1.83% 17,219 0.19% 12,302
12/31/1996 16,289 -0.42% 17,147 0.00% 12,302
01/31/1997 16,329 0.19% 17,179 0.32% 12,342
02/28/1997 16,478 0.92% 17,337 0.31% 12,380
03/31/1997 16,326 -1.33% 17,107 0.25% 12,411
04/30/1997 16,461 0.84% 17,251 0.12% 12,426
05/31/1997 16,667 1.51% 17,511 -0.06% 12,418
06/30/1997 16,831 1.07% 17,698 0.12% 12,433
07/31/1997 17,221 2.77% 18,189 0.12% 12,448
08/31/1997 17,120 -0.94% 18,018 0.19% 12,472
09/30/1997 17,316 1.19% 18,232 0.25% 12,503
10/31/1997 17,427 0.64% 18,349 0.25% 12,534
11/30/1997 17,524 0.59% 18,457 -0.06% 12,527
12/31/1997 17,751 1.46% 18,727 -0.12% 12,512
01/31/1998 17,889 1.03% 18,919 0.19% 12,535
02/28/1998 17,912 0.03% 18,925 0.19% 12,559
03/31/1998 17,951 0.09% 18,942 0.19% 12,583
04/30/1998 17,930 -0.45% 18,857 0.18% 12,606
05/31/1998 18,159 1.58% 19,155 0.18% 12,628
06/30/1998 18,242 0.39% 19,230 0.12% 12,644
07/31/1998 18,295 0.25% 19,278 0.12% 12,659
08/31/1998 18,513 1.55% 19,576 0.12% 12,674
09/30/1998 18,687 1.25% 19,821 0.12% 12,689
10/31/1998 18,680 0.00% 19,821 0.24% 12,720
11/30/1998 18,750 0.35% 19,890 0.00% 12,720
12/31/1998 18,805 0.25% 19,940 -0.06% 12,712
01/31/1999 18,966 1.19% 20,177 0.24% 12,742
02/28/1999 18,930 -0.44% 20,089 0.12% 12,758
03/31/1999 18,984 0.14% 20,117 0.30% 12,796
04/30/1999 19,024 0.25% 20,167 0.73% 12,889
05/31/1999 18,955 -0.58% 20,050 0.00% 12,889
06/30/1999 18,709 -1.44% 19,761 0.00% 12,889
07/31/1999 18,748 0.36% 19,833 0.30% 12,928
08/31/1999 18,551 -0.80% 19,674 0.24% 12,959
09/30/1999 18,543 0.04% 19,682 0.48% 13,021
10/31/1999 18,297 -1.08% 19,469 0.18% 13,045
11/30/1999 18,449 1.06% 19,676 0.06% 13,053
12/31/1999 18,280 -0.75% 19,528 0.00% 13,053
01/31/2000 18,158 -0.44% 19,442 0.24% 13,084
02/29/2000 18,376 1.16% 19,668 0.59% 13,161
03/31/2000 18,758 2.18% 20,096 0.82% 13,269
04/30/2000 18,667 -0.59% 19,978 0.06% 13,277
</TABLE>
*Source: Standard and Poor's Micropal.
CLASS B (1/1/99 - 4/30/00)
GRAPHIC MATERIAL (6)
The following line graph compares the performance of Franklin Federal Tax-Free
Income Fund's Class B shares to that of the Lehman Brothers Municipal Bond
Index, and to the Consumer Price Index based on a $10,000 investment from 1/1/99
to 4/30/00.*
<TABLE>
<CAPTION>
Date Franklin Federal Lehman Brothers CPI
Tax-Free Income Municipal Bond
Fund-Class B Index
<S> <C> <C> <C> <C> <C> <C>
01/01/1999 10,000 10,000 10,000
01/31/1999 10,086 1.19% 10,119 0.24% 10,024
02/28/1999 10,054 -0.44% 10,074 0.12% 10,036
03/31/1999 10,079 0.14% 10,089 0.30% 10,066
04/30/1999 10,096 0.25% 10,114 0.73% 10,140
05/31/1999 10,055 -0.58% 10,055 0.00% 10,140
06/30/1999 9,920 -1.44% 9,910 0.00% 10,140
07/31/1999 9,935 0.36% 9,946 0.30% 10,170
08/31/1999 9,826 -0.80% 9,866 0.24% 10,194
09/30/1999 9,817 0.04% 9,870 0.48% 10,243
10/31/1999 9,682 -1.08% 9,764 0.18% 10,262
11/30/1999 9,766 1.06% 9,867 0.06% 10,268
12/31/1999 9,672 -0.75% 9,793 0.00% 10,268
01/31/2000 9,603 -0.44% 9,750 0.24% 10,293
02/29/2000 9,706 1.16% 9,863 0.59% 10,353
03/31/2000 9,903 2.18% 10,078 0.82% 10,438
04/30/2000 9,490 -0.59% 10,019 0.06% 10,445
</TABLE>
*Source: Standard and Poor's Micropal.
Past performance does not guarantee future results.
Class C (5/1/95-4/30/00)
GRAPHIC MATERIAL (8)
The following line graph compares the performance of Franklin Federal Tax-Free
Income Fund's Class C shares to that of the Lehman Brothers Municipal Bond
Index, and to the Consumer Price Index based on a $10,000 investment from 5/1/95
to 4/30/00.*
<TABLE>
<CAPTION>
Date Franklin Federal Lehman Brothers CPI
Tax-Free Income Municipal Bond
Fund-Class C Index
<S> <C> <C> <C> <C> <C>
05/01/1995 9,898 10,000 10,000
05/31/1995 10,127 3.19% 10,319 0.20% 10,020
06/30/1995 10,090 -0.87% 10,229 0.20% 10,040
07/31/1995 10,163 0.95% 10,326 0.00% 10,040
08/31/1995 10,254 1.27% 10,458 0.26% 10,066
09/30/1995 10,303 0.63% 10,523 0.20% 10,086
10/31/1995 10,430 1.45% 10,676 0.33% 10,120
11/30/1995 10,574 1.66% 10,853 -0.07% 10,112
12/31/1995 10,685 0.96% 10,957 -0.07% 10,105
01/31/1996 10,725 0.76% 11,041 0.59% 10,165
02/29/1996 10,677 -0.68% 10,966 0.32% 10,198
03/31/1996 10,576 -1.28% 10,825 0.52% 10,251
04/30/1996 10,557 -0.28% 10,795 0.39% 10,291
05/31/1996 10,563 -0.04% 10,791 0.19% 10,310
06/30/1996 10,667 1.09% 10,908 0.06% 10,316
07/31/1996 10,743 0.90% 11,006 0.19% 10,336
08/31/1996 10,745 -0.02% 11,004 0.19% 10,356
09/30/1996 10,885 1.40% 11,158 0.32% 10,389
10/31/1996 10,989 1.13% 11,284 0.32% 10,422
11/30/1996 11,140 1.83% 11,491 0.19% 10,442
12/31/1996 11,124 -0.42% 11,443 0.00% 10,442
01/31/1997 11,146 0.19% 11,464 0.32% 10,475
02/28/1997 11,233 0.92% 11,570 0.31% 10,508
03/31/1997 11,134 -1.33% 11,416 0.25% 10,534
04/30/1997 11,220 0.84% 11,512 0.12% 10,547
05/31/1997 11,355 1.51% 11,686 -0.06% 10,540
06/30/1997 11,461 1.07% 11,811 0.12% 10,553
07/31/1997 11,722 2.77% 12,138 0.12% 10,565
08/31/1997 11,648 -0.94% 12,024 0.19% 10,586
09/30/1997 11,766 1.19% 12,167 0.25% 10,612
10/31/1997 11,835 0.64% 12,245 0.25% 10,639
11/30/1997 11,905 0.59% 12,317 -0.06% 10,632
12/31/1997 12,044 1.46% 12,497 -0.12% 10,619
01/31/1998 12,142 1.03% 12,626 0.19% 10,640
02/28/1998 12,151 0.03% 12,629 0.19% 10,660
03/31/1998 12,171 0.09% 12,641 0.19% 10,680
04/30/1998 12,143 -0.45% 12,584 0.18% 10,699
05/31/1998 12,292 1.58% 12,783 0.18% 10,719
06/30/1998 12,352 0.39% 12,832 0.12% 10,731
07/31/1998 12,382 0.25% 12,865 0.12% 10,744
08/31/1998 12,513 1.55% 13,064 0.12% 10,757
09/30/1998 12,635 1.25% 13,227 0.12% 10,770
10/31/1998 12,625 0.00% 13,227 0.24% 10,796
11/30/1998 12,666 0.35% 13,274 0.00% 10,796
12/31/1998 12,697 0.25% 13,307 -0.06% 10,789
01/31/1999 12,800 1.19% 13,465 0.24% 10,815
02/28/1999 12,759 -0.44% 13,406 0.12% 10,828
03/31/1999 12,789 0.14% 13,425 0.30% 10,861
04/30/1999 12,820 0.25% 13,458 0.73% 10,940
05/31/1999 12,757 -0.58% 13,380 0.00% 10,940
06/30/1999 12,586 -1.44% 13,187 0.00% 10,940
07/31/1999 12,606 0.36% 13,235 0.30% 10,973
08/31/1999 12,468 -0.80% 13,129 0.24% 10,999
09/30/1999 12,467 0.04% 13,134 0.48% 11,052
10/31/1999 12,285 -1.08% 12,992 0.18% 11,072
11/30/1999 12,392 1.06% 13,130 0.06% 11,079
12/31/1999 12,272 -0.75% 13,032 0.00% 11,079
01/31/2000 12,185 -0.44% 12,974 0.24% 11,105
02/29/2000 12,315 1.16% 13,125 0.59% 11,171
03/31/2000 12,576 2.18% 13,411 0.82% 11,262
04/30/2000 12,511 -0.59% 13,332 0.06% 11,269
</TABLE>
*Source: Standard and Poor's Micropal.
AVERAGE ANNUAL TOTAL RETURN
4/30/00
CLASS C
--------------------------------------------------------------------------------
1-Year -4.29%
5-Year +4.58%
Since Inception (5/1/95) +4.58%
*Source: Standard and Poor's Micropal.
Past performance does not guarantee future results.
FRANKLIN FEDERAL TAX-FREE INCOME FUND
Financial Highlights
<TABLE>
<CAPTION>
CLASS A
-------
YEAR ENDED APRIL 30,
2000 1999 1998 1997 1996
------------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
<S> <C> <C> <C> <C> <C>
(for a share outstanding throughout the year)
Net asset value, beginning of year .......... $12.31 $12.25 $11.90 $11.83 $11.73
------------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income(b)..................... .66 .67 .69 .71 .74
Net realized and unrealized gains (losses) . (.89) .06 .35 .07 .10
------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations ............ (.23) .73 1.04 .78 .84
------------------------------------------------------------------------------------------------------------------------------------
Less distributions from:
Net investment income ...................... (.66) (.67) (.69) (.71) (.74)
Net realized gains ......................... (.01) -- -- -- --
------------------------------------------------------------------------------------------------------------------------------------
Total distributions ......................... (.67) (.67) (.69) (.71) (.74)
------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year ................ $11.41 $12.31 $12.25 $11.90 $11.83
===================================================================================================================================
Total return(a) ............................... (1.87%) 6.10% 8.92% 6.81% 7.33%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) ............. $6,321,014 $7,170,226 $7,022,961 $6,905,488 $7,012,601
Ratios to average net assets:
Expenses ................................... .60% .60% .59% .58% .57%
Net investment income ...................... 5.64% 5.41% 5.70% 6.00% 6.20%
Portfolio turnover rate ..................... 16.63% 9.90% 14.54% 16.43% 25.10%
</TABLE>
(a) Total return does not reflect sales commissions or the contingent
deferred sales charge, and is not annualized for periods less than one
year.
(b) Based on average shares outstanding effective year ended April 30,
1999.
FRANKLIN FEDERAL TAX-FREE INCOME FUND
Financial Highlights (continued)
CLASS B
YEAR ENDED APRIL 30,
--------------------
2000 1999(d)
------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year .......... $ 12.30 $ 12.39
------------------------------
Income from investment operations:
Net investment income(b) ..................... .59 .23
Net realized and unrealized losses ......... (.88) (.11)
------------------------------
Total from investment operations ............ (.29) .12
------------------------------
Less distributions from:
Net investment income ...................... (.59) (.21)
Net realized gains ......................... (.01) --
------------------------------
Total distributions ......................... (.60) (.21)
------------------------------
Net asset value, end of year ................ $ 11.41 $ 12.30
==============================
Total return(a) ............................... (2.35%) 0.96%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) ............. $ 66,158 $ 27,988
Ratios to average net assets:
Expenses ................................... 1.17% 1.17%(c)
Net investment income ...................... 5.10% 4.86%(c)
Portfolio turnover rate ..................... 16.63% 9.90%
(a) Total return does not reflect sales commissions or the contingent
deferred sales charge, and is not annualized for periods less than one
year.
(b) Based on average shares outstanding.
(c) Annualized.
(d) For the period January 1, 1999 (effective date) to April 30, 1999.
FRANKLIN FEDERAL TAX-FREE INCOME FUND
Financial Highlights (continued)
<TABLE>
<CAPTION>
CLASS C
YEAR ENDED APRIL 30,
--------------------
2000 1999 1998 1997 1996(e)
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year .......... $ 12.31 $ 12.24 $ 11.90 $ 11.82 $ 11.73
---------------------------------------------------------------------------------
Income from investment operations:
Net investment income(b) ..................... .59 .60 .63 .66 .68
Net realized and unrealized gains (losses) . (.89) .07 .33 .06 .09
---------------------------------------------------------------------------------
Total from investment operations ............ (.30) .67 .96 .72 .77
---------------------------------------------------------------------------------
Less distributions from:
Net investment income ...................... (.59) (.60) (.62) (.64) (.68)
Net realized gains ......................... (.01) -- -- -- --
---------------------------------------------------------------------------------
Total distributions ......................... (.60) (.60) (.62) (.64) (.68)
---------------------------------------------------------------------------------
Net asset value, end of year ................ $ 11.41 $ 12.31 $ 12.24 $ 11.90 $ 11.82
=================================================================================
Total return(a) ............................... (2.43%) 5.58% 8.22% 6.28% 6.68%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) ............. $ 200,120 $ 212,474 $ 135,195 $ 71,944 $ 34,110
Ratios to average net assets:
Expenses ................................... 1.17% 1.17% 1.17% 1.16% 1.15%
Net investment income ...................... 5.07% 4.83% 5.12% 5.42% 5.68%
Portfolio turnover rate ..................... 16.63% 9.90% 14.54% 16.43% 25.10%
</TABLE>
(a) Total return does not reflect sales commissions or the contingent
deferred sales charge, and is not annualized for periods less than one
year.
(b) Based on average shares outstanding effective year ended April 30,
1999.
(e) 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 the beginning of the year includes this dividend.
See notes to financial statements
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, APRIL 30, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS 98.4%
BONDS 95.6%
ALABAMA 1.4%
Alabama HFA, SFMR, Series D-2, GNMA Secured, FNMA Insured, 5.75%, 10/01/23 ...... $ 3,955,000 $ 3,755,114
Alabama Water Pollution Control Authority Revolving Fund Loan, Series B,
Pre-Refunded, 7.75%, 8/15/12 ................................................... 5,690,000 5,781,154
Anniston Regional Medical Center Board, Series A, AMBAC Insured, 5.125%, 6/01/28 7,000,000 6,175,400
Courtland IDB,
PCR, Champion International Corp. Project, Refunding, 6.15%, 6/01/19 ......... 5,000,000 4,767,950
Solid Waste Disposal Revenue, Champion International Corp. Project, Refunding,
6.00%, 8/01/29 .............................................................. 12,000,000 10,802,400
Courtland IDBR,
Champion International Corp., Refunding, Series A, 7.20%, 12/01/13 ........... 12,000,000 12,508,200
Solid Waste Disposal Revenue, Champion International Corp. Project, Refunding,
Series A, 6.70%, 11/01/29 ................................................... 4,000,000 4,006,320
Fairfield IDB, Environmental Improvement Revenue, USX Corp. Project, Refunding,
5.45%, 9/01/14 ................................................................. 1,445,000 1,316,713
Jefferson County Sewer Revenue,
Capital Improvement wts., Series A, FGIC Insured, 5.375%, 2/01/36 ............ 9,700,000 8,698,184
Wts., Refunding, Series A, FGIC Insured, 5.625%, 2/01/22 ..................... 4,000,000 3,809,400
Wts., Series D, FGIC Insured, 5.75%, 2/01/27 ................................. 19,715,000 19,162,783
Mcintosh IDB, Environmental Improvement Revenue, CIBA Specialty, Refunding,
Series C, 5.375%, 6/01/28 ...................................................... 5,000,000 4,245,050
Montgomery Medical Clinic Board Health Care Facilities Revenue, Jackson Hospital
and Clinic, Refunding, AMBAC Insured, 6.00%, 3/01/26 ........................... 5,385,000 5,384,462
------------
90,413,130
------------
ALASKA 1.2%
Alaska Industrial Development and Export Authority, Revolving Fund, Series A,
7.95%, 4/01/10 ................................................................. 1,775,000 1,827,593
Alaska State HFC,
Collateralized Home Mortgage, Series A-1, 6.75%, 12/01/32 .................... 2,120,000 2,162,824
Refunding, Series A, MBIA Insured, 6.00%, 12/01/15 ........................... 3,080,000 3,115,143
Refunding, Series A, MBIA Insured, 5.875%, 12/01/30 .......................... 11,600,000 11,115,816
Refunding, Series A, MBIA Insured, 6.10%, 12/01/37 ........................... 29,000,000 28,494,820
Series A, Pre-Refunded, 6.60%, 12/01/23 ...................................... 8,000,000 8,416,640
Veterans Mortgage Program, MBIA Insured, 6.75%, 12/01/25 ..................... 16,265,000 16,661,703
Anchorage Parking Authority Revenue, 5th Avenue Garage Lease Project, Refunding,
6.50%, 12/01/02 .............................................................. 2,300,000 2,341,170
6.75%, 12/01/08 .............................................................. 3,500,000 3,655,015
------------
77,790,724
------------
ARIZONA 1.0%
Gila County IDAR, Asarco Inc., Refunding, 5.55%, 1/01/27 ........................ 3,340,000 2,602,662
Maricopa County IDA,
Health Facilities Revenue, Catholic Healthcare West Project, Refunding,
Series A, 5.00%, 7/01/16 .................................................... 23,000,000 18,210,710
Hospital Facility Revenue, Mayo Clinic Hospital, 5.25%, 11/15/37 ............. 20,000,000 17,396,600
Mesa IDAR, Discovery Health System, Series A, MBIA Insured, 5.75%, 1/01/25 ...... 22,500,000 22,005,000
Phoenix Civic Improvement Corp. Airport Revenue, senior lien, Series A, FSA
Insured, 5.00%, 7/01/25 ........................................................ 7,000,000 6,158,040
------------
66,373,012
------------
ARKANSAS 1.7%
Arkansas GO, Waste Disposal and Pollution, Refunding, Series B, 6.25%, 7/01/20 .. 130,000 131,422
Arkansas State Development Finance Authority HMR, Series B-1, GNMA Secured,
FNMA Insured, 5.80%, 1/01/23 ................................................... 445,000 425,527
</TABLE>
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, APRIL 30, 2000 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
ARKANSAS (CONT.)
Arkansas State Development Finance Authority Revenue, White River Medical Center
Project,
5.55%, 6/01/19 ............................................................... $ 1,000,000 $ 830,160
5.60%, 6/01/24 ............................................................... 1,200,000 983,964
Arkansas State Development Finance Authority SFMR, MBS Program,
Series B, 6.10%, 1/01/29 ..................................................... 915,000 895,520
Series D, 6.85%, 1/01/27 ..................................................... 95,000 97,964
Series D-A, 5.375%, 7/01/30 .................................................. 560,000 490,874
Arkansas State Development Finance Authority Wastewater System Revenue, Revolving
Loan Fund, Series A, .85%, 12/01/19 .......................................... 1,000,000 1,005,240
Arkansas State Student Loan Authority Revenue, Refunding, Sub Series B,
6.25%, 6/01/10 ............................................................... 500,000 513,415
5.60%, 6/01/14 ............................................................... 325,000 314,239
Arkansas State Water Resources Development, Series B, 5.75%, 7/01/25 ............ 300,000 297,999
Blytheville Solid Waste Recycling and Sewage Treatment Revenue, Nucor Corp. .....
Project, 6.375%, 1/01/23 ....................................................... 100,000 101,657
Camden Environmental Improvement Revenue, International Paper Co. Project,
Series A, 7.625%, 11/01/18 ..................................................... 250,000 267,385
Conway Public Facilities Board, Capital Improvement Revenue, Hendrix College
Project, 6.00%, 10/01/26 ....................................................... 500,000 500,230
Conway Sales and Use Tax Revenue, Capital Improvement, Series A, FSA Insured,
5.35%, 12/01/17 ................................................................ 1,970,000 1,921,715
Desha County Residential Housing Facilities Board SFMR, Refunding, 7.50%, 4/01/11 1,525,000 1,556,751
Fort Smith Water and Sewer Revenue, Refunding and Construction, MBIA Insured,
6.00%, 10/01/12 ................................................................ 130,000 135,402
Fouke School District No. 15 GO, Refunding and Construction, MBIA Insured,
Pre-Refunded, 6.60%, 4/01/19 ................................................... 130,000 137,346
Greenland School District No. 95, Washington County, Refunding and Construction,
MBIA Insured, 6.50%, 5/01/13 ................................................... 115,000 116,241
Gurdon PCR, International Paper Co. Project, Refunding, Series A, 5.375%, 3/01/20 2,160,000 1,898,532
Jefferson County PCR,
Arkansas Power and Light Co. Project, Refunding, 6.30%, 6/01/18 .............. 1,865,000 1,843,105
Entergy Arkansas Inc. Project, Refunding, 5.60%, 10/01/17 .................... 7,900,000 7,040,401
Jonesboro City Water and Light Plant Public Utilities System Revenue, Refunding,
AMBAC Insured, 5.25%, 12/01/13 ................................................. 200,000 198,650
Jonesboro Residential Housing and Health Care Facilities Board Hospital Revenue,
St. Bernard's Regional Medical Center, Refunding, Series B, AMBAC Insured,
5.90%, 7/01/16 ................................................................. 450,000 455,477
Little River County Revenue, Georgia-Pacific Corp. Project, Refunding, 5.60%,
10/01/26 ....................................................................... 16,000,000 13,989,760
Little Rock GO, Capital Improvement, Refunding, 6.30%, 2/01/09 .................. 140,000 140,388
Little Rock Municipal Airport Revenue, Refunding, MBIA Insured, 6.00%, 11/01/14 . 130,000 131,858
Little Rock School District GO, Refunding, 6.25%, 12/01/07 ...................... 120,000 120,055
Little Rock Waste Disposal Revenue, 5.80%, 5/01/16 .............................. 440,000 441,888
North Little Rock Health Facilities Board Health Care Revenue, Baptist Health
Facility, Series A, MBIA Insured, 6.50%, 12/01/21 .............................. 800,000 764,000
Paragould Hospital Revenue, 6.375%, 10/01/17 .................................... 400,000 374,220
Pine Bluff Environmental Improvement Revenue, International Paper Co. Project,
Series B, 5.55%, 11/01/22 ...................................................... 500,000 436,160
Pope County PCR,
Arkansas Power and Light Co. Project, Refunding, 6.30%, 11/01/20 ............. 60,500,000 60,155,755
Power and Light Co. Project, Refunding, 6.30%, 12/01/16 ...................... 2,600,000 2,611,544
Pulaski County Health Facilities Board Revenue,
Catholic Health Initiatives, Series A, 5.00%, 12/01/28 ....................... 1,500,000 1,232,490
Nazareth Sisters of Charity, St. Vincent's Infirmary, Refunding, MBIA Insured,
ETM, 6.05%, 11/01/09 ........................................................ 125,000 132,883
</TABLE>
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, APRIL 30, 2000 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
ARKANSAS (CONT.)
Pulaski County Public Facilities Board,
College Projects, Refunding, Series A, GNMA Secured, 5.55%, 6/20/27 .......... $ 1,300,000 $ 1,189,097
Refunding, Series A, GNMA Secured, 5.45%, 12/20/18 ........................... 1,000,000 944,110
Pulaski County Public Facilities Board MFR, South Oaks Apartments, Refunding,
Series A, GNMA Secured, 6.50%, 10/20/29 ........................................ 600,000 610,722
Saline County Hospital Revenue, Refunding, Connie Lee Insured, 6.00%, 9/01/19 ... 700,000 705,705
Saline County Retirement Housing and Healthcare Facilities Board Revenue,
Refunding, AMBAC Insured, 5.80%, 6/01/11 ....................................... 195,000 199,758
Sebastian County Community Junior College District GO, Refunding and Improvement,
AMBAC Insured, 5.60%, 4/01/17 .................................................. 600,000 590,316
University of Central Arkansas Academic Facilities Revenue,
Series B, AMBAC Insured, 5.875%, 4/01/16 ..................................... 250,000 254,173
Series C, AMBAC Insured, 6.00%, 4/01/21 ...................................... 1,000,000 1,011,850
University of Central Arkansas Athletic Facilities Revenue, Series C, AMBAC
Insured,
6.00%, 4/01/21 ............................................................... 1,000,000 1,011,850
6.125%, 4/01/26 .............................................................. 1,200,000 1,218,312
University of Central Arkansas Housing System Revenue, Refunding, Series A,
AMBAC Insured, 6.00%, 4/01/21 .................................................. 1,000,000 1,011,850
University of Southern Arkansas Revenues, Student Fees, MBIA Insured, 6.00%,
10/01/13 ....................................................................... 125,000 125,308
------------
111,563,268
------------
CALIFORNIA 4.2%
Alhambra COP, Clubhouse Facility Project, 11.25%,
1/01/08 ...................................................................... 410,000 416,564
1/01/09 ...................................................................... 455,000 462,216
1/01/10 ...................................................................... 500,000 507,870
Burbank RDA, Tax Allocation, Refunding, Series A, 6.25%, 12/01/24 ............... 5,160,000 5,166,863
California Educational Facilities Authority Revenue,
National University, Connie Lee Insured, 6.00%, 5/01/09 ...................... 3,580,000 3,774,824
Pooled College and University Projects, Series B, 6.00%, 12/01/20 ............ 6,025,000 5,678,924
California Health Facilities Financing Authority Revenue, St. Francis Medical
Center, Refunding, Series H,
AMBAC Insured, 6.30%, 10/01/15 .................................................. 2,800,000 2,952,068
California State GO,
5.90%, 5/01/08 ............................................................... 235,000 248,184
6.00%, 5/01/18 ............................................................... 535,000 543,325
5.90%, 4/01/23 ............................................................... 1,200,000 1,203,972
FGIC Insured 6.00%, 5/01/20 .................................................. 850,000 859,784
Veterans Bonds, Series BC, 6.00%, 2/01/10 .................................... 1,000,000 1,003,070
Veterans Bonds, Series BD, BE, and BF, 6.55%, 2/01/25 ........................ 7,840,000 7,854,661
California State Public Works Board Lease Revenue, University of California,
Various Projects, Series A, Pre-Refunded, 6.375%,
10/01/14 ..................................................................... 4,000,000 4,309,160
10/01/19 ..................................................................... 2,000,000 2,154,580
California Statewide CDA Revenue, COP, Sutter Health Obligated Group, MBIA
Insured, 6.00%, 8/15/25 ........................................................ 14,750,000 14,800,150
Chino USD, COP, Refunding, FSA Insured, 5.90%, 9/01/15 .......................... 8,240,000 8,435,865
Commerce Refuse to Energy Authority Revenue, Refunding, Series 1994, 8.75%,
7/01/10 ........................................................................ 1,000,000 1,104,600
</TABLE>
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, APRIL 30, 2000 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
CALIFORNIA (CONT.)
Foothill/Eastern Corridor Agency Toll Road Revenue,
Refunding, MBIA Insured, 5.75%, 1/15/40 ...................................... $ 20,000,000 $ 18,427,800
Senior lien, Series A, Pre-Refunded, 6.50%, 1/01/32 .......................... 59,240,000 64,566,861
Forty-Niner Shops Inc. Auxiliary Organization, California State Long Beach
Project, Pre-Refunded, 6.875%,
4/01/07 ...................................................................... 1,090,000 1,153,351
4/01/12 ...................................................................... 1,565,000 1,655,958
Los Angeles CRDA, Housing Revenue, Refunding, Series A, AMBAC Insured, 6.55%,
1/01/27 ........................................................................ 3,180,000 3,278,548
Los Angeles Department of Water and Power Electric Plant Revenue, Refunding,
MBIA Insured, 6.00%, 2/01/28 ................................................... 3,000,000 3,032,730
Los Angeles Regional Airports Improvement Corp. Lease Revenue,
Facilities Sub-Lease, International Airport, Refunding, 6.35%, 11/01/25 ...... 18,500,000 17,562,420
United Airlines, International Airport, Refunding, 6.875%, 11/15/12 .......... 8,400,000 8,724,744
Metropolitan Water District Revenue, Southern California Waterworks, Series A,
5.00%, 7/01/26 ................................................................. 26,420,000 22,870,473
Pomona PFA, Revenue, Series Q, MBIA Insured, 5.90%, 12/01/25 .................... 4,000,000 4,014,320
San Francisco City and County RDA, Lease Revenue, George R. Moscone Center,
FSA Insured, 6.75%, 7/01/24 .................................................... 7,075,000 7,599,753
San Francisco City and County Redevelopment Financing Authority Tax Allocation
Revenue, Redevelopment Projects,
Pre-Refunded, 6.50%, 8/01/22 .................................................... 12,680,000 13,772,889
San Francisco City and County Sewer Revenue, Series A, FGIC Insured, 5.90%,
10/01/20 ....................................................................... 10,380,000 10,441,346
San Joaquin Hills Transportation Corridor Agency Toll Road Revenue, senior lien,
5.00%, 1/01/33 ............................................................... 5,000,000 4,092,100
Pre-Refunded, 7.00%, 1/01/30 ................................................. 16,785,000 18,030,951
University of California Revenues, Research Facilities, Series B, Pre-Refunded,
6.55%, 9/01/24 ................................................................. 11,780,000 12,641,236
Windsor RDAR, Tax Allocation, Windsor Project, 7.00%, 9/01/24 ................... 2,405,000 2,472,532
------------
275,814,692
------------
COLORADO 4.8%
Colorado Health Facilities Authority Revenue,
Catholic Health Initiatives, Series A, 5.00%, 12/01/28 ....................... 3,035,000 2,497,410
Kaiser Permanente, Series A, 5.35%, 11/01/16 ................................. 13,250,000 11,945,803
Kaiser Permanente, Series B, 5.35%, 8/01/15 .................................. 20,200,000 18,427,248
Colorado HFA, GO, Series A, 7.50%, 5/01/29 ...................................... 1,205,000 1,205,000
Colorado Public Highway Authority Revenue, Highway E-470, Refunding, Senior
Series A, MBIA Insured, 5.00%, 9/01/21 ......................................... 12,715,000 11,172,798
Denver City and County Airport Revenue,
Series A, 8.875%, 11/15/12 ................................................... 12,130,000 12,989,653
Series A, 7.50%, 11/15/23 .................................................... 13,590,000 14,451,334
Series A, 8.50%, 11/15/23 .................................................... 72,960,000 75,509,952
Series A, 8.00%, 11/15/25 .................................................... 1,480,000 1,533,872
Series A, 8.00%, 11/15/25 .................................................... 20,305,000 20,963,085
Series A, Pre-Refunded, 7.50%, 11/15/12 ...................................... 11,200,000 12,100,480
Series A, Pre-Refunded, 8.875%, 11/15/12 ..................................... 4,515,000 4,869,111
Series A, Pre-Refunded, 7.50%, 11/15/23 ...................................... 2,930,000 3,252,945
Series A, Pre-Refunded, 8.50%, 11/15/23 ...................................... 6,985,000 7,268,731
Series A, Pre-Refunded, 7.25%, 11/15/25 ...................................... 16,465,000 17,691,807
Series A, Pre-Refunded, 7.25%, 11/15/25 ...................................... 8,060,000 8,660,551
Series A, Pre-Refunded, 8.00%, 11/15/25 ...................................... 2,020,000 2,096,800
Series A, Pre-Refunded, 8.00%, 11/15/25 ...................................... 520,000 544,461
</TABLE>
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, APRIL 30, 2000 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
COLORADO (CONT.)
Denver City and County Airport Revenue, (cont.)
Series B, 7.25%, 11/15/23 .................................................... $ 2,120,000 $ 2,194,921
Series B, Pre-Refunded, 7.25%, 11/15/23 ...................................... 530,000 567,519
Series D, 7.75%, 11/15/21 .................................................... 8,950,000 9,420,233
Series D, 7.00%, 11/15/25 .................................................... 7,835,000 7,886,476
Series D, Pre-Refunded, 7.75%, 11/15/21 ...................................... 2,510,000 2,665,595
Denver City and County Special Facilities Airport Revenue, United Airlines Inc. .
Project, Series A, 6.875%, 10/01/32 ............................................ 47,980,000 47,211,360
Littleton MFHR, Riverpointe I, Refunding, Series A, FSA Insured, 5.95%, 4/01/29 . 11,400,000 11,092,884
University of Colorado Hospital Authority Revenue, Series A, AMBAC Insured,
5.00%, 11/15/29 ................................................................ 11,000,000 9,341,750
------------
317,561,779
------------
CONNECTICUT
Meriden Housing Authority MFR, Connecticut Baptist Housing Project, GNMA Secured,
5.80%, 8/20/39 ................................................................. 2,870,000 2,697,341
------------
DELAWARE .1%
Delaware State EDA Revenue, Water Development, Wilmington, Refunding, Series B,
6.45%, 12/01/07 ................................................................ 1,160,000 1,236,351
Delaware State Housing Authority MFMR, Refunding, Series D, 6.75%, 7/01/06 ...... 2,000,000 2,098,100
------------
3,334,451
------------
FLORIDA 2.2%
Bay County Resource Recovery Revenue,
Series A, MBIA Insured, Pre-Refunded, 6.50%, 7/01/07 ......................... 2,100,000 2,212,854
Series B, MBIA Insured, Pre-Refunded, 6.50%, 7/01/07 ......................... 11,020,000 11,612,215
Broward County Resource Recovery Revenue, Broward Waste Energy Co., LP, North
Project, Series 1984, 7.95%, 12/01/08 .......................................... 36,700,000 37,870,363
Callaway/Bay County Wastewater Systems Revenue, Series A, FGIC Insured, 6.00%,
9/01/26 ........................................................................ 695,000 701,269
Escambia County Health Facilities Authority Revenue, Ascension Health Credit,
Refunding, Series A-2, AMBAC Insured, 5.75%, 11/15/29 .......................... 14,000,000 13,555,640
Florida State Board of Education Capital Outlay,
Public Education, Refunding, Series 1992, 6.40%, 6/01/19 ..................... 22,475,000 23,133,518
Public Education, Refunding, Series D, 5.75%, 6/01/22 ........................ 10,000,000 9,900,800
Public Education, Refunding, Series D, 6.00%, 6/01/23 ........................ 17,500,000 17,986,325
Manatee County IDR, Manatee Hospital and Health System Inc., Pre-Refunded, 9.25%,
3/01/21 ........................................................................ 6,500,000 6,872,710
Palm Beach County School Board COP, Series A, FGIC Insured, 6.00%, 8/01/23 ...... 5,100,000 5,145,084
St. Augustine Water and Sewer Revenue, Refunding, Series A, MBIA Insured, 6.20%,
10/01/00 ..................................................................... 840,000 846,367
10/01/01 ..................................................................... 890,000 909,438
10/01/02 ..................................................................... 940,000 971,095
10/01/03 ..................................................................... 1,005,000 1,046,808
10/01/04 ..................................................................... 1,065,000 1,118,410
10/01/05 ..................................................................... 1,130,000 1,194,625
10/01/06 ..................................................................... 1,200,000 1,280,124
10/01/07 ..................................................................... 1,275,000 1,362,440
10/01/08 ..................................................................... 1,355,000 1,444,606
10/01/12 ..................................................................... 6,300,000 6,667,164
------------
145,831,855
------------
</TABLE>
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, APRIL 30, 2000 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
GEORGIA 1.3%
Atlanta Airport Facilities Revenue, Refunding, Series A, FGIC Insured, 5.50%,
1/01/26 ........................................................................ $ 13,750,000 $ 13,008,875
Burke County Development Authority PCR,
Georgia Power Co. Plant Vogtle, 1st Series, 5.40%, 5/01/34 ................... 17,705,000 15,462,485
Georgia Power Co. Plant Vogtle, 7th Series, MBIA Insured, 6.625%, 10/01/24 ... 8,025,000 8,196,575
Georgia Power Co. Plant Vogtle, Refunding, 2nd Series, AMBAC Insured, 5.25%,
5/01/34 ..................................................................... 14,000,000 12,326,160
Fulton County Development Authority Special Facilities Revenue, Delta Airlines
Inc. Project, Refunding,
6.85%, 11/01/07 .............................................................. 3,400,000 3,504,278
6.95%, 11/01/12 .............................................................. 5,500,000 5,694,425
Georgia Municipal Electric Authority Power Revenue,
Series B, 6.375%, 1/01/16 .................................................... 14,000,000 14,317,520
Series EE, 6.40%, 1/01/23 .................................................... 6,325,000 6,456,434
Georgia State HFAR, Homeownership Opportunity Program, Series C, 6.60%, 12/01/23 2,960,000 3,041,874
Monroe County Development Authority PCR, Georgia Power Co., AMBAC Insured, 6.25%,
7/01/19 ........................................................................ 4,300,000 4,363,683
------------
86,372,309
------------
HAWAII 1.8%
Hawaii State Airports System Revenue,
FGIC Insured, 7.00%, 7/01/20 ................................................. 1,000,000 1,035,900
Refunding, Third Series 1994, AMBAC Insured, 5.75%, 7/01/09 .................. 300,000 306,834
Second Series, 7.00%, 7/01/07 ................................................ 12,000,000 12,481,920
Second Series, 6.90%, 7/01/12 ................................................ 500,000 552,070
Second Series 1990, FGIC Insured, 7.50%, 7/01/20 ............................. 60,000 61,378
Second Series 1991, 7.00%, 7/01/18 ........................................... 4,350,000 4,497,683
Second Series 1991, MBIA Insured, 6.75%, 7/01/21 ............................. 200,000 205,802
Second Series 1992, MBIA Insured, 6.90%, 7/01/12 ............................. 400,000 445,380
Hawaii State Department of Budget and Finance Special Purpose Mortgage Revenue,
Hawaiian Electric Co. and Subsidiaries, MBIA Insured, 6.55%, 12/01/22 ........ 3,425,000 3,491,000
Hawaiian Electric Co., Series A, MBIA Insured, 6.60%, 1/01/25 ................ 1,950,000 2,020,376
Kaiser Permanente, Refunding, Series A, 6.25%, 3/01/21 ....................... 1,000,000 969,360
Kapiolani Health Care System, Refunding, 6.40%, 7/01/13 ...................... 600,000 603,852
Kapiolani Health Care System, Refunding, 6.00%, 7/01/19 ...................... 2,725,000 2,537,193
St. Francis Medical Centers, Refunding, FSA Insured, 6.50%, 7/01/22 .......... 1,100,000 1,126,774
Wahiawa General Hospital Project, 7.50%, 7/01/12 ............................. 945,000 920,676
Hawaii State Department of Budget and Finance Special Purpose Revenue,
6.00%, 7/01/11 ............................................................... 1,000,000 979,240
6.20%, 7/01/16 ............................................................... 2,000,000 1,940,300
Hawaiian Electric Co. Project, Series A, MBIA Insured, 5.65%, 10/01/27 ....... 20,000,000 18,858,200
Hawaiian Electric Co. Project, Series B, MBIA Insured, 5.875%, 12/01/26 ...... 500,000 484,625
Kaiser Permanente, Series A, 5.15%, 3/01/15 .................................. 4,000,000 3,560,960
Kapiolani Health Obligation, 6.25%, 7/01/21 .................................. 7,350,000 6,920,025
Queens Health System, Refunding, Series A, 6.05%, 7/01/16 .................... 1,000,000 975,770
Queens Health System, Refunding, Series A, 6.00%, 7/01/20 .................... 120,000 115,117
Queens Health System, Refunding, Series A, 5.75%, 7/01/26 .................... 7,000,000 6,383,930
Queens Health System, Series B, MBIA Insured, 5.00%, 7/01/28 ................. 2,680,000 2,279,394
Wilcox Memorial Hospital Projects, 5.25%, 7/01/13 ............................ 600,000 506,352
</TABLE>
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, APRIL 30, 2000 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
HAWAII (CONT.)
Hawaii State Department of Budget and Finance Special Purpose Revenue, (cont.),,,
Wilcox Memorial Hospital Projects, 5.35%, 7/01/18 ............................ $ 2,040,000 $ 1,640,038
Wilcox Memorial Hospital Projects, 5.50%, 7/01/28 ............................ 2,410,000 1,902,719
Hawaii State Department of Transportation Special Facilities Revenue, Matson
Terminals Inc., Refunding, 5.75%, 3/01/13 ...................................... 75,000 71,614
Hawaii State GO,
Series BW, 6.375%, 3/01/11 ................................................... 100,000 107,227
Series CA, 6.00%, 1/01/09 .................................................... 100,000 104,803
Series CT, FSA Insured, 5.875%, 9/01/19 ...................................... 5,000,000 5,018,000
Hawaii State Harbor Capital Improvement Revenue,
Refunding, Series 1994, FGIC Insured, 6.25%, 7/01/15 ......................... 1,000,000 1,021,380
Refunding, Series 1994, FGIC Insured, 6.375%, 7/01/24 ........................ 500,000 507,435
Series 1990, MBIA Insured, 7.25%, 7/01/10 .................................... 70,000 71,672
Series 1990, MBIA Insured, 7.00%, 7/01/17 .................................... 80,000 81,776
Series 1992, FGIC Insured, 6.50%, 7/01/19 .................................... 200,000 203,908
Hawaii State Housing Finance and Development Corp. Revenue, Affordable Rental
Housing Program, Series A,
6.00%, 7/01/15 ............................................................... 1,000,000 1,005,680
6.05%, 7/01/22 ............................................................... 750,000 749,925
6.10%, 7/01/30 ............................................................... 235,000 231,788
Hawaii State Housing Finance and Development Corp. SFM Purchase Revenue,
Series A, 7.10%, 7/01/24 ..................................................... 3,815,000 3,919,455
Series A, 6.00%, 7/01/26 ..................................................... 255,000 248,092
Series A, FNMA Insured, 5.75%, 7/01/30 ....................................... 2,500,000 2,327,825
Series B, 7.00%, 7/01/31 ..................................................... 8,055,000 8,323,876
Hawaii State SFMR, HFC,
Series A, 7.00%, 7/01/11 ..................................................... 230,000 237,677
Series B, 6.90%, 7/01/16 ..................................................... 245,000 252,992
Honolulu City and County GO,
Refunding, Series 1992, 6.00%, 12/01/14 ...................................... 150,000 155,160
Series C, FGIC Insured, 5.00%, 7/01/20 ....................................... 6,250,000 5,453,563
Honolulu City and County MFHR, Waipahu Towers Project, Series A, 6.90%, 6/20/35 . 1,205,000 1,234,860
Honolulu City and County Wastewater System Revenue, 2nd Bond Resolution, Junior
Series, FGIC Insured, 5.00%, 7/01/23 ........................................... 10,000,000 8,649,300
Honolulu City and County Water Supply Board Water System Revenue, 5.80%, 7/01/21 1,785,000 1,765,544
Kauai County GO, Refunding, Series C, AMBAC Insured, 5.95%, 8/01/10 ............. 220,000 230,109
Maui County GO,
6.05%, 9/01/07 ............................................................... 30,000 30,437
6.10%, 9/01/08 ............................................................... 170,000 172,433
Series C, FGIC Insured, 5.20%, 3/01/17 ....................................... 575,000 533,451
------------
120,512,850
------------
IDAHO .6%
Idaho Housing Agency Revenue, Refunding, Series D-1, 6.45%, 7/01/19 ............. 1,935,000 1,981,092
Idaho Housing Agency SFMR, Senior Bond, Series B-1, FGIC Insured,
7.85%, 7/01/09 ............................................................... 405,000 409,479
7.90%, 1/01/21 ............................................................... 625,000 632,181
</TABLE>
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, APRIL 30, 2000 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
IDAHO (CONT.)
Power County Industrial Development Corp. Solid Waste Disposal Revenue, FMC Corp.
Project, 6.45%, 8/01/32 ........................................................ $ 33,750,000 $ 32,209,313
Power County PCR, FMC Corp. Project, Refunding, 5.625%, 10/01/14 ................ 2,200,000 2,012,956
------------
37,245,021
------------
ILLINOIS 6.6%
Bryant PCR, Central Illinois Light Co. Project, Refunding,
Series A, 6.50%, 2/01/18 ..................................................... 7,200,000 7,218,000
Series C, 6.50%, 1/01/10 ..................................................... 5,000,000 5,127,250
Chicago Board of Education GO, Chicago School Reform, MBIA Insured, 6.00%,
12/01/16 ....................................................................... 9,700,000 9,888,180
Chicago COP, AMBAC Insured, 7.75%, 7/15/11 ...................................... 18,600,000 20,741,232
Chicago Gas Supply Revenue, The Peoples Gas Light, Refunding, Series A, 6.10%,
6/01/25 ........................................................................ 12,000,000 12,040,200
Chicago GO,
FGIC Insured, 5.25%, 1/01/27 ................................................. 5,690,000 5,125,324
Lakefront Millennium Parking Facilities, MBIA Insured, 5.75%, 1/01/23 ........ 8,955,000 8,853,629
Chicago O'Hare International Airport Special Facilities Revenue,
American Airlines Inc. Project, 8.20%, 12/01/24 .............................. 11,720,000 12,739,992
United Airlines Inc. Project, 8.45%, 5/01/07 ................................. 4,300,000 4,418,551
United Airlines Inc. Project, 8.50%, 5/01/18 ................................. 12,305,000 12,689,162
Chicago SFMR, Collateralized, Series A, GNMA Secured, FNMA Insured, 7.25%,
9/01/28 ........................................................................ 3,020,000 3,183,201
Cook County GO, Capital Improvement, Refunding, FGIC Insured, 5.90%, 12/01/14 ... 10,000,000 10,176,500
Cook County Tinley Park School District No.140, Refunding, Series A, AMBAC
Insured, 6.00%, 12/01/15 ....................................................... 8,750,000 8,943,550
Illinois Development Finance Authority Hospital Revenue, Adventist Health System,
Sunbelt Obligation, 5.65%, 11/15/24 .......................................... 6,030,000 4,953,524
Adventist Health System, Sunbelt Obligation, 5.50%, 11/15/29 ................. 20,000,000 15,764,200
Sisters of St. Francis Health Services, Refunding, MBIA Insured, 5.375%,
11/01/27 .................................................................... 5,000,000 4,453,900
Illinois Development Finance Authority PCR,
Central Illinois Public Service Co., Refunding, Series A, 6.375%, 1/01/28 .... 15,200,000 15,368,416
Commonwealth Edison Co. Project, Refunding, Series 1991, 7.25%, 6/01/11 ...... 7,500,000 7,768,575
Illinois Power Co. Project, Refunding, Series A, 7.375%, 7/01/21 ............. 26,550,000 28,418,324
Illinois Development Finance Authority Revenue, Provena Health, Series A, MBIA
Insured, 5.50%, 5/15/21 ........................................................ 13,240,000 12,138,564
Illinois HDA,
MF Program, Lawndale Redevelopment Project, 7.10%, 12/01/34 .................. 20,000,000 21,222,800
MF Program, Refunding, Series A, 7.10%, 7/01/26 .............................. 12,915,000 13,472,928
MF Program, Series 1, 6.625%, 9/01/12 ........................................ 12,000,000 12,293,880
MF Program, Series 1, 6.75%, 9/01/21 ......................................... 7,550,000 7,707,493
MF Program, Series C, 7.35%, 7/01/11 ......................................... 2,265,000 2,335,419
RMR, Series B, 7.25%, 8/01/17 ................................................ 7,065,000 7,281,118
Illinois HDA Revenue, Homeowner Mortgage, Series A-1, 6.85%, 8/01/17 ............ 3,575,000 3,737,055
Illinois Health Facilities Authority Revenue,
Children's Memorial Hospital, Series A, AMBAC Insured, 5.75%, 8/15/25 ........ 14,120,000 13,364,156
Edwards Hospital Project, Pre-Refunded, 7.00%, 2/15/22 ....................... 2,000,000 2,109,500
Loyola University Health Systems, Refunding, Series A, MBIA Insured, 5.625%,
7/01/18 ..................................................................... 7,090,000 6,805,266
Loyola University Health Systems, Series A, MBIA Insured, ETM, 5.625%, 7/01/18 2,105,000 2,087,108
Methodist Medical Center, Refunding, MBIA Insured, 5.25%, 11/15/21 ........... 2,885,000 2,549,648
Northwestern Medical Facility Foundation, Refunding, MBIA Insured, 5.125%,
11/15/28 .................................................................... 7,500,000 6,371,700
South Suburban Hospital, ETM, 7.00%, 2/15/18 ................................. 4,200,000 4,733,988
</TABLE>
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, APRIL 30, 2000 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
ILLINOIS (CONT.)
Illinois Health Facilities Authority Revenue, (cont.)
South Suburban Hospital, Pre-Refunded, 7.00%, 2/15/18 ........................ $ 2,800,000 $ 2,953,300
Victory Health Services, Series A, 5.75%, 8/15/27 ............................ 8,015,000 6,703,906
Illinois State COP, Department Of Central Management, FSA Insured, Pre-Refunded,
6.875%, 7/01/07 ................................................................ 2,600,000 2,756,754
Illinois State Dedicated Tax Revenue, Civic Center, Series A, AMBAC Insured,
6.00%, 12/15/15 .............................................................. 2,105,000 2,110,894
Pre-Refunded, 6.00%, 12/15/15 ................................................ 845,000 853,602
Metropolitan Pier and Exposition Authority Dedicated State Tax Revenue,
McCormick Place Expansion Project,
Refunding, Series A, FGIC Insured, 5.25%, 12/15/28 ........................... 37,000,000 32,765,350
Series A, 6.50%, 6/15/22 ..................................................... 5,000 5,150
Series A, 6.50%, 6/15/27 ..................................................... 555,000 570,218
Series A, FGIC Insured, 6.50%, 6/15/07 ....................................... 5,000 5,323
Metropolitan Pier and Exposition Authority Hospitality Facilities Revenue,
McCormick Place Convention Center,
5.75%, 7/01/06 ............................................................... 1,645,000 1,686,816
6.25%, 7/01/17 ............................................................... 9,500,000 10,194,260
7.00%, 7/01/26 ............................................................... 12,000,000 13,607,280
Onterie Center HFC, Mortgage Revenue, Refunding, MBIA Insured, 7.05%, 7/01/27 ... 4,350,000 4,500,336
Regional Transportation Authority Revenue, Series A, AMBAC Insured, 6.125%,
6/01/22 ........................................................................ 3,970,000 4,073,458
Southwestern Illinois Development Authority IDR, Spectrulite Consortium Inc.
Project,
6.20%, 2/01/05 ............................................................... 1,825,000 1,850,933
6.625%, 2/01/10 .............................................................. 3,050,000 3,101,179
Southwestern Illinois Development Authority Private Activity Revenue, Progressive
Recovery Glenmark, 8.50%, 8/01/10 .............................................. 2,545,000 2,612,519
Southwestern Illinois Development Authority Revenue, Anderson Hospital Project,
Series A, Pre-Refunded, 7.00%, 8/15/22 ......................................... 6,200,000 6,596,738
Southwestern Illinois Development Authority Solid Waste Disposal Revenue, LaCede
Steel Co. Project,
8.375%, 8/01/08 .............................................................. 4,360,000 4,463,463
8.50%, 8/01/20 ............................................................... 5,390,000 5,515,318
Upper River Valley Development Authority Environmental Facilities Revenue,
General Electric Co. Project, 5.45%, 2/01/23 ................................... 3,600,000 3,281,688
Will County Exempt Facilities Revenue, Mobil Oil Refining Corp. Project, 6.00%,
2/01/27 ........................................................................ 7,130,000 6,863,195
------------
433,154,013
------------
INDIANA 1.8%
Beech Grove EDR, Westvaco Corp., 8.75%, 7/01/10 ................................. 50,000 50,186
Carmel EDR, Cool Creek Association, Refunding, 6.50%, 9/01/15 ................... 1,000,000 1,027,490
Carmel Industrial RDA, County Option, Income Tax Lease, Rent Revenue, MBIA
Insured, 5.25%, 1/01/18 ........................................................ 1,090,000 1,009,177
Cloverdale Multi-School Building Corp. First Mortgage, MBIA Insured, 5.35%,
1/15/23 ........................................................................ 1,200,000 1,103,532
East Chicago Industrial Solid Waste Disposal Revenue, US Gypsum Corp. Project,
5.50%, 9/01/28 ................................................................. 5,250,000 4,366,530
Eastern Hancock Middle School Building Corp. First Mortgage, Pre-Refunded, 6.00%,
1/15/21 ........................................................................ 1,000,000 1,051,730
Elkhart County Hospital Authority Revenue, Goshen Hospital Association Inc.
Project, 7.35%, 7/01/12 ........................................................ 1,750,000 1,776,565
Elwood Middle School Building Corp. First Mortgage, Refunding, 7.30%, 1/01/08 ... 500,000 517,050
Hammond Industrial Sewer and Solid Waste Disposal Revenue, American
Maize-Products Co., Project A, 8.00%, 12/01/24 ................................. 20,000,000 21,476,600
Hammond Multi-School Building Corp. First Mortgage, Refunding, Series A, 6.20%,
7/10/15 ........................................................................ 1,500,000 1,528,470
Indiana Bond Bank Special Program, Series B, 6.20%, 2/01/23 ..................... 3,500,000 3,331,930
</TABLE>
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, APRIL 30, 2000 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
INDIANA (CONT.)
Indiana Health Facility Financing Authority Hospital Revenue,
Hancock Memorial Hospital Health Services, 6.125%, 8/15/17 ................... $ 2,000,000 $ 1,818,160
Hancock Memorial Hospital Project, Series 1990, Pre-Refunded, 8.30%, 8/15/20 . 3,455,000 3,559,687
Jackson County Schneck Memorial Hospital, Pre-Refunded, 7.50%, 2/15/22 ....... 1,835,000 1,947,687
Jackson County Schneck Memorial Hospital, Refunding, 5.25%, 2/15/22 .......... 1,200,000 924,960
Methodist Hospital Inc., 6.75%, 9/15/09 ...................................... 1,280,000 1,326,195
Sisters of St. Francis Health, Series A, MBIA Insured, 5.00%, 11/01/29 ....... 1,000,000 834,260
St. Anthony's Medical Center/Home Inc., Series A, 7.00%, 10/01/17 ............ 1,000,000 1,056,230
Indiana Health Facility Financing Authority Revenue, Greenwood Village South
Project, Refunding, 5.625%, 5/15/28 ............................................ 1,750,000 1,348,078
Indiana State Development Financing Authority Environmental Revenue, 6.25%,
7/15/30 ........................................................................ 2,000,000 1,876,440
Indiana State Educational Facilities Authority Revenue,
DePauw University Project, Refunding, 5.30%, 7/01/16 ......................... 600,000 558,732
Manchester College Project, 6.85%, 10/01/18 .................................. 3,240,000 3,277,681
Valparaiso University, AMBAC Insured, 5.125%, 10/01/23 ....................... 2,015,000 1,754,138
Indiana State HFA, SFMR,
GNMA Secured, FNMA Insured, 6.10%, 7/01/22 ................................... 900,000 892,350
Refunding, Series A, 6.75%, 1/01/10 .......................................... 2,940,000 3,058,600
Refunding, Series A, 6.80%, 1/01/17 .......................................... 12,835,000 13,306,943
Series F-2, GNMA Secured, 7.75%, 7/01/22 ..................................... 250,000 256,848
Indiana State Office Building Commission Correctional Facilities Program Revenue,
Pre-Refunded, 6.375%, 7/01/16 .................................................. 1,000,000 1,043,260
Indianapolis Airport Authority, Indianapolis International Airport Revenue,
6.50%, 11/15/31 ................................................................ 1,460,000 1,385,277
Indianapolis Local Public Improvement Bond, Series D, 6.75%, 2/01/20 ............ 15,375,000 16,010,141
Jasper County EDR, Georgia-Pacific Corp. Project,
5.625%, 12/01/27 ............................................................. 3,500,000 3,047,310
Refunding, 6.70%, 4/01/29 .................................................... 3,000,000 2,977,020
Jasper County PCR, Northern Indiana Public Service Co., Refunding, MBIA Insured,
7.10%, 7/01/17 ................................................................. 500,000 521,215
Lake Central Industrial Multi-School Building Corp. First Mortgage, Refunding,
MBIA Insured, 6.50%, 1/15/14 ................................................... 2,100,000 2,206,386
Madison County Authority Anderson Hospital Revenue, Refunding, Series A, BIG
Insured, 8.00%, 1/01/14 ........................................................ 95,000 96,454
Marion County Convention and Recreational Facilities Authority Excise Tax
Revenue, Lease Rental, Series A, AMBAC Insured, 7.00%, 6/01/21 ................. 250,000 259,803
Muncies Edit Building Corp. First Mortgage, Series A, AMBAC Insured, 6.60%,
12/01/17 ....................................................................... 4,000,000 4,248,320
New Albany Floyd County School Building Corp. Revenue, First Mortgage, MBIA
Insured, 5.375%, 1/15/18 ....................................................... 1,500,000 1,422,075
New Prairie Unified School Building Corp. Revenue, First Mortgage, Refunding,
FSA Insured, 5.80%, 7/05/11 .................................................... 1,520,000 1,559,262
Penn-Harris-Madison Multi-School Building Corp. First Mortgage, FSA Insured,
Pre-Refunded, 5.90%, 7/15/14 ................................................... 1,000,000 1,055,010
Princeton PCR, Public Service Co. of Indiana Project, Refunding, Series C, MBIA
Insured, 7.375%, 3/15/12 ....................................................... 250,000 257,368
Rochester Community Multi-School Building Corp. Revenue, First Mortgage, AMBAC
Insured, 5.20%, 1/15/18 ........................................................ 1,000,000 921,780
Steuben County Metropolitan School District COP, 6.90%, 1/01/08 ................. 500,000 509,780
Sullivan Industrial PCR, Hoosier Energy, Merom Project, Refunding, 7.10%, 4/01/19 750,000 774,068
Sullivan PCR, Indiana-Michigan Power Co. Project, Refunding, Series C, 5.95%,
5/01/09 ........................................................................ 6,000,000 5,889,660
------------
119,220,438
------------
</TABLE>
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, APRIL 30, 2000 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
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<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
KANSAS .1%
Kansas State Development Finance Authority Hospital Revenue,
Susan B. Allen Memorial Hospital, Series Z, Asset Guaranteed,
5.25%, 12/15/23 ..................................................................... $ 2,500,000 $ 2,192,325
Newton Hospital Revenue, Newton Healthcare Corp., Refunding, Series A,
5.70%, 11/15/18 ..................................................................... 1,875,000 1,541,531
5.75%, 11/15/24 ..................................................................... 1,500,000 1,201,785
------------
4,935,641
------------
KENTUCKY 2.0%
Ashland PCR, Ashland Oil Inc. Project, Refunding, 6.65%, 8/01/09 ...................... 3,900,000 4,013,841
Henderson County Solid Waste Disposal Revenue,
MacMillan Bloedel Project, 7.00%, 3/01/25 ........................................... 10,000,000 10,226,800
Jefferson County MFHR, Watterson Park Apartments Project,
Series A, 6.35%, 11/15/11 ........................................................... 4,850,000 4,947,049
Kenton County Airport Board Revenue, Special Facilities,
Delta Airlines Inc. Project,
Series A, 7.80%, 12/01/15 .......................................................... 20,000,000 20,437,200
Series A, 7.50%, 2/01/20 ........................................................... 10,000,000 10,279,500
Series A, 7.125%, 2/01/21 .......................................................... 9,330,000 9,439,628
Series B, 7.25%, 2/01/22 ........................................................... 3,350,000 3,401,892
Kentucky Development Finance Authority Hospital Revenue,
Claire Medical Center Project, Pre-Refunded, 7.125%, 9/01/21 ........................ 700,000 734,888
Kentucky Economic Development Finance Authority Hospital System Revenue,
Appalachian Regional Health Center Facility, Refunding and Improvement,
5.80%, 10/01/12 .................................................................... 1,000,000 745,350
5.85%, 10/01/17 .................................................................... 5,615,000 3,885,748
Kentucky HFC Revenue, Series B, 6.625%, 7/01/14 ....................................... 4,910,000 5,022,832
Mount Sterling Lease Revenue, Kentucky League Cities, Series A,
6.10%, 3/01/08 ..................................................................... 20,375,000 21,164,939
6.20%, 3/01/18 ..................................................................... 11,765,000 12,053,948
Pendleton County Multi-County Lease Revenue, Kentucky Association
of Counties Leasing Trust, Series A, 6.50%, 3/01/19 ................................. 27,160,000 27,730,360
------------
134,083,975
------------
LOUISIANA 1.4%
Bastrop PCR, International Paper Co. Project, Refunding, 6.90%, 3/01/07 ............... 2,000,000 2,080,880
Calcasieu Parish Inc. IDB, PCR, Gulf States
Utilities Co. Project, Refunding, 6.75%, 10/01/12 .................................... 14,285,000 14,556,558
Calcasieu Parish Memorial Hospital Service District Revenue,
Lake Charles Parish Memorial Hospital Project, Series A, FSA Insured,
6.375%, 12/01/12 ................................................................... 4,310,000 4,576,401
6.50%, 12/01/18 .................................................................... 5,530,000 5,875,293
6.65%, 12/01/21 .................................................................... 3,145,000 3,289,985
Calcasieu Parish Public Trust Authority Mortgage Revenue, Refunding,
Series A, 7.75%, 6/01/12 ........................................................... 1,730,000 1,798,629
Series B, 6.375%, 11/01/02 ......................................................... 140,000 142,950
Series B, 6.875%, 11/01/12 ......................................................... 475,000 490,404
De Soto Parish Environmental Improvement Revenue,
International Paper Co. Project, Series A, 7.70%, 11/01/18 ........................... 2,500,000 2,681,100
</TABLE>
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, APRIL 30, 2000 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
LOUISIANA (CONT.)
East Baton Rouge Mortgage Finance Authority, SFM Purchase,
Series A, 6.80%, 10/01/28 ............................................................ $ 5,010,000 $ 5,140,060
Series C, 7.00%, 4/01/32 ............................................................. 1,435,000 1,478,222
Series D, 7.10%, 4/01/32 ............................................................. 1,215,000 1,248,984
Jefferson Parish Hospital Service District No. 2 Hospital Revenue,
FSA Insured, 5.00%, 7/01/28 .......................................................... 5,000,000 4,221,650
Lafayette Public Trust Financing Authority SFMR, Refunding,
Series A, 8.50%, 11/15/12 ............................................................ 908,238 914,514
Louisiana HFA, Mortgage Revenue,
Refunding, 7.375%, 9/01/13 ........................................................... 540,000 551,200
SF, Refunding, Series B-2, GNMA Secured, 5.75%, 12/01/28 ............................. 2,800,000 2,610,916
Louisiana Public Facilities Authority Revenue, Alton Ochsner Medical
Foundation Project, Refunding, Series B, MBIA Insured, 6.50%, 5/15/22 ................. 3,500,000 3,635,240
New Orleans GO, Refunding, AMBAC Insured,
6.125%, 10/01/16 ..................................................................... 10,275,000 10,500,639
6.20%, 10/01/21 ...................................................................... 8,050,000 8,159,722
Office Facility Corp. Capital Facilities Bonds, 7.75%, 12/01/10 ......................... 3,400,000 3,592,100
Ouachita Parish Hospital Service District No. 1 Revenue,
Glenwood Regional Medical Center, Pre-Refunded, 7.50%, 7/01/21 ........................ 4,000,000 4,201,480
Pointe Coupee Parish PCR, Gulf States Utilities Co. Project,
Refunding, 6.70%, 3/01/13 ............................................................ 2,200,000 2,219,822
Terrebonne Parish Hospital Service District No. 1 Hospital Revenue,
Terrebonne General Medical Center Project,
Refunding, AMBAC Insured, 5.375%, 4/01/23 ............................................ 1,000,000 906,240
West Feliciana Parish PCR, Gulf State Utility Co. Project,
7.70%, 12/01/14 ...................................................................... 2,000,000 2,112,140
7.00%, 11/01/15 ...................................................................... 3,050,000 3,166,449
-----------
90,151,578
-----------
MAINE 1.1%
Bucksport Solid Waste Disposal Revenue,
Champion International Corp. Project, 6.25%, 5/01/10 .................................. 5,000,000 5,035,000
Jay Solid Waste Disposal Revenue, International Paper Co. Project, Refunding,
Series B, 6.20%, 9/01/19 ............................................................. 8,000,000 7,771,360
Maine Financial Authority Solid Waste Recycling Facilities Revenue,
Great Northern Paper Co., Bowater Project, 7.75%, 10/01/22 ........................... 29,300,000 30,511,555
Maine State Health and Higher Educational Facilities Authority Revenue,
Series B, FSA Insured, Pre-Refunded,
7.00%, 7/01/24 ....................................................................... 20,000 21,818
7.00%, 7/01/24 ....................................................................... 2,425,000 2,645,408
Maine State Housing Authority Mortgage Purchase,
Series A-5, 6.20%, 11/15/16 .......................................................... 2,500,000 2,533,275
Series C, 6.55%, 11/15/12 ............................................................ 3,700,000 3,849,406
Series C, 6.65%, 11/15/24 ............................................................ 3,500,000 3,644,515
Series D, 6.45%, 11/15/07 ............................................................ 3,540,000 3,626,695
Series D, 6.70%, 11/15/15 ............................................................ 5,800,000 6,015,412
Rumford PCR, Boise Cascade Corp. Project, Refunding, 6.625%, 7/01/20 .................... 4,800,000 4,759,920
-----------
70,414,364
-----------
MARYLAND 1.6%
Gaithersberg Hospital Facilities Revenue, Shady Grove Adventist Hospital,
Refunding and Improvement,
Series A, Pre-Refunded, 8.25%, 9/01/21 ............................................... 43,225,000 46,026,845
Series C, FSA Insured, 6.00%, 9/01/21 ................................................ 10,110,000 10,168,436
</TABLE>
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, APRIL 30, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
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<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
MARYLAND (CONT.)
Maryland State CDA, Department of Housing and Community Development,
MFHR, Series G, Mortgage Insured, 6.55%, 5/15/19 ................................... $ 5,345,000 $ 5,466,011
SF Program, 3rd Series, 7.25%, 4/01/27 ............................................. 965,000 987,938
Montgomery County Housing Opportunities Commission SFMR, Refunding,
Series B, 6.625%, 7/01/28 .......................................................... 6,500,000 6,620,640
Takoma Park Hospital Facilities Revenue, Washington Adventist
Hospital Project, Series A,
Sub Series 1, 8.25%, 9/01/21 ....................................................... 20,125,000 20,990,576
Sub Series 1, Pre-Refunded, 8.25%, 9/01/21 ......................................... 10,930,000 11,638,483
Sub Series 2, Pre-Refunded, 8.25%, 9/01/21 ......................................... 5,000,000 5,317,400
-----------
107,216,329
-----------
MASSACHUSETTS 3.7%
Massachusetts State GO,
Consolidated Loan, Series A, 7.50%, 6/01/04 ........................................ 7,500,000 8,096,400
Refunding, Series B, 6.50%, 8/01/08 ................................................ 5,900,000 6,412,474
Massachusetts State Health and Educational Facilities Authority Revenue,
Framingham Union Hospital, Series B, Pre-Refunded, 8.50%, 7/01/20 .................. 9,020,000 9,257,677
Melrose-Wakefield Hospital, Refunding, Series B, ETM, 6.35%, 7/01/06 ............... 1,100,000 1,164,680
Notre Dame Health Care Center, Series A, 7.875%, 10/01/22 .......................... 2,310,000 2,396,394
Sisters Providence Health System, Series A, Pre-Refunded, 6.50%, 11/15/08 .......... 1,000,000 1,061,820
Sisters Providence Health System, Series A, Pre-Refunded, 6.625%, 11/15/22 ......... 12,050,000 12,855,302
Massachusetts State HFA,
HDA, Series D, FGIC Insured, 6.875%, 11/15/21 ...................................... 5,250,000 5,451,128
Housing Projects, Refunding, Series A, 6.30%, 10/01/13 ............................. 25,635,000 26,251,265
Housing Projects, Refunding, Series A, 6.375%, 4/01/21 ............................. 24,750,000 25,002,203
Housing Revenue, SF, Series 41, 6.30%, 12/01/14 .................................... 6,190,000 6,370,810
Housing Revenue, SF, Series 41, 6.35%, 6/01/17 ..................................... 5,695,000 5,827,978
Series C, FGIC Insured, 6.90%, 11/15/21 ............................................ 9,715,000 10,168,108
Series D, FGIC Insured, 6.80%, 11/15/12 ............................................ 250,000 261,110
Massachusetts State Industrial Finance Agency Health Care Facilities Revenue,
Jewish Geriatric Services Inc., Series B,
5.375%, 5/15/17 .................................................................... 1,965,000 1,769,797
5.50%, 5/15/27 ..................................................................... 5,000,000 4,414,350
Pre-Refunded, 7.00%, 4/01/22 ....................................................... 5,000,000 5,335,350
Massachusetts State Industrial Finance Agency Revenue,
D'Youville Senior Care,
5.65%, 10/01/17 .................................................................... 2,295,000 2,164,529
5.70%, 10/01/27 .................................................................... 7,375,000 6,928,223
Massachusetts State Port Authority Revenue, Special Facilities,
Bosfuel Project, MBIA Insured, 5.75%, 7/01/39 ...................................... 11,750,000 11,055,928
Massachusetts State Turnpike Authority Metropolitan Highway System Revenue,
Series A, MBIA Insured, 5.00%, 1/01/37 ............................................. 77,130,000 65,046,043
sub. lien, Refunding, Series B, MBIA Insured, 5.125%, 1/01/37 ...................... 21,350,000 18,395,587
Plymouth County COP, Series A, Pre-Refunded, 7.00%, 4/01/12 ........................... 10,000,000 10,670,700
------------
246,357,856
------------
</TABLE>
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, APRIL 30, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
MICHIGAN 1.2%
Battle Creek Tax Increment Finance Authority, Pre-Refunded, 7.40%, 5/01/16 .............. $ 2,000,000 $ 2,201,640
Belding Area Schools GO, FGIC Insured,
6.10%, 5/01/26 ....................................................................... 810,000 820,206
Pre-Refunded, 6.10%, 5/01/26 ......................................................... 2,995,000 3,173,352
Detroit GO,
Refunding, Series B, 6.375%, 4/01/06 ................................................. 7,265,000 7,596,575
Refunding, Series B, 6.25%, 4/01/09 .................................................. 625,000 646,963
Self-Insurance, Series A, 5.70%, 5/01/02 ............................................. 2,250,000 2,266,808
Series A, Pre-Refunded, 6.70%, 4/01/10 ............................................... 4,550,000 4,910,360
Detroit/Wayne County Stadium Authority, FGIC Insured, 5.25%, 2/01/27 .................... 4,235,000 3,783,210
Kalamazoo EDC Revenue, Limited Obligation, Friendship Village, Refunding,
Series A, 6.25%, 5/15/27 ............................................................. 2,000,000 1,728,560
Michigan State Building Authority Revenue, Series II, 6.25%, 10/01/20 ................... 15,650,000 15,936,708
Michigan State HDA,
Limited Obligation Revenue, Fraser Woods Project,
FSA Insured, 6.625%, 9/15/19 ......................................................... 2,500,000 2,583,275
Rental Housing Revenue, Refunding, Series A, 6.60%, 4/01/12 .......................... 4,730,000 4,910,450
SFMR, Series A, 6.45%, 12/01/14 ...................................................... 2,000,000 2,049,240
SFMR, Series A, 6.875%, 6/01/23 ...................................................... 280,000 286,902
Michigan State Hospital Finance Authority Revenue,
Ascension Health Credit, Refunding, Series A,
MBIA Insured, 6.125%, 11/15/23 ....................................................... 18,000,000 18,145,440
Henry Ford Health, Refunding, Series A, 5.25%, 11/15/25 .............................. 4,000,000 3,262,720
Presbyterian Villages Obligation Group, 5.70%, 1/01/01 ............................... 310,000 309,377
Presbyterian Villages Obligation Group, 5.80%, 1/01/02 ............................... 355,000 353,307
Presbyterian Villages Obligation Group, 5.90%, 1/01/03 ............................... 325,000 322,608
Presbyterian Villages Obligation Group, 6.00%, 1/01/04 ............................... 390,000 385,936
Presbyterian Villages Obligation Group, 6.375%, 1/01/15 .............................. 275,000 253,924
Presbyterian Villages Obligation Group, 6.40%, 1/01/15 ............................... 1,000,000 924,750
Presbyterian Villages Obligation Group, 6.50%, 1/01/25 ............................... 3,500,000 3,112,375
-----------
79,964,686
-----------
MINNESOTA 2.0%
Cloquet PCR, Potlach Corp. Projects, Refunding, 5.90%, 10/01/26 ......................... 9,100,000 8,162,882
Dakota County Housing RDA, Limited Annual Appropriation Tax and Revenue,
Development Housing Facilities Project,
7.25%, 1/01/01 ....................................................................... 695,000 697,474
7.50%, 1/01/06 ....................................................................... 3,930,000 3,983,055
8.00%, 1/01/07 ....................................................................... 1,605,000 1,612,495
Golden Valley Revenue, Covenant Retirement Communities,
Series A, 5.50%, 12/01/29 ............................................................ 6,000,000 4,958,400
International Falls PCR, Boise Cascade Corp. Project,
Refunding, 5.65%, 12/01/22 ........................................................... 3,500,000 3,009,930
Minneapolis CDA and St. Paul Housing RDA,
Homeownership Mortgage Revenue, Joint Housing Program,
FGIC Insured, 9.875%, 12/01/15 ....................................................... 5,000 5,001
Minnesota Agriculture and Economic Development Board Revenue,
Health Care System, Fairview Hospital, Refunding,
Series A, MBIA Insured, 5.75%, 11/15/26 .............................................. 25,810,000 25,057,897
Minnesota State HFA, SFM, Series D-1,
6.45%, 7/01/11 ....................................................................... 3,130,000 3,227,187
6.50%, 1/01/17 ....................................................................... 1,215,000 1,247,185
Minnetonka MFHR, Ridgepointe II Project, Refunding,
Series A, GNMA Secured, 5.95%, 10/20/33 .............................................. 11,075,000 10,838,770
</TABLE>
Franklin Federal Tax-Free Income Fund
STATEMENT OF INVESTMENTS, APRIL 30, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
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<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
MINNESOTA (CONT.)
Red Wing Housing RDA, Jordan Tower II Project, Pre-Refunded, 7.00%, 1/01/19 ........... $ 1,500,000 $ 1,577,460
Rochester Health Care Facilities Revenue, Mayo Foundation,
Series A, 5.50%, 11/15/27 .......................................................... 21,500,000 20,224,620
Roseville MFHR, Rosepointe I Project, Refunding, Series A,
GNMA Secured, 5.95%, 10/20/33 ...................................................... 8,600,000 8,428,602
St. Louis Park EDA, Tax Increment Revenue, FGIC Insured,
Pre-Refunded, 8.40%, 9/01/09 ....................................................... 6,000,000 6,396,300
St. Paul Port Authority IDR,
Bandana Square, Series C, 7.70%, 12/01/00 .......................................... 230,000 228,730
Bandana Square, Series C, 7.70%, 12/01/01 .......................................... 255,000 251,068
Bandana Square, Series C, 7.70%, 12/01/02 .......................................... 270,000 264,398
Bandana Square, Series C, 7.70%, 12/01/07 .......................................... 1,690,000 1,449,783
Bandana Square, Series C, 7.80%, 12/01/12 .......................................... 3,465,000 2,774,495
Brown and Bigelow Co., Series 1979-2, 7.50%, 10/01/00 .............................. 515,000 513,084
Brown and Bigelow Co., Series 1979-2, 7.50%, 10/01/01 .............................. 550,000 543,620
Brown and Bigelow Co., Series 1979-2, 7.50%, 10/01/02 .............................. 595,000 583,713
Brown and Bigelow Co., Series 1979-2, 7.50%, 10/01/03 .............................. 640,000 623,514
Brown and Bigelow Co., Series 1979-2, 7.50%, 10/01/04 .............................. 685,000 663,073
Brown and Bigelow Co., Series 1979-2, 7.50%, 10/01/05 .............................. 740,000 715,772
Brown and Bigelow Co., Series 1979-2, 7.50%, 10/01/06 .............................. 795,000 765,299
Brown and Bigelow Co., Series 1979-2, 7.50%, 10/01/07 .............................. 855,000 819,415
Brown and Bigelow Co., Series 1979-2, 7.50%, 10/01/08 .............................. 915,000 873,331
Brown and Bigelow Co., Series 1979-2, 7.50%, 10/01/09 .............................. 670,000 636,641
Common Bond Fund, Fort Road Medical Center, Refunding,
Series C, 7.95%, 9/01/01 ........................................................... 140,000 138,068
Common Bond Fund, Fort Road Medical Center, Refunding,
Series C, 7.95%, 9/01/02 ........................................................... 155,000 151,934
Common Bond Fund, Fort Road Medical Center, Refunding,
Series C, 7.95%, 9/01/10 ........................................................... 1,705,000 1,413,871
Common Bond Fund, Ideal Security Hardware Corp., Refunding,
Series F, 8.00%, 12/01/01 .......................................................... 105,000 103,370
Common Bond Fund, Ideal Security Hardware Corp., Refunding,
Series F, 8.00%, 12/01/02 .......................................................... 115,000 112,598
Common Bond Fund, Ideal Security Hardware Corp., Refunding,
Series F, 8.00%, 12/01/12 .......................................................... 1,790,000 1,457,704
Washington County Housing and RDAR,
Orleans Apartments Project, Series A, 8.25%, 7/01/21 ............................... 3,000,000 2,883,810
Pooled Housing and Redevelopment, Refunding, 7.20%, 1/01/22 ........................ 5,885,000 6,054,782
Raymie Johnson Apartments Project, Pre-Refunded, 7.70%, 12/01/19 ................... 5,210,000 5,543,232
-----------
128,992,563
-----------
MISSISSIPPI 1.2%
Claiborne County PCR, Systems Energy Resources Inc.,
Refunding, 6.20%, 2/01/26 .......................................................... 36,500,000 33,781,845
bJackson County Environmental Improvement Revenue, International
Paper Company Project, 6.70%, 5/01/24 .............................................. 3,500,000 3,502,835
Mississippi Business Finance Corp. PCR,
System Energy Resource Inc. Project, 5.875%, 4/01/22 ............................... 40,000,000 34,473,200
System Energy Resource Inc. Project, Refunding, 5.90%, 5/01/22 ..................... 8,250,000 7,131,548
Mississippi Home Corp. SFR, Refunding, Senior Series A,
FGIC Insured, 9.25%, 3/01/12 ....................................................... 805,000 831,903
Mississippi State Educational Facilities Authority Revenue,
Private Nonprofit Institutions of Higher Learning,
Tougaloo College Project, Series A, 6.50%, 6/01/18 ................................. 2,275,000 2,225,223
------------
81,946,554
-----------
</TABLE>
Franklin Federal Tax-Free Income Fund
STATEMENT OF INVESTMENTS, APRIL 30, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
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<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
MISSOURI .4%
Missouri State Health and Educational Facilities Authority Health Facilities
Revenue, Health Midwest, Series B, MBIA Insured, 6.25%, 2/15/12 ......................... $ 5,000,000 $ 5,185,350
Missouri State Health and Educational Facilities Authority Revenue,
SSM Health Care, Refunding, Series A, MBIA Insured, 5.00%, 6/01/22 ...................... 6,500,000 5,664,230
St. Louis Parking Facilities Revenue, Pre-Refunded, 6.625%, 12/15/21 ..................... 6,000,000 6,358,140
Taney County IDA, Hospital Revenue, The Skaggs Community
Hospital Association, 5.40%, 5/15/28 .................................................... 4,000,000 3,086,320
West Plains IDA, Hospital Revenue, Ozarks Medical Center Project,
Series A, Pre-Refunded, 8.625%, 9/15/20 .............................................. 3,465,000 3,567,876
-----------
23,861,916
-----------
MONTANA .7%
Forsyth County PCR,
Puget Sound Power and Light Co. Project, AMBAC Insured, 6.80%, 3/01/22 ............... 10,000,000 10,472,800
The Montana Power Co. Colstrip Project, Refunding,
Series A, 6.125%, 5/01/23 ............................................................ 3,250,000 3,131,798
The Montana Power Co., Refunding, Series B, MBIA Insured, 5.90%, 12/01/23 ............ 20,385,000 20,451,047
Montana State Board of Housing SFM, Refunding,
Series A, 6.50%, 12/01/22 ............................................................ 2,835,000 2,878,404
Series B-1, 6.25%, 12/01/21 .......................................................... 6,720,000 6,812,534
Montana State Health Facilities Authority Revenue, Montana
Developmental Center Project, 6.40%, 6/01/19 .......................................... 2,000,000 2,014,840
-----------
45,761,423
-----------
NEBRASKA .1%
Nebraska Investment Finance Authority Revenue, ETM, 7.00%, 11/01/09 ..................... 5,255,000 5,251,374
-----------
NEVADA 3.4%
Churchill County Health Care Facilities Revenue, Western Health Network,
Series A, MBIA Insured, 6.25%, 1/01/14 ............................................... 2,000,000 2,059,220
Clark County HFC, MFHR, FHA Insured, 7.75%, 7/01/23 ..................................... 5,030,000 5,114,756
Clark County IDR,
Nevada Power Co. Project, Refunding, Series B, 5.90%, 10/01/30 ....................... 10,000,000 8,667,000
Nevada Power Co. Project, Refunding, Series C, 7.20%, 10/01/22 ....................... 12,500,000 12,825,125
Nevada Power Co. Project, Series A, 5.90%, 11/01/32 .................................. 2,600,000 2,249,416
Southwest Gas Corp., Series A, 7.30%, 9/01/27 ........................................ 18,080,000 18,711,896
Southwest Gas Corp., Series A, 6.50%, 12/01/33 ....................................... 10,000,000 9,566,800
Southwest Gas Corp., Series B, 7.50%, 9/01/32 ........................................ 62,470,000 65,198,065
Henderson Health Care Facilities Revenue, Catholic Healthcare West,
Series A, 5.25%, 7/01/18 ............................................................. 23,685,000 18,383,113
Humboldt County PCR, Sierra Pacific Power Co., Refunding, Series A,
AMBAC Insured, 6.30%, 7/01/22 ........................................................ 4,500,000 4,579,785
Nevada Housing Division,
MFHR, Series B, FNMA Insured, 6.55%, 10/01/25 ........................................ 5,405,000 5,544,665
SF Program, FI/GML, Series A, 8.30%, 10/01/19 ........................................ 1,610,000 1,673,209
SF Program, FI/GML, Series A-2, 8.375%, 10/01/19 ..................................... 1,010,000 1,017,121
SF Program, Refunding, Series A-1, 6.25%, 10/01/26 ................................... 3,735,000 3,776,944
SF Program, Refunding, Series C-2, FHA Insured, 6.75%, 10/01/26 ...................... 7,395,000 7,574,846
Nevada State GO,
Colorado River Commission Revenue, Series 1994,
Pre-Refunded, 6.50%, 7/01/24 ......................................................... 15,915,000 16,936,266
Municipal Bond Bank Project No.40-41, Series A, ETM, 6.375%, 12/01/17 ................ 10,275,000 10,771,283
Reno RDA, Tax Allocation,
Downtown Redevelopment Project, Series C, Pre-Refunded, 7.75%, 9/01/05 ............... 2,695,000 2,776,793
Downtown Redevelopment Project, Series D, Pre-Refunded, 7.625%, 9/01/16 .............. 4,035,000 4,221,135
</TABLE>
Franklin Federal Tax-Free Income Fund
Statement of Investments, April 30, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Long Term Investments (cont.)
Bonds (cont.)
NEVADA (CONT.)
Reno RDA, Tax Allocation, (cont.)
Downtown Redevelopment Project, Series D, Pre-Refunded, 7.625%, 9/01/16 ............ $ 4,255,000 $ 4,454,091
Refunding, Series A, 6.20%, 6/01/18 ................................................ 3,000,000 2,951,820
Washoe County Gas and Water Facilities Revenue, Refunding,
AMBAC Insured, 6.30%, 12/01/14 ..................................................... 5,000,000 5,162,200
Washoe County Hospital Facility Revenue, Washoe Medical Center Inc. Project,
Series A, AMBAC Insured, 6.25%, 6/01/13 ............................................ 9,295,000 9,621,440
------------
223,836,989
------------
NEW HAMPSHIRE 1.5%
Nashua Housing Authority MFR, Clocktower Project, Refunding,
GNMA Secured, 6.25%, 6/20/33 ....................................................... 6,081,000 6,118,216
New Hampshire Higher Education and Health Facilities Authority Revenue,
New Hampshire Catholic Charities, 5.80%, 8/01/22 ................................... 1,000,000 830,370
Rivier College, 5.60%, 1/01/28 ..................................................... 4,590,000 4,069,494
St. Joseph Hospital, 7.50%, 1/01/16 ................................................ 2,300,000 2,332,706
The Hitchcock Clinic, MBIA Insured, 6.00%, 7/01/27 ................................. 4,275,000 4,223,786
New Hampshire State HFA,
MFHR, Series 1, 7.10%, 1/01/14 ..................................................... 4,920,000 5,066,911
SFMR, Series E, 6.75%, 7/01/19 ..................................................... 4,680,000 4,825,922
SFMR, Series E, 6.80%, 7/01/25 ..................................................... 3,605,000 3,705,363
New Hampshire State IDAR, Pollution Control, Public Service
Co. of New Hampshire Project, Series A, 7.65%, 5/01/21 ............................. 6,870,000 7,048,414
Series B, 7.50%, 5/01/21 ........................................................... 50,690,000 51,983,609
Series C, 7.65%, 5/01/21 ........................................................... 7,450,000 7,643,477
97,848,268
NEW JERSEY .7%
Hudson County Improvement Authority Solid Waste Systems Revenue, Refunding,
Series 1, 6.00%, 1/01/19 ........................................................... 2,100,000 1,991,535
Series 1, 6.00%, 1/01/29 ........................................................... 5,000,000 4,627,650
Series 2, 6.125%, 1/01/19 .......................................................... 2,000,000 1,923,540
Series 2, 6.125%, 1/01/29 .......................................................... 5,000,000 4,707,800
Mercer County Improvement Authority Revenue, Solid Waste,
Refunding, 5.75%, 9/15/16 .......................................................... 2,500,000 2,517,800
New Jersey EDA, Lease Revenue, International Center for Public Health Project,
University of Medicine and Dentistry, AMBAC Insured, 6.00%, 6/01/32 ................... 5,000,000 5,071,400
New Jersey Health Care Facilities Financing Authority Revenue,
Cathedral Health Services, Pre-Refunded, 7.25%, 2/15/21 ............................... 3,975,000 4,137,737
New Jersey State Turnpike Authority Turnpike Revenue, Series A, MBIA Insured,
5.60%, 1/01/22 ..................................................................... 7,500,000 7,315,650
5.50%, 1/01/25 ..................................................................... 13,000,000 12,441,390
------------
44,734,502
------------
NEW MEXICO .5%
Farmington PCR, Public Service Co. of New Mexico,
Refunding, Series A, AMBAC Insured, 6.375%, 12/15/22 ............................... 10,435,000 10,610,934
Lordsburg PCR, Phelps Dodge Corp. Project, Refunding, 6.50%, 4/01/13 .................. 17,000,000 17,442,850
New Mexico Mortgage Finance Authority SFM Program, Refunding,
Series A, 6.85%, 7/01/10 ........................................................... 2,990,000 3,080,926
------------
31,134,710
------------
</TABLE>
Franklin Federal Tax-Free Income Fund
Statement of Investments, April 30, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Long Term Investments (cont.)
Bonds (cont.)
NEW YORK 17.3%
Metropolitan Transportation Authority Dedicated Tax Fund,
Series A, FGIC Insured, 6.00%, 4/01/30 ............................................... $12,500,000 $12,582,625
MTA Commuter Facilities Revenue, Series A,
5.25%, 7/01/28 ....................................................................... 5,000,000 4,342,600
6.125%, 7/01/29 ...................................................................... 15,040,000 15,007,965
FGIC Insured, 6.00%, 7/01/16 ......................................................... 8,950,000 9,181,179
MTA Dedicated Tax Fund Revenue, Series A, MBIA Insured, 5.25%, 4/01/26 .................. 11,125,000 10,061,339
MTA Transit Facilities Revenue,
Refunding, Series M, 6.00%, 7/01/14 .................................................. 18,210,000 18,433,437
Series A, FSA Insured, 6.00%, 7/01/16 ................................................ 3,630,000 3,723,763
Series A, FSA Insured, 5.625%, 7/01/27 ............................................... 10,800,000 10,041,516
Series A, FSA Insured, Pre-Refunded, 6.10%, 7/01/21 .................................. 6,260,000 6,702,770
Service Contract, Refunding, Series 8, 5.375%, 7/01/21 ............................... 15,000,000 13,765,800
MTA Transportation Facilities Revenue, Series A, 6.00%, 7/01/24 ......................... 5,000,000 4,930,500
Nassau Health Care Corp. Health System Revenue, Nassau County Guaranty,
FSA Insurer, 5.75%, 8/01/29 .......................................................... 10,000,000 9,589,800
New Rochelle IDA, Civic Facilities Revenue, College of New Rochelle Project,
Pre-Refunded, 6.625%, 7/01/12 ........................................................ 1,245,000 1,312,429
New York City GO,
Group B, Series D, 8.25%, 8/01/12 .................................................... 30,000 31,664
Refunding, Series B, 6.20%, 8/15/06 .................................................. 1,500,000 1,574,475
Refunding, Series E, 6.00%, 8/01/26 .................................................. 2,765,000 2,735,857
Refunding, Series F, 6.00%, 8/01/13 .................................................. 14,000,000 14,392,280
Refunding, Series F, 5.25%, 8/01/15 .................................................. 20,580,000 19,462,712
Refunding, Series H, 6.25%, 8/01/15 .................................................. 13,035,000 13,588,205
Refunding, Series H, 6.125%, 8/01/25 ................................................. 65,785,000 66,030,378
Refunding, Series J, 6.00%, 8/01/21 .................................................. 28,260,000 28,189,633
Series A, 6.125%, 8/01/06 ............................................................ 14,140,000 14,768,664
Series A, 6.20%, 8/01/07 ............................................................. 20,515,000 21,492,950
Series A, 6.25%, 8/01/08 ............................................................. 4,390,000 4,607,525
Series A, 7.75%, 8/15/14 ............................................................. 40,000 42,017
Series A, 6.25%, 8/01/16 ............................................................. 3,280,000 3,348,060
Series A, Pre-Refunded, 6.125%, 8/01/06 .............................................. 360,000 379,804
Series A, Pre-Refunded, 6.20%, 8/01/07 ............................................... 1,295,000 1,369,916
Series A, Pre-Refunded, 7.75%, 8/15/13 ............................................... 4,810,000 5,068,634
Series A, Pre-Refunded, 7.75%, 8/15/14 ............................................... 205,000 216,023
Series A, Pre-Refunded, 6.25%, 8/01/16 ............................................... 1,720,000 1,795,886
Series A, Pre-Refunded, 7.75%, 8/15/17 ............................................... 3,285,000 3,461,634
Series A, Pre-Refunded, 8.00%, 8/15/20 ............................................... 5,000 5,284
Series B, 8.25%, 6/01/02 ............................................................. 5,000 5,253
Series B, 7.50%, 2/01/04 ............................................................. 10,000,000 10,587,100
Series B, 8.25%, 6/01/05 ............................................................. 1,000,000 1,130,720
Series B, 6.30%, 8/15/08 ............................................................. 22,360,000 23,545,974
Series B, 6.125%, 8/01/09 ............................................................ 11,510,000 11,983,291
Series B, 6.375%, 8/15/10 ............................................................ 17,170,000 18,098,897
Series B, 7.50%, 10/01/11 ............................................................ 65,000 66,255
Series B, 7.50%, 10/01/12 ............................................................ 40,000 40,761
Series B, 7.00%, 2/01/19 ............................................................. 9,825,000 10,248,261
Series B, 6.00%, 8/15/26 ............................................................. 1,670,000 1,652,398
</TABLE>
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, APRIL 30, 2000 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
NEW YORK (CONT.)
New York City GO, (cont.)
Series B, ETM, 8.00%, 6/01/01 ................................................ $ 3,000,000 $ 3,112,320
Series B, Pre-Refunded, 8.25%, 6/01/02 ....................................... 4,495,000 4,739,303
Series B, Pre-Refunded, 6.30%, 8/15/08 ....................................... 4,515,000 4,810,281
Series B, Pre-Refunded, 6.375%, 8/15/10 ...................................... 4,570,000 4,884,599
Series B, Pre-Refunded, 6.75%, 10/01/15 ...................................... 50,000 52,815
Series B, Pre-Refunded, 6.75%, 10/01/17 ...................................... 1,300,000 1,374,698
Series B, Pre-Refunded, 7.00%, 2/01/19 ....................................... 5,175,000 5,435,147
Series B, Pre-Refunded, 6.00%, 8/15/26 ....................................... 330,000 349,741
Series B, Sub Series B-1, Pre-Refunded, 7.00%, 8/15/16 ....................... 3,000,000 3,260,010
Series B-1, Pre-Refunded, 7.30%, 8/15/11 ..................................... 8,000,000 8,768,720
Series C, Pre-Refunded, 7.25%, 8/15/24 ....................................... 3,540,000 3,658,378
Series C, Sub Series C-1, 7.00%, 8/01/18 ..................................... 25,000 26,300
Series C, Sub Series C-1, Pre-Refunded, 7.00%, 8/01/17 ....................... 1,930,000 2,047,711
Series C, Sub Series C-1, Pre-Refunded, 7.00%, 8/01/18 ....................... 1,680,000 1,782,463
Series D, 7.30%, 2/01/01 ..................................................... 380,000 387,805
Series D, 8.00%, 8/01/16 ..................................................... 5,000 5,259
Series D, 6.00%, 2/15/25 ..................................................... 18,710,000 18,541,236
Series D, ETM, 7.30%, 2/01/01 ................................................ 4,620,000 4,718,314
Series D, Pre-Refunded, 8.25%, 8/01/11 ....................................... 160,000 169,376
Series D, Pre-Refunded, 8.25%, 8/01/12 ....................................... 11,095,000 11,745,167
Series D, Pre-Refunded, 8.25%, 8/01/13 ....................................... 7,750,000 8,204,150
Series D, Pre-Refunded, 8.25%, 8/01/14 ....................................... 4,340,000 4,591,590
Series D, Pre-Refunded, 7.625%, 2/01/15 ...................................... 9,000,000 9,553,230
Series D, Pre-Refunded, 7.50%, 2/01/16 ....................................... 5,000,000 5,297,050
Series D, Pre-Refunded, 8.00%, 8/01/16 ....................................... 45,000 47,502
Series D, Pre-Refunded, 7.50%, 2/01/17 ....................................... 12,000,000 12,712,920
Series D, Pre-Refunded, 8.00%, 8/01/17 ....................................... 100,000 105,561
Series D, Pre-Refunded, 8.00%, 8/01/18 ....................................... 50,000 52,781
Series D, Pre-Refunded, 8.00%, 8/01/19 ....................................... 30,000 31,668
Series D, Pre-Refunded, 8.00%, 8/15/21 ....................................... 15,000 15,853
Series D, Pre-Refunded, 6.00%, 2/15/25 ....................................... 1,920,000 2,012,448
Series E, 5.75%, 2/15/09 ..................................................... 5,295,000 5,401,588
Series E, 6.50%, 12/01/12 .................................................... 20,000 20,029
Series E, Pre-Refunded, 6.00%, 8/01/26 ....................................... 235,000 249,001
Series F, 8.20%, 11/15/04 .................................................... 85,000 90,498
Series F, Pre-Refunded, 8.20%, 11/15/04 ...................................... 5,250,000 5,601,645
Series F, Pre-Refunded, 6.50%, 2/15/07 ....................................... 8,050,000 8,606,738
Series F, Pre-Refunded, 6.50%, 2/15/08 ....................................... 7,540,000 8,061,466
Series F, Pre-Refunded, 6.60%, 2/15/10 ....................................... 16,000,000 17,173,760
Series F, Pre-Refunded, 8.25%, 11/15/15 ...................................... 2,000,000 2,135,440
Series F, Pre-Refunded, 8.25%, 11/15/17 ...................................... 2,500,000 2,669,300
Series G, 6.00%, 10/15/26 .................................................... 15,160,000 15,000,820
Series G, Pre-Refunded, 6.00%, 10/15/26 ...................................... 175,000 185,635
Series H, 7.10%, 2/01/12 ..................................................... 210,000 220,219
Series H, 7.00%, 2/01/16 ..................................................... 215,000 224,703
</TABLE>
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, APRIL 30, 2000 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
NEW YORK (CONT.)
New York City GO, (cont.)
Series H, Pre-Refunded, 7.10%, 2/01/12 ............................................... $ 2,790,000 $ 2,934,885
Series H, Pre-Refunded, 7.20%, 2/01/14 ............................................... 10,000,000 10,535,800
Series H, Pre-Refunded, 7.00%, 2/01/16 ............................................... 3,785,000 3,975,272
Series H-1, 6.125%, 8/01/11 .......................................................... 4,900,000 5,069,981
Series H-1, Pre-Refunded, 6.125%, 8/01/09 ............................................ 240,000 253,202
Series H-1, Pre-Refunded, 6.125%, 8/01/11 ............................................ 100,000 105,501
Series I, 6.25%, 4/15/13 ............................................................. 18,245,000 19,129,518
Series I, 6.25%, 4/15/27 ............................................................. 3,185,000 3,230,577
Series I, Pre-Refunded, 6.25%, 4/15/13 ............................................... 18,365,000 19,694,442
Series I, Pre-Refunded, 6.25%, 4/15/27 ............................................... 3,815,000 4,091,168
New York City IDA, IDR, Brooklyn Navy Yard Cogeneration Partners,
5.65%, 10/01/28 ...................................................................... 5,000,000 4,303,550
5.75%, 10/01/36 ...................................................................... 5,750,000 4,933,155
New York City Municipal Water Finance Authority Water and Sewer System Revenue,
Series A, 7.10%, 6/15/12 ............................................................. 895,000 923,175
Series A, 5.75%, 6/15/30 ............................................................. 8,000,000 7,722,240
Series A, Pre-Refunded, 7.10%, 6/15/12 ............................................... 1,560,000 1,617,907
Series A, Pre-Refunded, 7.00%, 6/15/15 ............................................... 4,980,000 5,159,479
Series B, 5.75%, 6/15/29 ............................................................. 15,000,000 14,505,600
Series B, MBIA Insured, 5.75%, 6/15/26 ............................................... 3,000,000 2,928,510
New York City Transitional Finance Authority Revenue, Future Tax Secured,
(b) Refunding, Series C-A, 5.50%, 11/01/24 ........................................... 4,200,000 3,968,202
Series B, 6.00%, 11/15/29 ............................................................ 10,000,000 10,085,000
New York City Transportation Authority MTA, Triborough COP,
Series A, AMBAC Insured, 5.40%, 1/01/19 .............................................. 20,000,000 19,049,800
New York State Dormitory Authority Lease Revenue GO,
Court Facilities, 6.00%, 5/15/39 ..................................................... 16,000,000 15,622,880
New York State Dormitory Authority Lease Revenue,
State University Dormitory Facilities, 5.50%, 7/01/27 ................................ 8,915,000 8,102,487
New York State Dormitory Authority Revenue,
City University General Resources, Series 2, MBIA Insured,
Pre-Refunded, 6.25%, 7/01/19 ......................................................... 4,000,000 4,194,600
City University System Consolidated, Series 1, 5.375%, 7/01/24 ....................... 21,420,000 19,368,392
City University System Consolidated, Third, Series 1, 5.25%, 7/01/25 ................. 10,000,000 8,738,200
City University System, Third General, 6.00%, 7/01/20 ................................ 16,860,000 16,838,756
City University System, Third General, Series 2, 6.00%, 7/01/26 ...................... 5,500,000 5,406,830
City University System, Third General, Series 2,
Pre-Refunded, 6.00%, 7/01/26 ......................................................... 14,150,000 14,999,283
Interfaith Medical Center, Series D, 5.40%, 2/15/28 .................................. 8,000,000 7,206,320
Mental Health Services Facilities, Series A, 6.00%, 8/15/17 .......................... 18,000,000 18,169,200
Mental Health Services Facilities, Series A, 5.75%, 2/15/27 .......................... 5,000,000 4,763,650
Second Hospital, Interfaith Medical Center, Series D, 5.30%, 2/15/19 ................. 5,000,000 4,538,800
State University Educational Facilities, 5.125%, 5/15/21 ............................. 9,000,000 7,928,190
State University Educational Facilities, Series B,
Pre-Refunded, 7.375%, 5/15/14 ........................................................ 4,240,000 4,328,870
State University Educational Facilities, Series B, Pre-Refunded, 7.00%,
5/15/16 .............................................................................. 2,000,000 2,041,680
New York State Dormitory Authority Revenues, Upstate Community Colleges,
Series A, 5.00%, 7/01/28 ................................................................ 10,000,000 8,304,800
New York State Energy Research and Development Authority Electric Facilities
Revenue, Consolidated Edison Project, Refunding, Series A, 6.10%, 8/15/20 ............ 8,500,000 8,479,430
Long Island Light, Series A, Pre-Refunded, 7.15%, 2/01/22 ............................ 1,500,000 1,591,230
</TABLE>
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, APRIL 30, 2000 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
NEW YORK (CONT.)
New York State Energy Research and Development
Authority Electric Facilities Revenue, (cont.)
Series A, 7.15%, 6/01/20 ................................................... $ 12,885,000 $ 13,322,575
Series A, Pre-Refunded, 7.15%, 6/01/20 ..................................... 4,615,000 4,886,131
New York State HFA, Service Contract Obligation Revenue,
Refunding, Series C, 5.875%, 9/15/14 ....................................... 4,675,000 4,686,314
Refunding, Series C, 5.50%, 9/15/22 ........................................ 17,505,000 15,881,586
Series A, 6.375%, 9/15/14 .................................................. 25,000 25,794
Series A, 6.375%, 9/15/16 .................................................. 3,785,000 3,891,056
Series A, Pre-Refunded, 6.375%, 9/15/14 .................................... 3,130,000 3,354,859
Series A, Pre-Refunded, 6.50%, 3/15/25 ..................................... 10,000,000 10,856,000
Series C, 6.125%, 3/15/20 .................................................. 25,500,000 25,515,045
New York State HFAR,
Health Facilities, New York City, Refunding,
Series A, 5.90%, 5/01/05 ................................................ 14,070,000 14,498,291
Housing Project Mortgage, Refunding, Series A,
FSA Insured, 6.10%, 11/01/15 ............................................ 5,475,000 5,578,861
Housing Project Mortgage, Refunding, Series A,
FSA Insured, 6.125%, 11/01/20 ........................................... 4,230,000 4,276,530
New York State Medical Care Facilities Finance Agency Revenue,
Hospital and Nursing Home, Mortgage Revenue, Series A,
FHA Insured, 6.50%, 2/15/34 ............................................. 6,645,000 6,827,405
Hospital and Nursing Home, Refunding, FSA Mortgage
Insured, 6.40%, 8/15/14 ................................................. 10,105,000 10,516,375
Hospital Mortgage, Series A, AMBAC Insured, Pre-Refunded,
6.50%, 8/15/29 .......................................................... 7,600,000 8,202,376
The Hospital for Special Surgery Revenue,
Series A, Pre-Refunded, 6.375%, 8/15/24 ................................. 12,500,000 13,386,625
New York State Tollway Authority Service Contract Revenue,
Local Highway and Bridge, 5.75%, 4/01/16 ................................... 13,200,000 13,077,240
Pre-Refunded, 6.25%, 4/01/14 ............................................... 11,600,000 12,384,972
New York State Urban Development Corp. Revenue,
Correctional Capital Facilities, Series 5, 6.10%, 1/01/12 .................. 7,685,000 7,891,189
Youth Facilities, 6.00%, 4/01/17 ........................................... 11,720,000 11,815,752
Triborough Bridge and Tunnel Authority Revenue, General Purpose,
Series B, 5.50%, 1/01/30 ................................................... 15,000,000 14,043,750
TSASC Inc. New York, TFABS, Series 1, 6.25%,
7/15/34 .................................................................... 22,375,000 21,878,499
7/15/27 .................................................................... 19,630,000 19,325,146
Warren and Washington Counties IDAR, Adirondack
Resource Recovery Project, Refunding, Series A,
7.90%, 12/15/07 ............................................................ 3,900,000 3,915,951
--------------
1,142,610,356
--------------
NORTH CAROLINA 4.0%
Charlotte-Mecklenberg Hospital Authority Health Care System Revenue,
5.90%, 1/15/16 ............................................................. 7,010,000 6,952,658
Pre-Refunded, 5.90%, 1/15/16 ............................................... 2,890,000 3,049,181
Cumberland County Hospital Facilities Revenue,
Cumberland County Hospital Systems Inc., Refunding,
5.25%, 10/01/24 ............................................................ 6,000,000 5,026,740
Eastern Municipal Power Agency Power System Revenue,
Refunding, Series D, 6.75%, 1/01/26 ........................................ 5,000,000 5,006,900
Series D, 6.70%, 1/01/19 ................................................... 2,000,000 2,013,380
North Carolina Eastern Municipal Power Agency Power System Revenue,
Refunding, Series A, 6.50%, 1/01/17 ........................................ 25,700,000 25,542,202
Refunding, Series A, 5.75%, 1/01/26 ........................................ 65,350,000 56,808,102
</TABLE>
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, APRIL 30, 2000 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
NORTH CAROLINA (CONT.)
North Carolina Eastern Municipal Power Agency Power System
Revenue, (cont.)
Refunding, Series B, 6.25%, 1/01/12 ........................................ $ 6,875,000 $ 6,868,675
Refunding, Series B, 6.00%, 1/01/14 ........................................ 14,000,000 13,617,660
Refunding, Series B, 6.00%, 1/01/22 ........................................ 1,250,000 1,161,363
Refunding, Series B, 6.25%, 1/01/23 ........................................ 39,030,000 37,299,020
Refunding, Series B, 5.75%, 1/01/24 ........................................ 35,140,000 30,682,491
Refunding, Series B, FGIC Insured, 6.25%, 1/01/23 .......................... 4,000,000 4,049,440
Refunding, Series B, MBIA Insured, 5.80%, 1/01/16 .......................... 11,175,000 11,151,197
Refunding, Series B, MBIA Insured, 5.75%, 12/01/16 ......................... 14,420,000 13,111,818
Series B, 6.00%, 1/01/05 ................................................... 1,355,000 1,371,314
Series D, 5.875%, 1/01/13 .................................................. 5,790,000 5,515,149
North Carolina Medical Care Commission Hospital Revenue,
Mission St. Joseph's Health System Project,
MBIA Insured, 5.125%, 10/01/28 ............................................. 5,000,000 4,317,150
North Carolina Municipal Power Agency No. 1 Catawba
Electric Revenue, Refunding,
5.75%, 1/01/15 ............................................................. 12,435,000 11,582,829
6.25%, 1/01/17 ............................................................. 9,720,000 9,600,250
University Hospital Chapel Hill Revenue, Refunding,
AMBAC Insured, 5.00%, 2/15/21 .............................................. 5,000,000 4,383,450
Wake County Industrial Facilities and PCFA Revenue,
Carolina Power and Light Co., 6.90%, 4/01/09 ............................... 5,000,000 5,108,650
--------------
264,219,619
--------------
NORTH DAKOTA .3%
Ellendale MFHR, Ellendale Manor Apartments Project, 9.75%, 7/01/16 ............. 244,000 244,288
Mercer County PCR, Basin Electric Power Corp.,
Refunding, Second Series, AMBAC Insured, 6.05%, 1/01/19 .................... 9,130,000 9,223,674
Series E, 7.00%, 1/01/19 ................................................... 11,195,000 11,539,358
Wahpeton MFHR, Evergreen Apartments Project, 9.75%, 7/01/16 .................... 658,000 657,882
--------------
21,665,202
--------------
OHIO 1.7%
Cuyahoga County Hospital Revenue, University Hospitals
Health System Inc., Refunding, AMBAC Insured,
5.50%, 1/15/30 ............................................................. 5,000,000 4,635,300
Dayton Special Facilities Revenue, Emery Air Freight Corp.,
Emery Worldwide Air Inc., Refunding,
Series A, 5.625%, 2/01/18 .................................................. 6,000,000 5,312,880
Series E, 6.05%, 10/01/09 .................................................. 4,000,000 4,031,120
Series F, 6.05%, 10/01/09 .................................................. 2,750,000 2,771,395
Franklin County Convention Facilities Authority Tax and Lease
Revenue, Anticipation Bonds, MBIA Insured, 5.00%, 12/01/27 ................. 7,500,000 6,481,125
Hamilton County Hospital Facilities Revenue, Children's Hospital
Medical Center, Series G, MBIA Insured, 5.00%, 5/15/23 ..................... 10,000,000 8,622,100
Montgomery County Health Systems Revenue,
Franciscan at Saint Leonard, Refunding, 5.50%, 7/01/18 ..................... 3,625,000 3,622,028
Franciscan Facility, Series B-2, 8.10%, 7/01/01 ............................ 1,000,000 1,011,030
Franciscan Medical Center-Dayton, Refunding, 5.50%, 7/01/18 ................ 1,995,000 1,993,364
Series B-2, 8.10%, 7/01/18 ................................................. 3,705,000 4,195,246
Series B-2, Pre-Refunded, 8.10%, 7/01/18 ................................... 8,295,000 9,678,938
</TABLE>
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, APRIL 30, 2000 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
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<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
OHIO (CONT.)
Montgomery County Hospital Facilities Revenue, Grandview Hospital and
Medical Center, Refunding,
5.50%, 12/01/10 ............................................................ $ 1,300,000 $ 1,319,266
5.60%, 12/01/11 ............................................................ 1,000,000 1,022,260
5.65%, 12/01/12 ............................................................ 925,000 949,032
Ohio State Air Quality Development Authority Revenue,
Dayton Power and Light Co. Project, Refunding, 6.10%, 9/01/30 .............. 12,000,000 11,597,280
PCR, Toledo Edison, Series B, Refunding, 8.00%, 5/15/19 .................... 6,325,000 6,454,916
Ohio State EDR, Good Samaritan Medical Center, Series 1990-3, 7.875%, 12/01/10 . 1,400,000 1,427,664
Ohio State Solid Waste Disposal Revenue, USG Corp. Project, 5.65%, 3/01/33 ..... 5,330,000 4,510,246
Ohio State Water Development Authority PCR, Facilities Revenue, Toledo Edison,
Series A, 8.00%, 5/15/19 ................................................... 10,000,000 10,205,400
Ohio State Water Development Authority Revenue, Dayton Power, Refunding,
Series A, 6.40%, 8/15/27 ................................................... 3,250,000 3,320,200
University of Akron General Receipts, FGIC Insured, 5.75%, 1/01/29 ............. 11,305,000 10,979,642
University of Cincinnati COP, University Center Project,
MBIA Insured, 5.125%, 6/01/24 .............................................. 10,500,000 9,423,120
--------------
113,563,552
--------------
OKLAHOMA .9%
Oklahoma State Turnpike Authority Turnpike Revenue, First Senior,
7.875%, 1/01/21 ............................................................ 610,000 621,718
Stillwater Medical Center Authority Revenue,
Series A, 6.10%, 5/15/09 ................................................... 3,440,000 3,260,226
Series B, 6.35%, 5/15/12 ................................................... 1,235,000 1,167,211
Series B, 6.50%, 5/15/19 ................................................... 3,390,000 3,176,905
Tulsa County Home Finance Authority Mortgage Revenue,
Series D, GNMA Secured, 6.95%, 12/01/22 .................................... 310,000 317,127
Tulsa County Municipal Airport Revenue, American Airlines Inc.,
7.35%, 12/01/11 ............................................................ 4,000,000 4,177,080
6.25%, 6/01/20 ............................................................. 18,530,000 17,674,470
7.375%, 12/01/20 ........................................................... 11,000,000 11,136,070
Tulsa County Parking Authority, Series B,
6.90%, 12/01/07 ............................................................ 3,000,000 3,158,310
7.00%, 12/01/14 ............................................................ 5,500,000 5,745,135
Tulsa Housing Assistance Corp. Revenue, First Lien, Refunding, 6.80%, 7/01/11 .. 2,740,000 2,808,253
Tulsa Industrial Authority Hospital Revenue, St. John Medical Center Project,
Series A, 6.25%, 2/15/14 ................................................... 2,000,000 2,115,800
Valley View Hospital Authority Revenue, Valley View Regional Medical Center,
Refunding, 6.00%, 8/15/14 .................................................. 4,000,000 3,634,960
--------------
58,993,265
--------------
OREGON .5%
Medford Hospital Facilities Authority Revenue, Asante Health System,
Series A, MBIA Insured, 5.00%, 8/15/24 ..................................... 3,655,000 3,188,293
Oregon State Department of Administrative Services COP, Series A,
AMBAC Insured, 6.00%, 5/01/26 .............................................. 10,000,000 10,120,300
Oregon State EDR, Georgia Pacific Corp. Project,
Refunding, Series 183, 5.70%, 12/01/25 ..................................... 3,500,000 3,069,255
Series CLVII, 6.35%, 8/01/25 ............................................... 5,500,000 5,298,755
Salem-Keizer GO, School District No. 24J, 5.00%, 6/01/19 ....................... 15,055,000 13,549,801
--------------
35,226,404
--------------
PENNSYLVANIA 3.4%
Allegheny County IDAR, Environmental Improvement,
6.70%, 12/01/20 ............................................................ 5,250,000 5,252,205
USX Corp., Refunding, 5.50%, 12/01/29 ...................................... 10,000,000 8,374,900
</TABLE>
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, APRIL 30, 2000 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
PENNSYLVANIA (CONT.)
Berks County GO, AMBAC Insured, 5.00%, 11/15/25 ................................ $ 5,000,000 $ 4,307,300
Cambria County HDA, Hospital Revenue, Conemaugh Valley Memorial Hospital,
Refunding, Series B, Connie Lee Insured, Pre-Refunded,
6.30%, 7/01/08 ............................................................. 9,600,000 10,046,592
6.375%, 7/01/18 ............................................................ 10,740,000 11,255,950
Delaware County IDAR, Philadelphia Electric, Refunding, Series 1991,
7.375%, 4/01/21 ............................................................ 6,500,000 6,803,290
Delaware River Port Authority PA & NJ, Delaware River Bridges Revenue,
FSA Insured, 5.75%,
1/01/22 .................................................................... 8,500,000 8,395,620
1/01/26 .................................................................... 10,000,000 9,828,000
Delaware Valley Regional Finance Authority Local Government Revenue,
Series B, AMBAC Insured, 5.60%, 7/01/17 .................................... 5,000,000 4,923,800
Lehigh County IDA, PCR, Pennsylvania Power and Light Co. Project,
Refunding, Series A, MBIA Insured, 6.15%, 8/01/29 .......................... 4,000,000 4,025,040
Montgomery County Higher Education and Health Authority Revenue,
Jeanes Health System Project, Pre-Refunded, 8.75%, 7/01/20 ................. 5,500,000 5,646,795
Montgomery County IDA, Retirement Community Revenue, Act Retirement-Life
Communities, 5.25%, 11/15/28 ............................................... 2,500,000 1,965,075
Pennsylvania EDA,
Financing Authority Revenue, Macmillan, LP Project, Pre-Refunded,
7.60%, 12/01/20 ......................................................... 5,000,000 5,626,050
Financing Resources Recovery Revenue, Colver Project,
Series D, 7.125%, 12/01/15 .............................................. 13,500,000 13,814,550
Pennsylvania HFA,
Rental Housing, Refunding, FGIC Insured, 6.40%, 7/01/12 .................... 10,590,000 10,907,488
SFM, Series 1991, 7.15%, 4/01/15 ........................................... 3,635,000 3,738,525
Pennsylvania State Financial Authority Revenue, Municipal
Capital Improvements Program, Refunding, 6.60%, 11/01/09 ................... 33,280,000 35,252,838
Philadelphia Gas Works Revenue,
1st Series A, FSA Insured, 5.00%, 7/01/26 .................................. 5,000,000 4,312,300
13th Series, Pre-Refunded, 7.70%, 6/15/21 .................................. 2,850,000 2,999,711
14th Series A, Pre-Refunded, 6.375%, 7/01/26 ............................... 1,210,000 1,279,418
Refunding, 14th Series, 6.375%, 7/01/26 .................................... 2,740,000 2,724,163
Philadelphia GO,
MBIA Insured, 5.00%, 5/15/25 ............................................... 5,000,000 4,373,800
Refunding, Series A, 11.50%, 8/01/00 ....................................... 1,000,000 1,015,340
Philadelphia Hospitals and Higher Education Facilities Authority Revenue,
Temple University Hospital, 5.875%, 11/15/23 ............................... 5,000,000 4,100,500
Philadelphia Hospitals and Higher Educational Facilities Authority Revenue,
Mortgage, North Philadelphia Health Systems, Series A, FHA Insured,
5.30%, 1/01/18 ............................................................. 3,330,000 3,006,324
5.35%, 1/01/23 ............................................................. 5,780,000 5,148,419
5.375%, 1/01/28 ............................................................ 3,765,000 3,319,149
Philadelphia Parking Authority Parking Revenue, Airport, FSA Insured,
5.25%, 9/01/29 ............................................................. 15,000,000 13,473,750
Philadelphia Water and Sewer Revenue, Series 10, ETM, 7.35%, 9/01/04 ........... 10,695,000 11,455,201
Pittsburgh and Allegheny County Public Auditorium Hotel Room Revenue,
AMBAC Insured, 5.125%, 2/01/35 ............................................. 15,000,000 12,978,450
Washington County Authority Revenue, Capital Projects and Equipment Program,
Refunding, AMBAC Insured, 6.15%, 12/01/29 .................................. 5,000,000 5,109,950
--------------
225,460,493
--------------
</TABLE>
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, APRIL 30, 2000 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
RHODE ISLAND 1.5%
Providence GO, Special Obligation Tax Increment, Series A, 7.65%, 6/01/16 ...... $ 9,900,000 $ 10,643,787
Rhode Island Clean Water Financing Agency Revenue, Safe Drinking
Water Providence,
Series A, AMBAC Insured, 6.70%, 1/01/15 .................................... 2,200,000 2,358,114
Rhode Island Housing and Mortgage Finance Corp. Revenue,
Homeownership Opportunity,
Series 2, 7.75%, 4/01/22 ................................................... 1,110,000 1,133,543
Series 10-A, 6.50%, 10/01/22 ............................................... 20,200,000 20,616,322
Series 10-A, 6.50%, 4/01/27 ................................................ 13,085,000 13,288,864
Series 13, 6.70%, 10/01/15 ................................................. 7,400,000 7,663,884
Series 13, 6.85%, 4/01/27 .................................................. 1,160,000 1,189,023
Series 15-A, 6.85%, 10/01/24 ............................................... 15,000,000 15,438,000
Series 17-A, 6.25%, 4/01/17 ................................................ 2,320,000 2,364,080
Series 17-A, 6.375%, 10/01/26 .............................................. 2,720,000 2,764,554
Rhode Island Port Authority and EDC Revenue, Shepard Building Project,
Series B, AMBAC Insured, Pre-Refunded, 6.75%, 6/01/25 ...................... 3,000,000 3,235,800
Rhode Island State Health and Educational Building Corp. Revenue,
Health Facilities, Saint Antoine, Series B, 6.125%, 11/15/29 ............... 8,400,000 8,009,568
Health Facilities, Tockwotton Home, Pre-Refunded, 7.25%, 4/15/17 ........... 3,000,000 3,184,650
St. Antoine Residence, 6.70%, 11/15/12 ..................................... 2,320,000 2,486,785
St. Antoine Residence, 6.75%, 11/15/18 ..................................... 2,750,000 2,952,098
--------------
97,329,072
--------------
SOUTH CAROLINA .7%
Berkeley County School District COP, Berkeley School Facilities Group Inc.,
AMBAC Insured, Pre-Refunded, 6.30%, 2/01/16 ................................ 1,800,000 1,909,386
Piedmont Municipal Power Agency Electric Revenue, Refunding,
6.60%, 1/01/21 ............................................................. 10,645,000 10,490,435
Series A, 5.75%, 1/01/24 ................................................... 3,150,000 2,814,053
Series A, AMBAC Insured, 6.55%, 1/01/16 .................................... 7,340,000 7,338,312
Series A, AMBAC Insured, 5.75%, 1/01/24 .................................... 5,050,000 4,866,382
Richland County PCR, Union Camp Corp. Project, Refunding,
Series C, 6.55%, 11/01/20 .................................................. 3,000,000 3,006,900
South Carolina Public Service Authority Revenue, Refunding,
Series A, AMBAC Insured, 6.375%, 7/01/21 ................................... 12,765,000 13,022,215
--------------
43,447,683
--------------
SOUTH DAKOTA .2%
Lawrence County PCR, Black Hills Power and Light Co. Project, Refunding,
6.70%, 6/01/10 ............................................................. 5,000,000 5,197,350
South Dakota HDA Revenue, Homeownership Mortgage,
Series A, 6.30%, 5/01/17 ................................................... 2,155,000 2,193,941
Series D, 6.65%, 5/01/14 ................................................... 3,315,000 3,428,870
Series G, 7.125%, 5/01/14 .................................................. 3,405,000 3,572,832
--------------
14,392,993
--------------
TENNESSEE .8%
Chattanooga Health Educational and Housing Facility Board Revenue,
Catholic Health Initiatives, Refunding,
Series A, 5.00%, 12/01/18 .................................................. 2,150,000 1,809,698
Hamilton County IDB, MFHR, Patten Towers Apartments, Series A,
6.125%, 8/01/05 ............................................................ 2,290,000 2,305,526
6.30%, 8/01/07 ............................................................. 1,000,000 1,012,620
</TABLE>
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, APRIL 30, 2000 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
TENNESSEE (CONT.)
Johnson City Health and Educational Facilities Board Hospital Revenue,
Refunding, First Mortgage Mountain States Health, Series A, MBIA Insured,
6.00%, 7/01/21 ............................................................. $ 7,000,000 $ 6,966,120
Knox County Health, Educational and Housing Facilities Board MFHR,
East Towne Village Project, GNMA Secured, 8.20%, 7/01/28 ................... 4,675,000 4,772,614
Memphis-Shelby County Airport Authority Special Facilities and
Project Revenue, Federal Express Corp.,
7.875%, 9/01/09 ............................................................ 14,690,000 15,459,462
6.75%, 9/01/12 ............................................................. 6,520,000 6,720,751
Metropolitan Government of Nashville and Davidson County Health and Educational
Facilities Board Revenue, Multi-Modal Health Facility, Asset Guaranty,
5.50%, 5/01/23 ............................................................. 985,000 888,401
Metropolitan Government of Nashville and Davidson County IDBR, Osco Treatment
Inc., Refunding and Improvement, 6.00%, 5/01/03 5,000,000 4,834,400
Metropolitan Nashville Airport Authority Revenue, Series C,
FGIC Insured, 6.60%, 7/01/15 ............................................... 1,940,000 2,016,669
Shelby County Health Educational and Housing Facilities Board Hospital Revenue,
MBIA Insured, 5.00%, 4/01/18 ............................................... 5,000,000 4,440,050
Tennessee HDA, Homeownership Program, Series 1992, 6.80%, 7/01/17 .............. 2,115,000 2,177,054
Tennessee State Local Development Authority Revenue, Community Provider
Pooled Loan Program, Pre-Refunded, 6.45%, 10/01/14 ......................... 2,275,000 2,436,866
--------------
55,840,231
--------------
TEXAS 5.8%
Austin Utility System Revenue,
Refunding, FGIC Insured, 6.25%, 5/15/16 .................................... 7,755,000 7,984,781
Series A, Pre-Refunded, 8.00%, 11/15/16 .................................... 18,100,000 18,741,464
Bexar County Health Facilities Development Corp. Revenue, Incarnate Word
Health Services, Refunding, FSA Insured, ETM,
6.00%, 11/15/15 ............................................................ 4,500,000 4,765,050
6.10%, 11/15/23 ............................................................ 8,300,000 8,938,021
Bexar County HFC, MFHR, Sunpark Apartments Project, 6.875%, 12/01/12 ........... 1,675,000 1,713,257
Bexar Metropolitan Water District Water Works Systems Revenue, Refunding,
MBIA Insured, 5.875%, 5/01/22 .............................................. 2,860,000 2,826,967
Brazos River Authority PCR, Texas Utilities Electric Co. Project,
Collateralized, Refunding, Series C, 5.55%, 6/01/30 ........................ 20,000,000 16,844,400
Dallas-Fort Worth International Airport Facilities Improvement Corp. Revenue,
American Airlines Inc.,
8.00%, 11/01/24 ............................................................ 99,000,000 101,730,420
Refunding, 6.00%, 11/01/14 ................................................. 29,400,000 28,623,840
El Paso HFC, SFMR, Refunding, Series A, 8.75%, 10/01/11 ........................ 2,775,000 2,947,855
Fort Worth Higher Education Financial Corp. Higher Education Revenue,
Texas Christian University Project,
5.00%, 3/15/27 ............................................................. 4,000,000 3,452,320
Grand Prairie Health Facilities Development Corp., Dallas/Fort Worth Medical
Center Project, Refunding,
AMBAC Insured, 6.875%, 11/01/10 ............................................ 2,700,000 2,747,223
Gulf Coast Waste Disposal Authority Environmental Improvement Revenue,
UXS Corp. Projects, Refunding, 5.50%, 9/01/17 .............................. 3,250,000 2,850,445
Harris County IDR, Marine Terminal Revenue, Refunding, 6.95%, 2/01/22 .......... 20,250,000 20,870,460
Houston Water and Sewer System Revenue,
Junior lien, Refunding, Series D, FGIC Insured, 5.00%, 12/01/25 ............ 9,710,000 8,405,559
Series B, 6.375%, 12/01/14 ................................................. 21,000,000 21,929,040
Joshua ISD, Refunding, Series B, 6.125%, 2/15/26 ............................... 20,000 20,007
Lower Neches Valley Authority IDC Revenue, Mobil Oil Refunding Corp.,
Refunding, 5.55%, 3/01/33 .................................................. 2,500,000 2,253,450
Lubbock HFC, SFMR, MBS Program, Refunding, Series A, GNMA Secured, 6.125%,
12/01/17 .................................................................. 1,000,000 1,012,780
</TABLE>
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, APRIL 30, 2000 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
TEXAS (CONT.)
Matagorda County Navigation District No. 1 PCR,
Central Power and Light Co. Project, Refunding,
Series E, MBIA Insured, 6.10%, 7/01/28 ..................................... $ 16,500,000 $ 16,534,650
Central Power and Light Co. Project, Refunding, 6.00%, 7/01/28 ............... 19,200,000 18,129,984
Matagorda County Navigation District No. 1 Revenue, PCR, Collateralized,
Houston Lighting and Power Co., Refunding, Series A, AMBAC Insured,
6.70%, 3/01/27 ............................................................ 5,500,000 5,745,630
Mesquite HFC, SFMR, Series 1983, 10.75%, 9/01/14 ............................... 450,000 454,478
North Central Health Facility Development Corp. Revenue, Texas Health Resources
System, Series B, MBIA Insured, 5.125%, 2/15/22 .............................. 5,985,000 5,259,917
Nueces River Authority Environmental Improvement Revenue, Asarco Inc. Project,
Refunding, Series A, 5.60%, 4/01/18 ......................................... 4,500,000 3,560,085
Port Corpus Christi IDC Revenue, Valero, Refunding,
Series B, 5.40%, 4/01/18 ................................................... 4,000,000 3,480,120
Series C, 5.40%, 4/01/18 ................................................... 6,000,000 5,124,840
Port Corpus Christi Nueces County General Revenue, Union Pacific, Refunding,
5.65%, 12/01/22 ............................................................ 13,000,000 11,122,150
Red River Authority PCR, West Texas Utilities Co. Project, Public Service Co.
of Oklahoma, Central Power and Light Co., Refunding, MBIA Insured, 6.00%,
6/01/20 ................................................................... 5,000,000 5,031,500
Sabine River Authority PCR,
Southwestern Electric Power Co., Refunding, MBIA Insured, 6.10%, 4/01/18 ... 4,000,000 4,057,320
Texas Utilities Electric Co. Project, Collateralized, Refunding,
FGIC Insured, 6.55%, 10/01/22 .............................................. 7,700,000 7,948,556
San Antonio Water Revenue, senior lien, MBIA Insured,
6.50%, 5/15/10 ............................................................. 2,795,000 2,918,958
Pre-Refunded, 6.50%, 5/15/10 ............................................... 1,440,000 1,513,296
Tarrant County Health Facilities Development Corp. Health Services Revenue,
Health Resources System, Series A, MBIA Insured, 5.00%, 2/15/26 ............. 10,000,000 8,539,700
Texas Water Development Board Revenue, State Revolving Fund, 6.00%, 7/15/13 .... 2,500,000 2,584,825
Travis County HFC, SFMR, Refunding, Series A, 6.95%, 10/01/27 .................. 3,575,000 3,707,347
Tyler Health Facilities Development Corp. Hospital Revenue, East Texas Medical
Center Project,
Series A, MBIA Insured, 5.50%, 11/01/17 .................................... 1,735,000 1,665,374
Series D, FSA Insured, 5.375%, 11/01/27 .................................... 14,400,000 12,883,968
--------------
378,920,037
--------------
US TERRITORIES 1.6%
District of Columbia GO, Series E, MBIA Insured,
6.00%, 6/01/13 ............................................................. 3,845,000 3,917,055
Pre-Refunded, 6.00%, 6/01/13 ............................................... 155,000 162,118
District of Columbia HFA, MFHR, Refunding, Series A, FHA Insured
7.10%, 9/01/12 ............................................................. 1,830,000 1,877,287
7.15%, 3/01/24 ............................................................. 6,575,000 6,719,124
District of Columbia Hospital Revenue, Washington Hospital Center Corp.,
Series A, Pre-Refunded, 9.00%, 1/01/08 ..................................... 3,370,000 3,532,771
District of Columbia Redevelopment Land Agency Washington D.C. Sports Arena
Special Tax Revenue, 5.625%, 11/01/10 ...................................... 740,000 745,343
District of Columbia Revenue, Catholic University of America,
Connie Lee Insured, 6.45%, 10/01/23 ........................................ 5,265,000 5,593,799
Guam Airport Authority Revenue, Series B,
6.60%, 10/01/10 ............................................................ 325,000 341,156
6.70%, 10/01/23 ............................................................ 1,000,000 1,050,230
Guam Government Limited Obligation Highway Revenue, Refunding,
Series A, FSA Insured, 6.30%, 5/01/12 ...................................... 280,000 292,228
</TABLE>
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, APRIL 30, 2000 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
US TERRITORIES (CONT.)
Guam Power Authority Revenue, Series A, 5.25%, 10/01/23 ........................ $ 200,000 $ 176,780
Northern Mariana Islands Commonwealth Ports Authority Seaport Revenue,
Series A, 6.85%, 3/15/28 ................................................... 990,000 964,696
Puerto Rico Commonwealth GO,
AMBAC Insured, 5.40%, 7/01/25 .............................................. 250,000 236,513
Pre-Refunded, 6.50%, 7/01/23 ............................................... 250,000 268,525
Public Improvement, Refunding, 5.75%, 7/01/17 .............................. 250,000 250,508
Puerto Rico Commonwealth Highway and Transportation Authority Revenue,
Series A, 5.00%, 7/01/38 ................................................... 2,500,000 2,102,525
Series Y, 5.50%, 7/01/26 ................................................... 1,150,000 1,077,355
Series Y, 5.00%, 7/01/36 ................................................... 59,000,000 49,584,190
Series Y, 5.50%, 7/01/36 ................................................... 7,000,000 6,504,260
Puerto Rico Commonwealth Urban Renewal and Housing Corp. Commonwealth
Appropriation, Refunding, 7.875%, 10/01/04 .................................. 3,200,000 3,271,360
Puerto Rico Electric Power Authority Revenue,
Series R, Pre-Refunded, 6.25%, 7/01/17 ..................................... 100,000 104,520
Series T, 5.50%, 7/01/20 ................................................... 400,000 381,696
Series X, 5.50%, 7/01/25 ................................................... 200,000 187,574
Puerto Rico Housing Bank and Financing Authority SFMR, Affordable
Housing Mortgage, First Portfolio, 6.25%, 4/01/29 ............................ 130,000 131,442
Puerto Rico Industrial Medical and Environmental Pollution Control Facilities
Financing Authority Revenue, PepsiCo Inc. Project, 6.25%, 11/15/13 ........... 350,000 364,256
Puerto Rico Industrial Tourist Educational Medical and Environmental Control
Facilities Financing Authority Industrial Revenue,
Guaynabo Warehouse, Series A, 5.15%, 7/01/19 ............................... 850,000 735,242
Teacher's Retirement System Revenue,Series B, 5.50%, 7/01/21 ............... 250,000 238,853
Puerto Rico PBA, Public Education and Health Facilities, Refunding,
Series M, 5.75%, 7/01/15 ................................................... 900,000 903,501
University of Puerto Rico Revenues, Series M, MBIA Insured, 5.25%, 6/01/25 ..... 285,000 262,288
Virgin Islands PFA Revenue,
senior lien, Fund Loan Notes, Refunding, Series A, 5.50%, 10/01/18 ......... 1,400,000 1,250,592
senior lien, Fund Loan Notes, Refunding, Series A, 5.50%, 10/01/22 ......... 6,485,000 5,656,801
senior lien, Fund Loan Notes, Refunding, Series A, 5.625%, 10/01/25 ........ 1,900,000 1,666,642
sub. lien, Fund Loan Notes, Refunding, Series D, 5.50%, 10/01/01 ........... 1,755,000 1,744,593
sub. lien, Fund Loan Notes, Refunding, Series D, 5.50%, 10/01/02 ........... 1,700,000 1,678,087
sub. lien, Fund Loan Notes, Refunding, Series D, 5.50%, 10/01/03 ........... 1,850,000 1,817,274
Virgin Islands Water and Power Authority Electric System Revenue, Refunding,
5.30%, 7/01/18 ............................................................. 500,000 453,910
--------------
106,245,094
--------------
UTAH .7%
Carbon County Solid Waste Disposal Revenue, Laidlaw Inc. Project, Refunding,
Series A, 7.50%, 2/01/10 ................................................... 5,050,000 5,062,322
Intermountain Power Agency Power Supply Revenue, Refunding,
Series A, 6.15%, 7/01/14 ................................................... 25,000,000 25,707,250
Salt Lake County College Revenue,
Westminster College Project, 5.70%, 10/01/17 ............................... 1,000,000 932,180
Westminster College Project, 5.75%, 10/01/27 ............................... 1,000,000 917,040
Westminster College Project, 5.625%, 10/01/28 .............................. 3,305,000 2,969,642
</TABLE>
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, APRIL 30, 2000 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
UTAH (CONT.)
Utah State HFA,
Refunding, Series A, FNMA Insured, 6.50%, 5/01/19 .......................... $ 2,945,000 $ 2,977,896
SFM, Refunding, 6.80%, 1/01/12 ............................................. 470,000 485,007
SFM, Series B, 6.55%, 7/01/19 .............................................. 1,440,000 1,480,147
SFM, Series B, 6.55%, 7/01/26 .............................................. 2,320,000 2,369,138
SFM, Series C-1, 6.80%, 7/01/12 ............................................ 120,000 123,787
SFM, Series C-1, 8.375%, 7/01/19 ........................................... 245,000 246,000
SFM, Series E-1, 6.65%, 7/01/20 ............................................ 990,000 1,015,473
--------------
44,285,882
--------------
VERMONT .3%
Vermont Educational and Health Buildings Financing Agency Revenue, Fletcher
Allen Health, Series A, AMBAC Insured, 6.125%, 12/01/27 ...................... 13,000,000 13,144,300
Vermont HFA, SFHR, Series 5, 7.00%, 11/01/27 ................................... 9,400,000 9,620,806
--------------
22,765,106
--------------
VIRGINIA .6%
Danville IDA, Hospital Revenue,
Danville Regional Medical Center, FGIC Insured, Pre-Refunded,
6.50%, 10/01/24 .......................................................... 5,840,000 6,239,106
Regional Medical Center, FGIC Insured, Pre-Refunded, 6.50%, 10/01/19 ....... 5,885,000 6,287,181
Henrico County IDA, Public Facilities Lease Revenue, Regional Jail Project,
6.00%, 8/01/15 ............................................................. 7,250,000 7,559,793
Henrico County Water and Sewer Revenue, Refunding, 5.00%, 5/01/22 .............. 4,875,000 4,287,904
Lynchburg IDA, Healthcare Facilities Revenue, Centra Health, Refunding,
5.20%, 1/01/28 ............................................................. 2,000,000 1,708,840
Medical College Hospital Authority Revenue, General Revenue Bonds,
MBIA Insured, 5.125%, 7/01/18 .............................................. 2,000,000 1,830,220
Newport News GO, Series B, 5.00%, 3/01/19 ...................................... 3,550,000 3,176,540
Portsmouth IDAR, Hotel Conference Center and Parking, FSA Insured,
5.00%, 4/01/29 ............................................................. 4,000,000 3,465,080
Virginia State HDA, Commonwealth Mortgage, Series C, Sub Series C-6,
6.25%, 1/01/15 ............................................................. 5,120,000 5,199,565
--------------
39,754,229
--------------
WASHINGTON 2.7%
Aberdeen GO, Series A, MBIA Insured, 5.80%, 12/01/12 ........................... 100,000 100,990
Bellevue Water and Sewer Revenue, Refunding, 5.875%, 7/01/10 ................... 100,000 102,263
Bellingham Housing Authority Revenue,
Cascade Meadows Project, Pre-Refunded, 7.10%, 11/01/23 ..................... 200,000 216,386
Pacific Rim and Cascade Meadows Project, Refunding, MBIA Insured,
5.20%, 11/01/27 ............................................................ 200,000 172,810
Chelan County PUD No. 1,
Cheland Hydro Consolidated System Revenue, Series A, 5.65%, 7/01/32 ........ 5,000,000 4,611,700
Consolidated Revenue, Chelan Hydroelectric Division I Project,
Series A, FSA Insured, 5.25%, 7/01/33 .................................... 200,000 172,956
Clark County Sewer Revenue, MBIA Insured, 5.70%, 12/01/16 ...................... 200,000 198,508
Conservation and Renewable Energy System Revenue, Washington Conservation
Project, 6.50%, 10/01/14 ................................................... 400,000 417,612
Douglas County PUD No. 1 Electric Systems Revenue, MBIA Insured,
6.00%, 1/01/15 ............................................................ 100,000 101,912
Federal Way GO, Refunding, 5.85%, 12/01/21 ..................................... 100,000 98,074
Grant County PUD No. 2,
Priest Rapids Hydroelectric Revenue, Second Series, Series B, MBIA Insured,
5.875%, 1/01/26 .......................................................... 100,000 98,364
Wanapum Hydroelectric Revenue,Refunding, Second Series, Series A,
MBIA Insured, 5.20%, 1/01/23 ............................................. 250,000 221,663
</TABLE>
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, APRIL 30, 2000 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
WASHINGTON (CONT.)
King County GO,
Sewer District, 5.875%, 1/01/15 ............................................ $ 100,000 $ 101,020
Sewer, Refunding, Series C, 6.25%, 1/01/32 ................................. 8,715,000 8,851,738
King County Housing Authority Revenue, Woodridge Park Project, 6.25%, 5/01/15 .. 175,000 176,713
King County School District No. 400, Mercer Island, 5.90%, 12/01/15 ............ 100,000 101,112
King County School District No. 412, Shoreline, Pre-Refunded, 6.10%, 6/01/13 ... 100,000 104,465
King County School District No. 415, Kent, FSA Insured, 5.875%, 6/01/16 ........ 200,000 201,970
Lewis County PUD No. 1, Cowlitz Falls Hydroelectric Project Revenue,
6.00%, 10/01/24 ............................................................ 200,000 200,014
Pierce County EDC, Solid Waste Revenue,
Occidental Petroleum Corp., 5.80%, 9/01/29 ................................. 4,375,000 3,763,288
Steilacoom, Refunding, 6.60%, 8/01/22 ...................................... 32,480,000 33,257,896
Pierce County Sewer Revenue, 5.70%, 2/01/17 .................................... 100,000 98,717
Pilchuck Development Public Corp. Special Facilities Airport Revenue,
Tramco Project, B.F. Goodrich, 6.00%, 8/01/23 .............................. 800,000 741,696
Port Moses Lake Public Corp., Union Carbide Corp.,
7.50%, 8/01/04 ............................................................. 2,100,000 2,102,604
7.875%, 8/01/06 ............................................................ 1,000,000 1,015,460
Port of Seattle Revenue, Series B,
6.00%, 11/01/17 ............................................................ 180,000 181,363
Pre-Refunded, 6.00%, 11/01/17 .............................................. 20,000 20,468
Seatac GO, MBIA Insured, Pre-Refunded, 6.50%, 12/01/13 ......................... 3,210,000 3,427,221
Seattle Housing Authority Low Income Housing Assistance Revenue,
Kin On Project, 7.40%, 11/20/36 ............................................ 99,000 109,079
Seattle Municipality Metropolitan Sewer Revenue, Refunding, Series V,
6.20%, 1/01/32 ............................................................. 9,880,000 9,949,852
Seattle Water System Revenue, FGIC Insured, 5.00%, 10/01/23 .................... 300,000 260,760
Snohomish County GO, MBIA Insured, 5.90%, 12/01/15 ............................. 100,000 100,751
Snohomish County Housing Authority Revenue, Pooled, 6.30%, 4/01/16 ............. 200,000 202,748
Snohomish County PUD No. 1 Electric Revenue, Generation System,
Refunding, FGIC Insured, 6.00%, 1/01/18 .................................... 200,000 201,028
Snohomish County PUD No. 1 Water Revenue, 5.85%, 11/01/17 ...................... 100,000 100,028
Snohomish County USD No. 6 GO, 6.50%, 12/01/11 ................................. 7,000,000 7,566,229
Spokane County GO, Refunding, 6.00%, 12/01/14 .................................. 130,000 133,179
Spokane County Water District No. 3 Water Revenue, Refunding,
5.90%, 1/01/14 ............................................................. 100,000 100,047
Stevens County Public Corp. PCR, Water Power Co. Project, Refunding,
6.00%, 12/01/23 ............................................................ 300,000 286,880
Sunnyside GO, MBIA Insured, 6.10%, 12/01/14 .................................... 100,000 101,786
Tacoma Electric System Revenue, Refunding, FGIC Insured, 6.25%, 1/01/15 ........ 200,000 205,725
Tacoma GO, Series A, MBIA Insured, 5.625%, 12/01/22 ............................ 300,000 286,169
Tacoma Refuse Utility Revenue, AMBAC Insured, Pre-Refunded,
7.00%, 12/01/19 ............................................................ 100,000 109,725
Tacoma Water Revenue, FGIC Insured, 5.25%, 12/01/16 ............................ 100,000 93,686
University of Washington Alumni Association Lease Revenue,
Medical Center Roosevelt II, FSA Insured, 6.30%, 8/15/14 ................... 4,500,000 4,646,024
Washington State COP, Office Building Project, Series A, MBIA Insured,
6.00%, 4/01/12 ............................................................. 100,000 101,859
Washington State Health Care Facilities Authority Revenue,
Children's Hospital and Regional Medical Center, FSA Insured,
5.00%, 10/01/28 .......................................................... 600,000 507,000
Multicare Health Systems, MBIA Insured, 5.00%, 8/15/22 ..................... 250,000 215,487
Washington State Health Care Facilities Authority Revenue,
Providence Services, MBIA Insured, 5.50%, 12/01/26 ........................ 7,000,000 6,450,500
Washington State Higher Education Facilities Authority Revenue,
Pacific Lutheran University Project, Refunding,
Connie Lee Insured, 5.70%, 11/01/26 ...................................... 200,000 189,553
</TABLE>
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, APRIL 30, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
WASHINGTON (CONT.)
Washington State Housing Finance Commission SF Program,
Series 1A-1, GNMA Secured, FNMA Insured, 6.25%, 6/01/16 ........................ $ 100,000 $ 101,256
Series 1A-3, GNMA Secured, FMNA Insured, 6.15%, 12/01/15 ....................... 200,000 201,503
Series 2N, GNMA Secured, FNMA Insured, 6.05%, 12/01/16 ......................... 100,000 100,617
Series 3A, GNMA Secured, FNMA Insured, 5.75%, 12/01/28 ......................... 195,000 182,074
Washington State Housing Finance Commission SFMR, MBS Program, Series A,
GNMA Secured, FNMA Insured, 7.05%, 7/01/22 ........................................ 30,000 31,053
Washington State Motor Vehicle Fuel Tax GO, Series D, 6.00%, 9/01/20 .............. 240,000 241,168
Washington State Public Power Supply System Revenue,
Nuclear Project No. 1, Refunding, Series A, 6.05%, 7/01/12 ..................... 35,355,000 35,977,247
Nuclear Project No. 1, Refunding, Series A, MBIA Insured, 6.25%, 7/01/17 ....... 19,965,000 20,291,027
Nuclear Project No. 2, Refunding, Series A, 6.00%, 7/01/09 ..................... 18,330,000 18,768,453
Nuclear Project No. 2, Refunding, Series A, 6.30%, 7/01/12 ..................... 7,700,000 8,184,021
Nuclear Project No. 2, Series A, 6.25%, 7/01/12 ................................ 3,200,000 3,293,887
--------------
180,149,384
--------------
WEST VIRGINIA .7%
Braxton County Solid Waste Disposal Revenue, Weyerhaeuser Co. Project,
6.50%, 4/01/25 ................................................................. 3,500,000 3,482,639
Refunding, 5.40%, 5/01/25 ...................................................... 10,000,000 8,626,499
Putnam County PCR, FMC Corp. Project, Refunding, 5.625%, 10/01/13 ................. 1,700,000 1,570,391
Tyler County PCR, Union Carbide Corp., 7.625%, 8/01/05 ............................ 2,400,000 2,595,311
West Virginia State GO, Series A, FGIC Insured, 5.20%, 11/01/26 ................... 10,000,000 8,902,099
West Virginia State Hospital Finance Authority Hospital Revenue, Logan
General Hospital Project, Refunding and Improvement, 7.25%, 7/01/20 ............... 7,000,000 5,936,769
West Virginia State Housing Development Fund, Housing Finance, Series D,
7.00%, 5/01/17 ................................................................. 6,000,000 6,212,459
7.05%, 11/01/24 ................................................................ 9,000,000 9,299,069
--------------
46,625,236
--------------
WISCONSIN 1.2%
Janesville IDR, Simmons Manufacturing Co., 7.00%, 10/15/17 ........................ 2,200,000 2,212,362
Madison Industrial IDR, Madison Gas and Electric Co. Project, Series A,
6.75%, 4/01/27 .................................................................... 4,220,000 4,406,734
Wisconsin Housing and EDA, Homeownership Revenue,
Refunding, Series A, 6.10%, 11/01/10 ........................................... 9,190,000 9,365,528
Series 1, 6.75%, 9/01/15 ....................................................... 10,230,000 10,560,837
Series 1, 6.75%, 9/01/17 ....................................................... 3,000,000 3,097,019
Series A, 6.90%, 3/01/16 ....................................................... 1,985,000 2,072,856
Series A, 6.45%, 3/01/17 ....................................................... 5,500,000 5,635,904
Series A, 7.10%, 3/01/23 ....................................................... 4,475,000 4,615,962
Series B, 7.05%, 11/01/22 ...................................................... 3,000,000 3,109,199
Wisconsin State Health and Educational Facilities Authority Revenue,
Children's Hospital of Wisconsin Inc., AMBAC Insured, 5.375%, 2/15/28 .......... 21,050,000 18,989,836
Franciscan Sisters Christian, Series A, 5.50%, 2/15/18 ......................... 1,500,000 1,266,884
Franciscan Sisters Christian, Series A, 5.50%, 2/15/28 ......................... 3,000,000 2,411,519
</TABLE>
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, APRIL 30, 2000 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
WISCONSIN (CONT.)
Wisconsin State Health and Educational Facilities Authority Revenue, (cont.)
Mercy Health Systems Corp., AMBAC Insured, 6.125%, 8/15/13 ...................... $ 6,500,000 $ 6,697,209
Mercy Health Systems Corp., AMBAC Insured, 6.125%, 8/15/17 ...................... 7,500,000 7,620,074
--------------
82,061,923
--------------
WYOMING .3%
Wyoming CDA,
Housing Revenue, Refunding, Series 6, 6.10%, 12/01/28 ........................... 11,540,000 11,523,843
MFMR, Series A, 6.95%, 6/01/24 .................................................. 3,460,000 3,521,276
MFMR, Series A, Pre-Refunded, 6.90%, 6/01/12 .................................... 1,360,000 1,384,941
SFMR, Series G, 7.25%, 6/01/21 .................................................. 715,000 738,773
--------------
17,168,833
--------------
TOTAL BONDS (COST $6,311,325,292) .................................................. 6,295,102,205
--------------
ZERO COUPON BONDS 2.8%
Calcasieu Parish Memorial Hospital Service District Revenue, Lake Charles
Parish Memorial Hospital Project, Series A,12/01/22 ................................ 11,040,000 7,819,522
Chicago RMR, Refunding, Series B, MBIA Insured,10/01/09 ............................ 4,365,000 2,269,494
Coldwater Community Schools, MBIA Insured, Pre-Refunded,5/01/18 .................... 5,935,000 2,055,647
Colorado Springs Airport Revenue, Series C,
01/01/03 ........................................................................ 1,660,000 1,427,185
01/01/05 ........................................................................ 1,610,000 1,228,333
01/01/07 ........................................................................ 1,675,000 1,122,501
01/01/08 ........................................................................ 800,000 501,488
01/01/11 ........................................................................ 1,450,000 747,693
Cook County GO, Community Consolidated School District No. 54, Schaumburg
Township, Series B, FGIC Insured, Pre-Refunded,
01/01/07 ........................................................................ 3,505,000 2,389,043
01/01/08 ........................................................................ 4,800,000 3,061,584
01/01/09 ........................................................................ 4,380,000 2,611,706
01/01/10 ........................................................................ 5,760,000 3,218,630
Florida State Mid-Bay Bridge Authority Revenue, Series A, senior lien,
AMBAC Insured,
10/01/23 ........................................................................ 5,000,000 1,162,400
10/01/24 ........................................................................ 3,000,000 653,760
Foothill/Eastern Corridor Agency Toll Road Revenue,
Capital Appreciation, Refunding,01/15/24 ........................................ 65,000,000 14,013,350
Convertible Capital Appreciation, Refunding,01/15/23 ............................ 35,000,000 18,842,600
Harrison Community Schools GO, AMBAC Insured,5/01/20 ............................... 6,000,000 1,758,300
Jefferson County Capital Projects Corp. Lease Revenue, Refunding, Series A,
08/15/07 ........................................................................ 1,640,000 1,105,426
08/15/08 ........................................................................ 4,505,000 2,867,207
08/15/09 ........................................................................ 4,580,000 2,750,244
08/15/10 ........................................................................ 4,620,000 2,615,474
08/15/13 ........................................................................ 6,825,000 3,189,391
08/15/14 ........................................................................ 6,860,000 2,998,026
</TABLE>
46
<PAGE>
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, APRIL 30, 2000 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
ZERO COUPON BONDS (CONT.)
Jefferson County Capital Projects Corp. Lease Revenue, Refunding, Series A, (cont.)
08/15/16 ......................................................................... $ 7,005,000 $ 2,670,866
08/15/17 ......................................................................... 7,115,000 2,535,501
Metropolitan Pier and Exposition Authority Dedicated State Tax Revenue,
Capital Appreciation, Series A, FGIC Insured,06/15/09 ............................ 9,510,000 5,793,968
Capital Appreciation, Series A, FGIC Insured, Pre-Refunded, ETM, 06/15/09 ........ 1,490,000 908,587
McCormick Place Expansion Project, Series A, FGIC Insured,06/15/10 ............... 8,000,000 4,598,000
McCormick Place Expansion Project, Series A, FGIC Insured,06/15/11 ............... 9,690,000 5,249,848
McCormick Place Expansion Project, Series A, FGIC Insured,06/15/12 ............... 250,000 226,835
McCormick Place Expansion Project, Series A, FGIC Insured, Pre-Refunded,
06/15/12 ......................................................................... 11,550,000 10,695,762
McCormick Place Exposition, Series A, FGIC Insured,06/15/08 ...................... 1,315,000 849,240
McCormick Place Exposition, Series A, FGIC Insured,06/15/08 ...................... 7,185,000 4,563,912
Miami-Dade County Special Obligation, sub. lien, Series B, MBIA Insured, 10/01/34 ... 5,500,000 637,780
Owensboro Electric Light and Power Revenue, Series B, AMBAC Insured,1/01/08 ......... 5,250,000 3,482,588
San Joaquin Hills Transportation Corridor Agency Toll Road Revenue,
Refunding, Series A,01/15/21 ..................................................... 50,000,000 29,967,000
senior lien, ETM,01/01/23 ........................................................ 7,000,000 1,829,520
Shreveport Water and Sewer Revenue, Series B, FGIC Insured,
12/01/07 ......................................................................... 490,000 310,528
12/01/08 ......................................................................... 2,530,000 1,492,245
12/01/09 ......................................................................... 4,080,000 2,242,001
12/01/10 ......................................................................... 5,630,000 2,880,139
University of Illinois Revenues, AMBAC Insured,4/01/10 .............................. 14,250,000 8,282,813
Washington State Public Power Supply System Revenue, Nuclear Project No. 3,
Refunding, Series B,
07/01/12 ......................................................................... 6,400,000 3,204,416
07/01/13 ......................................................................... 11,000,000 5,143,490
07/01/14 ......................................................................... 15,000,000 6,556,800
--------------
TOTAL ZERO COUPON BONDS (COST $160,737,653) ......................................... 184,530,843
--------------
TOTAL LONG TERM INVESTMENTS (COST $6,472,062,945) ................................... 6,479,633,048
--------------
(a) SHORT-TERM INVESTMENTS
Long Island Power Authority Electric System Revenue, Sub Series 5, Daily
VRDN and Put, 5.75%, 5/01/33 ........................................................ 300,000 300,000
Massachusetts State Health and Educational Facilities Authority Revenue,
Capital Assets Program, Series D, MBIA Insured, Daily VRDN and Put, 5.70%,
1/01/35 ............................................................................. 1,200,000 1,200,000
Philadelphia Water and Wastewater Revenue, Series B, Weekly VRDN and Put,
4.50%, 8/01/27 ...................................................................... 300,000 300,000
--------------
TOTAL SHORT-TERM INVESTMENTS (COST $1,800,000) ...................................... 1,800,000
--------------
TOTAL INVESTMENTS (COST $6,473,862,945) 98.4% ....................................... 6,481,433,048
OTHER ASSETS, LESS LIABILITIES 1.6% ................................................. 105,858,462
--------------
NET ASSETS 100.0% ................................................................... $6,587,291,510
==============
</TABLE>
See glossary of terms on page 48.
(a) Variable rate demand notes (VRNDs) are tax-exempt obligations which contain
a floating or variable interest rate adjustment formula and an unconditional
right of demand to receive payment of the principal balance plus accrued
interest at specified dates.
(b) Sufficient collateral has been segregated for securities traded on a
when-issued or delayed delivery basis.
See notes to financial statements.
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, APRIL 30, 2000 (CONT.)
GLOSSARY OF TERMS
--------------------------------------------------------------------------------
AMBAC - American Municipal Bond Assurance Corp.
BIG - Bond Investors Guaranty Insurance Co.
CDA - Community Development Authority/Agency
COP - Certificate of Participation
CRDA - Community Redevelopment Authority/Agency
EDA - Economic Development Authority
EDC - Economic Development Corp.
EDR - Economic Development Revenue
ETM - Escrow to Maturity
FGIC - Financial Guaranty Insurance Co.
FHA - Federal Housing Authority/Agency
FI/GML - Federally Insured or Guaranteed Mortgage Loans
FNMA - Federal National Mortgage Association
FSA - Financial Security Assistance
GNMA - Government National Mortgage Association
GO - General Obligation
HDA - Housing Development Authority
HFA - Housing Finance Authority/Agency
HFAR - Housing Finance Authority/Agency Revenue
HFC - Housing Finance Corp.
HMR - Home Mortgage Revenue
IDA - Industrial Development Authority/Agency
IDB - Industrial Development Board/Bond
IDC - Industrial Development Corp.
IDAR - Industrial Development Authority Revenue
IDBR - Industrial Development Board/Bond Revenue
IDR - Industrial Development Revenue
ISD - Independent School District
LP - 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
MTA - Metropolitan Transit Authority
PCFA - Pollution Control Financing Authority
PCR - Pollution Control Revenue
PFA - Public Financing Authority
PUD - Public Utility District
RDA - Redevelopment Authority/Agency
RDAR - Redevelopment Authority/Agency Revenue
RMR - Residential Mortgage Revenue
SF - Single Family
SFHR - Single Family Housing Revenue
SFM - Single Family Mortgage
SFMR - Single Family Mortgage Revenue
SFR - Single Family Revenue
USD - Unified School District
VRDN - Variable Rate Demand Notes
FRANKLIN FEDERAL TAX-FREE INCOME FUND
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 2000
<TABLE>
<S> <C>
Assets:
Investments in securities:
Cost ................................................................................................... $ 6,473,862,945
===============
Value .................................................................................................. 6,481,433,048
Cash .................................................................................................... 2,383,252
Receivables:
Capital shares sold .................................................................................... 5,506,912
Interest ............................................................................................... 124,881,825
---------------
Total assets ....................................................................................... 6,614,205,037
---------------
Liabilities:
Payables:
Investment securities purchased ........................................................................ 7,572,031
Capital shares redeemed ................................................................................ 10,583,329
Affiliates ............................................................................................. 3,580,608
Shareholders ........................................................................................... 4,980,196
Other liabilities ....................................................................................... 197,363
---------------
Total liabilities .................................................................................. 26,913,527
---------------
Net assets, at value .............................................................................. $ 6,587,291,510
===============
Net assets consist of:
Undistributed net investment income ..................................................................... $ 2,695,511
Net unrealized appreciation ............................................................................. 7,570,103
Accumulated net realized loss ........................................................................... (47,959,732)
Capital shares .......................................................................................... 6,624,985,628
---------------
Net assets, at value ............................................................................... $ 6,587,291,510
===============
CLASS A:
Net asset value per share ($6,321,013,777 / 553,920,298 shares outstanding)* ............................ $ 11.41
===============
Maximum offering price per share ($11.41 / 95.75%) ...................................................... $ 11.92
===============
CLASS B:
Net asset value and maximum offering price per share ($66,157,670 / 5,800,135 shares outstanding)* ...... $ 11.41
===============
CLASS C:
Net asset value per share ($200,120,063 / 17,543,198 shares outstanding)* ............................... $ 11.41
===============
Maximum offering price per share ($11.41 / 99.00%) ...................................................... $ 11.53
===============
</TABLE>
* Redemption price is equal to net asset value less any applicable contingent
deferred sales charge.
See notes to financial statements.
FRANKLIN FEDERAL TAX-FREE INCOME FUND
Financial Statements (continued)
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED APRIL 30, 2000
<TABLE>
<S> <C>
Investment income:
Interest ...................................................................................... $ 437,935,705
-------------
Expenses:
Management fees (Note 3) ...................................................................... 31,729,190
Distribution fees (Note 3)
Class A ...................................................................................... 5,380,876
Class B ...................................................................................... 341,996
Class C ...................................................................................... 1,371,606
Transfer agent fees (Note 3) .................................................................. 3,343,918
Custodian fees ................................................................................ 78,857
Reports to shareholders ....................................................................... 477,154
Registration and filing fees .................................................................. 246,008
Professional fees (Note 3) .................................................................... 104,174
Directors' fees and expenses .................................................................. 122,786
Other ......................................................................................... 283,819
-------------
Total expenses ........................................................................... 43,480,384
-------------
Net investment income ................................................................... 394,455,321
-------------
Realized and unrealized losses:
Net realized loss from investments ............................................................ (47,663,825)
Net unrealized depreciation on investments .................................................... (494,853,639)
-------------
Net realized and unrealized loss ............................................................... (542,517,464)
-------------
Net decrease in net assets resulting from operations ........................................... $(148,062,143)
=============
</TABLE>
See notes to financial statements.
FRANKLIN FEDERAL TAX-FREE INCOME FUND
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED APRIL 30, 2000 AND 1999
<TABLE>
<CAPTION>
2000 1999
-------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ...................................................... $ 394,455,321 $ 394,499,322
Net realized gain (loss) from investments .................................. (47,663,825) 30,265,498
Net unrealized appreciation (depreciation) on investments .................. (494,853,639) 8,220,333
-------------------------------------------
Net increase (decrease) in net assets resulting from operations ........ (148,062,143) 432,985,153
Distributions to shareholders from:
Net investment income:
Class A ................................................................... (382,450,278) (387,521,130)
Class B ................................................................... (2,605,389) (156,270)
Class C ................................................................... (10,680,321) (8,350,778)
Net realized gains:
Class A ................................................................... (4,251,999) --
Class B ................................................................... (20,970) --
Class C ................................................................... (130,567) --
-------------------------------------------
Total distributions to shareholders ......................................... (400,139,524) (396,028,178)
Capital share transactions: (Note 2)
Class A .................................................................... (320,895,503) 110,674,594
Class B .................................................................... 41,612,034 28,056,262
Class C .................................................................... 4,088,573 76,844,652
-------------------------------------------
Total capital share transactions ....................................... (275,194,896) 215,575,508
Net increase (decrease) in net assets ................................. (823,396,563) 252,532,483
Net assets
Beginning of year ........................................................... 7,410,688,073 7,158,155,590
-------------------------------------------
End of year ................................................................. $ 6,587,291,510 $ 7,410,688,073
===========================================
Undistributed net investment income included in net assets:
End of year ................................................................. $ 2,695,511 $ 3,975,053
===========================================
</TABLE>
See notes to financial statements.
FRANKLIN FEDERAL TAX-FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Franklin Federal Tax-Free Income Fund (the Fund) is registered under the
Investment Company Act of 1940 as a diversified, open-end investment company.
The Fund seeks to provide tax-free income. The following summarizes the Fund's
significant accounting policies.
a. SECURITY VALUATION
Tax-free bonds generally trade in the over-the-counter market and are valued
within the range of the latest quoted bid and asked prices. 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. Securities for
which market quotations are not readily available are valued at fair value as
determined by management in accordance with procedures established by the Board
of Directors.
b. INCOME TAXES
No provision has been made for income taxes because the Fund's policy is to
qualify as a regulated investment company under the Internal Revenue Code and to
distribute substantially all of its taxable income.
c. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Interest income and estimated expenses are accrued daily. Bond discount and
premium are amortized on an income tax basis. Distributions to shareholders are
recorded on the ex-dividend date.
Realized and unrealized gains and 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.
d. 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
The Fund offers three classes of shares: Class A, Class B and Class C. Each
class of shares differs by its initial sales load, distribution fees, voting
rights on matters affecting a single class and its exchange privilege.
FRANKLIN FEDERAL TAX-FREE INCOME FUND
Notes to Financial Statements (continued)
2. CAPITAL STOCK (CONT.)
At April 30, 2000, there were ten billion shares of no par value stock
authorized, of which three billion each were designated as Class A and Class C,
and one hundred million were designated as Class B. Transactions in the Fund's
shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
----------------------------------------------------------------------------
2000 1999(a)
----------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A SHARES:
Shares sold .................................. 117,037,208 $ 1,368,319,268 141,557,333 $ 1,748,852,193
Shares issued on merger (Note 7) ............. 12,219,274 145,466,596 -- --
Shares issued in reinvestment of distributions 14,046,199 163,631,450 13,019,553 160,434,527
Shares redeemed .............................. (171,803,128) (1,998,312,817) (145,578,579) (1,798,612,126)
----------------------------------------------------------------------------
Net increase (decrease) ...................... (28,500,447) $ (320,895,503) 8,998,307 $ 110,674,594
============================================================================
CLASS B SHARES:
Shares sold .................................. 4,234,722 $ 49,734,204 2,267,562 $ 27,969,254
Shares issued in reinvestment of distributions 131,183 1,519,166 8,064 99,100
Shares redeemed .............................. (840,415) (9,641,336) (981) (12,092)
----------------------------------------------------------------------------
Net increase ................................. 3,525,490 $ 41,612,034 2,274,645 $ 28,056,262
============================================================================
CLASS C SHARES:
Shares sold .................................. 5,630,436 $ 65,795,085 7,659,630 $ 94,594,251
Shares issued in reinvestment of distributions 564,964 6,580,822 421,645 5,197,244
Shares redeemed .............................. (5,917,220) (68,287,334) (1,859,163) (22,946,843)
----------------------------------------------------------------------------
Net increase ................................. 278,180 $ 4,088,573 6,222,112 $ 76,844,652
============================================================================
</TABLE>
(a) For the period January 1, 1999 (effective date) to April 30,1999 for Class B
Shares.
3. TRANSACTIONS WITH AFFILIATES
Certain officers and directors of the Fund are also officers and/or directors of
Franklin/Templeton Distributors, Inc. (Distributors), Franklin Advisers, Inc.
(Advisers), Franklin/Templeton Investor Services, Inc. (Investor Services), and
Franklin Templeton Services, Inc. (FT Services), the Fund's principal
underwriter, investment manager, transfer agent, and administrative manager,
respectively.
The Fund pays an investment management fee to Advisers based on the month-end
net assets of the Fund as follows:
ANNUALIZED
FEE RATE NET ASSETS
------------------------------------------------------------------------
.625% First $100 million
.500% Over $100 million, up to and including $250 million
.450% Over $250 million, up to and including $10 billion
Fees are further reduced on net assets over $10 billion.
FRANKLIN FEDERAL TAX-FREE INCOME FUND
Notes to Financial Statements (continued)
3. TRANSACTIONS WITH AFFILIATES (CONT.)
Under an agreement with Advisers, FT Services provides administrative services
to the Fund. The fee is paid by Advisers based on average daily net assets, and
is not an additional expense of the Fund.
The Fund reimburses Distributors up to .10%, .65% and .65% per year of the
average daily net assets of Class A, Class B and Class C, respectively, for
costs incurred in marketing the Fund's shares.
Distributors paid net commissions on sales of the Fund shares, and received
contingent deferred sales charges for the year of $2,273,429 and $439,402,
respectively.
The Fund paid transfer agent fees of $3,343,918, of which $2,759,836 was paid to
Investor Services.
Included in professional fees are legal fees of $48,602 that were paid to a law
firm in which a partner is an officer of the Fund.
4. INCOME TAXES
At April 30, 2000, the Fund had tax basis capital losses of $19,296,804
including $288,994 from the merged funds (See Note 7), which may be carried over
to offset future capital gains. Such losses expire as follows:
Capital loss carryovers expiring in:
2003 ............................... $ 71,377
2004 ............................... 99,997
2007 ............................... 117,620
2008 ............................... 19,007,810
-----------
$19,296,804
===========
At April 30,2000, the Fund had deferred capital losses occurring subsequent to
October 31, 1999 of $28,656,015. For tax purposes, such losses will be reflected
in the year ending April 30, 2001.
At April 30, 2000, the net unrealized appreciation based on the cost of
investments for income tax purposes of $6,473,869,858 was as follows:
Unrealized appreciation ... $ 185,272,687
Unrealized depreciation ... (177,709,497)
-------------
Net unrealized appreciation $ 7,563,190
=============
Net realized capital losses differ for financial statement and tax purposes
primarily due to differing treatment of wash sales.
Net investment income differs for financial statement and tax purposes primarily
due to the differing tax treatment of non-deductible merger expenses.
FRANKLIN FEDERAL TAX-FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. INVESTMENT TRANSACTIONS
Purchases and sales of securities (excluding short-term securities) for the
period ended April 30, 2000 aggregated $1,153,063,312 and $1,495,407,207,
respectively.
6. CREDIT RISK
The Fund 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.
7. FUND MERGER
On June 24, 1999, the Fund acquired the net assets of the Hawaii Municipal Bond
Fund and the Indiana Tax-Free Income Fund pursuant to a plan of reorganization
approved by the Funds' shareholders. The merger was accomplished by a tax free
exchange, and the net assets acquired and shares issued were as follows:
SHARES
FUND NET ASSETS ISSUED BY
--------------------------------------------------------------------
Hawaii Municipal Bond Fund .... $39,698,063 3,316,463
Indiana Tax-Free Income Fund .. 56,285,879 4,702,246
------------------------------
Total ................... $95,983,942 8,018,709
==============================
The net asset figures shown above include $859,421 and $1,790,431 of unrealized
appreciation for the Hawaii Municipal Bond Fund and the Indiana Tax-Free Income
Fund, respectively. The merger was accounted for as a pooling of interests
without restatement for financial reporting purposes. The combined net assets of
the Fund immediately after the merger were $7,332,695,346.
On August 26, 1999, the Fund acquired the net assets of the Arkansas Municipal
Bond Fund and the Washington Municipal Bond Fund pursuant to a plan of
reorganization approved by the Funds' shareholders. The merger was accomplished
by a tax free exchange, and the net assets acquired and shares issued were as
follows:
SHARES
FUND NET ASSETS ISSUED BY
------------------------------------------------------------------
Arkansas Municipal Bond Fund ... $39,000,744 3,310,759
Washington Municipal Bond Fund.. 10,481,910 889,806
----------------------------
Total .................... $49,482,654 4,200,565
============================
The net asset figures shown above include ($1,177,947) and $101,148 of
unrealized (depreciation) appreciation for the Arkansas Municipal Bond Fund and
the Washington Municipal Bond Fund, respectively. The merger was accounted for
as a pooling of interests without restatement for financial reporting purposes.
The combined net assets of the Fund immediately after the merger were
$7,299,812,616.
FRANKLIN FEDERAL TAX-FREE INCOME FUND
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS
OF FRANKLIN FEDERAL TAX-FREE INCOME FUND
In our opinion, the accompanying statement of assets and liabilities, including
the statement of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Franklin Federal Tax-Free Income
Fund (the "Fund") at April 30, 2000, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the periods
presented, in conformity with accounting principles generally accepted in the
United States. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with auditing standards generally accepted in the
United States which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at April 30, 2000 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
San Francisco, California
June 6, 2000
FRANKLIN FEDERAL TAX-FREE INCOME FUND
TAX DESIGNATION
Under Section 852(b)(5)(A) of the Internal Revenue Code, the Fund hereby
designates 100% of the distributions paid from net investment income as
exempt-interest dividends for the fiscal year ended April 30, 2000.
