SHAREHOLDER LETTER
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)
Dear Shareholder:
This semiannual report for Franklin Federal Tax-Free Income Fund covers the
period ended October 31, 2000. During the six months under review, the U.S.
economy cooled as third quarter annualized gross domestic product (GDP) dropped
sharply to 2.4%, compared with the sizzling 5.6% GDP growth from the previous
quarter. The third-quarter performance was weaker than expected and marked the
slowest growth since the second quarter of 1999. This GDP report suggested that
the economy started to feel the impact of past Federal Reserve Board (Fed) rate
increases and may be on track for a soft landing. The Fed raised the federal
funds target rate to 6.5% in May, the only time during the period, seeking to
slow the economy and keep inflation under control.
CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Shareholder Letter ..... 1
Performance Summary .... 8
Financial Highlights &
Statement of Investments 10
Financial Statements ... 47
Notes to
Financial Statements ... 50
</TABLE>
FUND CATEGORY
[PYRAMID CHART]
(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.
The dollar value, number of shares or principal value, and complete legal titles
of all portfolio holdings are listed in the Fund's Statement of Investments
(SOI). The SOI begins on page 13.
<PAGE>
The municipal bond market performed relatively well during the period, following
a difficult year in 1999, in which strong economic numbers and the Fed's
interest-rate increases hampered bond prices. This relative strength was largely
due to the belief that the rate increases were beginning to achieve the desired
effect of slowing the economy's growth and that the Fed would not raise interest
rates further in the near term. Thus, long-term interest rates generally
declined during the six-month period with the 30-year Treasury bond yield
falling from 5.96% on April 30, 2000, to 5.79% on October 31, 2000. The 10-year
Treasury note's yield also dropped, from 6.21% at the beginning of the period to
5.75% at period's end. The municipal bond market generally followed Treasuries
and experienced falling yields. The Bond Buyer Municipal Bond Index (Bond Buyer
40), an indicator of the municipal bond market, decreased from a yield of 6.00%
to 5.74% for the same period.(2) Since bond yields and prices have an inverse
relationship, as yields fell, bond prices increased, leading to an increase in
the value of most bond funds.
Contributing to the favorable conditions for municipal bond funds during the
reporting period was lower supply. The strong economy, which increased revenues
for most municipalities, reduced the need for borrowing to finance capital
projects. From May 1 through October 31, 2000, national municipal bond
(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.
2
<PAGE>
issuance was down about 10.3% compared to the same period in 1999.(3) Reduced
supply and continued high demand for municipal bonds among insurance and mutual
fund companies, as well as retail investors, contributed to their price
increase.
In February 2000, the federal government announced a plan to buy back 30-year
Treasury bonds, which increased their price and decreased their yield. This
meant that, on a relative basis, long-term municipal bond yields were more
attractive. During the six-month reporting period, municipal bonds, as measured
by the Bond Buyer 40, yielded as much as 102% of a comparable Treasury bond's
yield. Historically, this ratio is about 90%.(3) Since municipal bonds are
tax-exempt, they generally yield less than Treasuries, which are subject to
federal income tax. When municipal bond yields are nearly the same as those of
Treasuries, investors can take advantage of the tax exemption at little extra
cost.
Looking forward, we believe the Fed will continue to monitor inflationary
tendencies closely. If the economy slows further toward the end of 2000, bond
markets may continue their positive trend. Predicting market cycles, however, 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 their
total return performance.
(3.) Source: The Bond Buyer, 11/00.
3
<PAGE>
CREDIT QUALITY BREAKDOWN*
(Based on Total Long-Term Investments)
10/31/00
[PIE CHART] AAA - 42.3%
AA - 12.7%
A - 21.6%
BBB - 22.5%
Below Investment
Grade - 0.9%
*Quality breakdown may include internal ratings for bond not rated by an
independent rating agency.
PORTFOLIO NOTES
Bond market strength during the reporting period contributed to positive price
performance by the Fund's holdings, resulting in higher Fund share prices. For
the six months ended October 31, 2000, your Fund's Class A share price, as
measured by net asset value, was up 2.19%. By comparison, the Bond Buyer 40's
price rose 5.30% and the Fund's benchmark, the Lehman Brothers Municipal Bond
Index, increased 2.80% in price.
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
the period under review, the Fund's Class A shares' distribution rate was 5.37%,
based on an annualization of the October dividend and the maximum offering price
per share on October 31, 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 8.89% 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.
Despite declining interest rates, the Fund's income-earning potential remained
fairly constant. We took advantage of the higher interest-rate environment in
1999 and the first half of 2000 to
4
<PAGE>
DIVIDEND DISTRIBUTIONS
5/1/00 - 10/31/00
<TABLE>
<CAPTION>
DIVIDEND PER SHARE
------------------
MONTH CLASS A CLASS B CLASS C
--------------------------------------------------------------------------------
<S> <C> <C> <C>
May 5.45 cents 4.91 cents 4.91 cents
June 5.45 cents 4.91 cents 4.90 cents
July 5.45 cents 4.91 cents 4.90 cents
August 5.45 cents 4.91 cents 4.90 cents
September 5.45 cents 4.92 cents 4.91 cents
October 5.45 cents 4.92 cents 4.91 cents
--------------------------------------------------------------------------------
TOTAL 32.70 CENTS 29.48 CENTS 29.43 CENTS
</TABLE>
invest bond call proceeds and cash inflows at attractive rates. Largely as a
result of these timely investments, we were able to pay out consistent dividends
during the period.
Relatively light new-issue supply and sustained retail demand characterized the
municipal bond market during the six months under review. We sought to
capitalize on these market conditions by selling bonds with shorter calls and
reinvesting the proceeds in securities with at least 10-year call protection
without compromising yield. In such times of decreased supply, the Fund's size
and leverage in the national market offer tremendous advantages to help us get
the first look at new offerings in the primary and secondary markets.
5
<PAGE>
PORTFOLIO BREAKDOWN
10/31/00
<TABLE>
<CAPTION>
% OF TOTAL
LONG-TERM
INVESTMENTS
-------------------------------
<S> <C>
Utilities 20.1%
Prerefunded 17.2%
Transportation 12.5%
Hospital & Health Care 11.6%
Housing 10.2%
Corporate-Backed 9.1%
General Obligation 8.7%
Subject to Government
Appropriation 6.0%
Tax-Supported 2.2%
Other Revenue 1.4%
Higher Education 1.0%
</TABLE>
Most of the securities we purchased during the reporting period were AAA-rated
insured bonds because we continued to feel that the market's insured sector
represented attractive value. These purchases also helped maintain the
portfolio's high credit quality. As of October 31, 2000, insured securities
represented 24.8% of the Fund's total long-term investments, and the average
credit rating of the Fund's holdings increased to AA. Some of the new positions
we added were Massachusetts Water Revenue bonds, Minneapolis Airport Revenue
bonds and University of Alabama Revenue bonds.
Franklin Federal Tax-Free Income Fund maintained broad sector diversification,
which helped reduce the portfolio's exposure to risk and volatility that may
have affected any one sector. The Fund's diversification and state
representation were similar to that of the overall market's issuance due to the
fact that we stayed fully invested and bought most securities in the new-issue
market. At the end of the period, our largest sectors were utilities,
transportation, hospitals and health care and housing.
Looking forward, we believe the Fund should continue to provide investors with
attractive, monthly tax-free income. As
6
<PAGE>
always, we appreciate your support, welcome your questions and comments and
look forward to serving your investment needs in the years ahead.
Sincerely,
/s/CHARLES B. JOHNSON
Charles B. Johnson
Chairman
Franklin Tax-Free Trust
/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
October 31, 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.
7
<PAGE>
PERFORMANCE SUMMARY AS OF 10/31/00
Six-month total return represents the change in value of an investment for the
period indicated and 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, as well as the level of operating expenses for
each class. Past distributions are not indicative of future trends. All total
returns include reinvested distributions at net asset value.
CLASS A: Subject to the current, maximum 4.25% initial sales charge. Prior to
7/1/94, Fund shares were offered at a lower initial sales charge; thus actual
total returns may differ. Effective 5/1/94, the Fund implemented a Rule 12b-1
plan, 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.
<TABLE>
<CAPTION>
CLASS A
<S> <C> <C>
Six-Month Total Return +5.14%
Net Asset Value (NAV) $11.66 (10/31/00) $11.41 (4/30/00)
Change in NAV +$0.25
Distributions (5/1/00-10/31/00) Dividend Income $0.3270
</TABLE>
<TABLE>
<CAPTION>
CLASS B
<S> <C> <C>
Six-Month Total Return +4.76%
Net Asset Value (NAV) $11.65 (10/31/00) $11.41 (4/30/00)
Change in NAV +$0.24
Distributions (5/1/00-10/31/00) Dividend Income $0.2948
</TABLE>
<TABLE>
<CAPTION>
CLASS C
<S> <C> <C>
Six-Month Total Return +4.75%
Net Asset Value (NAV) $11.65 (10/31/00) $11.41 (4/30/00)
Change in NAV +$0.24
Distributions (5/1/00-10/31/00) Dividend Income $0.2943
</TABLE>
Past performance does not guarantee future results.
8
<PAGE>
ADDITIONAL PERFORMANCE
AS OF 9/30/00
<TABLE>
<CAPTION>
INCEPTION
CLASS A 1-YEAR 5-YEAR 10-YEAR (10/7/83)
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return(1) +4.89% +29.85% +97.32% +287.06%
Average Annual Total Return(2) +0.43% +4.45% +6.57% +8.02%
</TABLE>
<TABLE>
<CAPTION>
INCEPTION
CLASS B 1-YEAR (1/1/99)
--------------------------------------------------------------------------------
<S> <C> <C>
Cumulative Total Return(1) +4.30% +2.40%
Average Annual Total Return(2) +0.34% -0.77%
</TABLE>
<TABLE>
<CAPTION>
INCEPTION
CLASS C 1-YEAR 5-YEAR (5/1/95)
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Cumulative Total Return(1) +4.21% +26.10% +31.27%
Average Annual Total Return(2) +2.17% +4.54% +4.95%
</TABLE>
AS OF 10/31/00
<TABLE>
<CAPTION>
SHARE CLASS A B C
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Distribution Rate(3) 5.37% 5.07% 5.01%
Taxable Equivalent Distribution Rate(4) 8.89% 8.39% 8.29%
30-Day Standardized Yield(5) 4.90% 4.56% 4.51%
Taxable Equivalent Yield(4) 8.11% 7.55% 7.47%
</TABLE>
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
October dividend and the maximum offering price (net asset value for Class B)
per share on 10/31/00.
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 10/31/00.
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.
For updated performance figures, see "Prices and Performance" at
franklintempleton.com, or call Franklin Templeton Investments at 1-800/342-5236.
Past performance does not guarantee future results.
9
<PAGE>
FRANKLIN FEDERAL TAX-FREE INCOME FUND
Financial Highlights
<TABLE>
<CAPTION>
CLASS A
-------
SIX MONTHS ENDED
OCTOBER 31, 2000 YEAR ENDED APRIL 30,
(UNAUDITED) 2000 1999 1998 1997 1996
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout
the period)
Net asset value, beginning of period $11.41 $12.31 $12.25 $11.90 $11.83 $11.73
---------------------------------------------------------------------------------
Income from investment operations:
Net investment income(b) .33 .66 .67 .69 .71 .74
Net realized and unrealized gains (losses) .25 (.89) .06 .35 .07 .10
---------------------------------------------------------------------------------
Total from investment operations .58 (.23) .73 1.04 .78 .84
---------------------------------------------------------------------------------
Less distributions from:
Net investment income (.33) (.66) (.67) (.69) (.71) (.74)
Net realized gains -- (.01) -- -- -- --
---------------------------------------------------------------------------------
Total distributions (.33) (.67) (.67) (.69) (.71) (.74)
---------------------------------------------------------------------------------
Net asset value, end of period $11.66 $11.41 $12.31 $12.25 $11.90 $11.83
=================================================================================
Total return(a) 5.14% (1.87%) 6.10% 8.92% 6.81% 7.33%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) $6,314,929 $6,321,014 $7,170,226 $7,022,961 $6,905,488 $7,012,601
Ratios to average net assets:
Expenses .60%(c) .60% .60% .59% .58% .57%
Net investment income 5.68%(c) 5.64% 5.41% 5.70% 6.00% 6.20%
Portfolio turnover rate 2.46% 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.
(c) Annualized.
10
<PAGE>
FRANKLIN FEDERAL TAX-FREE INCOME FUND
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
CLASS B
---------------------------------------------------------------------------------
SIX MONTHS ENDED
OCTOBER 31, 2000 YEAR ENDED APRIL 30,
---------------------------
(UNAUDITED) 2000 1999(d)
---------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period ............. $11.41 $12.30 $12.39
---------------------------------------------------------------------------------
Income from investment operations:
Net investment income(b) ........................ .29 .59 .23
Net realized and unrealized gains (losses) ...... .24 (.88) (.11)
---------------------------------------------------------------------------------
Total from investment operations ................. .53 (.29) .12
---------------------------------------------------------------------------------
Less distributions from:
Net investment income ........................... (.29) (.59) (.21)
Net realized gains .............................. -- (.01) --
---------------------------------------------------------------------------------
Total distributions .............................. (.29) (.60) (.21)
---------------------------------------------------------------------------------
Net asset value, end of period ................... $11.65 $11.41 $12.30
================================================================================
Total return(a) .................................. 4.76% (2.35%) 0.96%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ................ $84,910 $66,158 $27,988
Ratios to average net assets:
Expenses ........................................ 1.18%(c) 1.17% 1.17%(c)
Net investment income ........................... 5.10%(c) 5.10% 4.86%(c)
Portfolio turnover rate .......................... 2.46% 16.63% 9.90%
</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.
(c) Annualized.
(d) For the period January 1, 1999 (effective date) to April 30, 1999.
11
<PAGE>
FRANKLIN FEDERAL TAX-FREE INCOME FUND
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
CLASS C
---------------------------------------------------------------------------------
SIX MONTHS ENDED
OCTOBER 31, 2000 YEAR ENDED APRIL 30,
-------------------------------------------------------------
(UNAUDITED) 2000 1999 1998 1997 1996(e)
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period ............. $ 11.41 $ 12.31 $ 12.24 $ 11.90 $ 11.82 $ 11.73
---------------------------------------------------------------------------------
Income from investment operations:
Net investment income(b) ........................ .29 .59 .60 .63 .66 .68
Net realized and unrealized gains (losses) ...... .24 (.89) .07 .33 .06 .09
---------------------------------------------------------------------------------
Total from investment operations ................. .53 (.30) .67 .96 .72 .77
---------------------------------------------------------------------------------
Less distributions from:
Net investment income ........................... (.29) (.59) (.60) (.62) (.64) (.68)
Net realized gains .............................. -- (.01) -- -- -- --
---------------------------------------------------------------------------------
Total distributions .............................. (.29) (.60) (.60) (.62) (.64) (.68)
---------------------------------------------------------------------------------
Net asset value, end of period ................... $ 11.65 $ 11.41 $ 12.31 $ 12.24 $ 11.90 $ 11.82
=================================================================================
Total return(a) .................................. 4.75% (2.43%) 5.58% 8.22% 6.28% 6.68%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ................ $209,535 $ 200,120 $212,474 $ 135,195 $ 71,944 $ 34,110
Ratios to average net assets:
Expenses ........................................ 1.18%(c) 1.17% 1.17% 1.17% 1.16% 1.15%
Net investment income ........................... 5.12%(c) 5.07% 4.83% 5.12% 5.42% 5.68%
Portfolio turnover rate .......................... 2.46% 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.
(c) Annualized.
(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 period includes this
dividend.
See notes to financial statements.
12
<PAGE>
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, OCTOBER 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS 97.8%
BONDS 94.3%
ALABAMA 1.0%
Alabama HFA, SFMR, Series D-2, GNMA Secured, 5.75%, 10/01/23 ............................ $ 3,880,000 $ 3,821,528
Alabama Water Pollution Control Authority Revolving Fund Loan, Series B, Pre-Refunded,
7.75%, 8/15/12 ........................................................................ 5,430,000 5,456,661
Anniston Regional Medical Center Board, Series A, AMBAC Insured, 5.125%, 6/01/28 ........ 7,000,000 6,461,630
Courtland IDB,
PCR, Champion International Corp. Project, Refunding, 6.15%, 6/01/19 ............... 5,000,000 4,929,000
Solid Waste Disposal Revenue, Champion International Corp. Project, Refunding,
6.00%, 8/01/29 ................................................................... 12,000,000 11,356,200
Courtland IDBR,
Champion International Corp., Refunding, Series A, 7.20%, 12/01/13 ................. 12,000,000 12,527,160
Solid Waste Disposal Revenue, Champion International Corp. Project, Refunding,
Series A, 6.70%, 11/01/29 ......................................................... 4,000,000 4,100,040
Fairfield IDB, Environmental Improvement Revenue, USX Corp. Project, Refunding, 5.45%,
9/01/14 ............................................................................... 1,445,000 1,364,542
Jefferson County Sewer Revenue, Capital Improvement wts., Series A, FGIC Insured,
5.375%, 2/01/36 ....................................................................... 9,700,000 9,194,145
Mcintosh IDB, Environmental Improvement Revenue, CIBA Specialty, Refunding, Series C,
5.375%, 6/01/28 ....................................................................... 5,000,000 4,593,000
University of Alabama, University Revenues Hospital, Series A, MBIA Insured, 5.875%,
9/01/31 ............................................................................... 5,000,000 5,049,400
--------------
68,853,306
--------------
ALASKA 1.0%
Alaska Industrial Development and Export Authority, Revolving Fund, Series A, 7.95%,
4/01/10 ............................................................................... 1,775,000 1,813,092
Alaska State HFC, Collateralized Home Mortgage, Series A-1, 6.75%, 12/01/32 ............. 1,985,000 2,039,865
Refunding, Series A, MBIA Insured, 6.00%, 12/01/15 ................................. 2,915,000 3,020,610
Refunding, Series A, MBIA Insured, 6.10%, 12/01/37 ................................. 29,000,000 29,403,970
Series A, Pre-Refunded, 6.60%, 12/01/23 ............................................ 8,000,000 8,427,760
Veterans Mortgage Program, MBIA Insured, 6.75%, 12/01/25 ................................ 15,420,000 16,049,136
Anchorage Parking Authority Revenue, 5th Avenue Garage Lease Project, Refunding,
6.50%, 12/01/02 .................................................................... 2,300,000 2,341,814
6.75%, 12/01/08 .................................................................... 3,500,000 3,679,620
--------------
66,775,867
--------------
ARIZONA 1.1%
Gila County IDAR, Asarco Inc., Refunding, 5.55%, 1/01/27 ................................ 3,340,000 2,681,285
Maricopa County IDA,
Health Facilities Revenue, Catholic Healthcare West Project, Refunding, Series A,
5.00%, 7/01/16 ................................................................... 23,000,000 19,730,550
Hospital Facility Revenue, Mayo Clinic Hospital, 5.25%, 11/15/37 ................... 20,000,000 18,388,000
Mesa IDAR, Discovery Health System, Series A, MBIA Insured, 5.75%, 1/01/25 .............. 22,500,000 22,670,100
Phoenix Civic Improvement Corp. Airport Revenue, senior lien, Series A, FSA Insured,
5.00%, 7/01/25 ........................................................................ 7,000,000 6,459,110
--------------
69,929,045
--------------
ARKANSAS 1.6%
Arkansas GO, Waste Disposal and Pollution, Refunding, Series B, 6.25%, 7/01/20 .......... 130,000 131,949
Arkansas State Development Finance Authority HMR, Series B-1, GNMA Secured, 5.80%,
1/01/23 ............................................................................... 445,000 441,124
Arkansas State Development Finance Authority Revenue, White River Medical Center
Project, 5.60%, 6/01/24 ............................................................... 1,200,000 1,073,028
Arkansas State Development Finance Authority SFMR, MBS Program,
Series B, 6.10%, 1/01/29 ........................................................... 895,000 904,066
Series D, 6.85%, 1/01/27 ........................................................... 90,000 94,190
Arkansas State Development Finance Authority Wastewater System Revenue, Revolving Loan
Fund, Series A, 5.85%, 12/01/19 ....................................................... 1,000,000 1,027,830
</TABLE>
13
<PAGE>
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, OCTOBER 31, 2000 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
ARKANSAS (CONT.)
Arkansas State Student Loan Authority Revenue, Refunding, Sub Series B,
6.25%, 6/01/10 ..................................................................... $ 500,000 $ 520,210
5.60%, 6/01/14 ..................................................................... 325,000 324,067
Blytheville Solid Waste Recycling and Sewage Treatment Revenue, Nucor Corp. Project,
6.375%, 1/01/23 ....................................................................... 100,000 102,646
Camden Environmental Improvement Revenue, International Paper Co. Project, Series A,
7.625%, 11/01/18 ...................................................................... 250,000 268,928
Desha County Residential Housing Facilities Board SFMR, Refunding, 7.50%, 4/01/11 ....... 1,410,000 1,461,014
Fort Smith Water and Sewer Revenue, Refunding and Construction, MBIA Insured, 6.00%,
10/01/12 .............................................................................. 130,000 135,954
Fouke School District No. 15 GO, Refunding and Construction, MBIA Insured,
Pre-Refunded, 6.60%, 4/01/19 .......................................................... 130,000 138,411
Greenland School District No. 95, Washington County, Refunding and Construction,
MBIA Insured, 6.50%, 5/01/13 .......................................................... 115,000 116,224
Gurdon PCR, International Paper Co. Project, Refunding, Series A, 5.375%, 3/01/20 ....... 2,160,000 1,958,472
Jefferson County PCR,
Arkansas Power and Light Co. Project, Refunding, 6.30%, 6/01/18 .................... 1,865,000 1,882,289
Entergy Arkansas Inc. Project, Refunding, 5.60%, 10/01/17 .......................... 7,900,000 7,447,567
Jonesboro City Water and Light Plant Public Utilities System Revenue, Refunding,
AMBAC Insured, 5.25%, 12/01/13 ........................................................ 200,000 200,836
Little River County Revenue, Georgia-Pacific Corp. Project, Refunding, 5.60%,
10/01/26 .............................................................................. 16,000,000 14,534,560
Little Rock GO, Capital Improvement, Refunding, 6.30%, 2/01/09 .......................... 140,000 140,540
Little Rock Municipal Airport Revenue, Refunding, MBIA Insured, 6.00%, 11/01/14 ......... 130,000 132,439
Little Rock School District GO, Refunding, 6.25%, 12/01/07 .............................. 120,000 120,100
Pine Bluff Environmental Improvement Revenue, International Paper Co. Project,
Series B, 5.55%, 11/01/22 ............................................................. 500,000 454,340
Pope County PCR,
Arkansas Power and Light Co. Project, Refunding, 6.30%, 11/01/20 ................... 60,500,000 60,791,005
Power and Light Co. Project, Refunding, 6.30%, 12/01/16 ............................ 2,600,000 2,648,672
Pulaski County Health Facilities Board Revenue,
Catholic Health Initiatives, Series A, 5.00%, 12/01/28 ............................. 1,500,000 1,297,635
Nazareth Sisters of Charity, St. Vincent's Infirmary, Refunding, MBIA Insured,
ETM, 6.05%, 11/01/09 .............................................................. 125,000 136,686
Pulaski County Public Facilities Board MFR, South Oaks Apartments, Refunding,
Series A, GNMA Secured, 6.50%, 10/20/29 ............................................... 600,000 622,434
Saline County Hospital Revenue, Refunding, Connie Lee Insured, 6.00%, 9/01/19 ........... 700,000 718,039
Saline County Retirement Housing and Healthcare Facilities Board Revenue, Refunding,
AMBAC Insured, 5.80%, 6/01/11 ......................................................... 195,000 203,091
University of Central Arkansas Academic Facilities Revenue,
Series B, AMBAC Insured, 5.875%, 4/01/16 ........................................... 250,000 259,013
Series C, AMBAC Insured, 6.00%, 4/01/21 ............................................ 1,000,000 1,031,270
University of Central Arkansas Athletic Facilities Revenue, Series C, AMBAC Insured,
6.00%, 4/01/21 ..................................................................... 1,000,000 1,031,270
6.125%, 4/01/26 .................................................................... 1,200,000 1,242,864
University of Central Arkansas Housing System Revenue, Refunding, Series A, AMBAC
Insured, 6.00%, 4/01/21 ............................................................... 1,000,000 1,031,270
--------------
104,624,033
--------------
CALIFORNIA 3.9%
Alhambra COP, Clubhouse Facility Project, 11.25%,
1/01/08 ............................................................................ 410,000 414,485
1/01/09 ............................................................................ 455,000 459,978
1/01/10 ............................................................................ 500,000 505,470
</TABLE>
14
<PAGE>
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, OCTOBER 31, 2000 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
CALIFORNIA (CONT.)
Burbank RDA, Tax Allocation, Refunding, Series A, 6.25%, 12/01/24 ....................... $ 5,160,000 $ 5,271,920
California Educational Facilities Authority Revenue,
National University, Connie Lee Insured, 6.00%, 5/01/09 ............................ 3,580,000 3,831,173
Pooled College and University Projects, Series B, 6.00%, 12/01/20 .................. 6,025,000 6,069,465
California Health Facilities Financing Authority Revenue, St. Francis Medical Center,
Refunding, Series H, AMBAC Insured, 6.30%, 10/01/15 ................................... 2,800,000 3,023,468
California State GO,
5.90%, 5/01/08 ..................................................................... 235,000 251,368
6.00%, 5/01/18 ..................................................................... 535,000 556,780
6.00%, 5/01/20 ..................................................................... 850,000 888,735
5.90%, 4/01/23 ..................................................................... 1,200,000 1,227,924
Veterans Bonds, Series BC, 6.00%, 2/01/10 .......................................... 1,000,000 1,004,270
Veterans Bonds, Series BD, BE, and BF, 6.55%, 2/01/25 .............................. 7,840,000 7,863,677
Chino USD, COP, Refunding, FSA Insured, 5.90%, 9/01/15 .................................. 8,240,000 8,702,841
Commerce Refuse to Energy Authority Revenue, Refunding, Series 1994, 8.75%, 7/01/10 ..... 970,000 1,074,159
Foothill/Eastern Corridor Agency Toll Road Revenue,
Refunding, MBIA Insured, 5.75%, 1/15/40 ............................................ 20,000,000 19,511,800
senior lien, Series A, Pre-Refunded, 6.50%, 1/01/32 ................................ 59,240,000 66,190,037
Forty-Niner Shops Inc. Auxiliary Organization, California State Long Beach Project,
Pre-Refunded, 6.875%,
4/01/07 ............................................................................ 1,090,000 1,151,443
4/01/12 ............................................................................ 1,565,000 1,653,219
Los Angeles CRDA, Housing Revenue, Refunding, Series A, AMBAC Insured, 6.55%, 1/01/27 ... 3,180,000 3,335,534
Los Angeles Regional Airports Improvement Corp. Lease Revenue,
Facilities Sub-Lease, International Airport, Refunding, 6.35%, 11/01/25 ............ 18,500,000 18,317,035
United Airlines, International Airport, Refunding, 6.875%, 11/15/12 ................ 8,400,000 8,692,992
Metropolitan Water District Revenue, Southern California Waterworks, Series A, 5.00%,
7/01/26 ............................................................................... 26,420,000 24,647,482
Pomona PFA, Revenue, Series Q, MBIA Insured, 5.90%, 12/01/25 ............................ 4,000,000 4,123,280
San Francisco City and County RDA, Lease Revenue, George R. Moscone Center, FSA
Insured, 6.75%, 7/01/24 ............................................................... 7,075,000 7,696,397
San Francisco City and County Redevelopment Financing Authority Tax Allocation
Revenue, Redevelopment Projects, Pre-Refunded, 6.50%, 8/01/22 ......................... 12,680,000 13,986,674
San Francisco City and County Sewer Revenue, Series A, FGIC Insured, 5.90%, 10/01/20 .... 10,380,000 10,727,107
San Joaquin Hills Transportation Corridor Agency Toll Road Revenue, senior lien,
5.00%, 1/01/33 ..................................................................... 5,000,000 4,373,850
Pre-Refunded, 7.00%, 1/01/30 ....................................................... 16,785,000 18,102,790
University of California Revenues, Research Facilities, Series B, Pre-Refunded,
6.55%, 9/01/24 ........................................................................ 11,780,000 12,765,633
Windsor RDAR, Tax Allocation, Windsor Project, 7.00%, 9/01/24 ........................... 2,405,000 2,526,356
--------------
258,947,342
--------------
COLORADO 4.8%
Colorado Health Facilities Authority Revenue,
Catholic Health Initiatives, Series A, 5.00%, 12/01/28 ............................. 3,035,000 2,629,524
Kaiser Permanente, Series A, 5.35%, 11/01/16 ....................................... 13,250,000 12,378,680
Kaiser Permanente, Series B, 5.35%, 8/01/15 ........................................ 20,200,000 19,075,668
Colorado HFA, GO, Series A, 7.50%, 5/01/29 .............................................. 1,205,000 1,246,958
Colorado Public Highway Authority Revenue, Highway E-470, Refunding, Senior
Series A, MBIA Insured, 5.00%, 9/01/21 ................................................ 12,715,000 11,768,241
</TABLE>
15
<PAGE>
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, OCTOBER 31, 2000 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
COLORADO (CONT.)
Denver City and County Airport Revenue,
Series A, 8.875%, 11/15/12 ......................................................... $ 12,130,000 $ 12,841,788
Series A, 7.50%, 11/15/23 .......................................................... 13,590,000 14,544,562
Series A, 8.00%, 11/15/25 .......................................................... 1,480,000 1,520,374
Series A, Pre-Refunded, 7.50%, 11/15/12 ............................................ 11,200,000 12,070,800
Series A, Pre-Refunded, 8.875%, 11/15/12 ........................................... 4,515,000 4,798,407
Series A, Pre-Refunded, 7.50%, 11/15/23 ............................................ 2,930,000 3,279,051
Series A, Pre-Refunded, 8.50%, 11/15/23 ............................................ 6,985,000 7,133,501
Series A, Pre-Refunded, 8.50%, 11/15/23 ............................................ 72,960,000 74,509,670
Series A, Pre-Refunded, 7.25%, 11/15/25 ............................................ 16,465,000 17,665,957
Series A, Pre-Refunded, 7.25%, 11/15/25 ............................................ 8,060,000 8,647,896
Series A, Pre-Refunded, 8.00%, 11/15/25 ............................................ 520,000 538,164
Series A, Pre-Refunded, 8.00%, 11/15/25 ............................................ 20,305,000 20,733,029
Series A, Pre-Refunded, 8.00%, 11/15/25 ............................................ 2,020,000 2,062,622
Series B, 7.25%, 11/15/23 .......................................................... 2,120,000 2,213,344
Series B, Pre-Refunded, 7.25%, 11/15/23 ............................................ 530,000 567,047
Series D, 7.75%, 11/15/21 .......................................................... 8,950,000 9,346,217
Series D, 7.00%, 11/15/25 .......................................................... 7,835,000 7,908,257
Series D, Pre-Refunded, 7.75%, 11/15/21 ............................................ 2,510,000 2,640,646
Denver City and County Special Facilities Airport Revenue, United Airlines Inc.
Project, Series A, 6.875%, 10/01/32 ................................................... 47,980,000 48,407,982
Littleton MFHR, Riverpointe I, Refunding, Series A, FSA Insured, 5.95%, 4/01/29 ......... 11,400,000 11,540,448
University of Colorado Hospital Authority Revenue, Series A, AMBAC Insured, 5.00%,
11/15/29 .............................................................................. 11,000,000 9,757,880
--------------
319,826,713
--------------
CONNECTICUT
Meriden Housing Authority MFR, Connecticut Baptist Housing Project, GNMA Secured,
5.80%, 8/20/39 ........................................................................ 2,860,000 2,816,328
--------------
DELAWARE .1%
Delaware State EDA Revenue, Water Development, Wilmington, Refunding, Series B, 6.45%,
12/01/07 .............................................................................. 1,160,000 1,270,745
Delaware State Housing Authority MFMR, Refunding, Series D, 6.75%, 7/01/06 .............. 2,000,000 2,141,060
--------------
3,411,805
--------------
FLORIDA 2.1%
Bay County Resource Recovery Revenue,
Series A, MBIA Insured, Pre-Refunded, 6.50%, 7/01/07 ............................... 2,100,000 2,210,208
Series B, MBIA Insured, Pre-Refunded, 6.50%, 7/01/07 ............................... 11,020,000 11,598,330
Broward County Resource Recovery Revenue, Broward Waste Energy Co., LP, North
Project, Series 1984, 7.95%, 12/01/08 ................................................. 36,700,000 37,525,750
Callaway/Bay County Wastewater Systems Revenue, Series A, FGIC Insured, 6.00%, 9/01/26 .. 695,000 716,802
Escambia County Health Facilities Authority Revenue, Ascension Health Credit,
Refunding, Series A-2, AMBAC Insured, 5.75%, 11/15/29 ................................. 10,000,000 10,121,400
Florida State Board of Education Capital Outlay,
Public Education, Refunding, Series 1992, 6.40%, 6/01/19 ........................... 22,475,000 23,125,876
Public Education, Refunding, Series D, 5.75%, 6/01/22 .............................. 10,000,000 10,206,000
Public Education, Refunding, Series D, 6.00%, 6/01/23 .............................. 17,500,000 18,788,175
Manatee County IDR, Manatee Hospital and Health System Inc., Pre-Refunded, 9.25%,
3/01/21 ............................................................................... 6,500,000 6,727,435
Palm Beach County School Board COP, Series A, FGIC Insured, 6.00%, 8/01/23 .............. 5,100,000 5,329,551
</TABLE>
16
<PAGE>
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, OCTOBER 31, 2000 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
FLORIDA (CONT.)
St. Augustine Water and Sewer Revenue, Refunding, Series A, MBIA Insured, 6.20%,
10/01/01 ........................................................................... $ 890,000 $ 904,952
10/01/02 ........................................................................... 940,000 970,823
10/01/03 ........................................................................... 1,005,000 1,052,476
10/01/04 ........................................................................... 1,065,000 1,129,997
10/01/05 ........................................................................... 1,130,000 1,212,716
10/01/06 ........................................................................... 1,200,000 1,303,500
10/01/07 ........................................................................... 1,275,000 1,382,929
10/01/08 ........................................................................... 1,355,000 1,465,961
10/01/12 ........................................................................... 6,300,000 6,758,388
--------------
142,531,269
--------------
GEORGIA 1.2%
Atlanta Airport Facilities Revenue, Refunding, Series A, FGIC Insured, 5.50%,
1/01/26 ............................................................................... 13,750,000 13,637,800
Burke County Development Authority PCR,
Georgia Power Co. Plant Vogtle, 1st Series, 5.40%, 5/01/34 ......................... 17,705,000 16,297,984
Georgia Power Co. Plant Vogtle, Refunding, 2nd Series, AMBAC Insured, 5.25%,
5/01/34 .......................................................................... 14,000,000 13,122,340
Fulton County Development Authority Special Facilities Revenue, Delta Airlines Inc. ....
Project, Refunding,
6.85%, 11/01/07 .................................................................... 3,400,000 3,512,234
6.95%, 11/01/12 .................................................................... 5,500,000 5,704,820
Georgia Municipal Electric Authority Power Revenue,
Series B, 6.375%, 1/01/16 .......................................................... 14,000,000 14,596,120
Series EE, 6.40%, 1/01/23 .......................................................... 6,325,000 6,559,974
Georgia State HFAR, Homeownership Opportunity Program, Series C, 6.60%, 12/01/23 ........ 2,860,000 2,963,875
Monroe County Development Authority PCR, Georgia Power Co., AMBAC Insured, 6.25%,
7/01/19 ............................................................................... 4,300,000 4,404,318
--------------
80,799,465
--------------
HAWAII 1.5%
Hawaii State Airports System Revenue,
FGIC Insured, 7.00%, 7/01/20 ....................................................... 940,000 969,619
FGIC Insured, Pre-Refunded, 7.00%, 7/01/20 ......................................... 60,000 62,147
Refunding, Third Series 1994, AMBAC Insured, 5.75%, 7/01/09 ........................ 300,000 311,550
Second Series, 7.00%, 7/01/07 ...................................................... 12,000,000 12,417,240
Second Series, 6.90%, 7/01/12 ...................................................... 500,000 576,425
Second Series, MBIA Insured, 6.75%, 7/01/21 ........................................ 170,000 174,546
Second Series, MBIA Insured, Pre-Refunded, 6.75%, 7/01/21 .......................... 30,000 31,025
Second Series 1991, 7.00%, 7/01/18 ................................................. 4,350,000 4,484,198
Second Series 1992, MBIA Insured, 6.90%, 7/01/12 ................................... 400,000 461,140
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 3,536,929
Hawaiian Electric Co., Series A, MBIA Insured, 6.60%, 1/01/25 ...................... 1,950,000 2,053,838
Kaiser Permanente, Refunding, Series A, 6.25%, 3/01/21 ............................. 1,000,000 1,003,100
Kapiolani Health Care System, Refunding, 6.40%, 7/01/13 ............................ 600,000 612,252
Kapiolani Health Care System, Refunding, 6.00%, 7/01/19 ............................ 2,725,000 2,679,738
St. Francis Medical Centers, Refunding, FSA Insured, 6.50%, 7/01/22 ................ 1,100,000 1,132,626
Wahiawa General Hospital Project, 7.50%, 7/01/12 ................................... 885,000 835,741
</TABLE>
17
<PAGE>
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, OCTOBER 31, 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,
6.00%, 7/01/11 ..................................................................... $ 1,000,000 $ 1,001,120
6.20%, 7/01/16 ..................................................................... 2,000,000 2,017,980
Hawaiian Electric Co. Project, Series B, MBIA Insured, 5.875%, 12/01/26 ............ 500,000 504,610
Kaiser Permanente, Series A, 5.15%, 3/01/15 ........................................ 4,000,000 3,695,920
Kapiolani Health Obligation, 6.25%, 7/01/21 ........................................ 7,350,000 7,371,389
Queens Health System, Refunding, Series A, 6.05%, 7/01/16 .......................... 1,000,000 1,011,500
Queens Health System, Refunding, Series A, 6.00%, 7/01/20 .......................... 120,000 120,426
Queens Health System, Refunding, Series A, 5.75%, 7/01/26 .......................... 7,000,000 6,701,100
Queens Health System, Series B, MBIA Insured, 5.00%, 7/01/28 ....................... 2,680,000 2,379,947
Wilcox Memorial Hospital Projects, 5.25%, 7/01/13 .................................. 600,000 527,868
Wilcox Memorial Hospital Projects, 5.35%, 7/01/18 .................................. 2,040,000 1,733,041
Wilcox Memorial Hospital Projects, 5.50%, 7/01/28 .................................. 2,410,000 1,976,875
Hawaii State Department of Transportation Special Facilities Revenue, Matson Terminals
Inc., Refunding, 5.75%, 3/01/13 ....................................................... 75,000 74,211
Hawaii State GO,
Series BW, 6.375%, 3/01/11 ......................................................... 100,000 111,491
Series CA, 6.00%, 1/01/09 .......................................................... 100,000 107,947
Series CT, FSA Insured, 5.875%, 9/01/19 ............................................ 5,000,000 5,175,800
Hawaii State Harbor Capital Improvement Revenue,
Refunding, Series 1994, FGIC Insured, 6.25%, 7/01/15 ............................... 1,000,000 1,042,880
Refunding, Series 1994, FGIC Insured, 6.375%, 7/01/24 .............................. 500,000 517,065
Series 1992, FGIC Insured, 6.50%, 7/01/19 .......................................... 200,000 206,934
Hawaii State Housing Finance and Development Corp. Revenue, Affordable Rental Housing
Program, Series A,
6.00%, 7/01/15 ..................................................................... 1,000,000 1,031,420
6.05%, 7/01/22 ..................................................................... 750,000 766,808
6.10%, 7/01/30 ..................................................................... 235,000 237,921
Hawaii State Housing Finance and Development Corp. SFM Purchase Revenue,
Series A, 7.10%, 7/01/24 ........................................................... 3,805,000 3,908,496
Series A, 6.00%, 7/01/26 ........................................................... 250,000 251,165
Series A, FNMA Insured, 5.75%, 7/01/30 ............................................. 2,500,000 2,440,700
Series B, 7.00%, 7/01/31 ........................................................... 7,380,000 7,599,407
Hawaii State SFMR, HFC,
Series A, 7.00%, 7/01/11 ........................................................... 230,000 237,050
Series B, 6.90%, 7/01/16 ........................................................... 230,000 236,889
Honolulu City and County GO,
Refunding, Series 1992, 6.00%, 12/01/14 ............................................ 150,000 162,023
Series C, FGIC Insured, 5.00%, 7/01/20 ............................................. 6,250,000 5,801,125
Honolulu City and County MFHR, Waipahu Towers Project, Series A, 6.90%, 6/20/35 ......... 1,205,000 1,269,552
Honolulu City and County Wastewater System Revenue, 2nd Bond Resolution, Junior Series,
FGIC Insured, 5.00%, 7/01/23 .......................................................... 10,000,000 9,118,400
Honolulu City and County Water Supply Board Water System Revenue, 5.80%, 7/01/21 ........ 1,785,000 1,815,738
Kauai County GO, Refunding, Series C, AMBAC Insured, 5.95%, 8/01/10 ..................... 220,000 239,309
</TABLE>
18
<PAGE>
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, OCTOBER 31, 2000 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
HAWAII (CONT.)
Maui County GO,
6.05%, 9/01/07 ..................................................................... $ 30,000 $ 30,457
6.10%, 9/01/08 ..................................................................... 170,000 172,589
--------------
102,939,267
--------------
IDAHO .6%
Idaho Housing Agency Revenue, Refunding, Series D-1, 6.45%, 7/01/19 ..................... 1,935,000 2,008,917
Idaho Housing Agency SFMR, Senior Bond, Series B-1, FGIC Insured,
7.85%, 7/01/09 ..................................................................... 345,000 347,515
7.90%, 1/01/21 ..................................................................... 535,000 538,900
Power County Industrial Development Corp. Solid Waste Disposal Revenue, FMC Corp.
Project, 6.45%, 8/01/32 ............................................................... 33,750,000 33,875,550
Power County PCR, FMC Corp. Project, Refunding, 5.625%, 10/01/14 ........................ 2,200,000 2,138,928
--------------
38,909,810
--------------
ILLINOIS 6.1%
Bryant PCR, Central Illinois Light Co. Project, Refunding,
Series A, 6.50%, 2/01/18 ........................................................... 7,200,000 7,280,640
Series C, 6.50%, 1/01/10 ........................................................... 5,000,000 5,164,950
Chicago Board of Education GO, Chicago School Reform, MBIA Insured, 6.00%, 12/01/16 ..... 9,700,000 10,089,358
Chicago COP, AMBAC Insured, 7.75%, 7/15/11 .............................................. 18,000,000 20,596,680
Chicago Gas Supply Revenue, The Peoples Gas Light, Refunding, Series A, 6.10%, 6/01/25 .. 12,000,000 12,239,760
Chicago GO, Lakefront Millennium Parking Facilities, MBIA Insured, 5.75%, 1/01/23 ....... 8,955,000 9,089,325
Chicago O'Hare International Airport Special Facilities Revenue, American Airlines Inc.
Project, 8.20%, 12/01/24 .............................................................. 11,720,000 12,980,955
Chicago SFMR, Collateralized, Series A, GNMA Secured, 7.25%, 9/01/28 .................... 2,895,000 3,136,675
Cook County GO, Capital Improvement, Refunding, FGIC Insured, 5.90%, 12/01/14 ........... 10,000,000 10,385,600
Cook County Tinley Park School District No.140, Refunding, Series A, AMBAC Insured,
6.00%, 12/01/15 ....................................................................... 8,750,000 9,159,500
Illinois Development Finance Authority Hospital Revenue,
Adventist Health System, Sunbelt Obligation, 5.65%, 11/15/24 ....................... 6,030,000 5,108,616
Adventist Health System, Sunbelt Obligation, 5.50%, 11/15/29 ....................... 20,000,000 16,451,400
Sisters of St. Francis Health Services, Refunding, MBIA Insured, 5.375%, 11/01/27 .. 5,000,000 4,724,900
Illinois Development Finance Authority PCR,
Central Illinois Public Service Co., Refunding, Series A, 6.375%, 1/01/28 .......... 15,200,000 15,487,128
Commonwealth Edison Co. Project, Refunding, Series 1991, 7.25%, 6/01/11 ............ 7,500,000 7,735,950
Illinois Power Co. Project, Refunding, Series A, 7.375%, 7/01/21 ................... 26,550,000 28,737,189
Illinois Development Finance Authority Revenue, Provena Health, Series A, MBIA Insured,
5.50%, 5/15/21 ........................................................................ 10,000,000 9,771,400
Illinois HDA,
MF Program, Lawndale Redevelopment Project, 7.10%, 12/01/34 ........................ 20,000,000 21,546,600
MF Program, Refunding, Series A, 7.10%, 7/01/26 .................................... 12,915,000 13,484,035
MF Program, Series 1, 6.625%, 9/01/12 .............................................. 12,000,000 12,493,560
MF Program, Series 1, 6.75%, 9/01/21 ............................................... 7,550,000 7,817,346
MF Program, Series C, 7.35%, 7/01/11 ............................................... 2,265,000 2,331,704
RMR, Series B, 7.25%, 8/01/17 ...................................................... 7,065,000 7,275,749
Illinois HDA Revenue, Homeowner Mortgage, Series A-1, 6.85%, 8/01/17 .................... 3,540,000 3,752,435
</TABLE>
19
<PAGE>
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, OCTOBER 31, 2000 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
ILLINOIS (CONT.)
Illinois Health Facilities Authority Revenue,
Children's Memorial Hospital, Series A, AMBAC Insured, 5.75%, 8/15/25 ................. $ 9,120,000 $ 9,107,141
Edwards Hospital Project, Pre-Refunded, 7.00%, 2/15/22 ................................ 2,000,000 2,099,780
Loyola University Health Systems, Refunding, Series A, MBIA Insured, 5.625%, 7/01/18 .. 7,090,000 7,091,773
Loyola University Health Systems, Series A, MBIA Insured, ETM, 5.625%, 7/01/18 ........ 2,105,000 2,151,078
Methodist Medical Center, Refunding, MBIA Insured, 5.25%, 11/15/21 .................... 2,885,000 2,706,851
Northwestern Medical Facility Foundation, Refunding, MBIA Insured, 5.125%, 11/15/28 ... 7,500,000 6,793,125
South Suburban Hospital, ETM, 7.00%, 2/15/18 .......................................... 4,200,000 4,894,176
South Suburban Hospital, Pre-Refunded, 7.00%, 2/15/18 ................................. 2,800,000 2,939,692
Victory Health Services, Series A, 5.75%, 8/15/27 ..................................... 8,015,000 7,205,966
Illinois State COP, Department Of Central Management, FSA Insured, Pre-Refunded, 6.875%,
7/01/07 .................................................................................. 2,600,000 2,748,876
Illinois State Dedicated Tax Revenue, Civic Center, Series A, AMBAC Insured,
6.00%, 12/15/15 ....................................................................... 2,105,000 2,107,842
Pre-Refunded, 6.00%, 12/15/15 ......................................................... 845,000 846,597
Metropolitan Pier and Exposition Authority Dedicated State Tax Revenue, McCormick Place
Expansion Project,
Refunding, Series A, FGIC Insured, 5.25%, 12/15/28 .................................... 38,080,000 35,639,834
Series A, 6.50%, 6/15/22 .............................................................. 5,000 5,228
Series A, 6.50%, 6/15/27 .............................................................. 555,000 579,742
Series A, FGIC Insured, 6.50%, 6/15/07 ................................................ 5,000 5,329
Metropolitan Pier and Exposition Authority Hospitality Facilities Revenue, McCormick
Place Convention Center,
5.75%, 7/01/06 ........................................................................ 1,645,000 1,703,940
6.25%, 7/01/17 ........................................................................ 3,500,000 3,833,305
7.00%, 7/01/26 ........................................................................ 12,000,000 14,233,920
Onterie Center HFC, Mortgage Revenue, Refunding, MBIA Insured, 7.05%, 7/01/27 .............. 4,350,000 4,512,168
Regional Transportation Authority Revenue, Series A, AMBAC Insured, 6.125%, 6/01/22 ........ 3,970,000 4,071,275
Southwestern Illinois Development Authority IDR, Spectrulite Consortium Inc. Project,
6.20%, 2/01/05 ........................................................................ 1,825,000 1,869,822
6.625%, 2/01/10 ....................................................................... 3,050,000 3,139,853
Southwestern Illinois Development Authority Private Activity Revenue, Progressive
Recovery Glenmark, 8.50%, 8/01/10 ........................................................ 2,395,000 2,449,750
Southwestern Illinois Development Authority Revenue, Anderson Hospital Project, Series A,
Pre-Refunded, 7.00%, 8/15/22 ............................................................. 6,200,000 6,578,944
Southwestern Illinois Development Authority Solid Waste Disposal Revenue, LaCede
Steel Co. Project,
8.375%, 8/01/08 ....................................................................... 4,025,000 4,138,143
8.50%, 8/01/20 ........................................................................ 5,390,000 5,539,195
Upper River Valley Development Authority Environmental Facilities Revenue, General
Electric Co. Project, 5.45%, 2/01/23 ..................................................... 3,600,000 3,456,324
Will County Exempt Facilities Revenue, Mobil Oil Refining Corp. Project, 6.00%, 2/01/27 .... 7,130,000 7,174,919
--------------
406,466,043
--------------
INDIANA 1.7%
Beech Grove EDR, Westvaco Corp., 8.75%, 7/01/10 ............................................ 50,000 50,211
Carmel EDR, Cool Creek Association, Refunding, 6.50%, 9/01/15 .............................. 1,000,000 1,046,970
Carmel Industrial RDA, County Option, Income Tax Lease, Rent Revenue, MBIA Insured,
5.25%, 1/01/18 ........................................................................... 1,090,000 1,056,363
East Chicago Industrial Solid Waste Disposal Revenue, US Gypsum Corp. Project, 5.50%,
9/01/28 .................................................................................. 5,250,000 4,236,435
</TABLE>
20
<PAGE>
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, OCTOBER 31, 2000 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
INDIANA (CONT.)
Eastern Hancock Middle School Building Corp. First Mortgage, Pre-Refunded, 6.00%,
1/15/21 ................................................................................ $ 1,000,000 $ 1,070,690
Elkhart County Hospital Authority Revenue, Goshen Hospital Association Inc. Project,
7.35%, 7/01/12 ......................................................................... 1,750,000 1,775,988
Elwood Middle School Building Corp. First Mortgage, Refunding, 7.30%, 1/01/08 ............ 500,000 512,055
Hammond Industrial Sewer and Solid Waste Disposal Revenue, American Maize-Products Co.,
Project A, 8.00%, 12/01/24 ............................................................. 20,000,000 21,597,600
Hammond Multi-School Building Corp. First Mortgage, Refunding, Series A, 6.20%, 7/10/15 .. 1,500,000 1,548,240
Indiana Bond Bank Special Program, Series B, 6.20%, 2/01/23 .............................. 3,500,000 3,524,255
Indiana Health Facility Financing Authority Hospital Revenue,
Hancock Memorial Hospital Health Services, 6.125%, 8/15/17 .......................... 2,000,000 1,877,980
Jackson County Schneck Memorial Hospital, Pre-Refunded, 7.50%, 2/15/22 .............. 1,835,000 1,936,677
Jackson County Schneck Memorial Hospital, Refunding, 5.25%, 2/15/22 ................. 1,200,000 957,624
Methodist Hospital Inc., 6.75%, 9/15/09 ............................................. 1,280,000 1,331,738
Sisters of St. Francis Health, Series A, MBIA Insured, 5.00%, 11/01/29 .............. 1,000,000 873,680
St. Anthony's Medical Center/Home Inc., Series A, 7.00%, 10/01/17 ................... 1,000,000 1,052,820
Indiana Health Facility Financing Authority Revenue, Greenwood Village South Project,
Refunding, 5.625%, 5/15/28 ............................................................. 1,750,000 1,363,390
Indiana State Development Financing Authority Environmental Revenue, 6.25%, 7/15/30 ...... 2,000,000 1,952,320
Indiana State Educational Facilities Authority Revenue,
DePauw University Project, Refunding, 5.30%, 7/01/16 ................................ 600,000 589,932
Manchester College Project, 6.85%, 10/01/18 ......................................... 3,240,000 3,325,439
Valparaiso University, AMBAC Insured, 5.125%, 10/01/23 .............................. 2,015,000 1,882,353
Indiana State HFA, SFMR,
GNMA Secured, 6.10%, 7/01/22 ........................................................ 880,000 892,910
Refunding, Series A, 6.75%, 1/01/10 ................................................. 2,940,000 3,069,184
Refunding, Series A, 6.80%, 1/01/17 ................................................. 12,835,000 13,317,339
Series F-2, GNMA Secured, 7.75%, 7/01/22 ............................................ 235,000 240,085
Indiana State Office Building Commission Correctional Facilities Program Revenue,
Pre-Refunded, 6.375%, 7/01/16 .......................................................... 1,000,000 1,039,930
Indianapolis Airport Authority, Indianapolis International Airport Revenue, 6.50%,
11/15/31 ............................................................................... 1,460,000 1,401,804
Indianapolis Local Public Improvement Bond, Series D, 6.75%, 2/01/20 ..................... 15,375,000 16,102,699
Jasper County EDR, Georgia-Pacific Corp. Project,
5.625%, 12/01/27 .................................................................... 3,500,000 3,135,440
Refunding, 6.70%, 4/01/29 ........................................................... 3,000,000 3,031,080
Jasper County PCR, Northern Indiana Public Service Co., Refunding, MBIA Insured,
7.10%, 7/01/17 ......................................................................... 500,000 517,440
Lake Central Industrial Multi-School Building Corp. First Mortgage, Refunding,
MBIA Insured, 6.50%, 1/15/14 ........................................................... 2,100,000 2,199,351
Madison County Authority Anderson Hospital Revenue, Refunding, Series A, BIG Insured,
8.00%, 1/01/14 ......................................................................... 95,000 95,434
Marion County Convention and Recreational Facilities Authority Excise Tax Revenue,
Lease Rental, Series A, AMBAC Insured, 7.00%, 6/01/21 .................................. 250,000 258,050
Muncies Edit Building Corp. First Mortgage, Series A, AMBAC Insured, 6.60%, 12/01/17 ..... 4,000,000 4,270,080
New Albany Floyd County School Building Corp. Revenue, First Mortgage, MBIA Insured,
5.375%, 1/15/18 ........................................................................ 1,500,000 1,477,545
New Prairie Unified School Building Corp. Revenue, First Mortgage, Refunding,
FSA Insured, 5.80%, 7/05/11 ............................................................ 1,520,000 1,591,106
Penn-Harris-Madison Multi-School Building Corp. First Mortgage, FSA Insured,
Pre-Refunded, 5.90%, 7/15/14 ........................................................... 1,000,000 1,080,500
Rochester Community Multi-School Building Corp. Revenue, First Mortgage, AMBAC
Insured, 5.20%, 1/15/18 ................................................................ 1,000,000 963,590
Steuben County Metropolitan School District COP, 6.90%, 1/01/08 .......................... 500,000 506,525
</TABLE>
21
<PAGE>
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, OCTOBER 31, 2000 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
INDIANA (CONT.)
Sullivan Industrial PCR, Hoosier Energy, Merom Project, Refunding, 7.10%, 4/01/19 ....... $ 750,000 $ 770,040
Sullivan PCR, Indiana-Michigan Power Co. Project, Refunding, Series C, 5.95%, 5/01/09 ... 6,000,000 6,058,740
--------------
115,581,632
--------------
IOWA .1%
Iowa Finance Authority Mortgage Revenue, Abbey Health Care, Series A, GNMA Secured,
(b)5.90%, 5/20/20 .................................................................. 500,000 503,195
(b)6.10%, 5/20/31 .................................................................. 5,305,000 5,338,368
--------------
5,841,563
--------------
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 2,305,450
Newton Hospital Revenue, Newton Healthcare Corp., Refunding, Series A,
5.70%, 11/15/18 .................................................................... 1,875,000 1,552,275
5.75%, 11/15/24 .................................................................... 1,500,000 1,209,600
--------------
5,067,325
--------------
KENTUCKY 2.0%
Ashland PCR, Ashland Oil Inc. Project, Refunding, 6.65%, 8/01/09 ........................ 3,900,000 4,028,193
Henderson County Solid Waste Disposal Revenue, MacMillan Bloedel Project, 7.00%,
3/01/25 ............................................................................... 10,000,000 10,333,200
Jefferson County MFHR, Watterson Park Apartments Project, Series A, 6.35%, 11/15/11 ..... 4,850,000 5,046,280
Kenton County Airport Board Revenue, Special Facilities, Delta Airlines Inc. Project,
Series A, 7.80%, 12/01/15 .......................................................... 20,000,000 20,250,000
Series A, 7.50%, 2/01/20 ........................................................... 10,000,000 10,392,400
Series A, 7.125%, 2/01/21 .......................................................... 9,330,000 9,551,401
Series B, 7.25%, 2/01/22 ........................................................... 3,350,000 3,461,287
Kentucky Development Finance Authority Hospital Revenue, Claire Medical Center Project,
Pre-Refunded, 7.125%, 9/01/21 ......................................................... 700,000 729,078
Kentucky Economic Development Finance Authority Hospital System Revenue, Appalachian
Regional Health Center Facility, Refunding and Improvement,
5.80%, 10/01/12 .................................................................... 1,000,000 764,110
5.85%, 10/01/17 .................................................................... 5,615,000 3,986,650
Kentucky HFC Revenue, Series B, 6.625%, 7/01/14 ......................................... 4,910,000 5,091,375
Mount Sterling Lease Revenue, Kentucky League Cities, Series A,
6.10%, 3/01/08 ..................................................................... 20,375,000 21,375,005
6.20%, 3/01/18 ..................................................................... 11,765,000 12,196,305
Pendleton County Multi-County Lease Revenue, Kentucky Association of Counties Leasing
Trust, Series A, 6.50%, 3/01/19 ....................................................... 27,160,000 28,288,498
--------------
135,493,782
--------------
LOUISIANA 1.3%
Bastrop PCR, International Paper Co. Project, Refunding, 6.90%, 3/01/07 ................. 2,000,000 2,076,320
Calcasieu Parish Inc. IDB, PCR, Gulf States Utilities Co. Project, Refunding, 6.75%,
10/01/12 .............................................................................. 14,285,000 14,637,840
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 4,727,294
</TABLE>
22
<PAGE>
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, OCTOBER 31, 2000 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
LOUISIANA (CONT.)
Calcasieu Parish Memorial Hospital Service District Revenue, Lake Charles Parish Memorial
Hospital Project, Series A, FSA Insured, (cont.)
6.50%, 12/01/18 .................................................................... $ 5,530,000 $ 6,084,327
6.65%, 12/01/21 .................................................................... 3,145,000 3,300,898
Calcasieu Parish Public Trust Authority Mortgage Revenue, Refunding,
Series A, 7.75%, 6/01/12 ........................................................... 1,405,000 1,454,737
Series B, 6.375%, 11/01/02 ......................................................... 100,000 102,655
Series B, 6.875%, 11/01/12 ......................................................... 400,000 419,468
De Soto Parish Environmental Improvement Revenue, International Paper Co. Project,
Series A, 7.70%, 11/01/18 ............................................................. 2,500,000 2,695,850
East Baton Rouge Mortgage Finance Authority, SFM Purchase,
Series A, 6.80%, 10/01/28 .......................................................... 4,970,000 5,165,073
Series C, 7.00%, 4/01/32 ........................................................... 1,330,000 1,374,675
Series D, 7.10%, 4/01/32 ........................................................... 990,000 1,023,759
Jefferson Parish Hospital Service District No. 2 Hospital Revenue, FSA Insured, 5.00%,
7/01/28 .............................................................................. 5,000,000 4,427,100
Lafayette Public Trust Financing Authority SFMR, Refunding, Series A, 8.50%, 11/15/12 ... 859,482 860,780
Louisiana HFA, Mortgage Revenue, Refunding, 7.375%, 9/01/13 ............................. 370,000 377,263
Louisiana Public Facilities Authority Revenue, Alton Ochsner Medical Foundation Project,
Refunding, Series B, MBIA Insured, 6.50%, 5/15/22 ..................................... 3,500,000 3,642,450
New Orleans GO, Refunding, AMBAC Insured,
6.125%, 10/01/16 ................................................................... 10,275,000 10,705,112
6.20%, 10/01/21 .................................................................... 8,050,000 8,330,623
Office Facility Corp. Capital Facilities Bonds, 7.75%, 12/01/10 ......................... 3,400,000 3,587,510
Ouachita Parish Hospital Service District No. 1 Revenue, Glenwood Regional Medical
Center, Pre-Refunded, 7.50%, 7/01/21 .................................................. 4,000,000 4,157,320
Pointe Coupee Parish PCR, Gulf States Utilities Co. Project, Refunding, 6.70%, 3/01/13 .. 2,200,000 2,236,344
West Feliciana Parish PCR, Gulf State Utility Co. Project,
7.70%, 12/01/14 .................................................................... 2,000,000 2,088,560
7.00%, 11/01/15 .................................................................... 3,050,000 3,150,772
--------------
86,626,730
--------------
MAINE 1.1%
Bucksport Solid Waste Disposal Revenue, Champion International Corp. Project, 6.25%,
5/01/10 ............................................................................... 5,000,000 5,101,850
Jay Solid Waste Disposal Revenue, International Paper Co. Project, Refunding, Series B,
6.20%, 9/01/19 ........................................................................ 8,000,000 8,055,600
Maine Financial Authority Solid Waste Recycling Facilities Revenue, Great Northern
Paper Co., Bowater Project, 7.75%, 10/01/22 ........................................... 29,300,000 30,744,783
Maine State Health and Higher Educational Facilities Authority Revenue, Series B,
FSA Insured, Pre-Refunded, 7.00%, 7/01/24 ............................................. 2,445,000 2,687,935
Maine State Housing Authority Mortgage Purchase,
Series A-5, 6.20%, 11/15/16 ........................................................ 2,500,000 2,572,350
Series C, 6.55%, 11/15/12 .......................................................... 3,700,000 3,856,066
Series C, 6.65%, 11/15/24 .......................................................... 3,500,000 3,643,220
Series D, 6.45%, 11/15/07 .......................................................... 3,540,000 3,672,431
Series D, 6.70%, 11/15/15 .......................................................... 5,800,000 6,149,682
Rumford PCR, Boise Cascade Corp. Project, Refunding, 6.625%, 7/01/20 .................... 4,800,000 4,857,264
--------------
71,341,181
--------------
</TABLE>
23
<PAGE>
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, OCTOBER 31, 2000 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
MARYLAND 1.6%
Gaithersberg Hospital Facilities Revenue, Shady Grove Adventist Hospital, Refunding and
Improvement,
FSA Insured, 6.00%, 9/01/21 ........................................................ $ 10,110,000 $ 10,358,908
Series A, Pre-Refunded, 8.25%, 9/01/21 ............................................. 43,225,000 45,429,475
Maryland State CDA, Department of Housing and Community Development,
MFHR, Series G, Mortgage Insured, 6.55%, 5/15/19 ................................... 5,210,000 5,381,670
SF Program, 3rd Series, 7.25%, 4/01/27 ............................................. 965,000 988,604
Montgomery County Housing Opportunities Commission SFMR, Refunding, Series B, 6.625%,
7/01/28 ............................................................................... 6,500,000 6,676,085
Takoma Park Hospital Facilities Revenue, Washington Adventist Hospital Project, Series A,
Sub Series 1, 8.25%, 9/01/21 ....................................................... 20,125,000 20,862,581
Sub Series 1, Pre-Refunded, 8.25%, 9/01/21 ......................................... 10,930,000 11,487,430
Sub Series 2, Pre-Refunded, 8.25%, 9/01/21 ......................................... 5,000,000 5,250,750
--------------
106,435,503
--------------
MASSACHUSETTS 3.8%
Massachusetts State GO,
Consolidated Loan, Series A, 7.50%, 6/01/04 ........................................ 7,500,000 8,060,250
Refunding, Series B, 6.50%, 8/01/08 ................................................ 5,900,000 6,566,051
Massachusetts State Health and Educational Facilities Authority Revenue,
Melrose-Wakefield Hospital, Refunding, Series B, ETM, 6.35%, 7/01/06 ............... 1,100,000 1,181,301
Notre Dame Health Care Center, Series A, 7.875%, 10/01/22 .......................... 2,310,000 2,384,359
Sisters Providence Health System, Series A, Pre-Refunded, 6.50%, 11/15/08 .......... 1,000,000 1,073,760
Sisters Providence Health System, Series A, Pre-Refunded, 6.625%, 11/15/22 ......... 12,050,000 12,993,877
Massachusetts State HFA,
HDA, Series D, FGIC Insured, 6.875%, 11/15/21 ...................................... 5,250,000 5,469,398
Housing Projects, Refunding, Series A, 6.30%, 10/01/13 ............................. 25,635,000 26,558,885
Housing Projects, Refunding, Series A, 6.375%, 4/01/21 ............................. 24,750,000 25,343,505
Housing Revenue, SF, Series 41, 6.30%, 12/01/14 .................................... 6,190,000 6,519,184
Housing Revenue, SF, Series 41, 6.35%, 6/01/17 ..................................... 5,695,000 5,936,525
Series C, FGIC Insured, 6.90%, 11/15/21 ............................................ 9,715,000 10,164,124
Series D, FGIC Insured, 6.80%, 11/15/12 ............................................ 250,000 261,375
Massachusetts State Industrial Finance Agency Health Care Facilities Revenue, Jewish
Geriatric Services Inc., Series B,
5.375%, 5/15/17 .................................................................... 1,965,000 1,839,260
5.50%, 5/15/27 ..................................................................... 5,000,000 4,638,800
Pre-Refunded, 7.00%, 4/01/22 ....................................................... 5,000,000 5,331,350
Massachusetts State Industrial Finance Agency Revenue, D'Youville Senior Care,
5.65%, 10/01/17 .................................................................... 2,295,000 2,255,664
5.70%, 10/01/27 .................................................................... 7,375,000 7,215,774
Massachusetts State Port Authority Revenue, Special Facilities, Bosfuel Project, MBIA
Insured, 5.75%, 7/01/39 ............................................................... 11,750,000 11,640,843
Massachusetts State Turnpike Authority Metropolitan Highway System Revenue,
Series A, MBIA Insured, 5.00%, 1/01/37 ............................................. 77,130,000 68,678,866
sub. lien, Refunding, Series B, MBIA Insured, 5.125%, 1/01/37 ...................... 21,350,000 19,446,648
Massachusetts State Water Pollution Abatement Trust Revenue, Massachusetts Water Revenue
Authority Program, Refunding, Sub Series A, 5.75%, 8/01/29 ............................ 6,500,000 6,562,075
Plymouth County COP, Series A, Pre-Refunded, 7.00%, 4/01/12 ............................. 10,000,000 10,662,700
--------------
250,784,574
--------------
</TABLE>
24
<PAGE>
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, OCTOBER 31, 2000 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
MICHIGAN 1.3%
Battle Creek Tax Increment Finance Authority, Pre-Refunded, 7.40%, 5/01/16 .............. $ 2,000,000 $ 2,216,420
Belding Area Schools GO, FGIC Insured,
6.10%, 5/01/26 ..................................................................... 810,000 839,954
Pre-Refunded, 6.10%, 5/01/26 ....................................................... 2,995,000 3,237,296
Detroit GO,
Refunding, Series B, 6.375%, 4/01/06 ............................................... 7,265,000 7,722,986
Refunding, Series B, 6.25%, 4/01/09 ................................................ 625,000 657,031
Self-Insurance, Series A, 5.70%, 5/01/02 ........................................... 2,250,000 2,274,008
Series A, Pre-Refunded, 6.70%, 4/01/10 ............................................. 4,550,000 4,975,971
Detroit/Wayne County Stadium Authority, FGIC Insured, 5.25%, 2/01/27 .................... 4,235,000 3,998,729
Jackson County Building Authority, 5.60%, 5/01/30 ....................................... 4,145,000 4,115,363
Kalamazoo EDC Revenue, Limited Obligation, Friendship Village, Refunding, Series A,
6.25%, 5/15/27 ........................................................................ 2,000,000 1,746,800
Michigan State Building Authority Revenue, Series II, 6.25%, 10/01/20 ................... 15,650,000 16,103,537
Michigan State HDA,
Limited Obligation Revenue, Fraser Woods Project, FSA Insured, 6.625%, 9/15/19 ..... 2,500,000 2,616,800
Rental Housing Revenue, Refunding, Series A, 6.60%, 4/01/12 ........................ 4,730,000 4,938,877
SFMR, Series A, 6.45%, 12/01/14 .................................................... 1,875,000 1,962,206
Michigan State Hospital Finance Authority Revenue,
Ascension Health Credit, Refunding, Series A, MBIA Insured, 6.125%, 11/15/23 ....... 18,000,000 18,481,140
Henry Ford Health, Refunding, Series A, 5.25%, 11/15/25 ............................ 4,000,000 3,457,800
Presbyterian Villages Obligation Group, 5.70%, 1/01/01 ............................. 310,000 309,836
Presbyterian Villages Obligation Group, 5.80%, 1/01/02 ............................. 355,000 354,102
Presbyterian Villages Obligation Group, 5.90%, 1/01/03 ............................. 325,000 323,541
Presbyterian Villages Obligation Group, 6.00%, 1/01/04 ............................. 390,000 387,313
Presbyterian Villages Obligation Group, 6.375%, 1/01/15 ............................ 275,000 256,182
Presbyterian Villages Obligation Group, 6.40%, 1/01/15 ............................. 1,000,000 933,770
Presbyterian Villages Obligation Group, 6.50%, 1/01/25 ............................. 3,500,000 3,202,290
--------------
85,111,952
--------------
MINNESOTA 2.1%
Cloquet PCR, Potlach Corp. Projects, Refunding, 5.90%, 10/01/26 ......................... 9,100,000 8,604,232
Dakota County Housing RDA, Limited Annual Appropriation Tax and Revenue, Development
Housing Facilities Project,
7.25%, 1/01/01 ..................................................................... 695,000 696,334
7.50%, 1/01/06 ..................................................................... 3,930,000 3,976,060
8.00%, 1/01/07 ..................................................................... 1,605,000 1,607,520
Golden Valley Revenue, Covenant Retirement Communities, Series A, 5.50%, 12/01/29 ....... 6,000,000 5,324,220
International Falls PCR, Boise Cascade Corp. Project, Refunding, 5.65%, 12/01/22 ........ 3,500,000 3,116,120
Minneapolis and St. Paul Metropolitan Airports Commission Airport Revenue, Series A,
FGIC Insured, 5.75%, 1/01/32 .......................................................... 5,000,000 5,060,950
Minneapolis CDA and St. Paul Housing RDA, Homeownership Mortgage Revenue, Joint Housing
Program, FGIC Insured, 9.875%, 12/01/15 ............................................... 5,000 5,002
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 25,863,427
Minnesota State HFA, SFM, Series D-1,
6.45%, 7/01/11 ..................................................................... 3,065,000 3,198,236
6.50%, 1/01/17 ..................................................................... 1,180,000 1,221,477
</TABLE>
25
<PAGE>
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, OCTOBER 31, 2000 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
MINNESOTA (CONT.)
Minnetonka MFHR, Ridgepointe II Project, Refunding, Series A, GNMA Secured, 5.95%,
10/20/33 .............................................................................. $ 11,075,000 $ 11,240,904
Red Wing Housing RDA, Jordan Tower II Project, Pre-Refunded, 7.00%, 1/01/19 ............. 1,500,000 1,570,155
Rochester Health Care Facilities Revenue, Mayo Foundation, Series A, 5.50%, 11/15/27 .... 21,500,000 20,881,445
Roseville MFHR, Rosepointe I Project, Refunding, Series A, GNMA Secured, 5.95%, 10/20/33 8,565,000 8,693,304
St. Louis Park EDA, Tax Increment Revenue, FGIC Insured, Pre-Refunded, 8.40%, 9/01/09 ... 6,000,000 6,308,160
St. Paul Port Authority IDR,
Bandana Square, Series C, 7.70%, 12/01/00 .......................................... 230,000 229,821
Bandana Square, Series C, 7.70%, 12/01/01 .......................................... 255,000 252,863
Bandana Square, Series C, 7.70%, 12/01/02 .......................................... 270,000 266,587
Bandana Square, Series C, 7.70%, 12/01/07 .......................................... 1,690,000 1,418,400
Bandana Square, Series C, 7.80%, 12/01/12 .......................................... 2,500,000 1,973,325
Brown and Bigelow Co., Series 1979-2, 7.50%, 10/01/01 .............................. 550,000 546,860
Brown and Bigelow Co., Series 1979-2, 7.50%, 10/01/02 .............................. 595,000 588,217
Brown and Bigelow Co., Series 1979-2, 7.50%, 10/01/03 .............................. 640,000 629,338
Brown and Bigelow Co., Series 1979-2, 7.50%, 10/01/04 .............................. 685,000 670,266
Brown and Bigelow Co., Series 1979-2, 7.50%, 10/01/05 .............................. 740,000 724,260
Brown and Bigelow Co., Series 1979-2, 7.50%, 10/01/06 .............................. 795,000 775,387
Brown and Bigelow Co., Series 1979-2, 7.50%, 10/01/07 .............................. 855,000 831,231
Brown and Bigelow Co., Series 1979-2, 7.50%, 10/01/08 .............................. 915,000 886,910
Brown and Bigelow Co., Series 1979-2, 7.50%, 10/01/09 .............................. 670,000 647,220
Common Bond Fund, Fort Road Medical Center, Refunding, Series C, 7.95%, 9/01/01 .... 140,000 139,021
Common Bond Fund, Fort Road Medical Center, Refunding, Series C, 7.95%, 9/01/02 .... 155,000 153,146
Common Bond Fund, Fort Road Medical Center, Refunding, Series C, 7.95%, 9/01/10 .... 1,705,000 1,396,446
Common Bond Fund, Ideal Security Hardware Corp., Refunding, Series F, 8.00%,
12/01/01 ......................................................................... 105,000 104,111
Common Bond Fund, Ideal Security Hardware Corp., Refunding, Series F, 8.00%,
12/01/02 ......................................................................... 115,000 113,529
Common Bond Fund, Ideal Security Hardware Corp., Refunding, Series F, 8.00%,
12/01/12 ......................................................................... 1,790,000 1,412,775
Washington County Housing and RDAR,
Orleans Apartments Project, Series A, 8.25%, 7/01/21 ............................... 3,000,000 3,051,450
Pooled Housing and Redevelopment, Refunding, 7.20%, 1/01/22 ........................ 5,885,000 6,118,105
Raymie Johnson Apartments Project, Pre-Refunded, 7.70%, 12/01/19 ................... 5,210,000 5,491,027
--------------
135,787,841
--------------
MISSISSIPPI 1.3%
Claiborne County PCR, Systems Energy Resources Inc., Refunding, 6.20%, 2/01/26 .......... 36,500,000 33,218,285
Jackson County Environmental Improvement Revenue, International Paper Company Project,
6.70%, 5/01/24 ........................................................................ 3,500,000 3,610,390
Mississippi Business Finance Corp. PCR,
System Energy Resource Inc. Project, 5.875%, 4/01/22 ............................... 40,000,000 36,697,200
System Energy Resource Inc. Project, Refunding, 5.90%, 5/01/22 ..................... 8,250,000 7,591,650
Mississippi State Educational Facilities Authority Revenue, Private Nonprofit
Institutions of Higher Learning, Tougaloo College Project, Series A, 6.50%, 6/01/18 ... 2,210,000 2,229,802
--------------
83,347,327
--------------
MISSOURI .3%
Missouri State Health and Educational Facilities Authority Health Facilities Revenue,
Health Midwest, Series B, MBIA Insured, 6.25%, 2/15/12 ................................ 5,000,000 5,189,200
</TABLE>
26
<PAGE>
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, OCTOBER 31, 2000 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
MISSOURI (CONT.)
Missouri State Health and Educational Facilities Authority Revenue, SSM Health Care,
Refunding, Series A, MBIA Insured, 5.00%, 6/01/22 ..................................... $ 6,500,000 $ 5,976,620
St. Louis Parking Facilities Revenue, Pre-Refunded, 6.625%, 12/15/21 .................... 6,000,000 6,368,520
Taney County IDA, Hospital Revenue, The Skaggs Community Hospital Association, 5.40%,
5/15/28 ............................................................................... 4,000,000 3,198,000
--------------
20,732,340
--------------
MONTANA .7%
Forsyth County PCR,
Puget Sound Power and Light Co. Project, AMBAC Insured, 6.80%, 3/01/22 ............. 10,000,000 10,454,400
The Montana Power Co. Colstrip Project, Refunding, Series A, 6.125%, 5/01/23 ....... 3,250,000 3,250,618
The Montana Power Co., Refunding, Series B, MBIA Insured, 5.90%, 12/01/23 .......... 20,385,000 20,768,034
Montana State Board of Housing SFM, Refunding,
Series A, 6.50%, 12/01/22 .......................................................... 2,835,000 2,907,009
Series B-1, 6.25%, 12/01/21 ........................................................ 6,720,000 6,940,282
Montana State Health Facilities Authority Revenue, Montana Developmental Center Project,
6.40%, 6/01/19 ........................................................................ 2,000,000 2,041,120
--------------
46,361,463
--------------
NEBRASKA .1%
Nebraska Investment Finance Authority Revenue, ETM, 7.00%, 11/01/09 ..................... 5,255,000 5,333,089
--------------
NEVADA 3.8%
Churchill County Health Care Facilities Revenue, Western Health Network, Series A,
MBIA Insured, 6.25%, 1/01/14 .......................................................... 2,000,000 2,091,980
Clark County IDR,
Nevada Power Co. Project, Refunding, Series B, 5.90%, 10/01/30 ..................... 10,000,000 8,961,000
Nevada Power Co. Project, Refunding, Series C, 7.20%, 10/01/22 ..................... 12,500,000 12,927,250
Nevada Power Co. Project, Series A, 5.90%, 11/01/32 ................................ 2,600,000 2,326,454
Southwest Gas Corp., Series A, 6.50%, 12/01/33 ..................................... 10,000,000 9,972,300
Southwest Gas Corp., Series A, 7.30%, 9/01/27 ...................................... 18,080,000 18,787,651
Southwest Gas Corp., Series B, 7.50%, 9/01/32 ...................................... 62,470,000 65,238,670
Director of State Department of Business and Industry Revenue, Las Vegas Monorail
Project, First Tier, AMBAC Insured, 5.625%,
1/01/32 ............................................................................ 20,000,000 19,780,800
1/01/34 ............................................................................ 15,000,000 14,787,900
Henderson Health Care Facilities Revenue, Catholic Healthcare West, Series A, 5.25%,
7/01/18 ............................................................................... 23,685,000 19,779,344
Humboldt County PCR, Sierra Pacific Power Co., Refunding, Series A, AMBAC Insured,
6.30%, 7/01/22 ........................................................................ 4,500,000 4,658,580
Nevada Housing Division,
MFHR, Series B, FNMA Insured, 6.55%, 10/01/25 ...................................... 5,405,000 5,670,331
SF Program, FI/GML, Series A, 8.30%, 10/01/19 ...................................... 1,555,000 1,620,046
SF Program, FI/GML, Series A-2, 8.375%, 10/01/19 ................................... 820,000 828,061
SF Program, Refunding, Series A-1, 6.25%, 10/01/26 ................................. 3,560,000 3,648,181
SF Program, Refunding, Series C-2, FHA Insured, 6.75%, 10/01/26 .................... 7,175,000 7,433,372
Nevada State GO,
Colorado River Commission Revenue, Series 1994, Pre-Refunded, 6.50%, 7/01/24 ....... 15,915,000 17,095,734
Municipal Bond Bank Project No. 40-41, Series A, ETM, 6.375%, 12/01/17 ............. 10,275,000 10,717,133
</TABLE>
27
<PAGE>
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, OCTOBER 31, 2000 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
NEVADA (CONT.)
Reno RDA, Tax Allocation,
Downtown Redevelopment Project, Series D, Pre-Refunded, 7.625%, 9/01/16 ............ $ 4,255,000 $ 4,407,755
Downtown Redevelopment Project, Series D, Pre-Refunded, 7.625%, 9/01/16 ............ 4,035,000 4,178,202
Refunding, Series A, 6.20%, 6/01/18 ................................................ 3,000,000 3,029,670
Washoe County Gas and Water Facilities Revenue, Refunding, AMBAC Insured, 6.30%,
12/01/14 .............................................................................. 5,000,000 5,198,200
Washoe County Hospital Facility Revenue, Washoe Medical Center Inc. Project, Series A,
AMBAC Insured, 6.25%, 6/01/13 ......................................................... 9,295,000 9,785,962
--------------
252,924,576
--------------
NEW HAMPSHIRE 1.5%
Nashua Housing Authority MFR, Clocktower Project, Refunding, GNMA Secured, 6.25%,
6/20/33 ............................................................................... 6,055,000 6,262,384
New Hampshire Higher Education and Health Facilities Authority Revenue,
New Hampshire Catholic Charities, 5.80%, 8/01/22 ................................... 1,000,000 839,510
Rivier College, 5.60%, 1/01/28 ..................................................... 4,590,000 4,194,617
St. Joseph Hospital, 7.50%, 1/01/16 ................................................ 2,300,000 2,346,782
The Hitchcock Clinic, MBIA Insured, 6.00%, 7/01/27 ................................. 4,275,000 4,364,262
New Hampshire State HFA,
MFHR, Series 1, 7.10%, 1/01/14 ..................................................... 4,920,000 5,060,810
SFMR, Series E, 6.75%, 7/01/19 ..................................................... 4,490,000 4,700,806
SFMR, Series E, 6.80%, 7/01/25 ..................................................... 3,455,000 3,597,035
New Hampshire State IDAR, Pollution Control, Public Service Co. of New Hampshire
Project,
Series A, 7.65%, 5/01/21 ........................................................... 6,870,000 7,038,521
Series B, 7.50%, 5/01/21 ........................................................... 50,690,000 51,921,767
Series C, 7.65%, 5/01/21 ........................................................... 7,450,000 7,632,749
--------------
97,959,243
--------------
NEW JERSEY .7%
Hudson County Improvement Authority Solid Waste Systems Revenue, Refunding,
Series 1, 6.00%, 1/01/19 ........................................................... 2,100,000 2,042,250
Series 1, 6.00%, 1/01/29 ........................................................... 5,000,000 4,768,750
Series 2, 6.125%, 1/01/19 .......................................................... 2,000,000 1,972,500
Series 2, 6.125%, 1/01/29 .......................................................... 5,000,000 4,850,000
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 5,195,250
New Jersey Health Care Facilities Financing Authority Revenue, Cathedral Health
Services, Pre-Refunded, 7.25%, 2/15/21 ................................................ 3,975,000 4,085,624
New Jersey State Turnpike Authority Turnpike Revenue, Series A, MBIA Insured,
5.60%, 1/01/22 ..................................................................... 7,500,000 7,558,125
5.50%, 1/01/25 ..................................................................... 13,000,000 12,930,190
--------------
43,402,689
--------------
NEW MEXICO .5%
Farmington PCR, Public Service Co. of New Mexico, Refunding, Series A, AMBAC Insured,
6.375%, 12/15/22 ...................................................................... 10,435,000 10,751,076
Lordsburg PCR, Phelps Dodge Corp. Project, Refunding, 6.50%, 4/01/13 .................... 17,000,000 17,602,990
New Mexico Mortgage Finance Authority SFM Program, Refunding, Series A, 6.85%, 7/01/10 .. 1,660,000 1,725,022
--------------
30,079,088
--------------
</TABLE>
28
<PAGE>
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, OCTOBER 31, 2000 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
NEW YORK 16.7%
MTA Commuter Facilities Revenue, Series A,
5.25%, 7/01/28 ..................................................................... $ 5,000,000 $ 4,622,950
6.125%, 7/01/29 .................................................................... 15,040,000 15,460,368
FGIC Insured, 6.00%, 7/01/16 ....................................................... 8,950,000 9,431,600
MTA Dedicated Tax Fund Revenue, Series A,
FGIC Insured, 6.00%, 4/01/30 ....................................................... 12,500,000 12,972,250
MBIA Insured, 5.25%, 4/01/26 ....................................................... 11,125,000 10,513,681
MTA Transit Facilities Revenue,
Refunding, Series M, 6.00%, 7/01/14 ................................................ 18,210,000 18,781,794
Series A, FSA Insured, 6.00%, 7/01/16 .............................................. 3,630,000 3,825,330
Series A, FSA Insured, 5.625%, 7/01/27 ............................................. 10,800,000 10,630,548
Service Contract, Refunding, Series 8, 5.375%, 7/01/21 ............................. 15,000,000 14,376,150
MTA Transportation Facilities Revenue, Series A, 6.00%, 7/01/24 ......................... 5,000,000 5,111,250
Nassau County GO,
Improvement, Series F, 6.625%, 3/01/08 ............................................. 7,325,000 7,925,797
Water Utility Improvements, Series F, 6.625%, 3/01/07 .............................. 7,070,000 7,610,643
Nassau Health Care Corp. Health System Revenue, Nassau County Guaranty, FSA Insured,
5.75%, 8/01/29 ........................................................................ 10,000,000 10,062,700
New Rochelle IDA, Civic Facilities Revenue, College of New Rochelle Project,
Pre-Refunded, 6.625%, 7/01/12 ......................................................... 1,245,000 1,311,769
New York City GO,
Refunding, Series B, 6.20%, 8/15/06 ................................................ 1,500,000 1,609,260
Refunding, Series E, 6.00%, 8/01/26 ................................................ 2,765,000 2,824,752
Refunding, Series F, 6.00%, 8/01/13 ................................................ 14,000,000 14,755,020
Refunding, Series H, 6.25%, 8/01/15 ................................................ 13,035,000 13,919,164
Refunding, Series H, 6.125%, 8/01/25 ............................................... 65,785,000 68,002,612
Refunding, Series J, 6.00%, 8/01/21 ................................................ 28,260,000 29,030,368
Series A, 6.125%, 8/01/06 .......................................................... 14,140,000 15,016,539
Series A, 6.20%, 8/01/07 ........................................................... 20,515,000 21,831,653
Series A, 6.25%, 8/01/08 ........................................................... 4,390,000 4,677,633
Series A, 7.75%, 8/15/14 ........................................................... 40,000 41,543
Series A, 6.25%, 8/01/16 ........................................................... 3,280,000 3,379,187
Series A, Pre-Refunded, 6.125%, 8/01/06 ............................................ 360,000 384,750
Series A, Pre-Refunded, 6.20%, 8/01/07 ............................................. 1,295,000 1,387,346
Series A, Pre-Refunded, 7.75%, 8/15/13 ............................................. 4,810,000 5,009,615
Series A, Pre-Refunded, 7.75%, 8/15/14 ............................................. 205,000 213,508
Series A, Pre-Refunded, 6.25%, 8/01/16 ............................................. 1,720,000 1,797,830
Series A, Pre-Refunded, 7.75%, 8/15/17 ............................................. 3,285,000 3,421,328
Series A, Pre-Refunded, 8.00%, 8/15/20 ............................................. 5,000 5,215
Series B, 8.25%, 6/01/02 ........................................................... 5,000 5,185
Series B, 7.50%, 2/01/04 ........................................................... 10,000,000 10,505,000
Series B, 8.25%, 6/01/05 ........................................................... 1,000,000 1,146,410
Series B, 6.30%, 8/15/08 ........................................................... 22,360,000 24,013,969
Series B, 6.125%, 8/01/09 .......................................................... 11,510,000 12,166,530
Series B, 6.375%, 8/15/10 .......................................................... 17,170,000 18,433,712
Series B, 7.50%, 10/01/12 .......................................................... 40,000 40,776
Series B, 7.00%, 2/01/19 ........................................................... 9,825,000 10,219,769
Series B, 6.00%, 8/15/26 ........................................................... 1,670,000 1,706,222
</TABLE>
29
<PAGE>
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, OCTOBER 31, 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 $ 3,063,390
Series B, Pre-Refunded, 8.25%, 6/01/02 ............................................. 4,495,000 4,662,124
Series B, Pre-Refunded, 6.30%, 8/15/08 ............................................. 4,515,000 4,893,312
Series B, Pre-Refunded, 6.375%, 8/15/10 ............................................ 4,570,000 4,967,544
Series B, Pre-Refunded, 6.75%, 10/01/15 ............................................ 50,000 52,857
Series B, Pre-Refunded, 6.75%, 10/01/17 ............................................ 1,300,000 1,375,504
Series B, Pre-Refunded, 7.00%, 2/01/19 ............................................. 5,175,000 5,411,860
Series B, Pre-Refunded, 6.00%, 8/15/26 ............................................. 330,000 357,707
Series B, Sub Series B-1, Pre-Refunded, 7.00%, 8/15/16.............................. 3,000,000 3,291,000
Series B-1, Pre-Refunded, 7.30%, 8/15/11 ........................................... 8,000,000 8,844,000
Series C, Pre-Refunded, 7.25%, 8/15/24 ............................................. 3,540,000 3,622,022
Series C, Sub Series C-1, 7.00%, 8/01/18 ........................................... 25,000 26,283
Series C, Sub Series C-1, Pre-Refunded, 7.00%, 8/01/17.............................. 1,930,000 2,043,040
Series C, Sub Series C-1, Pre-Refunded, 7.00%, 8/01/18.............................. 1,680,000 1,778,398
Series D, 7.30%, 2/01/01 ........................................................... 380,000 382,664
Series D, 8.00%, 8/01/16 ........................................................... 5,000 5,195
Series D, 6.00%, 2/15/25 ........................................................... 18,710,000 19,070,168
Series D, ETM, 7.30%, 2/01/01 ...................................................... 4,620,000 4,653,218
Series D, Pre-Refunded, 8.25%, 8/01/11 ............................................. 160,000 166,950
Series D, Pre-Refunded, 8.25%, 8/01/12 ............................................. 11,125,000 11,608,270
Series D, Pre-Refunded, 8.25%, 8/01/13 ............................................. 7,750,000 8,086,660
Series D, Pre-Refunded, 8.25%, 8/01/14 ............................................. 4,340,000 4,526,880
Series D, Pre-Refunded, 7.625%, 2/01/15 ............................................ 9,000,000 9,484,830
Series D, Pre-Refunded, 7.50%, 2/01/16 ............................................. 5,000,000 5,261,900
Series D, Pre-Refunded, 8.00%, 8/01/16 ............................................. 45,000 46,873
Series D, Pre-Refunded, 7.50%, 2/01/17 ............................................. 12,000,000 12,628,560
Series D, Pre-Refunded, 8.00%, 8/01/17 ............................................. 100,000 104,163
Series D, Pre-Refunded, 8.00%, 8/01/18 ............................................. 50,000 52,082
Series D, Pre-Refunded, 8.00%, 8/01/19 ............................................. 30,000 31,249
Series D, Pre-Refunded, 8.00%, 8/15/21 ............................................. 15,000 15,645
Series D, Pre-Refunded, 6.00%, 2/15/25 ............................................. 1,920,000 2,045,242
Series E, 5.75%, 2/15/09 ........................................................... 5,295,000 5,517,920
Series E, 6.50%, 12/01/12 .......................................................... 20,000 20,030
Series E, Pre-Refunded, 6.00%, 8/01/26 ............................................. 235,000 254,634
Series F, 8.20%, 11/15/04 .......................................................... 85,000 89,525
Series F, Pre-Refunded, 8.20%, 11/15/04 ............................................ 5,250,000 5,532,765
Series F, Pre-Refunded, 6.50%, 2/15/07 ............................................. 8,050,000 8,730,145
Series F, Pre-Refunded, 6.50%, 2/15/08 ............................................. 7,540,000 8,177,055
Series F, Pre-Refunded, 6.60%, 2/15/10 ............................................. 16,000,000 17,413,600
Series F, Pre-Refunded, 8.25%, 11/15/15 ............................................ 2,000,000 2,108,720
Series F, Pre-Refunded, 8.25%, 11/15/17 ............................................ 2,500,000 2,635,900
Series G, 6.00%, 10/15/26 .......................................................... 15,160,000 15,528,236
Series G, Pre-Refunded, 6.00%, 10/15/26 ............................................ 175,000 190,705
Series H, 7.10%, 2/01/12 ........................................................... 210,000 219,131
</TABLE>
30
<PAGE>
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, OCTOBER 31, 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, 7.00%, 2/01/16 ........................................................... $ 215,000 $ 223,826
Series H, Pre-Refunded, 7.10%, 2/01/12 ............................................. 2,790,000 2,921,018
Series H, Pre-Refunded, 7.20%, 2/01/14 ............................................. 10,000,000 10,481,600
Series H, Pre-Refunded, 7.00%, 2/01/16 ............................................. 3,785,000 3,958,239
Series H-1, 6.125%, 8/01/11 ........................................................ 4,900,000 5,157,054
Series H-1, Pre-Refunded, 6.125%, 8/01/09 .......................................... 240,000 256,500
Series H-1, Pre-Refunded, 6.125%, 8/01/11 .......................................... 100,000 106,875
Series I, 6.25%, 4/15/13 ........................................................... 18,245,000 19,538,023
Series I, 6.25%, 4/15/27 ........................................................... 3,185,000 3,316,222
Series I, Pre-Refunded, 6.25%, 4/15/13 ............................................. 18,365,000 20,176,156
Series I, Pre-Refunded, 6.25%, 4/15/27 ............................................. 3,815,000 4,191,235
New York City IDA, IDR, Brooklyn Navy Yard Cogeneration Partners,
5.65%, 10/01/28 .................................................................... 5,000,000 4,560,800
5.75%, 10/01/36 .................................................................... 5,750,000 5,233,880
New York City Municipal Water Finance Authority Water and Sewer System Revenue,
Series A, 7.10%, 6/15/12 ........................................................... 895,000 917,196
Series A, 7.00%, 6/15/15 ........................................................... 4,980,000 5,112,219
Series A, 5.75%, 6/15/30 ........................................................... 8,000,000 8,075,840
Series A, Pre-Refunded, 7.10%, 6/15/12 ............................................. 1,560,000 1,602,354
Series B, 5.75%, 6/15/29 ........................................................... 15,000,000 15,118,350
Series B, MBIA Insured, 5.75%, 6/15/26 ............................................. 3,000,000 3,011,220
New York City Transitional Finance Authority Revenue, Future Tax Secured,
Refunding, Series C, 5.50%, 11/01/20 ............................................... 5,000,000 4,993,950
Refunding, Series C-A, 5.50%, 11/01/24 ............................................. 4,200,000 4,166,820
Series B, 6.00%, 11/15/29 .......................................................... 10,000,000 10,448,700
New York City Transportation Authority MTA, Triborough COP, Series A, AMBAC Insured,
5.40%, 1/01/19 ........................................................................ 15,000,000 14,861,850
New York State Dormitory Authority Lease Revenue GO, Court Facilities, 6.00%, 5/15/39 16,000,000 16,428,480
New York State Dormitory Authority Revenue,
City University General Resources, Series 2, MBIA Insured, Pre-Refunded, 6.25%,
7/01/19 .......................................................................... 4,000,000 4,243,280
City University System Consolidated, Third, Series 1, 5.25%, 7/01/25 ............... 10,000,000 9,319,600
City University System, Third General, 6.00%, 7/01/20 .............................. 16,860,000 17,263,460
City University System, Third General, Series 2, 6.00%, 7/01/26 .................... 5,500,000 5,607,580
City University System, Third General, Series 2, Pre-Refunded, 6.00%, 7/01/26 ...... 14,150,000 15,337,893
Interfaith Medical Center, Series D, 5.40%, 2/15/28 ................................ 8,000,000 7,584,400
Mental Health Services Facilities, Series A, 6.00%, 8/15/17 ........................ 18,000,000 18,711,900
Mental Health Services Facilities, Series A, 5.75%, 2/15/27 ........................ 5,000,000 5,012,550
Second Hospital, Interfaith Medical Center, Series D, 5.30%, 2/15/19 ............... 5,000,000 4,785,200
State University Educational Facilities, 5.125%, 5/15/21 ........................... 9,000,000 8,367,930
Upstate Community Colleges, Series A, 5.00%, 7/01/28 ............................... 10,000,000 8,852,100
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 8,694,905
Long Island Light, Series A, Pre-Refunded, 7.15%, 2/01/22 .......................... 1,500,000 1,587,675
Series A, 7.15%, 6/01/20 ........................................................... 12,885,000 13,377,465
Series A, Pre-Refunded, 7.15%, 6/01/20 ............................................. 4,615,000 4,884,747
</TABLE>
31
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FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, OCTOBER 31, 2000 (CONT.)
<TABLE>
<CAPTION>
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AMOUNT VALUE
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
NEW YORK (CONT.)
New York State HFA, Service Contract Obligation Revenue,
Refunding, Series C, 5.875%, 9/15/14 ............................................... $ 4,675,000 $ 4,778,598
Refunding, Series C, 5.50%, 9/15/22 ................................................ 17,505,000 16,857,665
Series A, 6.375%, 9/15/14 .......................................................... 25,000 26,335
Series A, 6.375%, 9/15/16 .......................................................... 3,785,000 3,979,776
Series A, Pre-Refunded, 6.375%, 9/15/14 ............................................ 3,130,000 3,396,801
Series A, Pre-Refunded, 6.50%, 3/15/25 ............................................. 10,000,000 11,039,700
Series C, 6.125%, 3/15/20 .......................................................... 25,500,000 26,028,870
New York State HFAR,
Health Facilities, New York City, Refunding, Series A, 5.90%, 5/01/05 .............. 14,070,000 14,671,633
Housing Project Mortgage, Refunding, Series A, FSA Insured, 6.10%, 11/01/15 ........ 5,475,000 5,746,451
Housing Project Mortgage, Refunding, Series A, FSA Insured, 6.125%, 11/01/20 ....... 4,230,000 4,385,326
New York State Medical Care Facilities Finance Agency Revenue,
Hospital and Nursing Home, Mortgage Revenue, Series A, FHA Insured, 6.50%, 2/15/34 . 6,610,000 6,881,208
Hospital Mortgage, Series A, AMBAC Insured, Pre-Refunded, 6.50%, 8/15/29 ........... 7,600,000 8,320,480
The Hospital for Special Surgery Revenue, Series A, Pre-Refunded, 6.375%, 8/15/24 .. 12,500,000 13,549,125
New York State Tollway Authority Service Contract Revenue, Local Highway and Bridge,
5.75%, 4/01/16 ..................................................................... 13,200,000 13,462,284
Pre-Refunded, 6.25%, 4/01/14 ....................................................... 11,600,000 12,608,736
New York State Urban Development Corp. Revenue,
Correctional Capital Facilities, Series 5, 6.10%, 1/01/12 .......................... 7,685,000 8,098,760
Youth Facilities, 6.00%, 4/01/17 ................................................... 11,720,000 12,165,594
Triborough Bridge and Tunnel Authority Revenue, General Purpose, Series B, 5.50%, 1/01/30 15,000,000 14,721,000
TSASC Inc. New York, TFABS, Series 1, 6.25%,
7/15/27 ............................................................................ 19,630,000 19,501,620
7/15/34 ............................................................................ 17,375,000 17,156,423
Warren and Washington Counties IDAR, Adirondack Resource Recovery Project, Refunding,
Series A, 7.90%, 12/15/07 ............................................................. 3,900,000 3,925,779
--------------
1,106,950,938
--------------
NORTH CAROLINA 4.0%
Charlotte-Mecklenberg Hospital Authority Health Care System Revenue,
5.90%, 1/15/16 ..................................................................... 7,010,000 7,140,807
Pre-Refunded, 5.90%, 1/15/16 ....................................................... 2,890,000 3,105,999
Cumberland County Hospital Facilities Revenue, Cumberland County Hospital Systems Inc.,
Refunding, 5.25%, 10/01/24 ............................................................ 6,000,000 5,245,800
North Carolina Eastern Municipal Power Agency Power System Revenue,
Refunding, Series A, 6.50%, 1/01/17 ................................................ 25,700,000 26,018,166
Refunding, Series A, 5.75%, 1/01/26 ................................................ 65,350,000 60,259,889
Refunding, Series B, 6.25%, 1/01/12 ................................................ 6,875,000 6,999,988
Refunding, Series B, 6.00%, 1/01/14 ................................................ 14,000,000 14,044,520
Refunding, Series B, 6.00%, 1/01/22 ................................................ 1,250,000 1,210,625
Refunding, Series B, 6.25%, 1/01/23 ................................................ 39,030,000 38,886,760
Refunding, Series B, 5.75%, 1/01/24 ................................................ 35,140,000 32,554,750
Refunding, Series D, 6.75%, 1/01/26 ................................................ 5,000,000 5,136,200
Refunding, Series B, FGIC Insured, 6.25%, 1/01/23 .................................. 4,000,000 4,097,920
</TABLE>
32
<PAGE>
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, OCTOBER 31, 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, MBIA Insured, 5.75%, 12/01/16 ................................. $ 14,420,000 $ 14,050,560
Series B, 6.00%, 1/01/05 ........................................................... 1,355,000 1,394,986
Series D, 5.875%, 1/01/13 .......................................................... 5,790,000 5,794,748
Series D, 6.70%, 1/01/19 ........................................................... 2,000,000 2,081,980
North Carolina Medical Care Commission Hospital Revenue, Mission St. Joseph's Health
System Project, MBIA Insured, 5.125%, 10/01/28 ........................................ 5,000,000 4,626,650
North Carolina Municipal Power Agency No. 1 Catawba Electric Revenue, Refunding,
5.75%, 1/01/15 ..................................................................... 12,435,000 12,163,171
6.25%, 1/01/17 ..................................................................... 9,720,000 9,810,882
University Hospital Chapel Hill Revenue, Refunding, AMBAC Insured, 5.00%, 2/15/21 ....... 5,000,000 4,621,500
Wake County Industrial Facilities and PCFA Revenue, Carolina Power and Light Co., 6.90%,
4/01/09 ............................................................................... 5,000,000 5,098,100
--------------
264,344,001
--------------
NORTH DAKOTA .3%
Ellendale MFHR, Ellendale Manor Apartments Project, 9.75%, 7/01/16 ...................... 238,000 238,350
Mercer County PCR, Basin Electric Power Corp.,
Refunding, Second Series, AMBAC Insured, 6.05%, 1/01/19 ............................ 9,130,000 9,417,412
Series E, 7.00%, 1/01/19 ........................................................... 11,195,000 11,463,904
Wahpeton MFHR, Evergreen Apartments Project, 9.75%, 7/01/16 ............................. 619,000 621,266
--------------
21,740,932
--------------
OHIO 1.6%
Cuyahoga County Hospital Facilities Revenue, Canton Inc., Project, 7.50%, 1/01/30 ....... 17,100,000 17,901,306
Dayton Special Facilities Revenue, Emery Air Freight Corp., Emery Worldwide Air Inc.,
Refunding,
Series A, 5.625%, 2/01/18 .......................................................... 6,000,000 5,323,200
Series E, 6.05%, 10/01/09 .......................................................... 4,000,000 3,975,320
Series F, 6.05%, 10/01/09 .......................................................... 2,750,000 2,733,033
Franklin County Convention Facilities Authority Tax and Lease Revenue, Anticipation
Bonds, MBIA Insured, 5.00%, 12/01/27 .................................................. 7,500,000 6,876,225
Hamilton County Hospital Facilities Revenue, Children's Hospital Medical Center,
Series G, MBIA Insured, 5.00%, 5/15/23 ................................................ 10,000,000 9,088,700
Montgomery County Health Systems Revenue,
Franciscan Facility, Series B-2, 8.10%, 7/01/01 .................................... 500,000 503,975
Series B-2, 8.10%, 7/01/18 ......................................................... 3,705,000 4,235,260
Series B-2, Pre-Refunded, 8.10%, 7/01/18 ........................................... 8,295,000 9,827,584
Montgomery County Hospital Facilities Revenue, Grandview Hospital and Medical Center,
Refunding,
5.50%, 12/01/10 .................................................................... 1,300,000 1,365,299
5.60%, 12/01/11 .................................................................... 1,000,000 1,057,510
5.65%, 12/01/12 .................................................................... 925,000 981,573
Ohio State Air Quality Development Authority Revenue, Dayton Power and Light Co. ........
Project, Refunding, 6.10%, 9/01/30 .................................................... 12,000,000 11,966,040
Ohio State EDR, Good Samaritan Medical Center, Series 1990-3, 7.875%, 12/01/10 .......... 1,360,000 1,388,002
Ohio State Solid Waste Disposal Revenue, USG Corp. Project, 5.65%, 3/01/33 .............. 5,330,000 4,438,025
Ohio State Water Development Authority Revenue, Dayton Power, Refunding, Series A,
6.40%, 8/15/27 ........................................................................ 3,250,000 3,347,240
</TABLE>
33
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FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, OCTOBER 31, 2000 (CONT.)
<TABLE>
<CAPTION>
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AMOUNT VALUE
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
OHIO (CONT.)
University of Akron General Receipts, FGIC Insured, 5.75%, 1/01/29 ...................... $ 11,305,000 $ 11,451,513
University of Cincinnati COP, University Center Project, MBIA Insured, 5.125%, 6/01/24 .. 10,500,000 9,890,370
--------------
106,350,175
--------------
OKLAHOMA .9%
Oklahoma State Turnpike Authority Turnpike Revenue, First Senior, 7.875%, 1/01/21 ....... 610,000 618,998
Stillwater Medical Center Authority Revenue,
Series A, 6.10%, 5/15/09 ........................................................... 3,440,000 3,338,451
Series B, 6.35%, 5/15/12 ........................................................... 1,220,000 1,190,805
Series B, 6.50%, 5/15/19 ........................................................... 3,390,000 3,294,063
Tulsa County Home Finance Authority Mortgage Revenue, Series D, GNMA Secured, 6.95%,
12/01/22 .............................................................................. 310,000 320,614
Tulsa County Municipal Airport Revenue, American Airlines Inc.,
7.35%, 12/01/11 .................................................................... 4,000,000 4,174,480
6.25%, 6/01/20 ..................................................................... 18,530,000 18,119,931
7.375%, 12/01/20 ................................................................... 11,000,000 11,235,070
Tulsa County Parking Authority, Series B,
6.90%, 12/01/07 .................................................................... 3,000,000 3,177,990
7.00%, 12/01/14 .................................................................... 5,500,000 5,764,495
Tulsa Housing Assistance Corp. Revenue, First Lien, Refunding, 6.80%, 7/01/11 ........... 2,740,000 2,835,873
Tulsa Industrial Authority Hospital Revenue, St. John Medical Center Project, Series A,
6.25%, 2/15/14 ........................................................................ 2,000,000 2,152,080
Valley View Hospital Authority Revenue, Valley View Regional Medical Center, Refunding,
6.00%, 8/15/14 ........................................................................ 4,000,000 3,748,280
--------------
59,971,130
--------------
OREGON .6%
Medford Hospital Facilities Authority Revenue, Asante Health System, Series A, MBIA
Insured, 5.00%, 8/15/24 ............................................................... 3,655,000 3,386,467
Oregon State Department of Administrative Services COP, Series A, AMBAC Insured, 6.00%,
5/01/26 ............................................................................... 10,000,000 10,435,200
Oregon State EDR, Georgia Pacific Corp. Project,
Refunding, Series 183, 5.70%, 12/01/25 ............................................. 3,500,000 3,155,810
Series CLVII, 6.35%, 8/01/25 ....................................................... 5,500,000 5,431,745
Salem-Keizer GO, School District No. 24J, 5.00%, 6/01/19 ................................ 15,055,000 14,135,140
--------------
36,544,362
--------------
PENNSYLVANIA 3.6%
Allegheny County Hospital Development Authority Revenue, Health System, Series A, 6.50%,
11/15/30 .............................................................................. 10,000,000 10,609,000
Allegheny County IDAR, Environmental Improvement,
6.70%, 12/01/20 .................................................................... 5,250,000 5,356,995
USX Corp., Refunding, 5.50%, 12/01/29 .............................................. 10,000,000 8,801,100
Berks County GO, AMBAC Insured, 5.00%, 11/15/25 ......................................... 5,000,000 4,533,750
(b)Butler Area School District GO, FGIC Insured, 5.60%, 4/01/28 ............................ 5,000,000 4,978,900
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 10,049,664
6.375%, 7/01/18 .................................................................... 10,740,000 11,255,735
Delaware County IDAR, Philadelphia Electric, Refunding, Series 1991, 7.375%, 4/01/21 .... 6,500,000 6,710,470
Delaware River Port Authority PA & NJ, Delaware River Bridges Revenue, FSA Insured,
5.75%,
1/01/22 ............................................................................ 8,500,000 8,662,860
1/01/26 ............................................................................ 10,000,000 10,170,000
</TABLE>
34
<PAGE>
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, OCTOBER 31, 2000 (CONT.)
<TABLE>
<CAPTION>
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AMOUNT VALUE
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
PENNSYLVANIA (CONT.)
Delaware Valley Regional Finance Authority Local Government Revenue, Series B, AMBAC
Insured, 5.60%, 7/01/17 ............................................................... $ 5,000,000 $ 5,130,750
Lehigh County IDA, PCR, Pennsylvania Power and Light Co. Project, Refunding, Series A,
MBIA Insured, 6.15%, 8/01/29 .......................................................... 4,000,000 4,124,000
Montgomery County IDA, Retirement Community Revenue, Act Retirement-Life Communities,
5.25%, 11/15/28 ....................................................................... 2,500,000 2,106,425
Pennsylvania EDA,
Financing Authority Revenue, MacMillan, LP Project, Pre-Refunded, 7.60%, 12/01/20 .. 5,000,000 5,697,750
Financing Resources Recovery Revenue, Colver Project, Series D, 7.125%, 12/01/15 ... 13,500,000 13,955,625
Pennsylvania HFA,
Rental Housing, Refunding, FGIC Insured, 6.40%, 7/01/12 ............................ 10,590,000 10,997,080
SFM, Series 1991, 7.15%, 4/01/15 ................................................... 3,635,000 3,727,765
Pennsylvania State Financial Authority Revenue, Municipal Capital Improvements Program,
Refunding, 6.60%, 11/01/09 ............................................................ 33,280,000 35,500,109
Philadelphia Gas Works Revenue,
1st Series A, FSA Insured, 5.00%, 7/01/26 .......................................... 5,000,000 4,537,000
13th Series, Pre-Refunded, 7.70%, 6/15/21 .......................................... 2,850,000 2,963,658
14th Series A, Pre-Refunded, 6.375%, 7/01/26 ....................................... 1,210,000 1,286,448
Refunding, 14th Series, 6.375%, 7/01/26 ............................................ 2,740,000 2,762,167
Philadelphia GO, MBIA Insured, 5.00%, 5/15/25 ........................................... 5,000,000 4,583,700
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 3,143,054
5.35%, 1/01/23 ..................................................................... 5,780,000 5,401,641
5.375%, 1/01/28 .................................................................... 3,765,000 3,513,159
Philadelphia Hospitals and Higher Educational Facilities Authority Revenue, Temple
University Hospital, 5.875%, 11/15/23 ................................................. 5,000,000 4,203,050
Philadelphia Parking Authority Parking Revenue, Airport, FSA Insured, 5.25%, 9/01/29 .... 15,000,000 14,068,950
Philadelphia Water and Sewer Revenue, Series 10, ETM, 7.35%, 9/01/04 .................... 10,040,000 10,711,074
Pittsburgh and Allegheny County Public Auditorium Hotel Room Revenue, AMBAC Insured,
5.125%, 2/01/35 ....................................................................... 15,000,000 13,664,550
Washington County Authority Revenue, Capital Projects and Equipment Program, Refunding,
AMBAC Insured, 6.15%, 12/01/29 ........................................................ 5,000,000 5,430,250
--------------
238,636,679
--------------
RHODE ISLAND 1.5%
Providence GO, Special Obligation Tax Increment, Series A, 7.65%, 6/01/16 ............... 9,900,000 10,758,033
Rhode Island Clean Water Financing Agency Revenue, Safe Drinking Water Providence,
Series A, AMBAC Insured, 6.70%, 1/01/15 ............................................... 2,200,000 2,382,358
Rhode Island Housing and Mortgage Finance Corp. Revenue, Homeownership Opportunity,
Series 2, 7.75%, 4/01/22 ........................................................... 55,000 55,896
Series 10-A, 6.50%, 10/01/22 ....................................................... 20,200,000 20,800,748
Series 10-A, 6.50%, 4/01/27 ........................................................ 13,085,000 13,409,770
Series 13, 6.70%, 10/01/15 ......................................................... 7,400,000 7,801,154
Series 13, 6.85%, 4/01/27 .......................................................... 425,000 430,032
Series 15-A, 6.85%, 10/01/24 ....................................................... 15,000,000 15,650,850
Series 17-A, 6.25%, 4/01/17 ........................................................ 2,320,000 2,403,938
Series 17-A, 6.375%, 10/01/26 ...................................................... 2,720,000 2,806,986
</TABLE>
35
<PAGE>
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, OCTOBER 31, 2000 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
RHODE ISLAND (CONT.)
Rhode Island Port Authority and EDC Revenue, Shepard Building Project, Series B, AMBAC
Insured, Pre-Refunded, 6.75%, 6/01/25 ................................................. $ 3,000,000 $ 3,268,680
Rhode Island State Health and Educational Building Corp. Revenue,
Health Facilities, Saint Antoine, Series B, 6.125%, 11/15/29 ....................... 8,400,000 8,337,756
Health Facilities, Tockwotton Home, Pre-Refunded, 7.25%, 4/15/17 ................... 3,000,000 3,172,440
St. Antoine Residence, 6.70%, 11/15/12 ............................................. 2,320,000 2,504,394
St. Antoine Residence, 6.75%, 11/15/18 ............................................. 2,750,000 2,972,420
--------------
96,755,455
--------------
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 1,924,416
Piedmont Municipal Power Agency Electric Revenue, Refunding,
6.60%, 1/01/21 ..................................................................... 10,645,000 10,642,658
Series A, 5.75%, 1/01/24 ........................................................... 3,150,000 2,907,702
Series A, AMBAC Insured, 6.55%, 1/01/16 ............................................ 7,340,000 7,339,853
Series A, AMBAC Insured, 5.75%, 1/01/24 ............................................ 5,050,000 5,049,596
Richland County PCR, Union Camp Corp. Project, Refunding, Series C, 6.55%, 11/01/20 ..... 3,000,000 3,035,580
South Carolina Public Service Authority Revenue, Refunding, Series A, AMBAC Insured,
6.375%, 7/01/21 ....................................................................... 12,765,000 13,159,439
--------------
44,059,244
--------------
SOUTH DAKOTA .2%
Lawrence County PCR, Black Hills Power and Light Co. Project, Refunding, 6.70%, 6/01/10.. 5,000,000 5,198,750
South Dakota HDA Revenue, Homeownership Mortgage,
Series A, 6.30%, 5/01/17 ........................................................... 2,155,000 2,236,179
Series D, 6.65%, 5/01/14 ........................................................... 3,315,000 3,492,783
Series G, 7.125%, 5/01/14 .......................................................... 3,405,000 3,614,952
--------------
14,542,664
--------------
TENNESSEE .8%
Chattanooga Health Educational and Housing Facility Board Revenue, Catholic Health
Initiatives, Refunding, Series A, 5.00%, 12/01/18 ..................................... 2,150,000 1,907,265
Hamilton County IDB, MFHR, Patten Towers Apartments, Series A,
6.125%, 8/01/05 .................................................................... 2,110,000 2,171,296
6.30%, 8/01/07 ..................................................................... 1,000,000 1,039,900
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 7,193,550
Knox County Health, Educational and Housing Facilities Board MFHR, East Towne Village
Project, GNMA Secured, 8.20%, 7/01/28 ................................................. 4,660,000 4,758,606
Memphis-Shelby County Airport Authority Special Facilities and Project Revenue, Federal
Express Corp.,
7.875%, 9/01/09 .................................................................... 14,690,000 15,394,386
6.75%, 9/01/12 ..................................................................... 6,520,000 6,758,828
Metropolitan Government of Nashville and Davidson County Health and Educational
Facilities Board Revenue, Multi-Modal Health Facility, Asset Guaranty, 5.50%, 5/01/23.. 970,000 925,496
(c)Metropolitan Government of Nashville and Davidson County IDBR, Osco Treatment Inc.,
Refunding and Improvement, 6.00%, 5/01/03 ............................................. 5,000,000 3,000,000
Metropolitan Nashville Airport Authority Revenue, Series C, FGIC Insured, 6.60%,
7/01/15 ............................................................................... 1,940,000 2,005,708
</TABLE>
36
<PAGE>
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, OCTOBER 31, 2000 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
TENNESSEE (CONT.)
Shelby County Health Educational and Housing Facilities Board Hospital Revenue, MBIA
Insured, 5.00%, 4/01/18 ............................................................... $ 5,000,000 $ 4,700,600
Tennessee HDA, Homeownership Program, Series 1992, 6.80%, 7/01/17 ....................... 1,990,000 2,064,784
Tennessee State Local Development Authority Revenue, Community Provider Pooled Loan
Program, Pre-Refunded, 6.45%, 10/01/14 ................................................ 2,275,000 2,463,757
--------------
54,384,176
--------------
TEXAS 6.0%
Austin Utility System Revenue,
Refunding, FGIC Insured, 6.25%, 5/15/16 ............................................ 7,755,000 8,135,073
Series A, Pre-Refunded, 8.00%, 11/15/16 ............................................ 18,100,000 18,444,081
Bexar County Health Facilities Development Corp. Revenue, Incarnate Word Health
Services, Refunding, FSA Insured, ETM,
6.00%, 11/15/15 .................................................................... 4,500,000 4,834,215
6.10%, 11/15/23 .................................................................... 8,300,000 9,039,613
Bexar County HFC, MFHR, Sunpark Apartments Project, 6.875%, 12/01/12 .................... 1,665,000 1,711,903
Bexar Metropolitan Water District Water Works Systems Revenue, Refunding, MBIA Insured,
5.875%, 5/01/22 ....................................................................... 2,860,000 2,900,755
Brazos River Authority PCR, Texas Utilities Electric Co. Project, Collateralized,
Refunding, Series C, 5.55%, 6/01/30 ................................................... 20,000,000 17,734,600
Dallas-Fort Worth International Airport Facilities Improvement Corp. Revenue, American
Airlines Inc.,
Pre-Refunded, 8.00%, 11/01/24 ...................................................... 99,000,000 100,980,000
Refunding, 6.00%, 11/01/14 ......................................................... 29,400,000 29,098,650
Refunding, Series B, 6.05%, 5/01/29 ................................................ 5,000,000 5,074,450
Refunding, Series C, 6.15%, 5/01/29 ................................................ 6,100,000 6,214,314
El Paso HFC, SFMR, Refunding, Series A, 8.75%, 10/01/11 ................................. 2,525,000 2,637,817
Fort Worth Higher Education Financial Corp. Higher Education Revenue, Texas Christian
University Project, 5.00%, 3/15/27 .................................................... 4,000,000 3,625,160
Grand Prairie Health Facilities Development Corp., Dallas/Fort Worth Medical Center
Project, Refunding, AMBAC Insured, 6.875%, 11/01/10 ................................... 2,700,000 2,809,215
Gulf Coast Waste Disposal Authority Environmental Improvement Revenue, UXS Corp.
Projects, Refunding, 5.50%, 9/01/17 ................................................... 3,250,000 2,978,788
Harris County IDR, Marine Terminal Revenue, Refunding, 6.95%, 2/01/22 ................... 20,250,000 20,920,275
Houston Water and Sewer System Revenue,
Junior lien, Refunding, Series D, FGIC Insured, 5.00%, 12/01/25 .................... 9,710,000 8,832,410
Series B, 6.375%, 12/01/14 ......................................................... 21,000,000 21,945,420
Joshua ISD, Refunding, Series B, 6.125%, 2/15/26 ........................................ 20,000 20,024
Lower Neches Valley Authority IDC Revenue, Mobil Oil Refunding Corp., Refunding, 5.55%,
3/01/33 ............................................................................... 2,500,000 2,391,450
Lubbock HFC, SFMR, MBS Program, Refunding, Series A, GNMA Secured, 6.125%, 12/01/17 ..... 1,000,000 1,036,010
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 16,627,545
Central Power and Light Co. Project, Refunding, 6.00%, 7/01/28 ..................... 19,200,000 18,892,608
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 5,738,590
Mesquite HFC, SFMR, Series 1983, 10.75%, 9/01/14 ........................................ 330,000 331,224
North Central Health Facility Development Corp. Revenue, Texas Health Resources System,
Series B, MBIA Insured, 5.125%, 2/15/22 ............................................... 5,985,000 5,563,237
Nueces River Authority Environmental Improvement Revenue, Asarco Inc. Project,
Refunding, Series A, 5.60%, 4/01/18 ................................................... 4,500,000 3,657,240
</TABLE>
37
<PAGE>
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, OCTOBER 31, 2000 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
TEXAS (CONT.)
Port Corpus Christi IDC Revenue, Valero, Refunding,
Series B, 5.40%, 4/01/18 ........................................................... $ 4,000,000 $ 3,617,360
Series C, 5.40%, 4/01/18 ........................................................... 6,000,000 5,325,780
Port Corpus Christi Nueces County General Revenue, Union Pacific, Refunding, 5.65%,
12/01/22 .............................................................................. 13,000,000 11,575,980
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 5,156,100
Sabine River Authority PCR,
Southwestern Electric Power Co., Refunding, MBIA Insured, 6.10%, 4/01/18 ........... 4,000,000 4,159,040
Texas Utilities Electric Co. Project, Collateralized, Refunding, FGIC Insured,
6.55%, 10/01/22 .................................................................. 7,700,000 8,011,619
San Antonio Water Revenue, senior lien, MBIA Insured,
6.50%, 5/15/10 ..................................................................... 2,620,000 2,740,101
Pre-Refunded, 6.50%, 5/15/10 ....................................................... 175,000 186,137
Pre-Refunded, 6.50%, 5/15/10 ....................................................... 1,440,000 1,511,064
Tarrant County Health Facilities Development Corp. Health Services Revenue, Health
Resources System, Series A, MBIA Insured, 5.00%, 2/15/26 .............................. 10,000,000 8,957,000
Texas Water Development Board Revenue, State Revolving Fund, 6.00%, 7/15/13 ............. 2,500,000 2,595,575
Travis County HFC, SFMR, Refunding, Series A, 6.95%, 10/01/27 ........................... 3,415,000 3,587,150
Tyler Health Facilities Development Corp. Hospital Revenue, East Texas Medical Center
Project,
Series A, MBIA Insured, 5.50%, 11/01/17 ............................................ 1,735,000 1,733,092
Series D, FSA Insured, 5.375%, 11/01/27 ............................................ 14,400,000 13,664,160
--------------
394,994,825
--------------
U.S. TERRITORIES 1.7%
District of Columbia GO, Series E, MBIA Insured,
6.00%, 6/01/13 ..................................................................... 3,845,000 3,987,688
Pre-Refunded, 6.00%, 6/01/13 ....................................................... 155,000 163,201
District of Columbia HFA, MFHR, Refunding, Series A, FHA Insured,
7.10%, 9/01/12 ..................................................................... 1,830,000 1,890,134
7.15%, 3/01/24 ..................................................................... 6,575,000 6,770,738
District of Columbia Hospital Revenue, Washington Hospital Center Corp., Series A,
Pre-Refunded, 9.00%, 1/01/08 .......................................................... 3,370,000 3,460,720
District of Columbia Redevelopment Land Agency Washington D.C. Sports Arena Special
Tax Revenue, 5.625%, 11/01/10 ......................................................... 740,000 744,248
District of Columbia Revenue, Catholic University of America, Connie Lee Insured,
6.45%, 10/01/23 ....................................................................... 5,265,000 5,628,496
Guam Airport Authority Revenue, Series B,
6.60%, 10/01/10 .................................................................... 325,000 344,991
6.70%, 10/01/23 .................................................................... 1,000,000 1,058,040
Guam Government Limited Obligation Highway Revenue, Refunding, Series A, FSA Insured,
6.30%, 5/01/12 ........................................................................ 280,000 292,320
Guam Power Authority Revenue, Series A, 5.25%, 10/01/23 ................................. 200,000 187,584
Northern Mariana Islands Commonwealth Ports Authority Seaport Revenue, Series A, 6.85%,
3/15/28 ............................................................................... 990,000 979,031
Puerto Rico Commonwealth GO,
AMBAC Insured, 5.40%, 7/01/25 ...................................................... 250,000 248,295
Pre-Refunded, 6.50%, 7/01/23 ....................................................... 250,000 272,618
Public Improvement, Refunding, 5.75%, 7/01/17 ...................................... 250,000 257,363
</TABLE>
38
<PAGE>
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, OCTOBER 31, 2000 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
U.S. TERRITORIES (CONT.)
Puerto Rico Commonwealth Highway and Transportation Authority Revenue,
Series A, 5.00%, 7/01/38 ........................................................... $ 2,500,000 $ 2,240,375
Series Y, 5.50%, 7/01/26 ........................................................... 1,150,000 1,132,808
Series Y, 5.00%, 7/01/36 ........................................................... 59,000,000 53,472,290
Series Y, 5.50%, 7/01/36 ........................................................... 7,000,000 6,891,850
Puerto Rico Commonwealth Urban Renewal and Housing Corp. Commonwealth Appropriation,
Refunding, 7.875%, 10/01/04 ........................................................... 2,445,000 2,477,959
Puerto Rico Electric Power Authority Revenue,
Series R, Pre-Refunded, 6.25%, 7/01/17 ............................................. 100,000 104,798
Series T, 5.50%, 7/01/20 ........................................................... 400,000 399,968
Series X, 5.50%, 7/01/25 ........................................................... 200,000 196,540
Puerto Rico Housing Bank and Financing Authority SFMR, Affordable Housing Mortgage,
First Portfolio, 6.25%, 4/01/29 ....................................................... 130,000 134,138
Puerto Rico Industrial Medical and Environmental Pollution Control Facilities Financing
Authority Revenue, PepsiCo Inc. Project, 6.25%, 11/15/13 .............................. 350,000 365,694
Puerto Rico Industrial Tourist Educational Medical and Environmental Control Facilities
Financing Authority Industrial Revenue,
Guaynabo Warehouse, Series A, 5.15%, 7/01/19 ....................................... 850,000 756,347
Teacher's Retirement System Revenue, Series B, 5.50%, 7/01/21 ...................... 250,000 250,290
Puerto Rico PBA, Public Education and Health Facilities, Refunding, Series M, 5.75%,
7/01/15 ............................................................................... 900,000 917,946
University of Puerto Rico Revenue, Series M, MBIA Insured, 5.25%, 6/01/25 ............... 285,000 274,332
Virgin Islands PFA Revenue,
senior lien, Fund Loan Notes, Refunding, Series A, 5.50%, 10/01/18 ................. 1,400,000 1,315,300
senior lien, Fund Loan Notes, Refunding, Series A, 5.50%, 10/01/22 ................. 6,485,000 5,974,955
senior lien, Fund Loan Notes, Refunding, Series A, 5.625%, 10/01/25 ................ 1,900,000 1,757,557
sub. lien, Fund Loan Notes, Refunding, Series D, 5.50%, 10/01/01 ................... 1,755,000 1,760,318
sub. lien, Fund Loan Notes, Refunding, Series D, 5.50%, 10/01/02 ................... 1,700,000 1,702,346
sub. lien, Fund Loan Notes, Refunding, Series D, 5.50%, 10/01/03 ................... 1,850,000 1,852,849
Virgin Islands Water and Power Authority Electric System Revenue, Refunding, 5.30%,
7/01/18 ............................................................................... 500,000 463,855
--------------
110,727,982
--------------
UTAH .7%
Carbon County Solid Waste Disposal Revenue, Laidlaw Inc. Project, Refunding, Series A,
7.50%, 2/01/10 ........................................................................ 5,050,000 4,953,848
Intermountain Power Agency Power Supply Revenue, Refunding, Series A,
6.15%, 7/01/14 ..................................................................... 8,775,000 9,301,237
Pre-Refunded, 6.15%, 7/01/14 ....................................................... 16,225,000 17,379,084
Salt Lake County College Revenue,
Westminster College Project, 5.70%, 10/01/17 ....................................... 1,000,000 973,510
Westminster College Project, 5.75%, 10/01/27 ....................................... 1,000,000 947,640
Westminster College Project, 5.625%, 10/01/28 ...................................... 3,305,000 3,070,543
Utah State HFA,
Refunding, Series A, FNMA Insured, 6.50%, 5/01/19 .................................. 2,945,000 3,019,626
SFM, Refunding, 6.80%, 1/01/12 ..................................................... 370,000 384,863
SFM, Series B, 6.55%, 7/01/19 ...................................................... 1,215,000 1,266,042
SFM, Series B, 6.55%, 7/01/26 ...................................................... 2,205,000 2,281,469
</TABLE>
39
<PAGE>
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, OCTOBER 31, 2000 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
UTAH (CONT.)
Utah State HFA, (cont.)
SFM, Series C-1, 6.80%, 7/01/12 .................................................... $ 115,000 $ 119,582
SFM, Series C-1, 8.375%, 7/01/19 ................................................... 155,000 156,065
SFM, Series E-1, 6.65%, 7/01/20 .................................................... 850,000 884,357
--------------
44,737,866
--------------
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 13,557,050
Vermont HFA, SFHR, Series 5, 7.00%, 11/01/27 ............................................ 9,140,000 9,473,701
--------------
23,030,751
--------------
VIRGINIA .6%
Danville IDA, Hospital Revenue,
Danville Regional Medical Center, FGIC Insured, Pre-Refunded, 6.50%, 10/01/24 ...... 5,840,000 6,307,726
Regional Medical Center, FGIC Insured, Pre-Refunded, 6.50%, 10/01/19 ............... 5,885,000 6,356,330
Henrico County IDA, Public Facilities Lease Revenue, Regional Jail Project, 6.00%,
8/01/15 ............................................................................... 7,250,000 7,687,103
Henrico County Water and Sewer Revenue, Refunding, 5.00%, 5/01/22 ....................... 4,875,000 4,511,764
Lynchburg IDA, Healthcare Facilities Revenue, Centra Health, Refunding, 5.20%, 1/01/28 .. 1,400,000 1,265,978
Medical College Hospital Authority Revenue, General Revenue Bonds, MBIA Insured, 5.125%,
7/01/18 ............................................................................... 2,000,000 1,935,540
Newport News GO, Series B, 5.00%, 3/01/19 ............................................... 3,550,000 3,311,440
Portsmouth IDAR, Hotel Conference Center and Parking, FSA Insured, 5.00%, 4/01/29 ....... 4,000,000 3,671,080
Virginia State HDA, Commonwealth Mortgage, Series C, Sub Series C-6, 6.25%, 1/01/15 ..... 5,120,000 5,250,458
--------------
40,297,419
--------------
WASHINGTON 2.8%
Aberdeen GO, Series A, MBIA Insured, 5.80%, 12/01/12 .................................... 100,000 102,395
Bellevue Water and Sewer Revenue, Refunding, 5.875%, 7/01/10 ............................ 100,000 103,597
Bellingham Housing Authority Revenue,
Cascade Meadows Project, Pre-Refunded, 7.10%, 11/01/23 ............................. 200,000 218,208
Pacific Rim and Cascade Meadows Project, Refunding, MBIA Insured, 5.20%, 11/01/27 .. 200,000 181,840
Chelan County PUD No. 1,
Chelan Hydro Consolidated System Revenue, Series A, 5.65%, 7/01/32 ................. 5,000,000 4,835,200
Consolidated Revenue, Chelan Hydroelectric Division I Project, Series A, FSA
Insured, 5.25%, 7/01/33 .......................................................... 200,000 180,908
Clark County Sewer Revenue, MBIA Insured, 5.70%, 12/01/16 ............................... 200,000 203,478
Conservation and Renewable Energy System Revenue, Washington Conservation Project,
6.50%, 10/01/14 ....................................................................... 400,000 425,588
Douglas County PUD No. 1 Electric Systems Revenue, MBIA Insured, 6.00%, 1/01/15 ......... 100,000 104,217
Federal Way GO, Refunding, 5.85%, 12/01/21 .............................................. 100,000 100,580
Grant County PUD No. 2,
Priest Rapids Hydroelectric Revenue, Second Series, Series B, MBIA Insured, 5.875%,
1/01/26 .......................................................................... 100,000 101,301
Wanapum Hydroelectric Revenue, Refunding, Second Series, Series A, MBIA Insured,
5.20%, 1/01/23 ................................................................... 250,000 233,760
King County GO,
Sewer District, 5.875%, 1/01/15 .................................................... 100,000 103,333
Sewer, Refunding, Series C, 6.25%, 1/01/32 ......................................... 8,715,000 9,075,888
King County Housing Authority Revenue, Woodridge Park Project, 6.25%, 5/01/15 ........... 175,000 179,953
King County School District No. 400, Mercer Island, 5.90%, 12/01/15 ..................... 100,000 103,249
King County School District No. 412, Shoreline, Pre-Refunded, 6.10%, 6/01/13 ............ 100,000 106,040
</TABLE>
40
<PAGE>
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, OCTOBER 31, 2000 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
WASHINGTON (CONT.)
King County School District No. 415, Kent, FSA Insured, 5.875%, 6/01/16 ................. $ 200,000 $ 205,966
Lewis County PUD No. 1, Cowlitz Falls Hydroelectric Project Revenue, 6.00%, 10/01/24 .... 200,000 200,636
Pierce County EDC, Solid Waste Revenue,
Occidental Petroleum Corp., 5.80%, 9/01/29 ......................................... 4,375,000 3,923,850
Steilacoom, Refunding, 6.60%, 8/01/22 .............................................. 32,480,000 33,504,744
Pierce County Sewer Revenue, 5.70%, 2/01/17 ............................................. 100,000 101,027
Pilchuck Development Public Corp. Special Facilities Airport Revenue, Tramco Project,
B.F. Goodrich, 6.00%, 8/01/23 ......................................................... 800,000 774,856
Port Moses Lake Public Corp., Union Carbide Corp.,
7.50%, 8/01/04 ..................................................................... 2,100,000 2,103,339
7.875%, 8/01/06 .................................................................... 1,000,000 1,012,050
Port of Seattle Revenue, Series B,
6.00%, 11/01/17 .................................................................... 180,000 182,626
Pre-Refunded, 6.00%, 11/01/17 ...................................................... 20,000 20,543
Seatac GO, MBIA Insured, Pre-Refunded, 6.50%, 12/01/13 .................................. 3,210,000 3,449,402
Seattle Housing Authority Low Income Housing Assistance Revenue, Kin On Project, 7.40%,
11/20/36 .............................................................................. 99,000 110,833
Seattle Municipality Metropolitan Sewer Revenue, Refunding, Series V, 6.20%, 1/01/32 .... 9,880,000 10,011,602
Seattle Water System Revenue, FGIC Insured, 5.00%, 10/01/23 ............................. 300,000 277,275
Snohomish County GO, MBIA Insured, 5.90%, 12/01/15 ...................................... 100,000 102,353
Snohomish County Housing Authority Revenue, Pooled, 6.30%, 4/01/16 ...................... 200,000 207,200
Snohomish County PUD No. 1 Electric Revenue, Generation System, Refunding, FGIC Insured,
6.00%, 1/01/18 ........................................................................ 200,000 204,104
Snohomish County PUD No. 1 Water Revenue, 5.85%, 11/01/17 ............................... 100,000 100,158
Snohomish County USD No. 6 GO, 6.50%, 12/01/11 .......................................... 7,000,000 7,929,110
Spokane County GO, Refunding, 6.00%, 12/01/14 ........................................... 130,000 136,180
Spokane County Water District No. 3 Water Revenue, Refunding, 5.90%, 1/01/14 ............ 100,000 100,077
Sunnyside GO, MBIA Insured, 6.10%, 12/01/14 ............................................. 100,000 103,412
Tacoma Electric System Revenue, Refunding, FGIC Insured, 6.25%, 1/01/15 ................. 200,000 209,014
Tacoma GO, Series A, MBIA Insured, 5.625%, 12/01/22 ..................................... 300,000 300,246
Tacoma Refuse Utility Revenue, AMBAC Insured, Pre-Refunded, 7.00%, 12/01/19 ............. 100,000 110,764
University of Washington Alumni Association Lease Revenue, Medical Center Roosevelt II,
FSA Insured, 6.30%, 8/15/14 ........................................................... 4,500,000 4,709,385
Washington State COP, Office Building Project, Series A, MBIA Insured, 6.00%, 4/01/12 ... 100,000 102,414
Washington State Health Care Facilities Authority Revenue,
Children's Hospital and Regional Medical Center, FSA Insured, 5.00%, 10/01/28 ...... 600,000 538,560
Multicare Health Systems, MBIA Insured, 5.00%, 8/15/22 ............................. 250,000 228,885
Providence Services, MBIA Insured, 5.50%, 12/01/26 ................................. 6,000,000 5,806,200
Washington State Higher Education Facilities Authority Revenue, Pacific Lutheran
University Project, Refunding, Connie Lee Insured, 5.70%, 11/01/26 .................... 200,000 198,658
Washington State Housing Finance Commission SF Program,
Series 1A-1, GNMA Secured, 6.25%, 6/01/16 .......................................... 100,000 103,589
Series 1A-3, GNMA Secured, 6.15%, 12/01/15 ......................................... 200,000 206,956
Series 2N, GNMA Secured, 6.05%, 12/01/16 ........................................... 100,000 103,647
Series 3A, GNMA Secured, 5.75%, 12/01/28 ........................................... 195,000 191,001
Washington State Housing Finance Commission SFMR, MBS Program, Series A, GNMA Secured,
7.05%, 7/01/22 ........................................................................ 30,000 31,433
Washington State Motor Vehicle Fuel Tax GO, Series D, 6.00%, 9/01/20 .................... 240,000 246,437
</TABLE>
41
<PAGE>
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, OCTOBER 31, 2000 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
WASHINGTON (CONT.)
Washington State Public Power Supply System Revenue,
Nuclear Project No. 1, Refunding, Series A, 6.05%, 7/01/12 ......................... $ 35,355,000 $ 36,931,479
Nuclear Project No. 1, Refunding, Series A, MBIA Insured, 6.25%, 7/01/17 ........... 19,965,000 20,520,227
Nuclear Project No. 2, Refunding, Series A, 6.00%, 7/01/09 ......................... 18,330,000 19,152,834
Nuclear Project No. 2, Refunding, Series A, 6.30%, 7/01/12 ......................... 7,700,000 8,511,195
Nuclear Project No. 2, Series A, 6.25%, 7/01/12 .................................... 3,200,000 3,329,536
--------------
182,653,338
--------------
WEST VIRGINIA .7%
Braxton County Solid Waste Disposal Revenue, Weyerhaeuser Co. Project,
6.50%, 4/01/25 ..................................................................... 3,500,000 3,549,070
Refunding, 5.40%, 5/01/25 .......................................................... 10,000,000 9,014,600
Putnam County PCR, FMC Corp. Project, Refunding, 5.625%, 10/01/13 ....................... 1,700,000 1,665,575
Tyler County PCR, Union Carbide Corp., 7.625%, 8/01/05 .................................. 2,400,000 2,610,144
West Virginia State GO, Series A, FGIC Insured, 5.20%, 11/01/26 ......................... 10,000,000 9,244,200
West Virginia State Hospital Finance Authority Hospital Revenue, Logan General Hospital
Project, Refunding and Improvement, 7.25%, 7/01/20 .................................... 7,000,000 5,969,600
West Virginia State Housing Development Fund, Housing Finance, Series D,
7.00%, 5/01/17 ..................................................................... 6,000,000 6,229,320
7.05%, 11/01/24 .................................................................... 9,000,000 9,325,350
--------------
47,607,859
--------------
WISCONSIN 1.3%
Janesville IDR, Simmons Manufacturing Co., 7.00%, 10/15/17 .............................. 2,200,000 2,228,534
Madison Industrial IDR, Madison Gas and Electric Co. Project, Series A, 6.75%, 4/01/27 4,220,000 4,399,645
Wisconsin Housing and EDA, Homeownership Revenue,
Refunding, Series A, 6.10%, 11/01/10 ............................................... 9,190,000 9,634,061
Series 1, 6.75%, 9/01/15 ........................................................... 10,230,000 10,626,310
Series 1, 6.75%, 9/01/17 ........................................................... 3,000,000 3,113,280
Series A, 6.90%, 3/01/16 ........................................................... 1,985,000 2,108,666
Series A, 6.45%, 3/01/17 ........................................................... 5,500,000 5,707,130
Series A, 7.10%, 3/01/23 ........................................................... 3,935,000 4,070,443
Series B, 7.05%, 11/01/22 .......................................................... 3,000,000 3,113,100
Wisconsin State Health and Educational Facilities Authority Revenue,
Children's Hospital of Wisconsin Inc., AMBAC Insured, 5.375%, 2/15/28 .............. 21,050,000 20,078,964
Franciscan Sisters Christian, Series A, 5.50%, 2/15/18 ............................. 1,500,000 1,328,700
Franciscan Sisters Christian, Series A, 5.50%, 2/15/28 ............................. 3,000,000 2,601,960
Mercy Health Systems Corp., AMBAC Insured, 6.125%, 8/15/13 ......................... 6,500,000 6,846,970
Mercy Health Systems Corp., AMBAC Insured, 6.125%, 8/15/17 ......................... 7,500,000 7,783,125
--------------
83,640,888
--------------
WYOMING .3%
Wyoming CDA,
Housing Revenue, Refunding, Series 6, 6.10%, 12/01/28 .............................. 11,540,000 11,767,569
MFMR, Series A, 6.95%, 6/01/24 ..................................................... 3,460,000 3,569,820
</TABLE>
42
<PAGE>
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, OCTOBER 31, 2000 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
WYOMING (CONT.)
Wyoming CDA, (cont.)
MFMR, Series A, Pre-Refunded, 6.90%, 6/01/12 ....................................... $ 1,320,000 $ 1,365,434
SFMR, Series G, 7.25%, 6/01/21 ..................................................... 570,000 587,704
--------------
17,290,527
--------------
TOTAL BONDS ............................................................................. 6,234,303,402
--------------
ZERO COUPON/STEP-UP BONDS 3.5%
Calcasieu Parish Memorial Hospital Service District Revenue, Lake Charles Parish Memorial
Hospital Project, Series A, 12/01/22 .................................................. 11,040,000 8,197,310
Chicago RMR, Refunding, Series B, MBIA Insured, 10/01/09 ................................ 3,440,000 1,852,130
Coldwater Community Schools, MBIA Insured, Pre-Refunded, 5/01/18 ........................ 5,935,000 2,214,230
Colorado Springs Airport Revenue, Series C,
01/01/03 ........................................................................... 1,660,000 1,481,932
01/01/05 ........................................................................... 1,610,000 1,289,320
01/01/07 ........................................................................... 1,675,000 1,189,736
01/01/08 ........................................................................... 800,000 534,928
01/01/11 ........................................................................... 1,450,000 803,112
Cook County GO, Community Consolidated School District No. 54, Schaumburg Township,
Series B, FGIC Insured, Pre-Refunded,
01/01/07 ........................................................................... 3,505,000 2,478,526
01/01/08 ........................................................................... 4,800,000 3,176,256
01/01/09 ........................................................................... 4,380,000 2,709,556
01/01/10 ........................................................................... 5,760,000 3,339,245
Director of State Department of Business and Industry Revenue, Las Vegas Monorail
Project, AMBAC Insured,
01/01/25 ........................................................................... 3,080,000 750,504
01/01/26 ........................................................................... 3,815,000 874,703
01/01/27 ........................................................................... 3,000,000 648,750
01/01/28 ........................................................................... 13,315,000 2,708,404
01/01/29 ........................................................................... 8,410,000 1,608,917
Florida State Mid-Bay Bridge Authority Revenue, Series A, senior lien, AMBAC Insured,
10/01/23 ........................................................................... 5,000,000 1,264,850
10/01/24 ........................................................................... 3,000,000 714,720
Foothill/Eastern Corridor Agency Toll Road Revenue,
Capital Appreciation, Refunding, 01/15/24 .......................................... 65,000,000 15,038,400
Convertible Capital Appreciation, Refunding, 01/15/23 .............................. 35,000,000 20,457,850
Harrison Community Schools GO, AMBAC Insured, 5/01/20 ................................... 6,000,000 1,885,260
Jefferson County Capital Projects Corp. Lease Revenue, Refunding, Series A,
08/15/07 ........................................................................... 1,640,000 1,170,058
08/15/08 ........................................................................... 4,505,000 3,053,399
08/15/09 ........................................................................... 4,580,000 2,940,223
08/15/10 ........................................................................... 4,620,000 2,803,924
08/15/13 ........................................................................... 6,825,000 3,427,993
08/15/14 ........................................................................... 6,860,000 3,234,353
08/15/16 ........................................................................... 7,005,000 2,898,389
08/15/17 ........................................................................... 7,115,000 2,761,189
</TABLE>
43
<PAGE>
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, OCTOBER 31, 2000 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
ZERO COUPON/STEP-UP BONDS (CONT.)
Kentucky Economic Development Finance Authority Revenue, Norton Healthcare Inc.,
Series C, MBIA Insured, zero cpn to 10/01/05,
6.05% thereafter, 10/01/19 ......................................................... $ 11,080,000 $ 8,345,567
6.10% thereafter, 10/01/21 ......................................................... 8,925,000 6,690,716
6.15% thereafter, 10/01/23 ......................................................... 16,945,000 12,702,989
Metropolitan Pier and Exposition Authority Dedicated State Tax Revenue,
Capital Appreciation, Series A, FGIC Insured, 06/15/09 ............................. 9,510,000 6,177,601
Capital Appreciation, Series A, FGIC Insured, Pre-Refunded, ETM, 06/15/09 .......... 1,490,000 975,235
McCormick Place Expansion Project, Series A, FGIC Insured, 06/15/10 ................ 8,000,000 4,919,760
McCormick Place Expansion Project, Series A, FGIC Insured, 06/15/11 ................ 9,690,000 5,612,836
McCormick Place Expansion Project, Series A, FGIC Insured, 06/15/12 ................ 250,000 235,455
McCormick Place Expansion Project, Series A, FGIC Insured, Pre-Refunded, 06/15/12 .. 11,550,000 11,086,845
McCormick Place Exposition, Series A, FGIC Insured, 06/15/08 ....................... 7,185,000 4,928,838
McCormick Place Exposition, Series A, FGIC Insured, Pre-Refunded, 06/15/08 ......... 1,315,000 907,455
Miami-Dade County Special Obligation, sub. lien, Series B, MBIA Insured, 10/01/34 ....... 5,500,000 695,915
Owensboro Electric Light and Power Revenue, Series B, AMBAC Insured, 1/01/08 ............ 5,250,000 3,696,420
San Joaquin Hills Transportation Corridor Agency Toll Road Revenue,
Refunding, Series A, 01/15/21 ...................................................... 50,000,000 32,915,500
senior lien, ETM, 01/01/23 ......................................................... 7,000,000 2,036,370
Shreveport Water and Sewer Revenue, Series B, FGIC Insured,
12/01/07 ........................................................................... 490,000 321,950
12/01/08 ........................................................................... 2,530,000 1,547,879
12/01/09 ........................................................................... 4,080,000 2,326,253
12/01/10 ........................................................................... 5,630,000 2,989,699
University of Illinois Revenues, AMBAC Insured, 4/01/10 ................................. 14,250,000 8,854,950
Washington State Public Power Supply System Revenue, Nuclear Project No. 3, Refunding,
Series B,
07/01/12 ........................................................................... 6,400,000 3,430,400
07/01/13 ........................................................................... 11,000,000 5,540,920
07/01/14 ........................................................................... 15,000,000 7,091,209
--------------
TOTAL ZERO COUPON/STEP-UP BONDS ......................................................... 231,538,929
--------------
TOTAL LONG TERM INVESTMENTS (COST $6,317,486,851) ....................................... 6,465,842,331
--------------
(a)SHORT-TERM INVESTMENTS .8%
Community Development Administration MF Development Revenue, Avalon Lea Apartments
Project, Refunding, FNMA Insured, Weekly VRDN and Put, 4.25%, 6/15/26 ................. 100,000 100,000
Connecticut State Health and Education, Weekly VRDN and Put, 4.20%, 7/01/29 ............. 300,000 300,000
Hapeville IDAR, Hapeville Hotel Ltd., Daily VRDN and Put, 4.55%, 11/01/15 ............... 2,000,000 2,000,000
Jackson County Mississippi Pollution Control Revenue, Daily VRDN and Put, 4.60%, 6/01/23 9,250,000 9,250,000
Metropolitan Nashville Airport Authority Special Facilities Revenue, American Airlines
Project,
Refunding, Series B, Daily VRDN and Put, 4.55%, 10/01/12 ........................... 3,100,000 3,100,000
Series A, Daily VRDN and Put, 4.55%, 10/01/12 ...................................... 3,100,000 3,100,000
New York City Municipal Water Finance Authority Water and Sewer System Revenue, Series C,
FGIC Insured, Daily VRDN and Put, 4.55%,
6/15/22 ............................................................................ 3,700,000 3,700,000
6/15/23 ............................................................................ 2,000,000 2,000,000
</TABLE>
44
<PAGE>
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, OCTOBER 31, 2000 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
(a)SHORT-TERM INVESTMENTS (CONT.)
New York State Energy Research and Development Authority PCR, New York State Electric
and Gas, Daily VRDN and Put, 4.55%, 6/01/29 ........................................... $ 9,775,000 $ 9,775,000
Uinta County PCR, Chevron USA Inc. Project, Refunding, Daily VRDN and Put, 4.60%,
8/15/20 ............................................................................... 9,600,000 9,600,000
West Jefferson IDB, PCR, Alabama Power Co. Project, Refunding, Daily VRDN and Put,
4.60%, 6/01/28 ........................................................................ 9,000,000 9,000,000
--------------
TOTAL SHORT-TERM INVESTMENTS (COST $51,925,000) ......................................... 51,925,000
--------------
TOTAL INVESTMENTS (COST $6,369,411,851) 98.6% ........................................... 6,517,767,331
OTHER ASSETS, LESS LIABILITIES 1.4% ..................................................... 91,606,738
--------------
NET ASSETS 100.0% ....................................................................... $6,609,374,069
==============
</TABLE>
See glossary of terms on page 46.
(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.
(c) See Note 6 regarding defaulted securities.
See notes to financial statements. 45
<PAGE>
FRANKLIN FEDERAL TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, OCTOBER 31, 2000 (CONT.)
GLOSSARY OF TERMS
-------------------------------------------------------------------------------
<TABLE>
<S> <C>
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/Agency
HFA - Housing Finance Authority/Agency
HFAR - Housing Finance Authority/Agency Revenue
HFC - Housing Finance Corp.
HMR - Home Mortgage Revenue
IDA - Industrial Development Authority/Agency
IDAR - Industrial Development Authority Revenue
IDB - Industrial Development Board
IDBR - Industrial Development Board Revenue
IDC - Industrial Development Corp.
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
PBA - Public Building 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
USD - Unified School District
VRDN - Variable Rate Demand Notes
</TABLE>
46
<PAGE>
FRANKLIN FEDERAL TAX-FREE INCOME FUND
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 2000 (UNAUDITED)
<TABLE>
<S> <C>
Assets:
Investments in securities:
Cost ............................................................................... $6,369,411,851
==============
Value .............................................................................. 6,517,767,331
Cash ................................................................................ 97,544
Receivables:
Capital shares sold ................................................................ 5,660,449
Interest ........................................................................... 121,531,442
--------------
Total assets ................................................................... 6,645,056,766
--------------
Liabilities:
Payables:
Investment securities purchased .................................................... 24,185,777
Capital shares redeemed ............................................................ 7,023,434
Affiliates ......................................................................... 3,487,606
Shareholders ....................................................................... 779,768
Other liabilities ................................................................... 206,112
--------------
Total liabilities .............................................................. 35,682,697
--------------
Net assets, at value .......................................................... $6,609,374,069
==============
Net assets consist of:
Undistributed net investment income ................................................. $ 2,573,416
Net unrealized appreciation ......................................................... 148,355,480
Accumulated net realized loss ....................................................... (48,406,491)
Capital shares ...................................................................... 6,506,851,664
--------------
Net assets, at value ........................................................... $6,609,374,069
==============
CLASS A:
Net asset value per share ($6,314,929,173 / 541,740,358 shares outstanding)* ........ $ 11.66
==============
Maximum offering price per share (11.66 / 95.75%) ................................... $ 12.18
==============
CLASS B:
Net asset value and maximum offering price per share
($84,909,916 / 7,287,971 shares outstanding)* ...................................... $ 11.65
==============
CLASS C:
Net asset value per share ($209,534,980 / 17,981,748 shares outstanding)* ........... $ 11.65
==============
Maximum offering price per share (11.65 / 99.00%) ................................... $ 11.77
==============
</TABLE>
* Redemption price is equal to net asset value less any applicable contingent
deferred sales charge.
See notes to financial statements.
47
<PAGE>
FRANKLIN FEDERAL TAX-FREE INCOME FUND
Financial Statements (continued)
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED OCTOBER 31, 2000 (UNAUDITED)
<TABLE>
<S> <C>
Investment income:
Interest ............................................................................ $206,622,454
------------
Expenses:
Management fees (Note 3) ............................................................ 14,940,479
Distribution fees (Note 3)
Class A ............................................................................ 2,581,681
Class B ............................................................................ 244,939
Class C ............................................................................ 662,064
Transfer agent fees (Note 3) ........................................................ 1,680,075
Custodian fees ...................................................................... 34,891
Reports to shareholders ............................................................. 159,985
Registration and filing fees ........................................................ 121,240
Professional fees (Note 3) .......................................................... 90,300
Directors' fees and expenses ........................................................ 61,289
Other ............................................................................... 119,695
------------
Total expenses ................................................................. 20,696,638
------------
Net investment income ......................................................... 185,925,816
------------
Realized and unrealized gains (losses):
Net realized loss from investments .................................................. (446,759)
Net unrealized appreciation on investments .......................................... 140,785,377
------------
Net realized and unrealized gain ..................................................... 140,338,618
------------
Net increase in net assets resulting from operations ................................. $326,264,434
============
</TABLE>
See notes to financial statements.
48
<PAGE>
FRANKLIN FEDERAL TAX-FREE INCOME FUND
Financial Statements (continued)
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED OCTOBER 31, 2000 (UNAUDITED)
AND THE YEAR ENDED APRIL 30, 2000
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
OCTOBER 31, 2000 APRIL 30, 2000
---------------- ---------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ........................................................ $ 185,925,816 $ 394,455,321
Net realized loss from investments ........................................... (446,759) (47,663,825)
Net unrealized appreciation (depreciation) on investments .................... 140,785,377 (494,853,639)
---------------- ---------------
Net increase (decrease) in net assets resulting from operations........... 326,264,434 (148,062,143)
Distributions to shareholders from:
Net investment income:
Class A ..................................................................... (178,976,987) (382,450,278)
Class B ..................................................................... (1,886,734) (2,605,389)
Class C ..................................................................... (5,184,190) (10,680,321)
Net realized gains:
Class A ..................................................................... -- (4,251,999)
Class B ..................................................................... -- (20,970)
Class C ..................................................................... -- (130,567)
---------------- ---------------
Total distributions to shareholders ........................................... (186,047,911) (400,139,524)
Capital share transactions: (Note 2)
Class A ..................................................................... (140,368,966) (320,895,503)
Class B ..................................................................... 17,124,333 41,612,034
Class C ..................................................................... 5,110,669 4,088,573
---------------- ---------------
Total capital share transactions .............................................. (118,133,964) (275,194,896)
Net increase (decrease) in net assets .................................... 22,082,559 (823,396,563)
Net assets
Beginning of period ........................................................... 6,587,291,510 7,410,688,073
---------------- ---------------
End of period ................................................................. $ 6,609,374,069 $ 6,587,291,510
================ ===============
Undistributed net investment income included in net assets:
End of period ................................................................. $ 2,573,416 $ 2,695,511
================ ===============
</TABLE>
See notes to financial statements.
49
<PAGE>
FRANKLIN FEDERAL TAX-FREE INCOME FUND
Notes to Financial Statements (unaudited)
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.
50
<PAGE>
FRANKLIN FEDERAL TAX-FREE INCOME FUND
Notes to Financial Statements (unaudited) (continued)
2. CAPITAL STOCK (CONT.)
At October 31, 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>
SIX MONTHS ENDED YEAR ENDED
OCTOBER 31, 2000 APRIL 30, 2000
-------------------------------- ---------------------------------
SHARES AMOUNT SHARES AMOUNT
----------- --------------- ------------ ---------------
<S> <C> <C> <C> <C>
CLASS A SHARES:
Shares sold .................................. 31,193,587 $ 358,597,278 117,037,208 $ 1,368,319,268
Shares issued on merger(a).................... -- -- 12,219,274 145,466,596
Shares issued in reinvestment of
distributions................................ 6,579,778 75,479,193 14,046,199 163,631,450
Shares redeemed .............................. (49,953,305) (574,445,437) (171,803,128) (1,998,312,817)
----------- --------------- ------------ ---------------
Net decrease ................................. (12,179,940) $ (140,368,966) (28,500,447) $ (320,895,503)
=========== =============== ============ ===============
CLASS B SHARES:
Shares sold .................................. 1,701,774 $ 19,586,502 4,234,722 $ 49,734,204
Shares issued in reinvestment of
distributions................................ 88,151 1,011,753 131,183 1,519,166
Shares redeemed .............................. (302,089) (3,473,922) (840,415) (9,641,336)
----------- --------------- ------------ ---------------
Net increase ................................. 1,487,836 $ 17,124,333 3,525,490 $ 41,612,034
=========== =============== ============ ===============
CLASS C SHARES:
Shares sold .................................. 2,050,194 $ 23,606,639 5,630,436 $ 65,795,085
Shares issued in reinvestment of
distributions................................ 266,568 3,057,966 564,964 6,580,822
Shares redeemed .............................. (1,878,212) (21,553,936) (5,917,220) (68,287,334)
----------- --------------- ------------ ---------------
Net increase ................................. 438,550 $ 5,110,669 278,180 $ 4,088,573
=========== =============== ============ ===============
</TABLE>
(a) During the year ended April 30, 2000, 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.
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:
<TABLE>
<CAPTION>
ANNUALIZED
FEE RATE NET ASSETS
---------- ----------
<S> <C>
.625% First $100 million
.500% Over $100 million, up to and including $250 million
.450% Over $250 million, up to and including $10 billion
</TABLE>
Fees are further reduced on net assets over $10 billion.
51
<PAGE>
FRANKLIN FEDERAL TAX-FREE INCOME FUND
Notes to Financial Statements (unaudited) (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 period of $904,703 and $125,252,
respectively.
The Fund paid transfer agent fees of $1,680,075 of which $1,288,095 was paid to
Investor Services.
Included in professional fees are legal fees of $9,070 that were paid to a law
firm in which a partner was an officer of the Fund.
4. INCOME TAXES
At April 30, 2000, the Fund had tax basis capital losses of $19,296,804 which
may be carried over to offset future capital gains. Such losses expire as
follows:
Capital loss carryovers expiring in:
<TABLE>
<S> <C>
2003 $ 71,377
2004 99,997
2007 117,620
2008 19,007,810
-----------
$19,296,804
===========
</TABLE>
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 October 31, 2000, the net unrealized appreciation based on the cost of
investments for income tax purposes of $6,369,418,764 was as follows:
<TABLE>
<S> <C>
Unrealized appreciation $243,314,753
Unrealized depreciation (94,966,186)
------------
Net unrealized appreciation $148,348,567
============
</TABLE>
Net realized capital losses differ for financial statement and tax purposes
primarily due to differing treatment of wash sales.
5. INVESTMENT TRANSACTIONS
Purchases and sales of securities (excluding short-term securities) for the
period ended October 31, 2000 aggregated $158,879,821 and $319,219,177,
respectively.
52
<PAGE>
FRANKLIN FEDERAL TAX-FREE INCOME FUND
Notes to Financial Statements (unaudited) (continued)
6. DEFAULTED SECURITIES
At October 31, 2000, the Fund held defaulted securities with a value aggregating
$3,000,000 representing .1% of the Fund's net assets. For information as to
specific securities, see the accompanying Statement of Investments.
For financial reporting purposes, the Fund discontinues accruing income on
defaulted bonds and provides an estimate for losses on interest receivable.
53
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