FRANKLIN TAX FREE TRUST, N-30D, 1995-10-30

FRANKLIN TAX FREE TRUST
N-30D, 1995-10-30

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MESSAGE FROM THE CHAIRMAN

Table of Contents Page
Message from the Chairman 1
Manager's Discussion 4
Fund Reports
Franklin Alabama Tax-Free
Income Fund 8
Franklin Florida Tax-Free
Income Fund 12
Franklin Georgia Tax-Free
Income Fund 16
Franklin Kentucky Tax-Free
Income Fund 20
Franklin Louisiana Tax-Free
Income Fund 23
Franklin Maryland Tax-Free
Income Fund 27
Franklin Missouri Tax-Free
Income Fund 31
Franklin North Carolina Tax-Free
Income Fund 35
Franklin Texas Tax-Free
Income Fund 39
Franklin Virginia Tax-Free
Income Fund 43
Statement of Investments 47
Financial Statements 93
Notes to Financial Statements 101

October 16, 1995

Dear Shareholders:

It's a pleasure to bring you the semi-annual report of the Franklin Tax-Free
Trust for the period ended August 31, 1995.

To date, 1995 has been a welcome change from the economic uncertainty of
1994, with stock and bond markets enjoying strong performances. In February, the
Dow Jones Industrial Average (R) broke the 4,000 mark for the first time, and
finished the period above 4,600. As of August 31, 1995, the bond market, as
measured by the Lehman Brothers Aggregate Bond Index, rose 7.44% to $103.78 from
$96.59 on December 30, 1994.

Of more importance to Franklin Tax-Free Trust shareholders is the strength of
the municipal bond market in 1995. Although a municipal bond price rally was
sidetracked in early December by the municipal bankruptcy filing of Orange
County, California, the municipal market has strengthened in 1995. Of course,
there's no guarantee that this market will continue to rise.

At this time, we think yields from municipal securities are currently very
attractive relative to yields available from U.S. Treasuries and other
high-quality, taxable fixed-income securities. For instance, municipal bonds --
as represented by the Bond Buyer 40 -- demonstrated an average yield of 6.11% on
August 31, 1995. For investors in the maximum federal income tax bracket of
39.6%, this tax-free yield equals a taxable yield of 10.12%, whereas the average
20-year U.S. Treasury bond offered a taxable yield of 6.65% on August 31, 1995.1

We maintain a very conservative approach in seeking to achieve each fund's
objective. We strive to maximize shareholders' current tax-free income while
attempting to minimize risk. Our strategy is simple: we purchase securities
based on their income producing potential and avoid short-term trading in an
effort to capture taxable capital gains. In addition, we also purchase bonds as
close to par, or face value, as possible in the current marketplace. This
strategy has a number of beneficial side effects, including fairly low portfolio
turnover rates resulting in lower expenses. This approach also tends to help
protect the funds from extreme price volatility. And while our investment
strategy focuses on income rather than capital growth, we feel that the positive
performance of the municipal bond market in 1995 has enabled the funds to report
impressive total returns for the six-month reporting period.

There has been a tremendous amount of discussion in the press regarding tax
reform issues, including a flat tax proposal, a consumption tax, a national
sales tax, and a "Super" IRA. Each of these proposals pose underlying questions
- -- Will there be any allowed deductions? Will I lose the benefit of investing in
tax-free municipal bonds? As you can imagine, a number of details need to be
fully considered. While it is probably too early to draw any conclusions on how
any of the proposed tax reform plans could impact the municipal bond market, we
understand that this topic raises important concerns. Our interview with Tom
Kenny, Director of Franklin's Municipal Bond Department, on page 4 should answer
some of your questions.

As you know, investment markets experience volatility, which is a normal part of
investing. That's why we've always encouraged our shareholders to focus on their
long-term investment goals. History has shown that, over the long term, stocks
and bonds have delivered impressive results.2 By concentrating on long-term
investment goals, you need not be unduly concerned with short-term market
fluctuations.

1. Source: Micropal.

You can also help minimize the effects of market fluctuations by diversifying
your investments. Mutual funds offer a level of diversification that would be
almost impossible for individual investors to achieve on their own. They also
provide full-time, professional management, and Franklin's Municipal Bond
Research Department is one of the largest in the industry.3 Our analysts
frequently make site visits to obtain invaluable first-hand information about
issuers and specific municipal projects. If you have questions, we would welcome
a chance to answer them.

As always, we appreciate your trust and support, and look forward to serving you
in the years to come.

Sincerely,

Charles B. Johnson
Chairman

2. Past performance cannot guarantee future results.

3. Source: Research and Ratings Review, Vol. II. Issue 8, November 14, 1994.
Franklin's municipal research team ranks second out of 1,000 investment advisory
firms, in terms of municipal bond analysts, in a survey by TMS Holdings, Inc.

Professional Management

We remain conservative in our management of the Trust's funds. As always, we
purchase only investment-grade bonds for our funds; that is, bonds whose credit
quality ratings at the time of purchase fell within Standard & Poor's or Moody's
four highest categories, or were judged to be of equal quality by the funds'
managers. In addition, we evaluate each issue on an individual basis, favoring
highly rated "essential service" bonds. These securities tend to have a more
reliable income stream generated from hospitals, utilities, and transportation
projects, to name a few. As a result, these bonds tend to be less affected by
budgetary and political changes, and are believed to be very attractive in a
municipal cost-cutting environment. Please keep in mind, however, that the
principal value of each fund's holdings, as well as the price of its shares,
will fluctuate with market conditions.

MANAGER'S DISCUSSION

Tom Kenny, director of Franklin's Municipal Bond Department, discusses a number
of current topics, including tax reform, interest rates, and his outlook for the
municipal bond market.

Tom, there's been a lot of press lately on the possibility of tax reform -- in
particular, a flat tax. What proposals are being considered?

There are three different flat tax proposals being discussed. And, these are in
addition to a number of other tax reform proposals, such as a consumption tax, a
national sales tax and a "Super" IRA. Basically, tax reform is a hot topic right
now -- ever since President Clinton appeared on national TV in April after
filling out his tax forms and said, "You know, a flat tax doesn't sound so bad."

With numerous tax reform proposals being considered, do you think that one of
them is going to pass?

The support for tax reform seems to be waning in recent weeks as more details of
some of these proposals are released. Ten out of ten tax payers will tell you
that taxes are too high and the current system is too complicated. There is
tremendous support for simplification. But when people realize that they would
lose their mortgage deduction -- which could cause their home value to decline
by 15 - 20% -- or that the wealthy would receive a large tax cut while the
middle class would have to pay more taxes under a flat tax system, their opinion
may change. So, I feel there is support for simplification but not necessarily
for radical reform.

However, I think something will happen. There's such a movement behind change
that it's not just going to disappear. With the election coming up, you're going
to continue hearing about tax reform, you're going to read about it, you're
going to see it on TV through next year and into 1997. But I don't think
anything will actually happen until '97, at the earliest.

Has the possibility of tax reform affected the municipal bond market at all?

The possibility of major tax reform has depressed municipal bond prices relative
to other fixed-income investments during the past few months; however, since we
have experienced a strong bond market, it hasn't been that noticeable. The
market has already somewhat priced the potential impact of tax reform, which
makes municipal yields very attractive today.

Depending on the state you live in and your tax bracket, the after-tax
equivalent yield available can be a very attractive 10%. Also, supply is down
25% in 1995 from 1994, and over 50% versus 1993. At the same time, we are
experiencing a record amount of bonds that are being called or redeemed and for
the second consecutive year, more bonds will be taken out of the muni market
than issued.

What is that in dollar terms?

The market may see about $130 to $140 billion in new issuance this year,
compared to $162 billion last year and $290 billion the year before. So new
issuance is down dramatically.

Did rising interest rates have anything to do with that?

Sure, but there are other reasons as well. One, voters simply aren't approving
as many bond issues today. Two, many governors that were elected last fall are
trying to implement tax cuts; in effect, they're reducing budgets and there's
just not a lot of debt capacity for increased debt service. And three, a big
reason we saw such high issuance in 1993 was because lower interest rates
resulted in an increase in refunding and pre-refunding issues -- just as many
homeowners refinanced their mortgages in '93 to take advantage of lower rates.
But because of tax code changes in 1986, issuers of municipal bonds can only
refund or prerefund their bonds once. Those that could refund, did. As a result,
the potential inventory of refundable bonds is much lower than a few years ago.

How will these factors affect prices of muni bonds?

It should be positive. The supply/demand fundamentals of the municipal market
are, in my opinion, promising, and the market has already partially discounted
the threat of tax reform. Over the long term, muni prices should improve on a
relative basis. From a historical perspective, munis are cheap today. Investors
can take advantage of this by dollar-cost averaging.

Another topic that's been a concern during the past year has been the bankruptcy
of Orange County. What's been the long-term impact on the municipal bond market?

The biggest impact has been in investor perception. Historically, general
obligation bonds (those that are backed by the full faith and credit of the
issuer) have been perceived as the safest kind of municipal bond. But in a
bankruptcy situation, like in Orange County, the investments that are most
affected are general obligations. Revenue bonds, backed by dedicated revenue
streams -- such as those from airport authority, solid waste authority,
transportation and the like -- haven't really been impacted. Investors in
general have re-thought how they look at revenue bonds and general obligation
bonds.

We have also seen an increase in the use of bond insurance, especially in
California. This year, the percentage of insured bonds for the entire market is
approximately 44% of total issuance while in California, 52% of all issues
obtained insurance.

Is that a big increase?

For the muni industry overall, it has increased from 37%; in California, it has
increased from 32%. In my opinion, that's a big jump. As a result, insured bonds
have become less expensive to purchase relative to uninsured bonds simply
because of the increased supply. And we have taken advantage of that by buying
more insured bonds this year.

What about interest rates? Have changes in interest rates affected your buying
decisions?

No. We don't try to second guess the market in terms of where we think rates are
headed, or alter our fundamental approach because of economic changes. Many
portfolio managers attempt this in an effort to capture capital growth.

Our approach is very straight-forward. We seek safety and income. I don't think
shareholders want the volatility you might generate by chasing capital growth.
We don't want to be number one in total return one year, and number 100 the
next. We use a consistent, conservative, "plain vanilla" approach. We manage our
funds for tax-free income, and take a long-term approach. Over time, income will
drive total return. For example, as measured by the Lehman Brothers 20-Year
Municipal Bond Index, income has been responsible for over 99% of total return
of municipal bonds over the last five years.1 So, by investing for income, you
should generate good total return performance. We think our shareholders are
better served by using this consistent approach. Investors in the tax-free funds
want to maximize tax-free income.

1. Source: Lehman Brothers 20-Year Municipal Bond Index.

How much research do you do before you buy a bond?

It really depends on the quality and type of bond. Lower-rated and non-rated
bonds will typically require more credit analysis than higher-rated bonds. Since
we purchase over 95% of our portfolio holdings in the new issue market, we spend
a lot of time up front performing site visits, addressing legal issues, and
structuring the issue to meet our credit and portfolio requirements. We have 23
analysts who spend much of their time on new issues, but also monitoring these
issues after purchase.

What are Franklin's total holdings in municipal bonds?

We currently have approximately $41 billion in municipal bonds in 42 tax-free
funds. Franklin is the largest buyer of municipal bonds in the country.

Does that size give you any advantages?

Sure. We get the attention of issuers and underwriters and we try to capitalize
on that by encouraging them to visit us in San Mateo to discuss their issue.
This allows us to give our input on structuring a deal. They, of course, hope
that we buy their deal.

When you say input, does that commit you to purchasing?

No. You can have input from a structuring standpoint, the actual bond structure,
or you can have input from a pricing standpoint, in terms of coupons and
maturities, and all of that input can go to the underwriter of the issue without
any commitment on our part. But if they make those changes to meet our needs,
then we're more likely to buy it than if they don't. So it can be to everyone's
advantage. We end up with an issue that meets our needs in terms of credit,
price, coupon and maturity, and the issuer ends up with a marketable product.

Where do you see the municipal bond market going through the end of the year,
and through the first six months of 1996?

I'd say the muni market is going to remain stable. We're going to see more of
the same, probably through the election. I think uncertainty surrounding tax
reform is going to continue to hold down munis for a while longer. No matter
what happens to the bond market, the economy or interest rates, we'll do what
we've always done -- we'll do our homework, maximize tax-free income for our
shareholders, and maintain a long-term investment horizon.

Thanks, Tom.

It's been my pleasure.

Kenny, Senior Vice President
Director, Franklin Municipal
Bond Department

FRANKLIN ALABAMA TAX-FREE INCOME FUND
Fund Objective:
Seeks to provide high current income exempt from regular federal and Alabama
state personal income taxes through a diversified portfolio consisting primarily
of Alabama municipal bonds.* While Alabama's economy continued to improve, its
unemployment rate remained typically above the national average as of January 9,
1995.** The evident economic growth is partially due to a more diverse economic
base, which includes a large concentration of manufacturing employment in paper,
metals and textile production. Growth in the trade sector was also visible,
along with the increase in auto-related manufacturing, due to Mercedes-Benz's
selection of Alabama as the site for its new sport utility vehicle assembly
plant.

Alabama's conservative financial practices have earned the state a AA rating
from Standard & Poor's and an Aa rating from Moody's, two national rating
agencies. The state's strong balanced budget acts allow spending only from
monies on-hand in the treasury. In addition, Alabama's new municipal bond
issuance is just over $553 million for the first half of 1995, down from $1.6
billion in 1994.** We believe Alabama's growing economic possibilities, coupled
with its conservative budget policies and a pending educational reform plan,
give the state a stable outlook.

GRAPHIC MATERIAL 1 OMMITTED - SEE APPENDIX AT END OF DOCUMENT

++The ratings reflect Standard & Poor's or Moody's assessment of the overall
credit quality of the fund's portfolio, based primarily on the fund's stated
objectives and policies. Non-rated bonds were judged to be of comparable quality
by the fund's managers. Ratings do not reflect the yield or market price of the
fund's shares nor approval by Standard & Poor's. Ratings are subject to change.

Franklin Alabama Tax-Free Income Fund Portfolio Breakdown on August 31, 1995
As a percentage of total net assets
% of total
Sector net assets
Utilities 34.0%
Hospitals 18.4%
Pre-refunded 12.4%
General Obligation Bonds 10.3%
Industrial 8.1%
Housing 7.7%
Education 3.5%
Other Revenue 2.8%
Transportation 1.9%
Certificates of Participation 0.9%

For a complete list of portfolio holdings, please see page 47 of this report.

*For investors subject to the federal alternative minimum tax, a small portion
of these dividends may be subject to such tax. Distributions of capital gains
and of ordinary income from accrued market discount, if any, are generally
taxable.

**Source: Moody's Municipal Credit Report, 1/9/95.

Performance Summary
Class I Shares

The Franklin Alabama Tax-Free Income Fund's Class I share price, as measured by
net asset value, increased to $11.52 on August 31, 1995, from $11.31 on February
28, 1995.

The fund continued to meet its investment objective of providing high current
income to shareholders. For the six-month period ended August 31, 1995, your
fund paid monthly income distributions totaling 32.4 cents ($0.324) per share.a
Dividends will vary based on the earnings of the fund's portfolio, and past
distributions are not necessarily predictive of future results.

At the end of the reporting period, your fund's distribution rate was 5.39%,
based on an annualization of the current monthly dividend of 5.4 cents ($0.054)
per share and the maximum offering price of $12.03 on August 31, 1995. This
double tax-free rate is generally higher than the after-tax return on a
comparable taxable investment. For example, if you are in the maximum combined
federal and Alabama state personal income tax bracket of 42.6%, you would have
to earn 9.39% from a taxable investment to match your fund's tax-free
distribution rate.

GRAPHIC MATERIAL 2 OMMITTED - SEE APPENDIX AT END OF DOCUMENT

aAssumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distribution will vary, depending on the
date you purchased your shares and any account activity during the month. Income
distributions and total return calculations include all income earned by the
fund during the reporting period.

Class II Shares

The Franklin Alabama Tax-Free Income Fund's Class II share price, as measured by
net asset value, increased to $11.54 on August 31, 1995, from $11.36 on its May
1, 1995, inception date.

The fund continued to meet its investment objective of providing high current
income to shareholders. For the abbreviated four-month period ended August 31,
1995, your fund paid monthly income distributions totaling 18.0 cents ($0.180)
per share.a Dividends will vary based on the earnings of the fund's portfolio,
and past distributions are not necessarily predictive of future results.

At the end of the reporting period, your fund's distribution rate was 4.94%,
based on an annualization of the current monthly dividend of 4.8 cents ($0.048)
per share and the maximum offering price of $11.66 on August 31, 1995. This
double tax-free rate is generally higher than the after-tax return on a
comparable taxable investment. For example, if you are in the maximum combined
federal and Alabama state personal income tax bracket of 42.6%, you would have
to earn 8.61% from a taxable investment to match your fund's tax-free
distribution rate.

GRAPHIC MATERIAL 3 OMMITTED - SEE APPENDIX AT END OF DOCUMENT

Franklin Alabama Tax-Free Income Fund

Periods ended August 31, 1995
<TABLE>
<CAPTION>
Since Since
Inception Inception
1-Year 5-Year (09/01/87) (05/01/95)

<S> <C> <C> <C> <C>
Cumulative Total Return1
Class I Shares 7.24% 46.69% 88.03% --
Class II Shares 3.31%

Average Annual Total Return2
Class I Shares 2.64% 7.45% 7.62% --

Distribution Rate3 Taxable Equivalent Distribution Rate4
Class I Shares 5.39% Class I Shares 9.39%
Class II Shares 4.94% Class II Shares 8.61%

30-Day Standardized Yield5 Taxable Equivalent Yield4
Class I Shares 5.03% Class I Shares 8.76%
Class II Shares 4.67% Class II Shares 8.14%

</TABLE>

1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include the maximum 4.25% initial sales
charge for Class I shares, or the maximum 1.00% initial sales charge and 1.00%
Contingent Deferred Sales Charge (CDSC) for Class II shares, applicable to
shares redeemed within the first 18 months of investment.
See note below.

2. Average annual total return represents the average annual change in value of
an investment over the specified periods. The figures reflect the maximum 4.25%
initial sales charge for Class I shares. See note below.

3. Class I shares distribution rate is based on an annualization of the fund's
current 5.4 cents per share monthly dividend and the maximum offering price of
$12.03 on August 31, 1995. Class II shares distribution rate is based on an
annualization of the fund's current 4.8 cents per share monthly dividend and the
maximum offering price of $11.66 on August 31, 1995.

4. Taxable equivalent distribution rate and yield assume the 1995 maximum
combined federal and Alabama state income tax bracket of 42.6%, based on the
39.6% federal income tax rate.

5. Yield, calculated as required by the SEC, is based on the earnings of fund's
portfolio during the 30 days ended August 31, 1995.

Note: Prior to July 1, 1994, fund shares were offered at a lower initial sales
charge, with dividends reinvested at the public offering price. Thus, actual
total returns for purchasers of shares during that period would have been
somewhat different than noted above. Effective May 1, 1994, the fund eliminated
the sales charge on reinvested dividends and implemented a plan of distribution
under Rule 12b-1, which will affect future performance. Class II shares, which
the fund began offering on May 1, 1995, are subject to different fees and
expenses, which will affect their performance. Please see the prospectus for
more details regarding Class I and Class II shares.

All total return calculations assume reinvestment of dividends and capital gains
at net asset value. Investment return and principal value will fluctuate with
market conditions, and you may have a gain or loss when you sell your shares.
Past performance cannot guarantee future results.

Past expense reductions by the fund's manager increased the fund's Class I total
returns.

FRANKLIN FLORIDA TAX-FREE INCOME FUND
Fund Objective:
Seeks to provide high current income exempt from regular federal income taxes
through a diversified portfolio consisting primarily of Florida municipal
bonds.* In addition, the fund's shares are free from Florida's annual
intangibles tax.

Florida remains one of the fastest growing states in the country, and its
economic and employment situation have been positively affected. The state's
economic recovery has been among the healthiest in the region, with employment
growth throughout 1994 ending at a strong 5.8%. The state's unemployment rate
was 6.5% during 1994, down from the recessionary peak of 8.2% in 1992.**

Florida's population increase, ranked ninth in national population growth
between 1989 and 1994, has also impacted the state on a financial level. The
state's higher new municipal bond issuance of $4.8 billion during the first half
of 1995, compared with a total issuance of $7.7 billion in 1994, is in part due
to its rapid growth.** Debt issuance is above average as it continues to meet
the demands of school construction, correctional facilities, highways and
environmental protection. Additional borrowing to support economic growth is
expected, and strong retail interest for Florida bonds has helped support their
prices. The state's well-managed financial program and steady economic
performance have contributed to a AA rating from Standard & Poor's, a national
rating agency. We believe the outlook for Florida's financial future is stable,
as growth continues.

GRAPHIC MATERIAL 4 OMMITTED - SEE APPENDIX AT END OF DOCUMENT

Franklin Florida Tax-Free Income Fund Portfolio Breakdown on August 31, 1995
As a percentage of total net assets
% of total
Sector net assets
Utilities 22.3%
Pre-refunded 17.7%
Hospitals 11.8%
Transportation 11.5%
Housing 9.2%
Special Assessment 8.1%
Certificates of Participation 4.9%
Other Revenue 3.9%
Miscellaneous 3.8%
Education 2.5%
General Obligation Bonds 2.4%
Health Care 0.8%
Industrial 0.6%
Sales Tax 0.5%

For a complete list of portfolio holdings, please see page 51 of this report.

Performance Summary

Class I Shares

The Franklin Florida Tax-Free Income Fund's Class I share price, as measured by
net asset value, increased to $11.55 on August 31, 1995, from $11.35 on February
28, 1995.

The fund continued to meet its investment objective of providing high current
income to shareholders. For the six-month period ended August 31, 1995, your
fund paid monthly income distributions totaling 34.2 cents ($0.342) per share.a
Dividends will vary based on the earnings of the fund's portfolio, and past
distributions are not necessarily predictive of future results.

At the end of the reporting period, your fund's distribution rate was 5.67%,
based on an annualization of the current monthly dividend of 5.7 cents ($0.057)
per share and the maximum offering price of $12.06 on August 31, 1995. This
tax-free rate is generally higher than the after-tax return on a comparable
taxable investment. For example, if you are in the maximum federal income tax
bracket of 39.6%, you would have to earn 9.39% from a taxable investment to
match your fund's tax-free distribution rate.

Please see the table on page 15 for more information regarding the fund's
performance.

GRAPHIC MATERIAL 5 OMMITTED - SEE APPENDIX AT END OF DOCUMENT

Class II Shares

The Franklin Florida Tax-Free Income Fund's Class II share price, as measured by
net asset value, increased to $11.61 on August 31, 1995, from $11.37 on its May
1, 1995, inception date.

The fund continued to meet its investment objective of providing high current
income to shareholders. For the abbreviated four-month period ended August 31,
1995, your fund paid monthly income distributions totaling 19.1 cents ($0.191)
per share.a Dividends will vary based on the earnings of the fund's portfolio,
and past distributions are not necessarily predictive of future results.

At the end of the reporting period, your fund's distribution rate was 5.22%,
based on an annualization of the current monthly dividend of 5.1 cents ($0.051)
per share and the maximum offering price of $11.73 on August 31, 1995. This
tax-free rate is generally higher than the after-tax return on a comparable
taxable investment. For example, if you are in the maximum federal income tax
bracket of 39.6%, you would have to earn 8.64% from a taxable investment to
match your fund's tax-free distribution rate.

Please see the table on page 15 for more information regarding the fund's
performance.

GRAPHIC MATERIAL 6 OMMITTED - SEE APPENDIX AT END OF DOCUMENT

Franklin Florida Tax-Free Income Fund

Periods ended August 31, 1995
Since Since
Inception Inception
1-Year 5-Year (09/01/87) (05/01/95)
<S> <C> <C> <C> <C>
Cumulative Total Return1
Class I Shares 7.91% 52.30% 94.23% --
Class II Shares 3.95%

Average Annual Total Return2
Class I Shares 3.36% 7.84% 8.05% --

Distribution Rate3 Taxable Equivalent Distribution Rate4
Class I Shares 5.67% Class I Shares 9.39%
Class II Shares 5.22% Class II Shares 8.64%

30-Day Standardized Yield5 Taxable Equivalent Yield4
Class I Shares 5.06% Class I Shares 8.38%
Class II Shares 4.68% Class II Shares 7.75%
</TABLE>

3. Class I shares distribution rate is based on an annualization of the fund's
current 5.7 cents per share monthly dividend and the maximum offering price of
$12.06 on August 31, 1995. Class II shares distribution rate is based on an
annualization of the fund's current 5.1 cents per share monthly dividend and the
maximum offering price of $11.73 on August 31, 1995.

4. Taxable equivalent distribution rate and yield assume the 1995 maximum
combined federal income tax bracket 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 August 31, 1995.

Past expense reductions by the fund's manager increased the fund's Class I total
returns.

FRANKLIN GEORGIA TAX-FREE INCOME FUND
Fund Objective:
Seeks to provide high current income exempt from regular federal and Georgia
state personal income taxes through a diversified portfolio consisting primarily
of Georgia municipal bonds.*

Georgia ranks among the top five states in the nation regarding employment and
total population growth. The state's stable and broad-based trade, service and
transportation-oriented economy helped push its unemployment rate down to 4.3%
as of April 1995, well below the national average of 5.6%.** While Georgia was
affected by the recession in the early part of the decade, it has grown rapidly
for the past two years, recording steady gains in employment and personal income
per capita relative to the national figures.

Georgia's steady growth, history of satisfactory finances and its moderate debt
level have earned it Moody's highest credit rating of Aaa. The state's strong
economic performance, driven by rapid population growth, has helped economically
sensitive state taxes to outperform budgeted expectations. New municipal bond
issuance was just over $1.3 billion in the first half of 1995, down from $4.7
billion in 1994.** Looking forward, we believe the 1996 Olympic Games will serve
to further boost Georgia's economic growth.

GRAPHIC MATERIAL 7 OMMITTED - SEE APPENDIX AT END OF DOCUMENT

Franklin Georgia Tax-Free Income Fund Portfolio Breakdown on August 31, 1995
As a percentage of total net assets
% of total
Sector net assets
Utilities 26.7%
Pre-refunded 16.9%
Housing 10.9%
Hospitals 9.1%
Industrial 7.3%
Transportation 6.8%
Sales Tax 5.6%
Other Revenue 4.7%
Certificates of Participation 4.1%
Education 3.8%
General Obligation Bonds 3.2%
Health Care 0.9%

For a complete list of portfolio holdings, please see page 60 of this report.

Performance Summary
Class I Shares

The Franklin Georgia Tax-Free Income Fund's Class I share price, as measured by
net asset value, increased to $11.74 on August 31, 1995, from $11.54 on February
28, 1995.

The fund continued to meet its investment objective of providing high current
income to shareholders. For the six-month period ended August 31, 1995, your
fund paid monthly income distributions totaling 33.0 cents ($0.33) per share.a
Dividends will vary based on the earnings of the fund's portfolio, and past
distributions are not necessarily predictive of future results.

At the end of the reporting period, your fund's distribution rate was 5.38%,
based on an annualization of the current monthly dividend of 5.5 cents ($0.055)
per share and the maximum offering price of $12.26 on August 31, 1995. This
double tax-free rate is generally higher than the after-tax return on a
comparable taxable investment. For example, if you are in the maximum
combined federal and Georgia state personal income tax bracket of 43.2%, you
would have to earn 9.47% from a taxable investment to match your fund's tax-free
distribution rate.

GRAPHIC MATERIAL 8 OMMITTED - SEE APPENDIX AT END OF DOCUMENT

Please see the table on page 19 for more information regarding the fund's
performance.

Class II Shares

The Franklin Georgia Tax-Free Income Fund's Class II share price, as measured by
net asset value, increased to $11.77 on August 31, 1995, from $11.57 on its May
1, 1995, inception date.

The fund continued to meet its investment objective of providing high current
income to shareholders. For the abbreviated four-month period ended August 31,
1995, your fund paid monthly income distributions totaling 18.2 cents ($0.182)
per share.a Dividends will vary based on the earnings of the fund's portfolio,
and past distributions are not necessarily predictive of future results.

At the end of the reporting period, your fund's distribution rate was 4.95%,
based on an annualization of the current monthly dividend of 4.9 cents ($0.049)
per share and the maximum offering price of $11.89 on August 31, 1995. This
double tax-free rate is generally higher than the after-tax return on a
comparable taxable investment. For example, if you are in the maximum
combined federal and Georgia state personal income tax bracket of 43.2%, you
would have to earn 8.71% from a taxable investment to match your fund's tax-free
distribution rate.

GRAPHIC MATERIAL 9 OMMITTED - SEE APPENDIX AT END OF DOCUMENT

Please see the table on page 19 for more information regarding the fund's
performance.

Franklin Georgia Tax-Free Income Fund

Periods ended August 31, 1995
Since Since
Inception Inception
1-Year 5-Year (09/01/87) (05/01/95)

Cumulative Total Return1
<S> <C> <C> <C> <C>
Class I Shares 7.39% 49.20% 89.93% --
Class II Shares 3.46%

Average Annual Total Return2
Class I Shares 2.86% 7.40% 7.75% --

Distribution Rate3 Taxable Equivalent Distribution Rate4
Class I Shares 5.38% Class I Shares 9.47%
Class II Shares 4.95% Class II Shares 8.71%

30-Day Standardized Yield5 Taxable Equivalent Yield4
Class I Shares 4.77% Class I Shares 8.40%
Class II Shares 4.43% Class II Shares 7.80%

</TABLE>

3. Class I shares distribution rate is based on an annualization of the fund's
current 5.5 cents per share monthly dividend and the maximum offering price of
$12.26 on August 31, 1995. Class II shares distribution rate is based on an
annualization of the fund's current 4.9 cents per share monthly dividend and the
maximum offering price of $11.89 on August 31, 1995.

4. Taxable equivalent distribution rate and yield assume the 1995 maximum
combined federal and Georgia state income tax bracket of 43.2%, based on the
39.6% federal income tax rate.

5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended August 31, 1995.

Past expense reductions by the fund's manager increased the fund's Class I total
returns.

FRANKLIN KENTUCKY TAX-FREE INCOME FUND
Fund Objective:
Seeks to provide high current income exempt from regular federal and Kentucky
state personal income taxes through a diversified portfolio consisting primarily
of Kentucky municipal bonds.*

Kentucky's supply of municipal bonds declined 12.0% to $760 million in the first
half of 1995.** Supply for the remainder of the year is expected to be low,
which should continue to support Kentucky's attractive municipal bond prices.
Growth in the state has increased as its economy has been restructured into a
more modern manufacturing and service-oriented base from the heavy
manufacturing, tobacco, coal and horse industries.

We believe the outlook for the Kentucky's economy is stable. Its low cost of
living and doing business, coupled with its aggressive recruitment and business
incentive programs, have made a number of corporate expansions and relocations
over the past decade possible. Toyota Manufacturing USA, for example, made a
heavily publicized decision to locate in a small Kentucky town in the state's
"Golden Triangle" region. Kentucky has improved its financial management
practices significantly over the past two years. The state earned a AA rating
from Standard & Poor's, a national rating agency, due to its growing economic
base, its modest but improving financial position and a manageable debt load.

GRAPHIC MATERIAL 10 OMMITTED - SEE APPENDIX AT END OF DOCUMENT

Franklin Kentucky Tax-Free Income Fund Portfolio Breakdown on August 31, 1995
As a percentage of total net assets
% of total
Sector net assets

Utilities 23.5%
Other Revenue 16.1%
Hospitals 14.7%
Housing 12.0%
Education 8.8%
Industrial 8.6%
Transportation 6.3%
General Obligations 4.7%
Certificates of Participation 4.3%
Pre-refunded 1.0%

For a complete list of portfolio holdings, please see page 64 of this report.

Performance Summary
The Franklin Kentucky Tax-Free Income Fund's share price, as measured by net
asset value, increased to $10.79 on August 31, 1995, from $10.54 on Feb- ruary
28, 1995.

The fund continued to meet its investment objective of providing high current
income to shareholders. For the six-month period ended August 31, 1995, your
fund paid monthly income distributions totaling 30.6 cents ($0.306) per share.a
Dividends will vary based on the earnings of the fund's portfolio, and past
distributions are not necessarily predictive of future results.

At the end of the reporting period, your fund's distribution rate was 5.43%,
based on an annualization of the current monthly dividend of 5.1 cents ($0.051)
per share and the maximum offering price of $11.27 on August 31, 1995. This
double tax-free rate is generally higher than the after-tax return on a
comparable taxable investment. For example, if you are in the maximum combined
federal and Kentucky state personal income tax bracket of 43.2%, you would have
to earn 9.56% from a taxable investment to match your fund's tax-free
distribution rate.

GRAPHIC MATERIAL 11 OMMITTED - SEE APPENDIX AT END OF DOCUMENT

Franklin Kentucky Tax-Free Income Fund
Period ended August 31, 1995

Since
Inception
1-Year (10/12/91)

<S> <C> <C> <C>
Cumulative Total Return1 7.97% 33.08%
Average Annual Total Return2 3.39% 6.44%

Distribution Rate3 5.43%

Taxable Equivalent Distribution Rate4 9.56%

30-Day Standardized Yield5 5.36%

Taxable Equivalent Yield4 9.44%

</TABLE>

1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include the maximum 4.25% initial sales
charge stated in the prospectus. See note below.

2. Average annual total returns represent the average annual change in value of
an investment over the specified periods. The figures reflect the maximum 4.25%
initial sales charge. See note below.

3. Based on an annualization of the fund's current 5.1 cents per share monthly
dividend and the maximum offering price of $11.27 on August 31, 1995.

4. Taxable equivalent distribution rate and yield assume the 1995 maximum
combined federal and Kentucky state personal income tax bracket of 43.2%, based
on the 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 August 31, 1995.

The manager of the fund has agreed to waive a portion of management fees, which
reduces operating expenses and increases distribution rate, yield and total
return to shareholders. If the manager had not taken this action, the fund's
distribution rate would have been lower, and yield for the period would have
been 4.92%. The fee waiver may be discontinued at any time upon notification of
the fund's Board of Trustees.

FRANKLIN LOUISIANA TAX-FREE INCOME FUND
Fund Objective:
Seeks to provide high current income exempt from regular federal and Louisiana
state personal income taxes through a diversified portfolio consisting primarily
of Louisiana municipal bonds.* While Louisiana's recovery has been slow as the
state attempts to diversify its energy-oriented economy, tourism and legal
gaming activity are expected to boost its sluggish economy. Louisiana's
financial condition was severely affected during the 1980s by the depressed
energy sector, and has since struggled to recover from the precipitous decline
in energy-related revenues. During the past year, however, employment growth
accelerated and outperformed the nation, particularly in the service,
manufacturing, lumber and paper industries.

Recent financial performance has improved as a result of stronger revenue
performance. Louisiana's debt ratios were well above-average, but have recently
declined as a result of reduced borrowing and a high retirement rate of
deficit-funding bonds issued in 1988. This decline resulted in the state
receiving a Baa1 rating from Moody's, a national rating agency. Borrowing levels
are expected to further decline as a consequence of several 1993 constitutional
reforms aimed at limiting and reducing Louisiana's debt.

GRAPHIC MATERIAL 12 OMMITTED - SEE APPENDIX AT END OF DOCUMENT

The ratings reflect Standard & Poor's or Moody's assessment of the overall
credit quality of the fund's portfolio, based primarily on the fund's stated
objectives and policies. Non-rated bonds were judged to be of comparable quality
by the fund's managers. Ratings do not reflect the yield or market price of the
fund's shares nor approval by Standard & Poor's. Ratings are subject to change.

Portfolio Breakdown on August 31, 1995
As a percentage of total net assets
% of total
Sector net assets
Utilities 27.5%
Pre-refunded 15.8%
Housing 15.3%
Hospitals 13.1%
Other Revenue 11.6%
Industrial 7.3%
General Obligation Bonds 3.4%
Sales Tax Bonds 2.5%
Certificates of Participation 1.7%
Transportation 1.3%
Education 0.5%

For a complete list of portfolio holdings, please see page 67 of this report.

Performance Summary
Class I Shares

The Franklin Louisiana Tax-Free Income Fund's Class I share price, as measured
by net asset value, increased to $11.16 on August 31, 1995, from $11.03 on
February 28, 1995.

At the end of the reporting period, your fund's distribution rate was 5.56%,
based on an annualization of the current monthly dividend of 5.4 cents ($0.054)
per share and the maximum offering price of $11.66 on August 31, 1995. This
double tax-free rate is generally higher than the after-tax return on a
comparable taxable investment. For example, if you are in the maximum
combined federal and Louisiana state personal income tax bracket of 43.2%, you
would have to earn 9.79% from a taxable investment to match your fund's tax-free
distribution rate.

GRAPHIC MATERIAL 13 OMMITTED - SEE APPENDIX AT END OF DOCUMENT

Please see the table on page 26 for more information regarding the fund's
performance.

Class II Shares

The Franklin Louisiana Tax-Free Income Fund's Class II share price, as measured
by net asset value, increased to $11.20 on August 31, 1995, from $11.01 on its
May 1, 1995 inception date.

At the end of the reporting period, your fund's distribution rate was 5.09%,
based on an annualization of the current monthly dividend of 4.8 cents ($0.048)
per share and the maximum offering price of $11.31 on August 31, 1995. This
double tax-free rate is generally higher than the after-tax return on a
comparable taxable investment. For example, if you are in the maximum
combined federal and Louisiana state personal income tax bracket of 43.2%, you
would have to earn 8.96% from a taxable investment to match your fund's tax-free
distribution rate.

GRAPHIC MATERIAL 14 OMMITTED - SEE APPENDIX AT END OF DOCUMENT

Please see the table on page 26 for more information regarding the fund's
performance.

Franklin Louisiana Tax-Free Income Fund

Periods ended August 31, 1995
Since Since
Inception Inception
1-Year 5-Year (09/01/87) (05/01/95)

Cumulative Total Return1
<S> <C> <C> <C> <C>
Class I Shares 6.65% 47.31% 86.72% --
Class II Shares 3.51%

Average Annual Total Return2
Class I Shares 2.14% 7.12% 7.52% --

Distribution Rate3 Taxable Equivalent Distribution Rate4
Class I Shares 5.56% Class I Shares 9.79%
Class II Shares 5.09% Class II Shares 8.96%

30-Day Standardized Yield5 Taxable Equivalent Yield4
Class I Shares 5.14% Class I Shares 9.05%
Class II Shares 4.97% Class II Shares 8.75%

</TABLE>

3. Class I shares distribution rate is based on an annualization of the fund's
current 5.4 cents per share monthly dividend and the maximum offering price of
$11.66 on August 31, 1995. Class II shares distribution rate is based on an
annualization of the fund's current 4.8 cents per share monthly dividend and the
maximum offering price of $11.31 on August 31, 1995.

4. Taxable equivalent distribution rate and yield assume the 1995 maximum
combined federal and Louisiana state income tax bracket of 43.2%, based on the
39.6% federal income tax rate.

5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended August 31, 1995.

Past expense reductions by the fund's manager increased the fund's Class I total
returns.

FRANKLIN MARYLAND TAX-FREE INCOME FUND
Fund Objective:
Seeks to provide high current income exempt from regular federal and Maryland
state personal income taxes through a portfolio consisting primarily of Maryland
municipal bonds.* Maryland remains one of the most affluent states, with its
personal income level ranking fifth in the nation. The state's diverse economic
structure and base of federal government employment contribute to its economic
stability and resilience. Although Maryland's rate of growth has lagged behind
national averages, its 1994 unemployment rate, at 5.4%, remained below the
national rate of 6.1%.** Maryland's strong and diverse economic base, led by the
service sector, helped to earn the state an AAA rating from Standard & Poor's
and an Aaa rating from Moody's, two national rating agencies. Other factors
leading to these superior ratings were Maryland's high wealth and income levels,
sound financial performance, strong financial position and a manageable direct
debt burden.

GRAPHIC MATERIAL 15 OMMITTED - SEE APPENDIX AT END OF DOCUMENT

Franklin Maryland Tax-Free Income Fund Portfolio Breakdown on August 31, 1995
As a percentage of total net assets
% of total
Sector net assets
Housing 24.8%
Pre-refunded 20.9%
Utilities 18.1%
Other Revenue 13.7%
Hospitals 7.5%
Certificates of Participation 4.9%
Transportation 4.5%
General Obligation Bonds 4.2%
Education 1.4%

For a complete list of portfolio holdings, please see page 71 of this report.

The state's new bond issuance for the first half of 1995 was just over $1.2
billion, down from a total of $3.4 billion in 1994. We believe the fiscal 1995
budget continues a trend of restrained spending in line with prudent revenue
investments, giving the state a stable outlook.

**Source: Standard & Poor's Creditweek Municipal, 3/6/95.

+Source: Moody's Municipal Credit Report, State of Maryland, 3/3/95.

Performance Summary
Class I Shares

The Franklin Maryland Tax-Free Income Fund's Class I share price, as measured by
net asset value, increased to $11.21 on August 31, 1995, from $10.92 on February
28, 1995.

The fund continued to meet its investment objective of providing high current
income to shareholders. For the six-month period ended August 31, 1995, your
fund paid monthly income distributions totaling 31.2 cents ($0.312) per share.a
Dividends will vary based on the earnings of the fund's portfolio, and past
distributions are not necessarily predictive of future results.

At the end of the reporting period, your fund's distribution rate was 5.33%,
based on an annualization of the current monthly dividend of 5.2 cents ($0.052)
per share and the maximum offering price of $11.71 on August 31, 1995. This
double tax-free rate is generally higher than the after-tax return on a
comparable taxable investment. For example, if you are in the maximum
combined federal and Maryland state personal income tax bracket of 45.4%, you
would have to earn 9.76% from a taxable investment to match your fund's tax-free
distribution rate.

GRAPHIC MATERIAL 16 OMMITTED - SEE APPENDIX AT END OF DOCUMENT

Please see the table on page 30 for more information regarding the fund's
performance.

Class II Shares

The Franklin Maryland Tax-Free Income Fund's Class II share price, as measured
by net asset value, increased to $11.24 on August 31, 1995, from $10.93 on its
May 1, 1995, inception date.

The fund continued to meet its investment objective of providing high current
income to shareholders. For the abbreviated four-month period ended August 31,
1995, your fund paid monthly income distributions totaling 17.2 cents ($0.172)
per share.a Dividends will vary based on the earnings of the fund's portfolio,
and past distributions are not necessarily predictive of future results.

At the end of the reporting period, your fund's distribution rate was 4.86%,
based on an annualization of the current monthly dividend of 4.6 cents ($0.046)
per share and the maximum offering price of $11.35 on August 31, 1995. This
double tax-free rate is generally higher than the after-tax return on a
comparable taxable investment. For example, if you are in the maximum
combined federal and Maryland state personal income tax bracket of 45.4%, you
would have to earn 8.90% from a taxable investment to match your fund's tax-free
distribution rate.

GRAPHIC MATERIAL 17 OMMITTED - SEE APPENDIX AT END OF DOCUMENT

Please see the table on page 30 for more information regarding the fund's
performance.

Franklin Maryland Tax-Free Income Fund

Periods ended August 31, 1995
Since Since
Inception Inception
1-Year 5-Year (10/03/88) (05/01/95)

Cumulative Total Return1
<S> <C> <C> <C> <C>
Class I Shares 8.83% 50.73% 69.03%
Class II Shares 4.56%

Average Annual Total Return2
Class I Shares 4.24% 7.61% 7.22%

Distribution Rate3 Taxable Equivalent Distribution Rate4
Class I Shares 5.33% Class I Shares 9.76%
Class II Shares 4.86% Class II Shares 8.90%

30-Day Standardized Yield5 Taxable Equivalent Yield4
Class I Shares 4.86% Class I Shares 8.90%
Class II Shares 4.49% Class II Shares 8.22%

</TABLE>

3. Class I shares distribution rate is based on an annualization of the fund's
current 5.2 cents per share monthly dividend and the maximum offering price of
$11.71 on August 31, 1995. Class II shares distribution rate is based on an
annualization of the fund's current 4.6 cents per share monthly dividend and the
maximum offering price of $11.35 on August 31, 1995.

4. Taxable equivalent distribution rate and yield assume the 1995 maximum
combined federal and Maryland state income tax bracket of 45.4%, based on the
39.6% federal income tax rate.

5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended August 31, 1995.

Past expense reductions by the fund's manager increased the fund's Class I total
returns.

FRANKLIN MISSOURI TAX-FREE INCOME FUND
Fund Objective:
Seeks to provide high current income exempt from regular federal and Missouri
state personal income taxes through a portfolio consisting primarily of Missouri
municipal bonds.* Missouri's economy remains diverse, with modest growth in the
service, trade and distribution sectors. The state is one of eight in the nation
to boast an AAA credit rating from Standard & Poor's, a national rating agency.
This superior rating is based on Missouri's improved financial position,
diversified economic base and reluctance toward borrowing.

Looking forward, the state's broadened riverboat gaming laws are expected to
boost the employment base and tourism industry. The city of St. Louis, in
particular, is targeting the convention and tourist industry by expanding and
improving its convention center, hotels and transportation. We expect the
state's continued growth to remain stable.

GRAPHIC MATERIAL 18 OMMITTED - SEE APPENDIX AT END OF DOCUMENT

Franklin Missouri Tax-Free Income Fund Portfolio Breakdown on August 31, 1995
As a percentage of total net assets
% of total
Sector net assets
Certificates of Participation 22.2%
Utilities 20.3%
Pre-refunded 18.3%
Hospitals 11.1%
Housing 8.4%
Health Care 4.7%
Other Revenue 4.6%
Transportation 3.6%
Education 2.4%
Industrial 2.0%
Tax Allocation Bonds 1.6%
General Obligation Bonds 0.8%

For a complete list of portfolio holdings, please see page 74 of this report.

Performance Summary

Class I Shares

The Franklin Missouri Tax-Free Income Fund's Class I share price, as measured by
net asset value, increased to $11.68 on August 31, 1995, from $11.44 on February
28, 1995.

The fund continued to meet its investment objective of providing high current
income to shareholders. For the six-month period ended August 31, 1995, your
fund paid monthly income distributions totaling 31.8 cents ($0.318) per share.a
Dividends will vary based on the earnings of the fund's portfolio, and past
distributions are not necessarily predictive of future results.

At the end of the reporting period, your fund's distribution rate was 5.21%,
based on an annualization of the current monthly dividend of 5.3 cents ($0.053)
per share and the maximum offering price of $12.20 on August 31, 1995. This
double tax-free rate is generally higher than the after-tax return on a
comparable taxable investment. For example, if you are in the maximum
combined federal and Missouri state personal income tax bracket of 43.2%, you
would have to earn 9.17% from a taxable investment to match your fund's tax-free
distribution rate.

GRAPHIC MATERIAL 19 OMMITTED - SEE APPENDIX AT END OF DOCUMENT

Please see the table on page 34 for more information regarding the fund's
performance.

Class II Shares

The Franklin Missouri Tax-Free Income Fund's Class II share price, as measured
by net asset value, increased to $11.70 on August 31, 1995, from $11.47 on its
May 1, 1995 inception date.

The fund continued to meet its investment objective of providing high current
income to shareholders. For the abbreviated four-month period ended August 31,
1995, your fund paid monthly income distributions totaling 17.6 cents ($0.176)
per share.a Dividends will vary based on the earnings of the fund's portfolio,
and past distributions are not necessarily predictive of future results.

At the end of the reporting period, your fund's distribution rate was 4.77%,
based on an annualization of the current monthly dividend of 4.7 cents ($0.047)
per share and the maximum offering price of $11.82 on August 31, 1995. This
double tax-free rate is generally higher than the after-tax return on a
comparable taxable investment. For example, if you are in the maximum
combined federal and Missouri state personal income tax bracket of 43.2%, you
would have to earn 8.40% from a taxable investment to match your fund's tax-free
distribution rate.

GRAPHIC MATERIAL 20 OMMITTED - SEE APPENDIX AT END OF DOCUMENT

Please see the table on page 34 for more information regarding the fund's
performance.

Franklin Missouri Tax-Free Income Fund

Periods ended August 31, 1995
Since Since
Inception Inception
1-Year 5-Year (09/01/87) (05/01/95)

Cumulative Total Return1
<S> <C> <C> <C> <C>
Class I Shares 7.61% 50.62% 89.28% --
Class II Shares 3.68%

Average Annual Total Return2
Class I Shares 3.03% 7.59% 7.71% --

Distribution Rate3 Taxable Equivalent Distribution Rate4
Class I Shares 5.21% Class I Shares 9.17%
Class II Shares 4.77% Class II Shares 8.40%

30-Day Standardized Yield5 Taxable Equivalent Yield4
Class I Shares 4.88% Class I Shares 8.59%
Class II Shares 4.51% Class II Shares 7.94%

</TABLE>

3. Class I shares distribution rate is based on an annualization of the fund's
current 5.3 cents per share monthly dividend and the maximum offering price of
$12.20 on August 31, 1995. Class II shares distribution rate is based on an
annualization of the fund's current 4.7 cents per share monthly dividend and the
maximum offering price of $11.82 on August 31, 1995.

4. Taxable equivalent distribution rate and yield assume the 1995 maximum
combined federal and Missouri state income tax bracket of 43.2%, based on the
39.6% federal income tax rate.

5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended August 31, 1995.

Past expense reductions by the fund's manager increased the fund's Class I total
returns.

FRANKLIN NORTH CAROLINA TAX-FREE INCOME FUND
Fund Objective:
Seeks to provide high current income exempt from regular federal and North
Carolina state personal income taxes through a portfolio consisting primarily of
North Carolina municipal bonds.*

North Carolina ranks among the top 10 states in the nation in terms of economic
growth, as measured by job and personal income growth. State unemployment rates
remain well below the national level, with the 1994 rate falling to 4.1%, 2%
lower than the national rate.** The state continues its transition from a
manufacturing economy--historically dominated by the textile, tobacco and
furniture industries--to a more diversified economic base relying increasingly
on finance, services and trade, which are expected to exhibit the strongest
growth.

North Carolina earned an AAA rating from Standard & Poor's, a national rating
agency, largely due to its strong economic characteristics, sound financial
performance and low debt levels. New bond issuance for the first half of 1995
totaled $677 million, down from 1994's $2.2 billion total figure.** We believe
the outlook for the state remains stable as North Carolina's economy continues
to show positive long and short-term trends.

GRAPHIC MATERIAL 21 OMMITTED - SEE APPENDIX AT END OF DOCUMENT

Franklin North Carolina Tax-Free Income Fund
Portfolio Breakdown on August 31, 1995
As a percentage of total net assets
% of total
Sector net assets

Utilities 29.6%
Pre-refunded 17.0%
Hospitals 14.1%
Certificates of Participation 13.8%
Housing 11.9%
General Obligation Bonds 6.4%
Industrial 3.3%
Other Revenue 2.0%
Transportation 1.5%
Education 0.4%

For a complete list of portfolio holdings, please see page 79 of this report.

**Source: Standard & Poor's Creditweek Municipal, 4/10/95.

Performance Summary

Class I Shares

The Franklin North Carolina Tax-Free Income Fund's Class I share price, as
measured by net asset value, increased to $11.57 on August 31, 1995, from $11.37
on February 28, 1995.

At the end of the reporting period, your fund's distribution rate was 5.36%,
based on an annualization of the current monthly dividend of 5.4 cents ($0.054)
per share and the maximum offering price of $12.08 on August 31, 1995. This
double tax-free rate is generally higher than the after-tax return on a
comparable taxable investment. For example, if you are in the maximum
combined federal and North Carolina state personal income tax bracket of 44.3%,
you would have to earn 9.62% from a taxable investment to match your fund's
tax-free distribution rate.

GRAPHIC MATERIAL 22 OMMITTED - SEE APPENDIX AT END OF DOCUMENT

Please see the table on page 38 for more information regarding the fund's
performance.

Class II Shares

The Franklin North Carolina Tax-Free Income Fund's Class II share price, as
measured by net asset value, increased to $11.61 on August 31, 1995, from $11.41
on its May 1, 1995 inception date.

The fund continued to meet its investment objective of providing high current
income to shareholders. For the abbreviated four-month period ended August 31,
1995, your fund paid monthly income distributions totaling 18.0 cents ($0.18)
per share.a Dividends will vary based on the earnings of the fund's portfolio,
and past distributions are not necessarily predictive of future results.

At the end of the reporting period, your fund's distribution rate was 4.91%,
based on an annualization of the current monthly dividend of 4.8 cents ($0.048)
per share and the maximum offering price of $11.73 on August 31, 1995. This
double tax-free rate is generally higher than the after-tax return on a
comparable taxable investment. For example, if you are in the maximum
combined federal and North Carolina state personal income tax bracket of 44.3%,
you would have to earn 8.82% from a taxable investment to match your fund's
tax-free distribution rate.

GRAPHIC MATERIAL 23 OMMITTED - SEE APPENDIX AT END OF DOCUMENT

Please see the table on page 38 for more information regarding the fund's
performance.

Franklin North Carolina Tax-Free Income Fund

Periods ended August 31, 1995
Since Since
Inception Inception
1-Year 5-Year (09/01/87) (05/01/95)

Cumulative Total Return1
<S> <C> <C> <C> <C>
Class I Shares 7.12% 47.17% 88.74% --
Class II Shares 3.48%

Average Annual Total Return2
Class I Shares 2.55% 7.10% 7.68% --

Distribution Rate3 Taxable Equivalent Distribution Rate4
Class I Shares 5.36% Class I Shares 9.62%
Class II Shares 4.91% Class II Shares 8.82%

30-Day Standardized Yield5 Taxable Equivalent Yield4
Class I Shares 4.85% Class I Shares 8.71%
Class II Shares 4.51% Class II Shares 8.10%

</TABLE>

3. Class I shares distribution rate is based on an annualization of the fund's
current 5.4 cents per share monthly dividend and the maximum offering price of
$12.08 on August 31, 1995. Class II shares distribution rate is based on an
annualization of the fund's current 4.8 cents per share monthly dividend and the
maximum offering price of $11.73 on August 31, 1995.

4. Taxable equivalent distribution rate and yield assume the 1995 maximum
combined federal and North Carolina state income tax bracket of 44.3%, based on
the 39.6% federal income tax rate.

5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended August 31, 1995.

Past expense reductions by the fund's manager increased the fund's Class I total
returns.

FRANKLIN TEXAS TAX-FREE INCOME FUND
Fund Objective:
Seeks to provide high current income exempt from regular federal income taxes
through a diversified portfolio consisting primarily of Texas municipal bonds.*

Texas' economy continued to outpace that of the nation, by adding over 250,000
jobs in 1994, more than any other state. The state's economic strength endured
despite higher unemployment rates in border towns due to the recent devaluation
of the Mexican Peso. Gains are expected to continue as Texas moves away from the
oil and gas industry, and strength in the service sector continues to grow.
While military and defense cuts could negatively affect the state's economy,
Texas is expected to outperform the nation in terms of economic growth for the
next two years.**

Because the state has a steadily growing and diversifying economy, satisfactory
financial performance and a low tax-supported debt burden, it has received an AA
rating from Standard & Poor's, a national rating agency. In addition, the
issuance of Texas municipal bonds decreased 27.0% in the first half of 1995,
supporting bond prices and providing attractive investment opportunities.** We
believe the outlook for Texas remains stable as it anticipates continued strong
economic growth to support its growing operations.

GRAPHIC MATERIAL 24 OMMITTED - SEE APPENDIX AT END OF DOCUMENT

Franklin Texas Tax-Free Income Fund Portfolio Breakdown on August 31, 1995 As
a percentage of total net assets
% of total
Sector net assets
Pre-refunded 25.6%
Utilities 24.2%
Hospitals 10.1%
Other Revenue 10.0%
Education 8.2%
Transportation 7.6%
Housing 6.3%
Industrial 5.6%
Certificates of Participation 1.3%
Health Care 1.1%

For a complete list of portfolio holdings, please see page 84 of this report.

**Source: Standard & Poor's Creditweek Municipal, 6/19/95.

Performance Summary
Class I Shares

The Franklin Texas Tax-Free Income Fund's Class I share price, as measured by
net asset value, increased to $11.47 on August 31, 1995, from $11.25 on February
28, 1995.

The fund continued to meet its investment objective of providing high current
income to shareholders. For the six-month period ended August 31, 1995, your
fund paid monthly income distributions totaling 33.6 cents ($0.336) per share.a
Dividends will vary based on the earnings of the fund's portfolio, and past
distributions are not necessarily predictive of future results.

At the end of the reporting period, your fund's distribution rate was 5.61%,
based on an annualization of the current monthly dividend of 5.6 cents ($0.056)
per share and the maximum offering price of $11.98 on August 31, 1995. This
tax-free rate is generally higher than the after-tax return on a comparable
taxable investment. For example, if you are in the maximum federal personal
income tax bracket of 39.6%, you would have to earn 9.29% from a taxable
investment to match your fund's tax-free distribution rate.

GRAPHIC MATERIAL 25 OMMITTED - SEE APPENDIX AT END OF DOCUMENT

Please see the table on page 42 for more information regarding the fund's
performance.

Class II Shares

The Franklin Texas Tax-Free Income Fund's Class II share price, as measured by
net asset value, increased to $11.52 on August 31, 1995, from $11.27 on its May
1, 1995 inception date.

The fund continued to meet its investment objective of providing high current
income to shareholders. For the abbreviated four-month period ended August 31,
1995, your fund paid monthly income distributions totaling 18.7 cents ($0.187)
per share.a Dividends will vary based on the earnings of the fund's portfolio,
and past distributions are not necessarily predictive of future results.

At the end of the reporting period, your fund's distribution rate was 5.15%,
based on an annualization of the current monthly dividend of 5.0 cents ($0.050)
per share and the maximum offering price of $11.64 on August 31, 1995. This
tax-free rate is generally higher than the after-tax return on a comparable
taxable investment. For example, if you are in the maximum federal income tax
bracket of 39.6%, you would have to earn 8.53% from a taxable investment to
match your fund's tax-free distribution rate.

GRAPHIC MATERIAL 26 OMMITTED - SEE APPENDIX AT END OF DOCUMENT

Please see the table on page 42 for more information regarding the fund's
performance.

Franklin Texas Tax-Free Income Fund

Periods ended August 31, 1995
Since Since
Inception Inception
1-Year 5-Year (09/01/87) (05/01/95)

Cumulative Total Return1
<S> <C> <C> <C> <C>
Class I Shares 7.14% 50.03% 91.86% --
Class II Shares 4.04%

Average Annual Total Return2
Class I Shares 2.62% 7.51% 7.89% --

Distribution Rate3 Taxable Equivalent Distribution Rate4
Class I Shares 5.61% Class I Shares 9.29%
Class II Shares 5.15% Class II Shares 8.53%

30-Day Standardized Yield5 Taxable Equivalent Yield4
Class I Shares 4.70% Class I Shares 7.78%
Class II Shares 4.33% Class II Shares 7.17%

</TABLE>

3. Class I shares distribution rate is based on an annualization of the fund's
current 5.6 cents per share monthly dividend and the maximum offering price of
$11.98 on August 31, 1995. Class II shares distribution rate is based on an
annualization of the fund's current 5.0 cents per share monthly dividend and the
maximum offering price of $11.64 on August 31, 1995.

4. Taxable equivalent distribution rate and yield assume the 1995 maximum
federal income tax bracket 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 August 31, 1995.

Past expense reductions by the fund's manager increased the fund's Class I total
returns.

FRANKLIN VIRGINIA TAX-FREE INCOME FUND
Fund Objective:
Seeks to provide high current income exempt from regular federal and Virginia
state personal income taxes through a diversified portfolio consisting primarily
of Virginia municipal bonds.*

While the commonwealth of Virginia anticipates slow economic growth, which may
slightly underperform that of the nation, its rigorous debt management program
assures that the debt burden will remain manageable. Virginia's economy, which
historically benefited from sizable levels of federal defense and non-defense
related spending, can be impacted by the advent of base closings and sharp
reductions in federal funding. However, diversification of the commonwealth's
economy into business services, retail trade and construction will likely
lighten the impact.

Virginia's diversified economy, low unemployment rates, above-average income
levels, strong financial management and low debt burden have all contributed to
its superior credit rating of AAA from Standard & Poor's, a national rating
agency. We believe the outlook for Virginia's continued growth is stable, with
its municipal bonds trading at higher prices compared to general market bonds.

GRAPHIC MATERIAL 27 OMMITTED - SEE APPENDIX AT END OF DOCUMENT

Franklin Virginia Tax-Free Income Fund Portfolio Breakdown on August 31, 1995
As a percentage of total net assets
% of total
Sector net assets
Pre-refunded 20.2%
Housing 20.1%
Transportation 15.0%
Utilities 13.0%
Hospitals 12.9%
Industrial 6.8%
Education 5.1%
Certificates of Participation 3.2%
General Obligation Bonds 2.9%
Miscellaneous 0.5%
Other Revenue 0.2%
Health Care 0.1%

For a complete list of portfolio holdings, please see page 88 of this report.

Performance Summary
Class I Shares

The Franklin Virginia Tax-Free Income Fund's Class I share price, as measured by
net asset value, increased to $11.56 on August 31, 1995, from $11.33 on February
28, 1995.

At the end of the reporting period, your fund's distribution rate was 5.37%,
based on an annualization of the current monthly dividend of 5.4 cents ($0.054)
per share and the maximum offering price of $12.07 on August 31, 1995. This
double tax-free rate is generally higher than the after-tax return on a
comparable taxable investment. For example, if you are in the maximum
combined federal and Virginia state personal income tax bracket of 43.1%, you
would have to earn 9.44% from a taxable investment to match your fund's tax-free
distribution rate.

GRAPHIC MATERIAL 28 OMMITTED - SEE APPENDIX AT END OF DOCUMENT

Please see the table on page 46 for more information regarding the fund's
performance.

Class II Shares

The Franklin Virginia Tax-Free Income Fund's
Class II share price, as measured by net asset value, increased to $11.61 on
August 31, 1995, from $11.35 on its May 1, 1995 inception date.

The fund continued to meet its investment objective
of providing high current income to shareholders. For the abbreviated four-month
period ended August 31, 1995, your fund paid monthly income distributions
totaling 18 cents ($0.18) per share.a Dividends will vary based on the earnings
of the fund's portfolio, and past distributions are not necessarily predictive
of future results.

At the end of the reporting period, your fund's distribution rate was 4.91%,
based on an annualization of the current monthly dividend of 4.8 cents ($0.048)
per share and the maximum offering price of $11.73 on August 31, 1995. This
double tax-free rate is generally higher than the after-tax return on a
comparable taxable investment. For example, if you are in the maximum
combined federal and Virginia state personal income tax bracket of 43.1%, you
would have to earn 8.63% from a taxable investment to match your fund's tax-free
distribution rate.

GRAPHIC MATERIAL 29 OMMITTED - SEE APPENDIX AT END OF DOCUMENT

Please see the table on page 46 for more information regarding the fund's
performance.

Franklin Virginia Tax-Free Income Fund

Periods ended August 31, 1995
Since Since
Inception Inception
1-Year 5-Year (09/01/87) (05/01/95)

Cumulative Total Return1
<S> <C> <C> <C> <C>
Class I Shares 7.71% 50.92% 90.86% --
Class II Shares 4.03%

Average Annual Total Return2
Class I Shares 3.17% 7.64% 7.82% --

Distribution Rate3 Taxable Equivalent Distribution Rate4
Class I Shares 5.37% Class I Shares 9.44%
Class II Shares 4.91% Class II Shares 8.63%

30-Day Standardized Yield5 Taxable Equivalent Yield4
Class I Shares 4.89% Class I Shares 8.59%
Class II Shares 4.53% Class II Shares 7.96%

</TABLE>

3. Class I shares distribution rate is based on an annualization of the fund's
current 5.4 cents per share monthly dividend and the maximum offering price of
$12.07 on August 31, 1995. Class II shares distribution rate is based on an
annualization of the fund's current 4.8 cents per share monthly dividend and the
maximum offering price of $11.73 on August 31, 1995.

4. Taxable equivalent distribution rate and yield assume the 1995 maximum
combined federal and Virginia state income tax bracket of 43.1%, based on the
39.6% federal income tax rate.

5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended August 31, 1995.

Past expense reductions by the fund's manager increased the fund's Class I total
returns.

FRANKLIN TAX-FREE TRUST
<TABLE>
<CAPTION>

Statement of Investments in Securities and Net Assets, August 31, 1995 (unaudited)

Face Value
Amount Franklin Alabama Tax-Free Income Fund (Note 1)
Investments 98.2%

<S> <C> <C>
$ 1,500,000 Alabama Building Renovation Financing Authority Revenue, 7.45%, 09/01/11 ..................... $ 1,648,920
670,000 Alabama HFA, MF Residential Development, Bragg, Series B, 7.75%, 07/15/31 .................... 699,694
Alabama HFA, SFMR, GNMA Secured,
490,000 Series A, 7.50%, 10/01/10 ................................................................... 515,686
130,000 Series A, 8.00%, 10/01/20 ................................................................... 135,907
3,440,000 Series A-1, 6.50%, 04/01/17 ................................................................. 3,463,254
150,000 Series A-2, 8.00%, 10/01/20 ................................................................. 157,679
1,250,000 Series A-2, 6.80%, 04/01/25.................................................................. 1,269,675
285,000 Series C, 7.45%, 10/01/21 ................................................................... 293,923
1,180,000 Series C-2, 7.75%, 04/01/22 ................................................................. 1,247,413
1,395,000 Alabama Judicial Building Authority Revenue, Judicial Facilities Project, AMBAC Insured,
7.25%, 01/01/14 ............................................................................. 1,506,740
700,000 Alabama Mental Health Finance Authority, Special Tax, FGIC Insured, Pre-Refunded
7.375%, 05/01/03 ............................................................................ 787,780
250,000 Alabama State University Dormitory Revenue, Pre-Refunded, 8.00%, 01/01/14 .................... 284,568
3,290,000 Alabama Water PCFA, Revolving Fund Loan, Series B, 7.75%, 08/15/12............................ 3,496,875
2,215,000 Alabaster Water and Gas Board Revenue, AMBAC Insured, 6.35%, 09/01/14......................... 2,307,454
750,000 Albertville GO Warrants, MBIA Insured, 7.00%, 04/01/11........................................ 810,713
115,000 Alexander City GO Warrants, Refunding, Series 1988, Pre-Refunded, 7.90%, 05/01/08............. 124,152
2,000,000 Alexander City Utility Revenue Warrants, FSA Insured, 6.20%, 08/15/10......................... 2,061,220
250,000 Anniston Regional Medical Center Board, Hospital Revenue, Refunding, Northeast Alabama
Regional Medical Center Project, Series A, 7.70%, 07/01/08 .................................. 257,935
1,500,000 Athens Water and Sewer Revenue Warrants, AMBAC Insured, 6.10%, 08/01/18 ...................... 1,529,805
1,600,000 Auburn Governmental Utility Services Corp., Waste Water Revenue, Merscot-Auburn L.P., FGIC
Insured, 7.30%, 01/01/12..................................................................... 1,718,288
2,000,000 Auburn University General Fee Revenue, Refunding, 7.00%, 06/01/11............................. 2,166,700
1,000,000 Bessemer Medical Clinic Board Revenue, Refunding, Bessemer Carraway Center, Series A,
MBIA Insured, 7.25%, 04/01/15................................................................ 1,071,980
500,000 Birmingham Airport Authority Revenue, Series 1990-A, AMBAC Insured, 7.375%, 07/01/10.......... 540,850
1,870,000 Birmingham BMC, Special Care Facilities Financing Authority Revenue, Series A, MBIA Insured,
7.00%, 01/01/21 ............................................................................. 2,007,726
Birmingham GO,
145,000 Refunding, 8.00%, 10/01/15................................................................... 157,108
1,000,000 Refunding, Series B, 6.25%, 04/01/12......................................................... 1,029,990
1,000,000 Refunding, Series B, 6.25%, 04/01/16......................................................... 1,023,220
500,000 Birmingham Historical Preservation Authority Revenue, Kelly Ingram/Civil Rights Project,
Pre-Refunded, 7.20%, 07/01/11................................................................ 570,880
Birmingham-Jefferson Civic Center Authority, Special Tax,
285,000 Capital Outlay, 7.40%, 01/01/08.............................................................. 310,673
640,000 Capital Outlay, 7.25%, 01/01/12.............................................................. 673,683
1,200,000 Birmingham Special Care Facilities Financing Authority Revenue, Health Care Medical Center East,
MBIA Insured, 7.00%, 07/01/12................................................................ 1,299,720
2,000,000 Birmingham Special Care Facilities Financing Authority Revenue, Refunding, Medical Center East,
MBIA Insured, 7.25%, 07/01/15................................................................ 2,063,080
1,200,000 Birmingham Waterworks and Sewer Board, Water and Sewer Revenue, Series 1990,
Pre-Refunded, 7.20%, 01/01/20................................................................ 1,348,116
3,250,000 Camden IDB, PCR, Facilities Revenue, Refunding, MacMillian Bloedel Project, Series A,
7.75%, 05/01/09 ............................................................................. 3,498,528
500,000 Citronelle IDB, PCR, Stauffer Chemical Project, Guaranteed by Imperial Chemical, Plc., Series 1982,
8.00%, 12/01/12 ............................................................................. 567,735
1,750,000 Colbert County Health Care Authority, Helen Keller Hospital, 8.75%, 06/01/09 ................. 1,919,663

Columbia IDB, PCR, Refunding,
$ 5,000,000 Alabama Power Co. Project, AMBAC Insured, 6.50%, 09/01/23.................................... $ 5,179,900
105,000 Alabama Power Co. Project, Farley Keller Hospital, Series G, 7.40%, 11/01/16................. 108,578
505,000 Courtland IDB, Solid Waste Disposal Revenue, Champion International Corp. Project, 7.75%, 01/01/20 541,375
4,000,000 Courtland IDBR, Refunding, Champion International Corp. Project, Series A, 7.20%, 12/01/13.... 4,329,200
2,000,000 Cullman Water Revenue Warrants, Series A, AMBAC Insured, 6.20%, 10/01/12...................... 2,046,900
2,000,000 Daphne Utilities Board, Water, Gas and Sewer Revenue, Refunding, Series A, FGIC Insured,
Pre-Refunded, 7.35%, 06/01/20................................................................ 2,282,120
200,000 Decatur GO Warrants, Series A, Pre-Refunded, 7.60%, 05/01/09.................................. 214,968
1,400,000 Demopolis HDC, MFHR, Refunding, Series 1990-A, CGIC Insured, 7.625%, 08/01/19................. 1,459,010
75,000 Dothan GO Warrants, Refunding, 8.00%, 09/01/13................................................ 77,641
2,600,000 East Alabama Health Care Authority Facilities Revenue, East Alabama Medical Center, MBIA Insured,
Pre-Refunded, 7.00%, 09/01/21................................................................ 2,953,600
3,500,000 Fairfield IDB, Environmental Improvement Revenue, Refunding, USX Corp. Project, Series A,
6.70%, 12/01/24 ........................................................................... 3,564,120
3,000,000 Fairfield Warrants, AMBAC Insured, 6.30%, 06/01/22............................................ 3,113,850
1,565,000 Gadsden HDC, MFR, Refunding, Series A, 7.00%, 01/01/22........................................ 1,610,135
1,000,000 Guam Airport Authority Revenue, Refunding, Series A, 6.50%, 10/01/23.......................... 1,003,590
530,000 Homewood Special Care Facilities Financing Authority Revenue, Refunding, Lakeshore Hospital
Project, Series B, Pre-Refunded, 8.25%, 02/01/04............................................. 604,205
1,000,000 Hoover GO Warrants, Series A, AMBAC Insured, Pre-Refunded, 7.30%, 03/01/14.................... 1,133,340
2,070,000 Houston County Health Care Authority Revenue, Southeast Alabama Medical Center,
MBIA Insured, 6.125%, 10/01/12............................................................... 2,109,206
Huntsville Health Care Authority Facilities Revenue,
100,000 Refunding, Series A, MBIA Insured, Pre-Refunded, 7.70%, 06/01/12............................. 110,234
2,175,000 Series B, MBIA Insured, 6.50%, 06/01/13...................................................... 2,280,966
230,000 Huntsville Solid Waste Disposal Authority and Resource Recovery Revenue, FGIC Insured,
7.00%, 10/01/14 ............................................................................ 245,610
1,000,000 Jasper County Waterworks & Sewer Board, Water and Sewer Revenue, AMBAC Insured,
6.15%, 06/01/14 ............................................................................ 1,028,370
200,000 Jefferson County GO Warrants, Pre-Refunded, 7.50%, 04/01/07................................... 219,502
200,000 Jefferson County Sewer Revenue Warrants, ETM 09/01/11, 7.50%, 09/01/13........................ 214,562
440,000 Lauderdale County and City of Florence Public Hospital Board Revenue, Eliza Coffee Memorial
Hospital, 7.00%, 07/01/19.................................................................... 449,922
1,255,000 LCM Housing Assistance Corp. Project, MFR, Refunding, Series A, 7.875%, 01/01/22.............. 1,310,220
1,050,000 Limestone County Water Authority Revenue, FGIC Insured, 7.70%, 12/01/19....................... 1,143,545
500,000 Madison County PBA Revenue Warrants, 6.90%, 11/01/11.......................................... 533,900
Madison GO Warrants,
2,000,000 MBIA Insured, 6.00%, 04/01/23................................................................ 2,013,140
975,000 Series 1990, 7.25%, 01/01/15................................................................. 1,047,326
1,560,000 Series B, MBIA Insured, 6.25%, 02/01/15...................................................... 1,611,698
2,290,000 Madison School Warrants, MBIA Insured, 6.25%, 02/01/14........................................ 2,374,936
Marshall County Health Care Authority Hospital Revenue,
2,530,000 Crossover Refunding, Guntersville-Arab Medical Center, 7.60%, 10/01/07....................... 2,746,796
10,810,000 Refunding, Boaz-Albertville Medical Center, 6.50%, 01/01/18.................................. 10,133,294
600,000 Marshall County Hospital Board Revenue, Refunding, Boaz-Albertville Medical Center, Pre-Refunded,
8.875%, 01/01/05............................................................................. 648,720
2,500,000 Marshall County Warrants, AMBAC Insured, Pre-Refunded, 7.00%, 02/01/12........................ 2,835,975
1,000,000 Mobile Airport Authority Revenue, Mae Project, 7.375%, 11/01/12............................... 1,021,300
1,500,000 Mobile Commissioner Water and Sewer Revenue, Refunding, 6.50%, 01/01/09....................... 1,604,100
Mobile GO Warrants,
45,000 Capital Improvement, Pre-Refunded, 7.90%, 08/15/11........................................... 49,035
900,000 Convention Center Project, AMBAC Insured, Pre-Refunded, 7.125%, 08/15/10..................... 1,022,346
1,000,000 Convention Center Project, AMBAC Insured, Pre-Refunded, 7.125%, 08/15/20..................... 1,135,940
$ 1,340,000 Mobile Housing Assistance Corp., MFHR, Refunding, Series 1990-A, CGIC Insured, 7.625%, 02/01/21 $ 1,399,550
8,000,000 Mobile IDB, Mobile Energy Services Co. Project, Solid Waste Disposal Revenue, Refunding,
6.95%, 01/01/20 ............................................................................. 8,181,360
155,000 Montgomery Downtown RDAR, Mortgage, State of Alabama Project, BIG Insured, Pre-Refunded,
7.75%, 10/01/13 ........................................................................... 173,412
5,750,000 Morgan County Decatur Health Care Revenue, Refunding, Decatur General Hospital, Connie Lee
Insured, 6.375%, 03/01/24.................................................................... 5,871,095
1,500,000 Moulton Waterworks Board, Water Revenue, Series A, 6.30%, 01/01/18............................ 1,444,425
1,500,000 Muscle Shoals Utilities Board, Water and Sewer Revenue, AMBAC Insured, Pre-Refunded,
7.25%, 04/01/17 ............................................................................. 1,670,685
Northeast Alabama Water, Sewer and Fire Protection District Revenue,
2,000,000 AMBAC Insured, 6.375%, 05/01/22.............................................................. 2,064,820
30,000 AMBAC Insured, Pre-Refunded, Pre-Refunded 7.90%, 05/01/15.................................... 33,334
200,000 Northport GO Warrants, FGIC Insured, Pre- Refunded 7.70%, 12/01/13............................ 224,452
5,000,000 Oneonta Utilities Board Revenue, CGIC Insured, 6.90%, 11/01/24 ............................... 5,328,000
3,640,000 Orange Beach Water, Sewer and Fire Protection Authority Revenue, 7.50%, 05/01/22.............. 3,897,130
Pelham Alabama Warrants,
1,000,000 AMBAC Insured, 6.25%, 11/01/12............................................................... 1,037,270
2,500,000 AMBAC Insured, 6.25%, 11/01/22............................................................... 2,575,225
780,000 Piedmont IDB, IDR, Springs Industrial Project, 8.25%, 09/01/10................................ 854,989
Puerto Rico Commonwealth Aqueduct and Sewer Authority Revenue,
500,000 Series A, 7.90%, 07/01/07.................................................................... 555,190
175,000 Series A, 7.875%, 07/01/17................................................................... 194,350
3,200,000 Series A, 7.00%, 07/01/19.................................................................... 3,400,960
Puerto Rico Commonwealth Electric Power Authority Revenue, Water Resources,
350,000 Refunding, Series L, Pre-Refunded, 8.00%, 07/01/08........................................... 392,406
15,000 Refunding, Series L, Pre-Refunded, 8.40%, 07/01/15........................................... 16,444
1,000,000 Refunding, Series N, 7.00%, 07/01/07......................................................... 1,074,210
1,870,000 Series P, 7.00%, 07/01/21.................................................................... 2,066,687
Puerto Rico Commonwealth Highway Authority Revenue,
155,000 Series P, Pre-Refunded, 8.125%, 07/01/13..................................................... 174,291
600,000 Series R, 7.15%, 07/01/00.................................................................... 665,952
175,000 Puerto Rico Commonwealth Infrastructure Financing Authority, Special Tax Revenue, Series A,
7.90%, 07/01/07 ............................................................................. 193,218
85,000 Puerto Rico Commonwealth Public Improvement GO, Pre-Refunded 7.90%, 07/01/11.................. 90,358
300,000 Puerto Rico Commonwealth Urban Renewal and Housing Corp., Refunding, 7.875%, 10/01/04......... 339,738
200,000 Puerto Rico Industrial, Medical and Environmental Facilities, PCFA Revenue, Upjohn Co. Project,
7.50%, 12/01/23 ............................................................................. 218,984
40,000 Puerto Rico PBA, Guaranteed Public Education and Health Facilities, Series H, Pre-Refunded,
7.875%, 07/01/16............................................................................. 43,509
Russell County PBA Revenue,
1,900,000 Phenix City Jail Project Warrants, 7.125%, 01/01/14.......................................... 1,926,087
200,000 Russell County Jail Project, Pre-Refunded, 8.50%, 01/01/14................................... 228,975
240,000 Shelby County Board of Education, Capital Outlay School Warrants, Pre-Refunded, 7.20%, 02/01/16 269,551
4,925,000 Tuscaloosa Warrants, AMBAC Insured, 6.75%, 07/01/20 .......................................... 5,193,461
1,500,000 University of Alabama, Student Housing Revenue, Series A, MBIA Insured, Pre-Refunded,
7.10%, 06/01/15 ............................................................................. 1,718,340
100,000 University of Puerto Rico Revenue, Refunding, Series J, Pre-Refunded 7.75%, 06/01/07.......... 104,890

$ 5,000,000 West Jefferson IDB, PCR, Refunding, Alabama Power Co., Miller Plant, Series C, MBIA Insured,
6.05%, 05/01/23 ............................................................................. $ 5,011,550
3,500,000 Wilsonville IDB, PCR, Refunding, Southern Electric Generating System, Series C, MBIA Insured,
6.75%, 02/01/15 ............................................................................. 3,714,830
--------------

Total Investments (Cost $ 166,255,873)98.2% ................................................... 175,030,236
Other Assets and Liabilities, Net %1.8%........................................................ 3,203,742
--------------
Net Assets 100.0%............................................................................. $178,233,978
==============

At August 31, 1995, the net unrealized appreciation based on
the cost of investments for income tax purposes of $166,256,623 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost............................................................... $ 9,491,402
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value............................................................... (717,789)
--------------
Net unrealized appreciation................................................................... $ 8,773,613
==============

</TABLE>

PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
BIG - Bond Investors Guaranty Insurance Co.
BMC - Baptist Medical Center
CGIC - Capital Guaranty Insurance Co.
ETM - Escrow to Maturity
FGIC - Financial Guaranty Insurance Co.
FSA - Financial Security Assistance
GNMA - Government National Mortgage Association
GO - General Obligation
HDC - Housing Development Corp.
HFA - Housing Finance Authority/Agency
IDB - Industrial Development Board
IDBR - Industrial Development Board Revenue
IDR - Industrial Development Revenue
MBIA - Municipal Bond Investors Assurance Corp.
MF - Multi-Family
MFHR - Multi-Family Housing Revenue
MFR - Multi-Family Revenue
PBA - Public Building Authority
PCFA - Pollution Control Financing Authority
PCR - Pollution Control Revenue
RDAR - Redevelopment Agency Revenue
SFMR - Single Family Mortgage Revenue

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

FRANKLIN TAX-FREE TRUST

Statement of Investments in Securities and Net Assets, August 31, 1995
(unaudited)

Face Value
Amount Franklin Florida Tax-Free Income Fund (Note 1)
Long Term Investments 97.0%

Bonds 93.4%
<S> <C> <C>
$ 6,705,000 Alachua County Health Facilities Authority Revenue, Refunding, Santa Fe Health Care
Facilities Project, 7.60%, 11/15/13......................................................... $ 7,216,323
11,205,000 Bay County Hospital System Revenue, Refunding, Bay Medical Center Project, 8.00%, 10/01/12... 12,066,328
Bay County Resource Recovery Revenue,
3,710,000 Refunding, Series A, MBIA Insured, 6.60%, 07/01/11.......................................... 4,027,910
18,150,000 Refunding, Series B, MBIA Insured, 6.60%, 07/01/12.......................................... 19,651,005
2,265,000 Series 1984, Pre-Refunded, 8.00%, 07/01/12.................................................. 2,423,935
Bay County Water System Revenue, Refunding,
525,000 AMBAC Insured, 6.50%, 09/01/07.............................................................. 573,825
675,000 AMBAC Insured, 6.60%, 09/01/11.............................................................. 733,799
4,000,000 Boynton Beach Public Service Tax Revenue, MBIA Insured, Pre-Refunded, 7.50%, 11/01/10........ 4,599,880
5,000,000 Brevard County Health Facilities Authority Revenue, Refunding, Wuesthoff Memorial Hospital,
Series B, 7.20%, 04/01/13................................................................... 5,273,900
2,005,000 Brevard County HFA, SFMR, Refunding, Series B, FSA Insured, 7.00%, 03/01/13.................. 2,084,378
2,250,000 Broward County Educational Facilities Authority Revenue, Refunding, Nova Southeastern University
Project, Connie Lee Insured, 6.125%, 04/01/17............................................... 2,262,893
Broward County Health Facility Authority Revenue, Nursing Home, Refunding,
2,080,000 7.40%, 08/15/10............................................................................. 2,211,789
1,475,000 7.50%, 08/15/20............................................................................. 1,599,534
Broward County HFAR,
4,550,000 Series B, GNMA Secured, 7.55%, 03/01/15..................................................... 4,816,130
1,365,000 Series C, GNMA Secured, 8.00%, 03/01/21..................................................... 1,437,386
450,000 Series D, GNMA Secured, 6.90%, 06/01/09..................................................... 471,204
1,075,000 Series D, GNMA Secured, 7.375%, 06/01/21.................................................... 1,129,922
Broward County Resource Recovery Revenue,
6,305,000 Broward Waste Energy Co., Limited Partnership, North Project, 7.95%, 12/01/08............... 7,033,984
11,965,000 SES Waste Energy Co., Limited Partnership, South Project, 7.95%, 12/01/08................... 13,372,682
200,000 Broward County Tourist Development, Special Tax Revenue, Convention Center Project, FGIC
Insured, Pre-Refunded, 7.75%, 10/01/13...................................................... 224,376
585,000 Broward County Water and Sewer Utility Revenue, Series B, AMBAC Insured, Pre-Refunded,
7.50%, 10/01/18 ............................................................................ 636,644
1,500,000 Cape Canaveral Hospital District Revenue, Certificates, AMBAC Insured, 6.875%, 01/01/21...... 1,622,100
Cape Coral Health Facilities Authority, Hospital Revenue,
19,000,000 Cape Coral Medical Center, Inc. Project, 7.80%, 11/15/18.................................... 18,620,000
2,000,000 Cape Coral Medical Center, Inc. Project, 7.50%, 11/15/21.................................... 1,960,000
Celebration Community Development District, Special Assessment,
5,500,000 MBIA Insured, 6.00%, 05/01/10............................................................... 5,670,115
4,000,000 MBIA Insured, 6.10%, 05/01/16............................................................... 4,063,720
Citrus County PCR, Refunding, Florida Power and Light Co., Crystal River,
11,100,000 Series A, 6.625%, 01/01/27.................................................................. 11,666,655
20,400,000 Series B, 6.35%, 02/01/22................................................................... 21,213,552
Clay County HFAR, SFM,
2,075,000 Series A, GNMA Secured, 8.20%, 06/01/21..................................................... 2,179,124
4,675,000 Series A, GNMA Secured, 7.80%, 06/01/22..................................................... 4,972,096
1,310,000 Series A, GNMA Secured, 7.45%, 09/01/23..................................................... 1,370,994
2,940,000 Clearwater MFR, Refunding, Rent Housing, Drew Gardens Projects, Series A, FHA Insured,
6.50%, 10/01/25 ............................................................................ 2,957,787
1,000,000 Clewiston Water and Sewer Revenue, Refunding, AMBAC Insured, Pre-Refunded, 7.65%, 10/01/10... 1,144,660
370,000 Collier County Water and Sewer District Revenue, Sewer Assessment, East and South Naples
Project, MBIA Insured, 7.15%, 10/01/11...................................................... 379,461
3,890,000 Coral Springs ID, Special Water and Sewer Project, 6.75%, 11/01/02........................... 4,016,697

Bonds (cont.)
Dade County GO, Unlimited Tax,
$ 1,000,000 Series DD, MBIA Insured, 7.70%, 10/01/13.................................................... $ 1,049,440
380,000 Series DD, MBIA Insured, 7.75%, 10/01/18.................................................... 398,780
Dade County Health Facilities Authority Revenue,
400,000 Baptist Hospital of Miami Project, Pre-Refunded, 7.375%, 05/01/13........................... 429,516
75,000 Mt. Sinai Medical Center Project, CGIC Insured, Pre-Refunded, 8.40%, 12/01/17............... 83,391
7,475,000 Refunding, Catholic Health and Rehabilitation, Inc. Project, 7.625%, 08/15/20............... 8,075,691
1,930,000 Dade County HFA, MFMR, GNMA Secured, Hialeah Center, Series 5, 7.875%, 12/01/32.............. 2,055,257
Dade County HFA, SFMR,
45,000 Refunding, Series A, 8.125%, 07/01/07....................................................... 45,869
1,500,000 Refunding, Series D, FSA Insured, 6.95%, 12/15/12........................................... 1,564,890
300,000 Refunding, Series E, FNMA Insured, 7.00%, 03/01/24.......................................... 309,855
2,990,000 Series A, GNMA Secured, 7.50%, 09/01/13..................................................... 3,078,085
1,555,000 Series A, GNMA Secured, 7.10%, 03/01/17..................................................... 1,623,218
260,000 Series B, GNMA Secured, 7.25%, 09/01/23..................................................... 270,013
125,000 Dade County IDA, IDR, Epworth Village West, FHA Insured, 8.25%, 02/01/28..................... 131,611
5,695,000 Dade County IDA, Solid Waste Disposal Revenue, Florida Power and Light Co. Project,
7.15%, 02/01/23 ............................................................................ 6,098,206
Dade County Public Facilities Revenue, Jackson Memorial Hospital,
140,000 Series A, MBIA Insured, 7.30%, 06/01/12..................................................... 145,086
1,110,000 Series A, MBIA Insured, Pre-Refunded, 7.30%, 06/01/12....................................... 1,160,683
5,960,000 Dade County School District GO, Pre-Refunded, 7.375%, 07/01/08............................... 6,722,522
5,000,000 Dade County, Special Obligation, Courthouse Center Project, 6.10%, 04/01/20.................. 5,003,800
Dovera Community Development District Revenue,
1,555,000 Special Assessment, 7.625%, 05/01/03........................................................ 1,616,267
2,235,000 Special Assessment, 7.875%, 05/01/12........................................................ 2,323,283
670,000 Dunes Community Development District Revenue, Water and Sewer Project, Pre-Refunded,
8.25%, 10/01/18 ............................................................................ 759,559
Duval County HFA, SFMR,
80,000 Series 1988, GNMA Secured, 8.625%, 12/01/19................................................. 84,543
95,000 Series A, GNMA Secured, 8.50%, 09/01/19..................................................... 99,838
2,625,000 Series A, GNMA Secured, 7.85%, 12/01/22..................................................... 2,780,505
840,000 Series B, GNMA Secured, 7.70%, 11/01/11..................................................... 876,523
1,460,000 Series C, GNMA Secured, FGIC Insured, 7.70%, 09/01/24....................................... 1,558,433
Escambia County HFA, SFMR,
15,000 Refunding, 8.75%, 10/01/15.................................................................. 15,464
4,235,000 Series A, GNMA Secured, 7.40%, 10/01/23..................................................... 4,400,843
4,350,000 Escambia County HFAR, Refunding, Baptist Hospital and Manor, 6.75%, 10/01/14................. 4,438,827
1,190,000 Escambia County PCR, Refunding, Gulf Power Co. Project, 8.25%, 06/01/17...................... 1,272,241
4,000,000 Escambia County Revenue, Series B, Sub-Series 1, MBIA Insured, 7.20%, 01/01/15............... 4,299,160
700,000 Escambia County Sales Tax Revenue, Refunding, Series A, Pre-Refunded, 7.70%, 01/01/02........ 722,673
3,255,000 Escambia County School Board, COP, FSA Insured, 6.375%, 02/01/12............................. 3,369,478
90,000 Escambia County Tourist Development Revenue, Pre-Refunded, 8.40%, 12/01/12................... 99,967
2,500,000 Escambia County Utilities Authority, Sanitary System Revenue, FSA Insured, 6.00%, 01/01/23... 2,505,025
2,000,000 Escambia County Utilities Authority System Revenue, Refunding, FGIC Insured, 7.75%, 1/01/15.. 2,195,520
Florida HFA,
3,700,000 General Mortgage, Refunding, Series A, 6.40%, 06/01/24...................................... 3,763,862
905,000 Homeownership Revenue, Series G-1, GNMA Secured, 7.80%, 09/01/10............................ 963,581
395,000 Homeownership Revenue, Series G-1, GNMA Secured, 8.30%, 06/01/20............................ 416,449
8,435,000 Homeownership Revenue, Series G-1, GNMA Secured, 7.90%, 03/01/22............................ 8,960,922
4,000,000 MF Housing, Citrus Meadows Apartments Project, Series Q, GNMA Secured, 7.65%, 06/20/31..... 4,164,800
3,445,000 MF Housing, Driftwood Terrace Project, Series I, 7.65%, 12/20/31............................ 3,593,617
Bonds (cont.)
Florida HFA, (cont.)
$ 4,000,000 MF Mortgage, Lake Carlton Arms, Guaranteed, Refunding, Series F, Mandatory Put 12/01/99,
7.375%, 12/01/07 .......................................................................... $ 4,098,280
2,900,000 MFHR, Refunding, Series A, 6.95%, 10/01/21.................................................. 3,014,405
455,000 SFMR, Series A, 8.60%, 07/01/16............................................................. 466,311
Florida State Board of Education, Capital Outlay,
7,000,000 Public Education, Series B, 5.875%, 06/01/25................................................ 6,907,180
650,000 Public Education, Series B-1, Pre-Refunded, 7.875%, 06/01/19................................ 725,368
8,775,000 Refunding, Public Education, Series A, 7.25%, 06/01/23...................................... 9,752,096
9,225,000 Refunding, Public Education, Series A, Pre-Refunded, 7.25%, 06/01/23........................ 10,529,876
18,445,000 Series C, 5.875%, 06/01/23.................................................................. 18,206,875
2,550,000 Florida State Community Services Corp., Walton County Water and Sewer Revenue, South Walton
County Regional Utilities, 7.00%, 03/01/18.................................................. 2,765,144
6,000,000 Florida State Correctional Privatization Commission, COP, Correctional Facility Bay Project,
MBIA Insured, 6.00%, 08/01/15............................................................... 6,081,000
2,960,000 Florida State Department of Corrections, COP, Okeechobee Correctional, AMBAC Insured,
6.25%, 03/01/15 ............................................................................ 3,075,558
Florida State Department of General Services, Board of Finance Division,
3,000,000 Department of Natural Resources Revenues, AMBAC Insured, 6.75%, 07/01/13.................... 3,253,050
100,000 Seminole County Road, Pre-Refunded, 7.75%, 11/01/18......................................... 106,380
145,000 Florida State Department of General Services, Facilities Management Division, Revenue, Florida
Facilities Pool, Pre-Refunded, 8.125%, 09/01/17............................................. 163,901
Florida State Department of Transportation, Turnpike Revenue,
8,780,000 Series A, AMBAC Insured, Pre-Refunded, 7.125%, 07/01/18..................................... 10,132,120
2,375,000 Series A, Pre-Refunded, 7.75%, 07/01/09..................................................... 2,709,970
14,950,000 Series A, Pre-Refunded, 7.50%, 07/01/19..................................................... 16,928,035
3,715,000 Florida State GO, Pre-Refunded, 7.375%, 07/01/19............................................. 4,190,297
Florida State Mid Bay Bridge Authority Revenue,
13,505,000 Crossover Refunding, Series A, 6.00%, 10/01/13.............................................. 12,972,363
7,000,000 Crossover Refunding, Series A, 6.10%, 10/01/22.............................................. 6,628,020
11,100,000 Refunding, Series D, 6.125%, 10/01/22....................................................... 10,545,222
2,600,000 Series A, 8.00%, 10/01/06................................................................... 2,901,444
14,250,000 Series A, 7.50%, 10/01/17................................................................... 15,545,325
6,000,000 Series A, ETM 10/01/18, 6.875%, 10/01/22.................................................... 6,741,600
15,720,000 Florida State Municipal Power Agency Revenue, Refunding, St. Lucie Project, Series 1986,
Pre-Refunded, 7.375%, 10/01/16.............................................................. 16,621,856
3,000,000 Florida State Turnpike Authority, Turnpike Revenue, Dept. of Transportation, Series A, FGIC Insured,
5.625%, 07/01/25............................................................................ 2,880,510
Fort Myers Revenue,
7,635,000 ID No. 15, Series A, 8.125%, 05/01/01....................................................... 7,871,151
3,640,000 ID No. 17, Series B, 8.125%, 05/01/01....................................................... 3,752,585
60,000 Fort Pierce Utilities Authority Revenue, Refunding, Series A, Pre-Refunded, 9.30%, 10/01/08.. 61,431
Gainesville Utility System Revenue,
1,520,000 Series A, 6.50%, 10/01/22................................................................... 1,616,186
1,600,000 Sub-Series A, AMBAC Insured, Pre-Refunded, 7.25%, 10/01/13.................................. 1,772,160
8,675,000 Gateway Services District Revenue, Transportation Roadway Service Charges, 8.75%, 05/01/14... 9,218,142
2,000,000 Gulf Breeze Local Government Loan Program Revenue, FGIC Insured, 7.75%, 12/01/15............. 2,258,700
3,685,000 Halifax Hospital Medical Center Revenue, Refunding, Series A, MBIA Insured, 6.75%, 10/01/11.. 4,028,774
Hillsborough County Aviation Authority Revenue, Refunding,
14,945,000 Special Purpose, Delta Airlines, Inc., 7.75%, 01/01/24...................................... 15,625,745
8,500,000 Tampa International Airport, Series A, FGIC Insured, 6.90%, 10/01/11........................ 9,154,840

Bonds (cont.)
Hillsborough County Capital Improvement Revenue, Center Project,
$ 8,300,000 Second Series, 6.625%, 07/01/12............................................................. $ 8,885,067
1,250,000 Second Series, 6.75%, 07/01/22.............................................................. 1,333,625
5,300,000 Hillsborough County IDA, IDR, Colonial Penn Insurance Project, 7.35%, 08/01/13............... 5,807,634
3,000,000 Hillsborough County Port District Revenue, Tampa Port Authority, Pre-Refunded, 8.25%, 06/01/09 3,585,480
Hillsborough County School Board, COP,
9,500,000 MBIA Insured, 6.00%, 07/01/12............................................................... 9,696,080
5,500,000 MBIA Insured, 6.00%, 07/01/14............................................................... 5,569,300
Hillsborough County Utilities Revenue,
10,400,000 Refunding, Series A, 6.625%, 08/01/11....................................................... 10,937,160
5,515,000 Refunding, Series A, 7.00%, 08/01/14........................................................ 5,885,939
3,000,000 Refunding, Series A, 6.50%, 08/01/16........................................................ 3,098,820
1,135,000 Refunding, Series A, Pre-Refunded, 7.00%, 08/01/14.......................................... 1,301,232
1,000,000 Refunding, Series B, 6.50%, 08/01/16........................................................ 1,032,940
16,880,000 Hillsborough County Water and Waste Water Facilities Revenue, Capital Improvement Program,
BMTF, Mode A, Sub-Series 2, Pre-Refunded, 8.30%, 08/01/16................................... 17,523,634
5,000,000 Holly Hill Water and Sewer Revenue, Refunding & Improvement, MBIA Insured, Pre-Refunded,
7.25%, 10/01/19 ............................................................................ 5,538,000
Jacksonville Electric Authority Revenue,
5,000,000 Refunding, St. John's River Power Park System, Series 1, 6.00%, 10/01/16.................... 4,999,650
1,750,000 Series 3-A, Pre-Refunded, 7.70%, 10/01/28................................................... 1,847,895
45,000 Jacksonville Excise Tax and Revenue, Series A, Pre-Refunded, 8.375%, 10/01/11................ 48,010
Jacksonville Health Facilities Authority, Hospital Revenue,
2,500,000 Refunding, Baptist Medical Center Project, Series A, MBIA Insured, 7.30%, 06/01/19.......... 2,715,400
8,480,000 Refunding, Riverside Hospital Project, 7.625%, 10/01/13..................................... 8,917,059
1,750,000 Jacksonville Hospital Revenue, University Medical Center, Inc. Project, Connie Lee Insured,
6.60%, 02/01/21 ............................................................................ 1,838,393
930,000 Jacksonville PCR, Anheuser Busch Cos., Inc. Project, 7.375%, 12/01/15........................ 973,087
550,000 Jacksonville Port Authority Facilities Revenue, BIG Insured, 7.875%, 11/01/18................ 582,373
Jupiter Sales Tax Revenue,
100,000 Series 1988, Pre-Refunded, 7.875%, 09/01/13................................................. 105,934
2,000,000 Series 1990, Pre-Refunded, 7.40%, 09/01/20.................................................. 2,303,040
5,000,000 Kissimmee Water and Sewer Revenue, Refunding, AMBAC Insured, 6.00%, 10/01/15................. 5,048,400
4,500,000 Lakeland Utility Tax Revenue, Refunding & Improvement, Series A, FGIC Insured, 6.00%, 10/01/17 4,561,515
1,000,000 Lee County Capital Bonds, Refunding, Series A, MBIA Insured, 7.30%, 10/01/07................. 1,114,160
Lee County IDA, Sewer IDR, Bonita Springs Project,
5,000,000 Insured by Asset Guaranty, 7.20%, 11/01/11.................................................. 5,402,700
2,000,000 Insured by Asset Guaranty, 7.25%, 11/01/20.................................................. 2,144,720
Lee County Solid Waste System Revenue,
1,945,000 Series A, MBIA Insured, 7.00%, 10/01/04..................................................... 2,186,102
1,175,000 Series A, MBIA Insured, 7.00%, 10/01/05..................................................... 1,309,491
1,305,000 Series A, MBIA Insured, 7.00%, 10/01/06..................................................... 1,450,742
6,500,000 Series A, MBIA Insured, 7.00%, 10/01/11..................................................... 7,104,630
Leesburg Hospital Revenue, Capital Improvement, Leesburg Regional Medical Center Project,
1,250,000 Series 1991-A, Pre-Refunded, 7.375%, 07/01/11............................................... 1,473,325
2,115,000 Series 1991-A, Pre-Refunded, 7.50%, 07/01/21................................................ 2,508,200
7,000,000 Leesburg Hospital Revenue, Refunding, Leesburg Regional Medical Center Project, Series A,
6.125%, 07/01/18............................................................................ 6,777,960
500,000 Leesburg Utilities Revenue, Refunding, FGIC Insured, 7.60%, 10/01/09......................... 552,370
1,100,000 Leon HFA, SFMR, Series A, GNMA Secured, 7.30%, 04/01/21 ..................................... 1,145,221

Bonds (cont.)
Manatee County HFA, SFMR,
$ 1,545,000 Series A, GNMA Secured, 8.10%, 11/01/20..................................................... $ 1,614,216
4,320,000 Series A, GNMA Secured, 6.85%, 11/01/23..................................................... 4,401,173
Manatee County IDR,
1,700,000 Manatee Hospital and Health System, Inc., 8.25%, 03/01/01................................... 1,784,779
6,700,000 Manatee Hospital and Health System, Inc., 9.25%, 03/01/21................................... 7,337,304
4,000,000 Martin County Consolidated Utilities System Revenue, Refunding & Improvement, FGIC Insured,
6.00%, 10/01/24 ............................................................................ 4,041,680
14,500,000 Martin County PCR, Refunding, Florida Power and Light Co. Project, MBIA Insured,
7.30%, 07/01/20 ............................................................................ 15,929,990
3,335,000 Mary Esther Water and Sewer Revenue, 6.875%, 01/01/18........................................ 3,502,350
2,000,000 Miami Beach Special Obligation, Subordinated, FGIC Insured, 7.375%, 12/01/08 ................ 2,252,440
Miami Health Facilities Authority Revenue, Refunding,
250,000 Mercy Hospital Project, 8.125%, 08/01/11.................................................... 271,933
7,500,000 Mercy Hospital Project, Series A, Pre-Refunded, 7.35%, 08/01/15............................. 8,469,375
6,500,000 Miramar Waste Water Improvement Assessment Revenue, FGIC Insured, 6.75%, 10/01/25............ 7,103,720
5,990,000 Nassau County PCR, Refunding, ITT Rayonier, Inc. Project, 6.25%, 06/01/10.................... 6,025,281
350,000 North Broward Hospital District Revenue, Pre-Refunded, 8.00%, 01/01/14....................... 365,152
1,500,000 North Port Utilities Revenue, FGIC Insured, 6.25%, 10/01/22.................................. 1,542,735
2,185,000 North Springs ID Revenue, Special Assessment, 6.75%, 05/01/03................................ 2,236,348
Northern Palm Beach County Water Control District, Unit Development No. 31,
725,000 Project 2, 6.75%, 11/01/07.................................................................. 738,231
1,470,000 Project 2, 6.625%, 11/01/13................................................................. 1,477,909
1,000,000 Ocala Gas Tax Revenue, MBIA Insured, Pre-Refunded, 7.40%, 12/01/09........................... 1,091,380
Orange County Capital Improvement Revenue,
170,000 Series A, MBIA Insured, 7.70%, 10/01/18..................................................... 188,029
30,000 Series A, MBIA Insured, Pre-Refunded, 7.70%, 10/01/18....................................... 33,614
180,000 Series B, MBIA Insured, Pre-Refunded, 7.70%, 10/01/18....................................... 201,681
Orange County Health Facilities Authority Revenue,
1,000,000 Adventist/Sunbelt, Series A, AMBAC Insured, 6.875%, 11/15/15................................ 1,089,920
3,000,000 Adventist/Sunbelt, Series A, CGIC Insured, 7.00%, 11/15/14.................................. 3,211,560
1,000,000 Crossover Refunding, Orlando Regional Health Care, Series A, MBIA Insured, 6.00%, 11/01/24.. 1,002,690
9,820,000 Refunding, Pooled Hospital Loan, Series A, FGIC Insured, 7.875%, 12/01/25................... 10,432,473
10,735,000 Refunding, Pooled Hospital Loan, Series B, BIG Insured, 7.875%, 12/01/25.................... 11,404,542
Orange County HFAR,
4,730,000 Refunding, Series A, GNMA Secured, FGIC Insured, 7.60%, 01/01/24............................ 5,044,450
2,245,000 Series A, GNMA Secured, 7.75%, 11/01/12..................................................... 2,360,236
410,000 Series A, GNMA Secured, 7.375%, 09/01/24.................................................... 431,476
895,000 Series D, GNMA Secured, 7.80%, 10/01/22..................................................... 931,793
5,050,000 Orange County Public Service, Tax Revenue, FGIC Insured, 6.00%, 10/01/24..................... 5,075,553
Orange County Tourist Development Tax Revenue,
3,000,000 AMBAC Insured, Pre-Refunded, 7.25%, 10/01/10................................................ 3,447,480
24,675,000 Series B, MBIA Insured, 6.00%, 10/01/24..................................................... 24,872,153
Orlando and Orange County Expressway Authority Revenue,
2,000,000 Junior Lien, Pre-Refunded, 7.375%, 07/01/06................................................. 2,098,280
265,000 Senior Lien, AMBAC Insured, ETM 07/01/11, 7.625%, 07/01/18.................................. 294,336
5,000,000 Senior Lien, Pre-Refunded, 7.50%, 07/01/16.................................................. 5,250,700
Orlando Community RDA, Tax Increment Revenue,
2,155,000 Series A, 6.50%, 10/01/11................................................................... 2,256,673
2,585,000 Series A, 6.75%, 10/01/16................................................................... 2,714,198
3,500,000 Osceola County Gas Tax Revenue, Refunding & Improvement, FGIC Insured, 6.00%, 04/01/13....... 3,560,935

Bonds (cont.)
Osceola County IDAR, Community Provider Pooled Loan Program,
$ 4,634,000 Series A, CGIC Insured, 7.75%, 07/01/10..................................................... $ 4,943,783
795,000 Series C, CGIC Insured, 7.60%, 07/01/10..................................................... 851,127
200,000 Osceola County Transportation Revenue, Series A, FGIC Insured, Pre-Refunded, 7.70%, 04/01/13. 221,244
Pace Property Finance Authority, Utilities System Revenue,
1,000,000 Refunding & Improvement, 6.125%, 09/01/07................................................... 1,020,170
2,545,000 Refunding & Improvement, 6.25%, 09/01/13.................................................... 2,525,963
1,490,000 Refunding & Improvement, 6.125%, 09/01/17................................................... 1,428,433
Palm Beach County Criminal Justice Facilities Revenue,
5,000,000 FGIC Insured, 6.00%, 06/01/15............................................................... 5,066,550
6,950,000 FGIC Insured, Pre-Refunded, 7.25%, 06/01/11................................................. 7,933,078
Palm Beach County HFA, SFM Purchase Revenue,
7,485,000 Series A, GNMA Secured, 7.70%, 03/01/22..................................................... 7,799,370
5,270,000 Series B, GNMA Secured, 7.60%, 03/01/23..................................................... 5,546,253
Palm Beach County Solid Waste Authority Revenue,
65,000 GO, 8.75%, 07/01/10......................................................................... 71,126
535,000 Refunding, BIG Insured, 7.40%, 12/01/05..................................................... 591,988
1,965,000 Refunding, BIG Insured, Pre-Refunded, 7.40%, 12/01/05....................................... 2,193,923
Palm Beach County Solid Waste, IDR, Okeelanta Power and Light Co. Project,...................
3,600,000 Series A, 6.50%, 02/15/09................................................................... 3,438,612
11,700,000 Series A, 6.70%, 02/15/15................................................................... 11,245,572
26,000,000 Series A, 6.85%, 02/15/21................................................................... 25,178,660
1,030,000 Pensacola-Westwood Homes Development Corp. Revenue, Refunding, Mortgage Loan,
FHA Insured, 6.40%, 07/15/23................................................................ 1,024,582
Pinellas County HFA, SFMR,
1,535,000 Multi County Program, Series B, GNMA Secured, 6.875%, 08/01/10.............................. 1,591,058
6,010,000 Multi County Program, Series B, GNMA Secured, 7.375%, 02/01/24.............................. 6,314,707
1,990,000 Series A, GNMA Secured, 7.30%, 08/01/22..................................................... 2,058,595
1,600,000 Series A, GNMA Secured, 7.75%, 08/01/23..................................................... 1,687,104
12,200,000 Pinellas County PCR, Refunding, Florida Power and Light Co., 7.20%, 12/01/14................. 13,335,576
Plantation Health Facilities Authority Revenue,
1,500,000 Covenant Retirement Community, Inc., 7.625%, 12/01/12....................................... 1,557,570
3,000,000 Covenant Retirement Community, Inc., 7.75%, 12/01/22........................................ 3,119,640
2,035,000 Polk County HFA, Refunding, Series A, GNMA Secured, 7.15%, 09/01/23.......................... 2,117,295
Port Everglades Authority, Port Improvement Revenue,
18,050,000 Refunding, Series A, 7.50%, 09/01/12........................................................ 19,137,152
575,000 Series 1986, ETM 11/01/02, 7.50%, 11/01/06.................................................. 686,343
65,000 Royal Palm Beach, Utility System Revenue, Series A, AMBAC Insured, Pre-Refunded,
8.875%, 10/15/13............................................................................ 72,565
Santa Rosa County Health Facilities Authority Revenue, Refunding,
40,000 Gulf Breeze Hospital, Inc., 8.60%, 10/01/02................................................. 43,261
520,000 Gulf Breeze Hospital, Inc., Pre-Refunded, 8.70%, 10/01/14................................... 594,558
14,000,000 Gulf Breeze Hospital, Inc., Series A, 6.20%, 10/01/14....................................... 13,367,340
4,290,000 Santa Rosa County IDR, Refunding, Holley Navarre Water System Project, 6.75%, 05/01/24...... 4,354,565
2,000,000 Sarasota County Utility System Revenue, Capital Appreciation, AMBAC Insured, Pre-Refunded,
7.50%, 06/01/10 ............................................................................ 2,156,960
150,000 Sarasota Water and Sewer Utility Revenue, Refunding, MBIA Insured, Pre-Refunded,
7.625%, 10/01/08............................................................................ 158,996
Seminole County School Board, COP,
1,150,000 Series A, MBIA Insured, 6.125%, 07/01/14.................................................... 1,174,967
5,000,000 Series B, MBIA Insured, 6.50%, 07/01/21..................................................... 5,358,050

Bonds (cont.)
$ 7,500,000 Seminole County Solid Waste Disposal System Revenue, MBIA Insured, Pre-Refunded,
7.25%, 10/01/20 ............................................................................ $ 8,618,700
3,000,000 South Indian River Water Control District, Refunding, Series C, Pre-Refunded, 7.50%, 10/01/06 3,339,600
100,000 St. Augustine Water and Sewer Utility Revenue, Refunding, 8.125%, 10/01/12................... 104,556
2,995,000 St. Johns County Water and Sewer Revenue, Series B-1, FGIC Insured, 7.00%, 06/01/11.......... 3,157,569
7,500,000 St. Lucie County Solid Waste Disposal Revenue, Florida Power and Light Co. Project,
7.15%, 02/01/23 ............................................................................ 8,023,050
8,205,000 St. Lucie County, West Services District, Capital Improvement Revenue, Lake Charles Project,
7.50%, 02/01/00 ............................................................................ 8,326,352
St. Petersburg Health Facilities Authority Revenue,
10,500,000 Allegany Health System, Series A, MBIA Insured, 7.00%, 12/01/15............................. 11,635,050
8,630,000 Allegany Health System, St. Mary, Series B, Pre-Refunded, 7.75%, 12/01/15................... 9,951,426
2,500,000 Bon Secours-Maria Manor Project, Series B, Pre-Refunded, 7.875%, 08/15/18................... 2,803,300
2,940,000 Refunding, Allegany Health System, St. Anthony, Series C, 7.75%, 01/01/14................... 3,179,228
340,000 Refunding, Allegany Health System, St. Anthony, Series C, Pre-Refunded, 7.75%, 01/01/14..... 374,146
Sunrise Lakes Recreation District, Phase 4,
3,080,000 Series A, 6.75%, 08/01/15................................................................... 3,099,743
6,120,000 Series A, 6.75%, 08/01/24................................................................... 6,103,966
Sunrise Special Tax District No. 1,
3,485,000 Refunding, 6.375%, 11/01/08................................................................. 3,654,859
12,390,000 Refunding, 6.375%, 11/01/21................................................................. 12,557,389
Tallahassee Consolidated Utility System Revenue,
3,400,000 Series 1994, 6.20%, 10/01/19................................................................ 3,479,016
7,190,000 Series B, Pre-Refunded, 6.90%, 10/01/14..................................................... 8,030,367
Tampa Allegany Health System Revenue, St. Joseph,
8,000,000 FGIC Insured, Pre-Refunded, 7.375%, 12/01/23................................................ 9,109,680
1,180,000 MBIA Insured, 6.75%, 12/01/17............................................................... 1,278,884
7,000,000 MBIA Insured, 6.50%, 12/01/23............................................................... 7,459,130
Tampa Capital Improvement Program Revenue,
6,300,000 Series A, 8.25%, 10/01/18................................................................... 6,818,301
31,670,000 Series B, 8.375%, 10/01/18.................................................................. 33,996,795
2,000,000 Tampa Guaranteed Entitlement Revenue, Refunding, AMBAC Insured, 7.15%, 10/01/18.............. 2,216,700
Tampa Sports Authority Revenue, Guaranteed Package, Tampa Bay Arena Project,
1,000,000 MBIA Insured, 6.00%, 10/01/15............................................................... 1,013,970
1,715,000 MBIA Insured, 6.05%, 10/01/20............................................................... 1,741,583
2,695,000 MBIA Insured, 6.10%, 10/01/26............................................................... 2,740,249
Tampa Sports Authority Revenue, Interlock Agreement, Tampa Bay,
4,250,000 MBIA Insured, 6.05%, 10/01/15............................................................... 4,292,033
5,160,000 MBIA Insured, 6.10%, 10/01/20............................................................... 5,210,878
6,800,000 MBIA Insured, 6.125%, 10/01/26.............................................................. 6,869,768
Tampa Water and Sewer Revenue,
340,000 Sub-Lien, Series A, AMBAC Insured, 7.75%, 10/01/14.......................................... 374,683
3,000,000 Sub-Lien, Series A, AMBAC Insured, 7.25%, 10/01/16.......................................... 3,221,730
1,655,000 Temple Terrace Water and Sewer Revenue, FGIC Insured, 6.30%, 10/01/17........................ 1,706,206
6,000,000 Titusville Water and Sewer Revenue, MBIA Insured, 6.20%, 10/01/14............................ 6,213,540
University Community Hospital, Inc., Florida Hospital Revenue, Refunding,
5,000,000 FSA Insured, Pre-Refunded, 7.375%, 09/01/07................................................. 5,764,250
5,000,000 FSA Insured, Pre-Refunded, 7.50%, 09/01/11.................................................. 5,792,050
1,425,000 Venice Capital Improvement Revenue, MBIA Insured, Pre-Refunded, 7.80%, 11/01/13.............. 1,517,554
Viera East Community Development District,
11,295,000 Refunding, Special Assessment, Series A, 6.00%, 05/01/14.................................... 11,302,116
2,505,000 Special Assessment, 7.50%, 05/01/03......................................................... 2,630,775
Bonds (cont.)
Viera East Community Development District, (cont.)
$ 4,360,000 Special Assessment, 8.50%, 05/01/04......................................................... $ 4,864,713
5,225,000 Special Assessment, 7.50%, 05/01/12......................................................... 5,477,941
10,640,000 Special Assessment, 8.625%, 05/01/14........................................................ 11,950,741
7,490,000 Special Assessment, Series B, 6.75%, 05/01/14............................................... 7,489,101
3,990,000 Viera East Community Development District, Water and Sewer Revenue, 7.875%, 05/01/03......... 4,157,660
500,000 Volusia County Educational Facility Authority Revenue, Embry-Riddle Aeronautical University,
Connie Lee Insured, 6.625%, 10/15/22........................................................ 531,370
Westgate/Belvedere Homes Community RDAR,
410,000 Series 1992, 6.50%, 11/01/09................................................................ 431,221
1,410,000 Series 1992, 6.60%, 11/01/17................................................................ 1,461,803
--------------
Total Bonds (Cost $1,148,182,797)............................................................ 1,219,948,515
--------------
c Zero Coupon Bonds3.6%
3,670,000 Broward County Water and Sewer Utility Revenue, Refunding, Series A, AMBAC Insured,
(original accretion rate 7.50%), 10/01/08................................................... 1,831,366
17,020,000 Dade County Guaranteed Entitlement Revenue, Capital Appreciation, AMBAC Insured,
Pre-Refunded, (original accretion rate 7.70%), 08/01/18..................................... 4,076,630
1,625,000 Hillsborough County Utilities Revenue, Refunding, Series A, (original accretion rate
6.97%), 08/01/98............................................................................ 1,422,638
5,770,000 Lakeland Electric and Water Revenue, Capital Appreciation, (original accretion rate
7.00%), 10/01/14............................................................................ 1,885,924
Port Everglades Authority, Port Improvement Revenue, Refunding,
10,575,000 Series A, (original accretion rate 7.40%), 09/01/02......................................... 7,322,870
9,075,000 Series A, (original accretion rate 7.40%), 09/01/03......................................... 5,915,992
3,550,000 Series A, (original accretion rate 7.40%), 09/01/04......................................... 2,174,411
50,000,000 Series A, (original accretion rate 7.45%), 09/01/10......................................... 19,822,500
Sarasota Special Obligation Revenue, Refunding,
1,365,000 AMBAC Insured, (original accretion rate 6.69%), 11/01/09.................................... 627,257
1,780,000 AMBAC Insured, (original accretion rate 6.74%), 11/01/12.................................... 663,138
2,180,000 AMBAC Insured, (original accretion rate 6.74%), 11/01/15.................................... 663,570
--------------
Total Zero Coupon Bonds (Cost $40,754,332)................................................... 46,406,296
--------------
Total Long Term Investments (Cost $1,188,937,129)............................................ 1,266,354,811
--------------
e Short Term Investments.5%
950,000 Dade County IDA, PCR, Florida Power and Light Co. Project, Refunding, Daily VRDN and Put,
3.35%, 04/01/20 ............................................................................ 950,000
500,000 Dade County Water and Sewer System Revenue, FGIC Insured, Weekly VRDN and Put,
3.45%, 10/05/22 ............................................................................ 500,000
100,000 Hillsborough County, IDA, PCR, Tampa Electric Co., Daily VRDN and Put, 3.35%, 05/15/18....... 100,000
2,600,000 Jacksonville PCR, Florida Power and Light Co. Project, Refunding, Daily VRDN and Put,
3.35%, 05/01/29 ............................................................................ 2,600,000
400,000 Orange County HFA, Housing Revenue, Sutton PL Ltd. Project, Series B, Weekly VRDN and Put,
3.60%, 10/01/08 ............................................................................ 400,000
800,000 Palm Beach County, Water and Sewer Revenue, Daily VRDN and Put, 3.90%, 10/01/11.............. 800,000
1,000,000 Volusia County Health Facilities Authority Revenue, Alliance Community, 3.60%, 09/01/20...... 1,000,000
--------------
Total Short Term Investments (Cost $6,350,000)............................................... 6,350,000
--------------
Total Investments (Cost $1,195,287,129)97.5%................................................. 1,272,704,811
Other Assets and Liabilities, Net 2.5%....................................................... 32,852,641
--------------
Net Assets 100.0%............................................................................ $1,305,557,452
==============

At August 31, 1995, the net unrealized appreciation based on
the cost of investments for income tax purposes of $1,195,287,129 was as
follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost............................................................ $ 80,874,063
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value............................................................ (3,456,381)
--------------
Net unrealized appreciation............................................................... $ 77,417,682
==============

</TABLE>

PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
BIG - Bond Investors Guaranty Insurance Co.
BMTF - Bi-Modal Multi-Term Format
CGIC - Capital Guaranty Insurance Co.
COP - Certificate of Participation
ETM - Escrow to Maturity
FGIC - Financial Guaranty Insurance Co.
FHA - Federal Housing Authority
FNMA - Federal National Mortgage Association
FSA - Financial Security Assistance
GNMA - Government National Mortgage Association
GO - General Obligation
HFA - Housing Finance Authority/Agency
HFAR - Housing Finance Authority/Agency Revenue
ID - Improvement District
IDA - Industrial Development Authority/Agency
IDAR - Industrial Development Authority/Agency Revenue
IDR - Industrial Development Revenue
MBIA - Municipal Bond Investors Assurance Corp.
MF - Multi-Family
MFHR - Multi-Family Housing Revenue
MFMR - Multi-Family Mortgage Revenue
MFR - Multi-Family Revenue
PCR - Pollution Control Revenue
RDA - Redevelopment Agency
RDAR - Redevelopment Agency Revenue
SFM - Single-Family Mortgage
SFMR - Single-Family Mortgage Revenue

cZero coupon bonds. The current effective yield may vary. The original accretion
rate will remain constant.

eVariable rate demand notes (VRDN's) are tax-exempt obligations which contain a
floating or variable interest rate adjustment formula and an unconditional right
of demand to receive payment of the principal balance plus accrued interest upon
short notice prior to specified dates. The interest rate may change on specified
dates in relationship with changes in a designated rate (such as the prime
interest rate or U.S. Treasury bills rate).

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

FRANKLIN TAX-FREE TRUST

Statement of Investments in Securities and Net Assets, August 31, 1995 (unaudited)

Face Value
Amount Franklin Georgia Tax-Free Income Fund (Note 1)
Long Term Investments 98.2%

<S> <C> <C>
$ 500,000 Albany-Dougherty County Hospital Authority Revenue, Anticipation Certificates, Series B,
AMBAC Insured, Pre-Refunded, 7.50%, 09/01/10................................................. $ 577,980
50,000 Albany-Dougherty Inner City Authority, Improvement Revenue, Municipal Auditorium Project,
Series 1988-B, 7.875%, 01/01/09.............................................................. 53,700
50,000 Athens Housing Authority, MFHR, Oakwood Forest Apartments Project, 8.125%, 12/01/05........... 50,924
1,400,000 Atlanta Board of Education, COP, FGIC Insured, Pre-Refunded, 7.125%, 06/01/12 ................ 1,587,376
Atlanta COP, Pretrial Detention Center,
1,000,000 MBIA Insured, 6.25%, 12/01/11................................................................ 1,036,780
3,800,000 MBIA Insured, 6.25%, 12/01/17................................................................ 3,898,648
420,000 Atlanta Downtown Development Authority, IDR, Underground Atlanta Project, Pre-Refunded,
7.75%, 10/01/16 ............................................................................. 445,502
2,000,000 Atlanta Downtown Development Authority Revenue, Refunding, Underground Atlanta Project,
6.25%, 10/01/16 ............................................................................. 2,059,820
3,500,000 Atlanta Special Purpose Facilities Revenue, Delta Air Lines, Inc. Project, Series 1989-B,
7.90%,12/01/18 ............................................................................. 3,715,775
85,000 Atlanta Urban Residential Finance Authority, SFMR, GNMA Secured, 8.25%, 10/01/21 ............. 89,065
1,000,000 Barnesville Water and Sewer Revenue, Refunding, 6.85%, 09/01/17 .............................. 1,037,300
100,000 Bartow County Water and Sewage Revenue, Refunding, AMBAC Insured, Pre-Refunded,
8.00%, 09/01/15 ............................................................................ 112,537
Burke County Development Authority, PCR,
160,000 Georgia Power Co., Plant Vogtle Project, 8.00%, 10/01/16..................................... 168,563
10,000,000 Refunding, Georgia Power Co., Plant Vogtle, First Series, MBIA Insured, 6.60%, 07/01/24...... 10,349,400
1,700,000 Chatham County Hospital Authority Revenue, Memorial Medical Center, Inc., Series A, MBIA Insured,
7.00%, 01/01/21 ............................................................................. 1,821,958
90,000 Cherokee County Hospital Authority Revenue, Certificates, MBIA Insured, 8.00%, 12/01/13 ...... 98,338
1,595,000 Cherokee County Water and Sewage Authority Revenue, Refunding, MBIA Insured, 6.90%, 08/01/18 . 1,784,167
200,000 Clark County Hospital Authority Revenue, Certificates, Series A, MBIA Insured, 7.10%, 01/01/08 209,998
1,400,000 Clayton County Development Authority, Special Facility Revenue, Refunding, Delta Air Lines, Inc.
Project, 7.625%, 01/01/20 .................................................................... 1,451,086
2,400,000 Clayton County Hospital Authority Revenue, Anticipation Certificates, Southern Regional Medical
Center, MBIA Insured, 7.00%, 08/01/13 ........................................................ 2,646,000
100,000 Cobb County, Kennestone Hospital Authority Revenue, Series A, MBIA Insured, ETM,
7.75%, 02/01/07 .............................................................................. 115,460
1,000,000 Cobb County, Residential Care Facilities Authority Revenue, Refunding, 7.50%, 08/01/15 ........ 1,073,060
1,000,000 Colquitt County Hospital Authority Revenue, Certificates, Colquitt Regional Medical Center,
MBIA Insured, 6.70%, 03/01/12 ............................................................... 1,074,800
1,300,000 Columbia County Water and Sewer Revenue, Series A, AMBAC Insured, 6.90%, 06/01/11 ............ 1,402,713
45,000 Columbus Hospital Authority Revenue, Anticipation Certificates, St. Francis Hospital Project,
Series 1987, BIG Insured, Pre-Refunded, 8.25%, 01/01/07 ..................................... 48,357
100,000 Columbus Water and Sewer Revenue, Series 1986, Pre-Refunded, 7.00%, 05/01/06 ................. 102,492
100,000 Commerce, City of, Combined Public Utility Revenue, Refunding & Improvement, AMBAC Insured,
Pre-Refunded, 7.50%, 12/01/20 ............................................................... 114,142
1,000,000 Conyers Water and Sewer Revenue, Series A, AMBAC Insured, 6.60%, 07/01/15 .................... 1,065,170
750,000 Coweta Association, County Commissioners of Georgia Leasing Program, MBIA Insured,
Pre-Refunded, 7.00%, 12/01/10 ............................................................... 834,173
300,000 Dade County Water and Sewer Authority Revenue, Refunding, FGIC Insured, Pre-Refunded,
7.60%, 07/01/15 ............................................................................. 340,170
2,000,000 Dalton Building Authority Revenue, Northwest Trade and Convention, Pre-Refunded, 7.10%, 07/01/11 2,294,320
100,000 Dekalb County Hospital Authority Revenue, Anticipation Certificates, Dekalb Medical Center,
Pre-Refunded, 7.00%, 08/01/09 ............................................................... 111,294
440,000 Dekalb County Housing Authority, SFMR, GNMA Secured, 7.70%, 02/01/24 ......................... 456,060
600,000 Dekalb County Water and Sewer Revenue, Series 1990, Pre-Refunded, 7.00%, 10/01/10 ............ 681,258

$ 1,315,000 Dekalb Private Hospital Authority Revenue, Anticipation Certificates, Emory University Project,
7.00%, 04/01/21 ............................................................................. $ 1,412,165
500,000 Douglas County School System GO, Pre-Refunded, 7.15%, 01/01/10 ............................... 543,055
500,000 Downtown Savannah Authority Revenue, Board of Public Education Project, MBIA Insured,
Pre-Refunded, 7.20%, 08/01/10 ............................................................... 550,870
400,000 Downtown Smyrna Development Authority Revenue, Pre-Refunded, 7.125%, 02/01/16 ................ 442,988
1,215,000 East Point Building Authority Revenue, Public Facilities and Equipment Project, AMBAC Insured,
6.70%, 02/01/11 ............................................................................. 1,292,736
95,000 Ellijay-Gilmer County Water and Sewer Authority Revenue, Pre-Refunded, 7.875%, 01/01/14 ...... 104,579
975,000 Fitzgerald Housing Authority Mortgage Revenue, Refunding, Bridge Creek, Series A, MBIA Insured,
6.50%, 07/01/24 ............................................................................. 983,785
100,000 Fulco Hospital Authority Revenue, Anticipation Certificates, Shepherd Spinal Center Project,
Series 1988-A, 7.75%, 09/01/08 .............................................................. 107,746
Fulton County Building Authority Revenue,
400,000 County Government and Health Facilities Project, Pre-Refunded, 7.50%, 01/01/08............... 412,708
750,000 Human Resources and Government Facilities Program, 7.10%, 01/01/15........................... 820,950
65,000 Judicial Center Facilities Project, Pre-Refunded, 8.20%, 01/01/15............................ 69,807
1,000,000 Refunding, Judicial Center Facilities Project, 6.50%, 01/01/15............................... 1,044,190
60,000 Fulton County School District, Unlimited Tax, GO, Pre-Refunded, 7.625%, 05/01/17 ............. 65,177
115,000 Fulton County Water and Sewer Revenue, Pre-Refunded, 8.25%, 01/01/14 ......................... 127,594
Fulton Dekalb Hospital Authority Revenue,
1,000,000 Certificates, Grady Memorial Hospital Project, AMBAC Insured, Pre-Refunded, 6.90%, 01/01/15.. 1,130,650
1,000,000 Grady Memorial Hospital Project, AMBAC Insured, Pre-Refunded, 6.90%, 01/01/20................ 1,130,650
1,480,000 Grady Memorial Hospital Project, Series A, AMBAC Insured, Pre-Refunded, 7.25%, 01/01/20...... 1,671,808
Gainesville Hospital Authority Revenue, Anticipation Certificates, Refunding, Northeast Georgia
Health Care Project, Series B, MBIA Insured,
455,000 7.20%, 10/01/20 ............................................................................. 490,413
470,000 Pre-Refunded, 7.20%, 10/01/20................................................................ 519,181
Georgia Municipal Electric Authority, Special Obligation, Refunding,
140,000 Second Crossover Series, 8.125%, 01/01/17.................................................... 153,082
1,000,000 Third Crossover Series, 6.60%, 01/01/18...................................................... 1,057,890
Georgia Municipal Electric Power Authority Revenue,
800,000 Refunding, Series R, Pre-Refunded, 7.40%, 01/01/25........................................... 892,416
635,000 Series A, Pre-Refunded, 7.875%, 01/01/18..................................................... 655,815
400,000 Series A, Pre-Refunded, 7.40%, 01/01/25...................................................... 446,208
7,500,000 Series E, AMBAC Insured, 6.65%, 01/01/21..................................................... 7,757,850
100,000 Series S, Pre-Refunded, 7.25%, 01/01/09...................................................... 111,092
Georgia State HFAR, Homeownership Opportunity Program,
2,895,000 Series A-1, 6.75%, 06/01/17.................................................................. 2,975,278
950,000 Series C, 6.60%, 12/01/23.................................................................... 967,613
1,000,000 Georgia State HFAR, MFMR, Club Candlewood Project, FSA Insured, 7.15%, 01/01/25 .............. 1,025,600
2,000,000 Georgia State HFAR, SFMR, Refunding, Series A, 6.60%, 12/01/23 ............................... 2,027,360
Georgia State Residential Finance Authority, Homeownership Mortgage,
1,280,000 Series B, FHA/VA, 7.00%, 12/01/12............................................................ 1,348,275
265,000 Series B, Sub-Series B-1, Convertible Loans, 7.50%, 06/01/17................................. 279,413
395,000 Series E, Sub-Series E-1, FHA Insured, 7.50%, 06/01/17....................................... 419,569
Georgia State Residential Finance Authority, SF Mortgage,
100,000 Series A, FHA Insured or VA/GML, 8.375%, 12/01/19............................................ 105,387
75,000 Series A-2, FHA Insured or VA/GML, 8.40%, 12/01/18........................................... 78,335
1,000,000 Georgia State Tollway Authority Revenue, Guaranteed, Georgia 400 Project, 6.80%, 07/01/10 .... 1,101,090
900,000 Gwinette County Hospital Authority Revenue, Anticipation Certificates, AMBAC Insured,
Pre-Refunded, 7.125%, 09/01/19 ............................................................... 1,009,170
3,300,000 Hogansville Combined Public Utility System Revenue, Refunding, FSA Insured, 6.00%, 10/01/23 . 3,286,503
$ 2,000,000 Houston County School District, Intergovernmental Contract Trust, MBIA Insured, 6.00%, 03/01/14 $ 2,021,680
1,000,000 La Grange Water and Sewerage Revenue, Pre-Refunded, 7.375%, 01/01/12 ......................... 1,132,350
850,000 Liberty County IDR, Refunding, Leconte Property, Inc. Project, 7.875%, 12/01/14 .............. 938,681
1,000,000 Macon-Bibb County Urban Development Authority Revenue, MFHR, Collateralized, Series A,
FNMA Secured, 7.50%, 01/01/24 ............................................................... 1,054,810
Metropolitan Atlanta Rapid Transit Authority Sales Tax Revenue,
6,230,000 Series A, MBIA Insured, 6.90%, 07/01/20...................................................... 6,748,274
630,000 Series K, 7.25%, 07/01/10.................................................................... 678,611
250,000 Series L, Pre-Refunded, 7.20%, 07/01/10...................................................... 279,515
1,000,000 Series O, 6.55%, 07/01/20.................................................................... 1,036,970
Monroe County Development Authority, PCR,
250,000 Georgia Power Co. Plant, Scherer Project, 8.375%, 07/01/17................................... 267,677
1,500,000 Refunding, Oglethorpe Power Co. Plant, Scherer Project, Series A, 6.80%, 01/01/12............ 1,635,105
100,000 Polk County Water Authority, Water and Sewerage Revenue, Refunding, MBIA Insured,
7.00%, 12/01/15 ............................................................................ 107,216
Private Colleges and Universities Facilities Authority Revenue,
1,000,000 Emory University Project, 6.875%, 05/01/15................................................... 1,011,420
50,000 Spelman College Project, MBIA Insured, 7.75%, 06/01/13....................................... 54,518
250,000 Puerto Rico Commonwealth Aqueduct and Sewer Authority Revenue, Series 1988-A,
7.875%, 07/01/17 ............................................................................ 277,643
1,500,000 Puerto Rico Commonwealth, Refunding, Series A, 6.00%, 07/01/14 ............................... 1,499,834
Puerto Rico Commonwealth Highway Authority Revenue,
230,000 Refunding, Series R, 7.15%, 07/01/00......................................................... 255,282
100,000 Series P, Pre-Refunded, 8.125%, 07/01/13..................................................... 112,446
Puerto Rico Commonwealth Infrastructure Financing Authority,
175,000 Special Tax Revenue, Series 1988-A, 7.90%, 07/01/07.......................................... 193,218
50,000 Special Tax Revenue, Series 1988-A, 7.50%, 07/01/09.......................................... 54,654
80,000 Puerto Rico Commonwealth Public Improvement GO, Series A, Pre-Refunded, 7.75%, 07/01/13 ...... 89,234
150,000 Puerto Rico Electric Power Authority Revenue, Refunding, Series M, Pre-Refunded, 8.00%, 07/01/08 168,174
Puerto Rico Electric Power Authority Revenue, Water Resources,
50,000 Refunding, Series N, 7.125%, 07/01/14........................................................ 54,578
130,000 Refunding, Series N, Pre-Refunded, 7.125%, 07/01/14.......................................... 144,942
165,000 Series O, 7.125%, 07/01/14................................................................... 180,111
235,000 Series O, Pre-Refunded, 7.125%, 07/01/14..................................................... 262,011
200,000 Puerto Rico Industrial, Medical and Environmental Facilities, PCFA Revenue, Baxter Travenol Labs.,
Series A, 8.00%, 09/01/12 ................................................................... 222,056
110,000 Puerto Rico Municipal Finance Agency, Series 1988-A, 8.25%, 07/01/08 ......................... 120,949
Puerto Rico PBA, Guaranteed, Public Education and Health Facilities,
80,000 Series H, Pre-Refunded, 7.875%, 07/01/16..................................................... 87,018
100,000 Series J, Pre-Refunded, 7.00%, 07/01/19...................................................... 109,116
1,500,000 Putnam County Development Authority PCR, Georgia Power Co. Plant, FGIC Insured,
7.25%, 07/01/21 ............................................................................. 1,559,865
200,000 Royston Downtown Development Authority Revenue, Cobb Memorial Hospital Project,
Pre-Refunded, 8.20%, 07/01/08 ............................................................... 220,237
1,000,000 Savannah EDA, IDR, Refunding, Hershey Foods Corp. Project, 6.60%, 06/01/12 ................... 1,065,400
3,000,000 Savannah Hospital Authority Revenue, Refunding, St. Joseph's Hospital Project, 6.20%, 07/01/23 2,903,250
4,600,000 Savannah Port Authority PCR, Refunding, Union Carbide Plastic Co., Inc. 7.55%, 08/01/04 ...... 4,710,446
St. Mary's Housing Authority MFMR,
700,000 Pine Apartments, Series C, FNMA Secured, 7.375%, 04/01/22.................................... 723,044
500,000 Refunding, Cumberland Oaks Apartments, Series A, FNMA Secured, 7.375%, 09/01/22.............. 527,075
200,000 Sugar Hill Combined Public Utility Revenue, MBIA Insured, Pre-Refunded, 7.35%, 01/01/14 ...... 212,708
2,330,000 Tift County School District, MBIA Insured, 6.125%, 02/01/15 .................................. 2,373,618
250,000 University of Puerto Rico Revenue, Refunding, Series J, Pre-Refunded, 7.75%, 06/01/07 ........ 262,225
$ 1,500,000 Walker Dade and Catoosa County Hospital Authority Revenue, Anticipation Certificates, Series A,
FGIC Insured, 7.00%, 10/01/10 ............................................................... $ 1,656,750
1,780,000 White County IDAR, Refunding, Clark Schwebel Fiber Glass, 6.85%, 06/01/10 .................... 1,865,476
--------------
Total Long Term Investments (Cost $113,652,131)............................................... 120,405,571
--------------
e Short Term Investments.5%
600,000 Hapeville Development Authority Industrial Development Revenue, Hapeville Hotel Ltd., Daily VRDN
and Put, 3.50%, 11/01/15 (Cost $600,000)..................................................... 600,000
--------------
Total Investments (Cost $114,252,131) 98.7%................................................... 121,005,571
Other Assets and Liabilities, Net 1.3%........................................................ 1,654,197
--------------
Net Assets 100.0%............................................................................. $122,659,768
==============

At August 31, 1995, the net unrealized appreciation based on
the cost of investments for income tax purposes of $114,252,131 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost................................................................ $ 6,821,377
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ............................................................... (67,937)
--------------
Net unrealized appreciation................................................................... $ 6,753,440
==============
</TABLE>

PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
BIG - Bond Investors Guaranty Insurance Co.
COP - Certificate of Participation
EDA - Economic Development Authority
ETM - Escrow to Maturity
FGIC - Financial Guaranty Insurance Co.
FHA - Federal Housing Authority/Agency
FNMA - Federal National Mortgage Association
FSA - Financial Security Assistance
GML - Guaranteed Mortgage Loan
GNMA - Government National Mortgage Association
GO - General Obligation
HFAR - Housing Finance Agency Revenue
IDAR - Industrial Development Authority Revenue
IDR - Industrial Development Revenue
MBIA - Municipal Bond Investors Assurance Corp.
MFHR - Multi-Family Housing Revenue
MFMR - Multi-Family Mortgage Revenue
PBA - Public Building Authority
PCFA - Pollution Control Financing Authority
PCR - Pollution Control Revenue
SF - Single-Family
SFMR - Single-Family Mortgage Revenue
VA - Veterans Administration

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

FRANKLIN TAX-FREE TRUST

Statement of Investments in Securities and Net Assets, August 31, 1995 (unaudited)

Face Value
Amount Franklin Kentucky Tax-Free Income Fund (Note 1)
Long Term Investments 97.7%

<S> <C> <C>
$ 700,000 Ashland PCR, Refunding, Ashland Oil, Inc. Project, 6.65%, 08/01/09.............................. $ 728,539
1,000,000 Ashland Solid Waste Revenue, Ashland Oil, Inc. Project, 7.20%, 10/01/20......................... 1,047,830
Boone County PCR, Refunding, Collateralized,
1,500,000 Cincinnati Gas and Electric Co., Series A, MBIA Insured, 5.50%, 01/01/24....................... 1,400,220
710,000 Dayton Power and Light Co., Series A, 6.50%, 11/15/22.......................................... 737,264
200,000 Campbell County Water Revenue, District No. 1, 6.60%, 12/01/11.................................. 209,648
325,000 Carroll County PCR, Collateralized, Kentucky Utilities Co. Project, Series B, 6.25%, 02/01/18... 336,346
750,000 Carroll County Solid Waste Disposal Facilities Revenue, Collateralized, Kentucky Utility Co. Project,
Series A, 5.75%, 12/01/23...................................................................... 726,533
Danville Multi-City Lease Revenue,
1,500,000 Campbellsville, Series B, MBIA Insured, 6.15%, 07/01/12........................................ 1,550,130
125,000 Housing Authority, Jefferson County, 6.50%, 02/01/12........................................... 127,524
100,000 Shelbyville, Series H, MBIA Insured, 6.70%, 07/01/11........................................... 107,526
Daviess County Hospital Revenue,
100,000 Odch, Inc. Project, Series A, MBIA Insured, 6.25%, 08/01/12.................................... 102,878
210,000 Odch, Inc. Project, Series A, MBIA Insured, 6.25%, 08/01/22.................................... 214,580
545,000 Daviess County Public Improvement Corp. Revenue, Refunding, First Mortgage, Court Facilities
Project, Series A, 5.70%, 10/01/14............................................................. 531,375
100,000 Eastern University Revenues, Consolidated Educational Building, Series Q, AMBAC Insured,
6.40%, 05/01/08................................................................................ 106,988
200,000 Edgewood Public Properties Corp. Revenue, First Mortgage, Public Facilities Project, 6.70%, 12/01/21 209,896
500,000 Fulton County Industrial Building Revenue, H.I.S., Inc. Project, 7.50%, 02/01/10................ 508,150
400,000 Guam Airport Authority Revenue, Refunding, Series A, 6.50%, 10/01/23............................ 401,436
225,000 Guam Power Authority Revenue, Series A, 6.30%, 10/01/22......................................... 222,395
125,000 Hopkins County Hospital Revenue, Trover Clinic Foundation, Inc., MBIA Insured, 6.625%, 11/15/11. 132,638
Jefferson County Health Facilities Revenue, Jewish Hospital Health Care Services, Inc.,
750,000 AMBAC Insured, 6.50%, 05/01/15................................................................. 783,173
720,000 AMBAC Insured, 6.55%, 05/01/22................................................................. 754,265
100,000 Jefferson County Hospital Revenue, Alliant Health System Project, Series C, MBIA Insured,
6.20%, 10/01/04................................................................................ 107,004
2,000,000 Jefferson County MFHR, Watterson Park Apartments Project, Series A, 6.35%, 11/15/11............. 2,004,220
Jefferson County PCR,
450,000 DuPont, Series A, 6.30%, 07/01/12.............................................................. 480,231
1,000,000 Louisville Gas and Electric Co. Project, Series B, 5.625%, 08/15/19............................ 967,410
550,000 Louisville Gas and Electric Co. Project, Series C, 5.45%, 10/15/20............................. 519,123
100,000 Refunding, Louisville Gas and Electric Co. Project, Series A, 7.45%, 06/15/15.................. 109,892
250,000 Jefferson County School District Finance Corp., School Building Revenue, Refunding, Series B,
MBIA Insured, 6.20%, 01/01/07.................................................................. 266,510
Kenton County Airport Board Revenue,
445,000 Delta Airlines Project, Special Facilities, Series A, 7.50%, 02/01/20.......................... 469,600
150,000 Delta Airlines Project, Special Facilities, Series A, 7.125%, 02/01/21......................... 154,713
445,000 Delta Airlines Project, Special Facilities, Series B, 7.25%, 02/01/22.......................... 466,311
Kenton County Water District No. 001, Waterworks Revenue,
155,000 Refunding, FGIC Insured, 6.375%, 02/01/17...................................................... 162,668
500,000 Series A, MBIA Insured, 5.80%, 02/01/15........................................................ 497,660
750,000 Kentucky Development Finance Authority, Hospital Revenue, Refunding & Improvement,
St. Elizabeth Medical Center, Series A, FGIC Insured, 6.00%, 11/01/10.......................... 760,305
625,000 Kentucky EDA, Hospital Facilities Revenue, St. Elizabeth Medical Center Project, Series A,
FGIC Insured, 6.00%, 12/01/22.................................................................. 628,481
500,000 Kentucky EDA Revenue, Refunding & Improvement, Ashland Hospital Corp. Medical Center, Series A,
CGIC Insured, 6.125%, 02/01/12................................................................. 510,525
1,500,000 Kentucky HFC, Housing Revenue, Series C, FHA Insured, 6.40%, 01/01/17........................... 1,503,300

Kentucky HFC, Housing Revenue, SFMR,
$ 40,000 Series A, 6.60%, 07/01/11...................................................................... $ 41,207
300,000 Series A, 5.80%, 01/01/19...................................................................... 285,627
150,000 Series B, 6.60%, 07/01/11...................................................................... 154,526
150,000 Series D, FHA/VA, 7.45%, 01/01/23.............................................................. 155,267
Kentucky Infrastructure Authority Revenue,
100,000 Revolving Fund Program, Series E, 6.50%, 06/01/11.............................................. 103,484
100,000 Revolving Fund Program, Series G, 6.30%, 06/01/12.............................................. 102,141
500,000 Revolving Fund Program, Series J, 6.375%, 06/01/14............................................. 514,300
1,400,000 Kentucky Local Correctional Facilities Construction Authority Revenue, Refunding, FSA Insured,
5.50%, 11/01/14................................................................................ 1,329,972
Kentucky State Development Finance Authority Revenue,
100,000 Refunding, Sisters of Charity of Nazareth Health Corp., 6.75%, 11/01/12........................ 104,508
110,000 St. Claire Medical Center Project, Pre-Refunded, 7.125%, 09/01/21.............................. 125,443
Kentucky State Property and Buildings Commission Revenue,
45,000 Project No. 50, Pre-Refunded, 6.00%, 02/01/10.................................................. 48,203
700,000 Project No. 56, 6.00%, 09/01/14................................................................ 703,906
Kentucky State Turnpike Authority, EDR,
15,000 Revitalization Road Project, Pre-Refunded, 7.25%, 05/15/10..................................... 16,976
85,000 Revitalization Road Project, Pre-Refunded, 7.25%, 05/15/10..................................... 96,200
Lexington-Fayette Urban County Government Revenue, University of Kentucky Library Project,
500,000 MBIA Insured, 6.625%, 11/01/13................................................................. 530,105
750,000 MBIA Insured, 6.75%, 11/01/24.................................................................. 802,740
Louisville and Jefferson County Metropolitan Sewer District Revenue, Refunding,
700,000 Series A, MBIA Insured, 5.50%, 05/15/21........................................................ 668,465
400,000 Series B, MBIA Insured, 5.50%, 05/15/23........................................................ 379,304
500,000 Louisville and Jefferson County Metropolitan Sewer District, Sewer and Drain System Revenue,
Refunding, Series A, AMBAC Insured, 6.75%, 05/15/25............................................ 537,370
450,000 Louisville and Jefferson County Regional Airport Authority System Revenue, Series A, MBIA Insured,
Series A, MBIA Insured, 5.60%, 07/01/13........................................................ 441,509
500,000 McCracken County Hospital Revenue, Refunding, Mercy Health System, Series A, MBIA Insured,
6.40%, 11/01/07................................................................................ 546,775
625,000 Mount Sterling Lease Revenue, Kentucky League Cities Funding, Series A, 6.10%, 03/01/08......... 634,425
75,000 Owensboro IDR, Refunding, Kmart Corp. Project, 6.80%, 12/01/07.................................. 76,541
1,050,000 Pendleton Multi-County Association Trust, Lease Revenue, Series A, 6.50%, 03/01/19.............. 1,060,332
100,000 Powderly IDR, Refunding, First Mortgage, Kmart Corp. Project, 6.90%, 03/01/07................... 102,655
350,000 Puerto Rico Commonwealth Aqueduct and Sewer Authority Revenue, Series 1988-A, 7.00%, 07/01/19... 371,980
100,000 Puerto Rico Commonwealth Electric Power Authority Revenue, Water Resources, Series P,
7.00%, 07/01/21................................................................................ 110,518
1,580,000 Puerto Rico Commonwealth GO, 6.45%, 07/01/17.................................................... 1,626,942
100,000 Puerto Rico Commonwealth Highway and Transportation Authority Revenue, Refunding, Series V,
6.625%, 07/01/12............................................................................... 105,058
140,000 Puerto Rico Commonwealth Highway Authority Revenue, Refunding, Series R, 6.75%, 07/01/05........ 152,067
50,000 Puerto Rico PBA, Guaranteed Public Education and Health Facilities, Series L, Pre-Refunded,
6.875%, 07/01/21............................................................................... 57,456
350,000 Russell Health System Facilities Revenue, Franciscan Health Center, Series B, 8.10%, 07/01/15... 395,608
100,000 Somerset Water Project Revenue, MBIA Insured, 6.40%, 12/01/06................................... 103,382
University of Kentucky Revenues, Community College Educational Buildings,
350,000 Refunding, Series J, 5.10%, 05/01/10........................................................... 333,981
100,000 Series I, 6.40%, 05/01/08...................................................................... 106,444

$ 145,000 University of Kentucky Revenues, Consolidated Educational Buildings, Series M, 6.40%, 05/01/10.. $ 152,883
750,000 University of Louisville Revenues, Refunding, Consolidated Educational Buildings, Series I,
5.40%, 05/01/16................................................................................ 709,777
--------------
Total Long Term Investments (Cost $33,645,374).................................................. 34,335,364
--------------
e Short Term Investments.8%
300,000 Puerto Rico Commonwealth Government Development Bank, Refunding, Weekly VRDN and Put,
3.20%, 12/01/15 (Cost $300,000)................................................................ 300,000
--------------
Total Investments (Cost $33,945,374) 98.5%...................................................... 34,635,364
Other Assets and Liabilities, Net 1.5%.......................................................... 514,291
--------------
Net Assets 100.0%............................................................................... $35,149,655
==============

At August 31, 1995, the net unrealized appreciation based on the
cost of investments for income tax purposes of $33,945,374 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost.................................................................. $ 995,967
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value.................................................................. (305,977)
--------------
Net unrealized appreciation..................................................................... $ 689,990
==============
</TABLE>

PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
CGIC - Capital Guaranty Insurance Co.
EDA - Economic Development Authority
EDR - Economic Development Revenue
FGIC - Financial Guaranty Insurance Co.
FHA - Federal Housing Authority/Agency
FSA - Financial Security Assistance
GO - General Obligation
HFC - Housing Finance Authority/Agency
IDR - Industrial Development Revenue
MBIA - Municipal Bond Investors Assurance Corp.
MFHR - Multi-Family Housing Revenue
PBA - Public Building Authority
PCR - Pollution Control Revenue
SFMR - Single-Family Mortgage Revenue
VA - Veterans Administration

eVariable rate demand notes (VRDNs) are tax-exempt obligations which contain a
floating or variable interest rate adjustment formula and an unconditional right
of demand to receive payment of the principal balance plus accrued interest upon
short notice prior to specified dates. The interest rate may change on specified
dates in relationship with changes in a designated rate (such as the prime
interest rate or U.S. Treasury bills rate).

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

FRANKLIN TAX-FREE TRUST

Statement of Investments in Securities and Net Assets, August 31, 1995
(unaudited)

Face Value
Amount Franklin Louisiana Tax-Free Income Fund (Note 1)
Long Term Investments 98.3%

Bonds 96.6%
Ascension Parish Sales and Use Tax,
<S> <C> <C>
$ 300,000 Gravity Drainage District No. 1, 7.25%, 12/01/06 ............................................. $ 324,438
300,000 Gravity Drainage District No. 1, 7.25%, 12/01/07 ............................................. 324,438
200,000 Gravity Drainage District No. 1, 7.25%, 12/01/08.............................................. 215,976
500,000 Bastrop, Inc., IDB, PCR, Refunding, International Paper Co. Project, 6.90%, 03/01/07........... 539,385
150,000 Baton Rouge Public Improvement, Sales and Use Tax Revenue, AMBAC Insured, 7.00%, 08/01/08...... 162,093
Caddo Parish GO,
60,000 Series A, MBIA Insured, Pre-Refunded, 7.20%, 02/01/08......................................... 65,748
200,000 Series B, MBIA Insured, Pre-Refunded, 7.20%, 02/01/08......................................... 218,166
200,000 Caddo Parish School District GO, Refunding, MBIA Insured, Pre-Refunded, 7.20%, 03/01/05........ 209,290
400,000 Calcasieu Parish Memorial Hospital Service District Revenue, Lake Charles Memorial Hospital Project,
BIG Insured, Pre-Refunded, 7.50%, 12/01/18.................................................... 428,740
50,000 Calcasieu Parish Public School ID No. 30, GO, Ward 4, Unlimited Tax, Pre-Refunded, 8.00%, 08/01/04 54,891
Calcasieu Parish Public Trust Mortgage Authority Revenue, Refunding,
1,275,000 Series A, 7.75%, 06/01/12..................................................................... 1,351,016
1,215,000 Series B, 6.875%, 11/01/12.................................................................... 1,241,463
1,380,000 Denham Springs-Livingston Housing and Mortgage Finance Authority, SFMR, ETM 08/01/00,
7.20%, 08/01/10 .............................................................................. 1,556,116
1,500,000 DeSoto Parish Environmental Improvement Revenue, International Paper Co. Project, Series A,
7.70%, 11/01/18............................................................................... 1,706,325
DeSoto Parish GO,
150,000 School District No. 1, Pre-Refunded, 8.00%, 01/01/09.......................................... 166,592
50,000 School District No. 2, 8.00%, 08/01/06........................................................ 55,432
East Baton Rouge Mortgage Finance Authority,
840,000 MBS, Series A, 7.875%, 08/01/23............................................................... 889,006
1,305,000 SF Purchase, Series F, GNMA Secured, 7.875%, 12/01/21......................................... 1,392,148
East Baton Rouge Parish Public Improvement, Sales and Use Tax,
145,000 MBIA Insured, 7.25%, 02/01/09................................................................. 153,925
425,000 MBIA Insured, 7.25%, 02/01/13................................................................. 451,159
750,000 East Baton Rouge Parish, Sales and Use Tax, FGIC Insured, 5.90%, 02/01/18...................... 746,258
50,000 Franklin Public Improvement GO, Sales and Use Tax Revenue, Refunding, 8.40%, 12/01/03.......... 54,188
Iberville Parish Consolidated School District No. 005,
245,000 GO, Unlimited Tax, Pre-Refunded, 8.00%, 10/01/04.............................................. 275,245
125,000 Pre-Refunded, 8.125%, 10/01/08................................................................ 140,876
125,000 Jefferson Parish Home Mortgage Authority, SFMR, GNMA Secured, Series A, 8.30%, 04/01/20........ 132,078
Jefferson Parish Road District No. 1, GO,
100,000 FGIC Insured, Pre-Refunded, 7.40%, 03/01/06................................................... 107,601
50,000 FGIC Insured, Pre-Refunded, 7.40%, 03/01/08................................................... 53,801
500,000 Jefferson Parish School Board, Sales and Use Tax Revenue, Series A, ETM 02/01/02, 7.35%, 02/01/03 517,040
400,000 Lafayette Parish Consolidated School District No. 1, FGIC Insured, Pre-Refunded, 7.70%, 03/01/07 446,352
415,000 Lafayette Public Electric Power Authority Revenue, Refunding, 7.25%, 11/01/12.................. 439,373
Lafayette Public Improvement, Sales Tax Revenue,
25,000 Refunding, Series 1988, FGIC Insured, Pre-Refunded, 8.00%, 03/01/08........................... 27,684
500,000 Series 1989, FGIC Insured, Pre-Refunded, 7.20%, 05/01/12...................................... 554,015
Lafayette Public Trust Financing Authority, SFMR,
493,317 Refunding, Series A, 8.50%, 11/15/12.......................................................... 526,834
30,000 Series A, ETM 04/01/11, 7.20%, 04/01/11....................................................... 33,608
95,000 Lafourche Parish Home Mortgage Authority, SFMR, ETM 07/01/00, 7.40%, 07/01/10.................. 107,421
3,000,000 Lake Charles Harbor and Terminal District, Port Facilities Revenue, Refunding, Occidental Petroleum
Corp., 7.20%, 12/01/20........................................................................ 3,238,379
750,000 Lake Charles Nonprofit HDC, Section 8 Assisted, Mortgage Revenue, Refunding, Chateau Project,
Series 1990-A, CGIC Insured, 7.875%, 02/15/25................................................. 772,709
1,750,000 Leesville, Inc., IDBR, Refunding, Wal-Mart Stores, Inc. Project, 7.10%, 03/01/11............... 1,852,252
Bonds (cont.)
$ 500,000 Louisiana Gas Fuel Tax Revenue, 7.25%, 11/15/04................................................ $ 548,350
Louisiana Mortgage, HFAR,
2,795,000 MF, Refunding, Series A, 7.00%, FHA Insured, 07/01/22......................................... 2,854,981
750,000 MF, Westview Project, FHA Insured, 7.80%, 04/01/30............................................ 786,479
25,000 SF, GNMA Secured, 9.125%, 11/01/18............................................................ 26,204
750,000 SF, GNMA Secured, 8.30%, 11/01/20............................................................. 779,662
1,600,000 Louisiana Office Capital Facility Corp., Non-Profit Corp., 7.75%, 12/01/10..................... 1,760,096
Louisiana Public Facilities Authority, Hospital Revenue, Refunding,
75,000 Touro Infirmary Project, Series A, BIG Insured, Pre-Refunded, 8.00%, 06/01/09................. 83,563
3,000,000 Women's Hospital Foundation Project, 7.25%, 10/01/22.......................................... 3,073,740
65,000 Women's Hospital Foundation Project, FGIC Insured, Pre-Refunded, 8.125%, 10/01/14............. 73,256
Louisiana Public Facilities Authority Revenue,
930,000 Alton Ochsner Medical Foundation Project, Series C, MBIA Insured, 6.50%, 05/15/22............. 960,392
63,348 MFHR, Pontchartrain Apartments, Carriage House Apartments Project, Series A, GNMA Secured,
8.375%, 07/20/23.............................................................................. 66,767
200,000 Refunding, Jefferson Parish Eastbank Office, FGIC Insured, 7.70%, 08/01/10.................... 222,142
2,411,900 SFM Purchase, Series C, 8.45%, 12/01/12....................................................... 2,567,010
1,500,000 Student Loan, Series A, Sub-Series 3, 7.00%, 09/01/06......................................... 1,570,140
50,000 Tulane University, Series B, Pre-Refunded, 8.00%, 08/15/15.................................... 54,497
35,000 Louisiana Public Facilities Authority, SFM Purchase, Series C, GNMA Secured, 8.80%, 04/01/13... 36,733
5,000,000 Louisiana Stadium District, Hotel Occupancy Tax and Stadium Revenue, Refunding, Series A,
FGIC Insured, 6.00%, 07/01/16................................................................. 5,003,400
700,000 Louisiana State GO, Series A, CGIC Insured, Pre-Refunded, 7.375%, 05/01/05..................... 729,589
Louisiana State Offshore Terminal Authority, Deepwater Port Revenue, Refunding, Loop, Inc. Project
First Stage,
1,000,000 Series B, 7.20%, 09/01/08..................................................................... 1,096,420
1,000,000 Series E, 7.60%, 09/01/10..................................................................... 1,105,790
1,050,000 Mississippi River Bridge Authority Revenue, 6.75%, 11/01/12.................................... 1,103,981
50,000 Morgan City GO, Sales and Use Tax Revenue, Refunding, Pre-Refunded, 8.40%, 12/01/03............ 55,366
Natchitoches Parish GO, Consolidated School,
125,000 District No. 7, Pre-Refunded, 8.30%, 03/01/10................................................. 141,756
230,000 District No. 7, Series B, Pre-Refunded, 7.50%, 03/01/09....................................... 257,745
235,000 District No. 7, Series B, Pre-Refunded, 7.50%, 03/01/10....................................... 263,348
65,000 New Orleans Audubon Park Commission, Aquarium Project, MBIA Insured, Pre-Refunded,
7.90%, 10/01/08............................................................................... 71,045
560,000 New Orleans Home Mortgage Authority, SFMR, Series A, ETM 04/01/00, 7.50%, 10/01/18............. 588,252
50,000 New Orleans International Airport Revenue, Series A, FGIC Insured, Pre-Refunded, 8.875%, 08/01/17 55,123
300,000 New Orleans Public Improvement GO, CGIC Insured, Pre-Refunded, 7.125%, 10/01/03................ 324,270
2,000,000 New Orleans GO, Refunding, AMBAC Insured, 6.00%, 09/01/21 ..................................... 1,994,740
1,000,000 New Roads Electric System Revenue, 7.00%, 07/01/17............................................. 1,048,750
50,000 Orleans Levee District Public Improvement, Refunding, Series A, 8.25%, 11/01/15................ 51,468
Orleans Parish Law Enforcement District, GO,
185,000 AMBAC Insured, 7.10%, 05/01/05................................................................ 199,114
750,000 AMBAC Insured, 7.10%, 05/01/10................................................................ 809,460
3,500,000 Ouachita Parish Hospital Service Revenue, District No. 1, Glenwood Regional Medical Center,
7.50%, 07/01/21............................................................................... 3,711,470
75,000 Plaquemines Parish GO, Unlimited Tax, Pre-Refunded, 8.40%, 08/01/06............................ 83,345
Puerto Rico Commonwealth Aqueduct and Sewer Authority Revenue,
500,000 Series A, 7.90%, 07/01/07..................................................................... 555,190
1,000,000 Series A, 7.875%, 07/01/17.................................................................... 1,110,570
350,000 Series A, 7.00%, 07/01/19..................................................................... 371,980
500,000 Puerto Rico Commonwealth GO, Series 1990, Pre-Refunded, 7.70%, 07/01/20........................ 581,390
Bonds (cont.)
$ 220,000 Puerto Rico Commonwealth Highway Authority Revenue, Series R, 7.20%, 07/01/01.................. $ 247,172
1,000,000 Puerto Rico Commonwealth Highway Transportation Authority Revenue, Series S, Pre-Refunded,
8.00%, 07/01/18............................................................................... 1,174,270
Puerto Rico Commonwealth Infrastructure Financing Authority, Special Tax Revenue,
525,000 Series 1988-A, 7.90%, 07/01/07................................................................ 579,653
100,000 Series 1988-A, 7.75%, 07/01/08................................................................ 109,962
Puerto Rico Electric Power Authority Revenue,
100,000 Refunding, Series M, Pre-Refunded, 8.00%, 07/01/08............................................ 112,116
1,400,000 Series P, 7.00%, 07/01/21..................................................................... 1,547,252
Puerto Rico Electric Power Authority Revenue, Refunding, Water Resources,
560,000 Series N, 7.125%, 07/01/14.................................................................... 611,285
1,040,000 Series N, Pre-Refunded, 7.125%, 07/01/14...................................................... 1,159,538
Puerto Rico HFC, SFMR, Portfolio No. 1,
85,000 Series A, GNMA Secured, 7.80%, 10/15/21....................................................... 88,868
295,000 Series B, GNMA Secured, 7.65%, 10/15/22....................................................... 311,673
1,000,000 Series C, GNMA Secured, 6.85%, 10/15/23....................................................... 1,037,630
150,000 Puerto Rico Industrial, Medical and Environmental Facilities, PCFA Revenue, Baxter Travenol Labs.,
Series A, 8.00%, 09/01/12..................................................................... 166,542
Puerto Rico PBA, Guaranteed Public Education and Health Facilities,
100,000 Series H, Pre-Refunded, 7.875%, 07/01/16...................................................... 108,772
1,000,000 Series J, Pre-Refunded, 7.25%, 07/01/17....................................................... 1,097,770
75,000 Rapides Parish GO, Consolidated School District No. 52, Pineville, 8.40%, 03/01/03............. 81,764
1,370,000 Rapides Parish Housing and Mortgage Finance Authority, SFM, ETM 08/01/00, 7.25%, 08/01/10...... 1,471,503
St. Bernard Parish Home Mortgage Authority Revenue, SFMR,
988,401 Refunding, Series A, 8.00%, 03/25/12.......................................................... 1,063,095
435,000 Series A, FGIC Insured, ETM 09/01/00, 7.50%, 09/01/10......................................... 506,453
2,500,000 St. Charles Parish, PCR, Louisiana Power and Light Co. Project, 7.50%, 06/01/21................ 2,648,225
St. Charles Parish, Solid Waste Disposal Revenue,
1,500,000 Louisiana Power and Light Co. Project, 7.05%, 04/01/22........................................ 1,554,960
750,000 Louisiana Power and Light Co. Project, Series A, 7.00%, 12/01/22.............................. 779,325
2,365,000 St. James Parish COP, Juvenile Detention Facility, Pre-Refunded, 7.50%, 07/01/10............... 2,433,774
St. John's Baptist Parish,
430,000 Sales Tax District, 7.30%, 12/01/08........................................................... 469,435
275,000 Sales Tax District, 7.30%, 12/01/09........................................................... 297,930
50,000 St. Mary's Parish Public Improvement, Sales and Use Tax Revenue, Refunding, Pre-Refunded,
8.40%, 12/01/03............................................................................... 55,366
598,656 St. Mary's Public Trust Financing Authority, SFMR, Refunding, Series A, 7.625%, 03/25/12....... 637,383
125,000 St. Tammany's Parish Hospital Service Revenue, District No. 2, Pre-Refunded, 8.00%, 10/01/08... 140,431
St. Tammany's Public Trust Financing Authority, SFMR,
165,000 Series A, ETM 07/01/00, 7.20%, 07/01/10....................................................... 191,692
50,000 Series A, ETM 07/01/11, 7.20%, 07/01/11....................................................... 55,622
150,000 Shreveport GO, Series A, Pre-Refunded, 7.50%, 01/01/09......................................... 164,445
3,500,000 Shreveport Water and Sewer Revenue, Refunding, Series A, FGIC Insured, 5.95%, 12/01/14......... 3,516,135
5,500,000 Tangipahoa Parish Hospital Service Revenue, District No. 1, Refunding, AMBAC Insured,
6.25%, 02/01/24............................................................................... 5,575,130
125,000 Terrebonne Parish Hospital Service Revenue, District No. 1, Refunding, Terrebonne General Medical
Center Project, BIG Insured, 7.50%, 04/01/15.................................................. 134,518
205,000 Ville Platte Utilities Revenue, Refunding, Pre-Refunded, 7.80%, 05/01/02....................... 230,014
West Feliciana Parish, PCR,
6,500,000 Gulf States Utilities, 7.70%, 12/01/14........................................................ 6,913,725
5,000,000 Refunding, Gulf States Utilities, 8.00%, 12/01/24............................................. 5,299,850
Total Bonds (Cost $95,278,361)................................................................. 100,882,913
c Zero Coupon Bonds1.7%
$ 5,000,000 Shreveport Water and Sewer Revenue, Refunding, Series B, FGIC Insured, (original accretion rate
7.05%), 12/01/11 (Cost $1,274,600)............................................................ $ 1,798,450
--------------
Total Long Term Investments (Cost $96,552,961)................................................. 102,681,363
--------------
e Short Term Investments.1%
100,000 East Baton Rouge Parish, PCR, Refunding, Rhone Poulenc Inc. Project,
Daily VRDN and Put, 3.55%, 06/01/98 (Cost $100,000)............................................ 100,000
--------------
Total Investments (Cost $96,652,961) 98.4%..................................................... 102,781,363
Other Assets and Liabilities, Net 1.6%......................................................... 1,706,855
--------------
Net Assets 100.0%.............................................................................. $104,488,218
==============

At August 31, 1995, the net unrealized appreciation based on the
cost of investments for income tax purposes of $96,652,961 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost................................................................. $6,131,808
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value............................................................... (3,406)
--------------
Net unrealized appreciation.................................................................... $ 6,128,402
==============

</TABLE>

PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
BIG - Bond Investors Guaranty Insurance Co.
CGIC - Capital Guaranty Insurance Co.
COP - Certificate of Participation
ETM - Escrow to Maturity
FGIC - Financial Guaranty Insurance Co.
FHA - Federal Housing Agency
GNMA - Government National Mortgage Association
GO - General Obligation
HDC - Housing Development Corp.
HFAR - Housing Finance Agency Revenue
HFC - Housing Finance Corp.
ID - Improvement District
IDB - Industrial Development Board
IDBR - Industrial Development Board Revenue
MBIA - Municipal Bond Investors Assurance Corp.
MBS - Mortgage-Backed Securities
MF - Multi-Family
MFHR - Multi-Family Housing Revenue
PBA - Public Building Authority
PCR - Pollution Control Revenue
PCFA - Pollution Control Financing Authority
SF - Single-Family
SFM - Single-Family Mortgage
SFMR - Single-Family Mortgage Revenue

cZero coupon bonds. The current effective yield may vary. The original accretion
rate will remain constant. eVariable rate demand notes (VRDN's) are tax-exempt
obligations which contain a floating or variable interest rate adjustment
formula and an unconditional right of demand to receive payment of the principal
balance plus accrued interest upon short notice prior to specified dates. The
interest rate may change on specified dates in relationship with changes in a
designated rate (such as the prime interest rate or U.S. Treasury bills rate).

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

FRANKLIN TAX-FREE TRUST

Statement of Investments in Securities and Net Assets, August 31, 1995
(unaudited)

Face Value
Amount Franklin Maryland Tax-Free Income Fund (Note 1)
Investments 97.6%............................................................................

<S> <C> <C>
$ 200,000 Anne Arundel County GO, Second Issue, 7.75%, 03/15/08......................................... $ 222,304
1,650,000 Anne Arundel County Mortgage Revenue, Refunding, Series A, MBIA Insured, 6.00%, 01/01/26...... 1,622,676
9,500,000 Anne Arundel County PCR, Refunding, Baltimore Gas and Electric Co. Project, 6.00%, 04/01/24... 9,514,155
4,250,000 Baltimore Convention Center Revenue, FGIC Insured, 6.15%, 09/01/19............................ 4,344,010
545,000 Baltimore COP, Refunding, Series C, MBIA Insured, 7.25%, 04/01/16............................. 602,972
90,000 Baltimore County Authority Revenue, Series 1989, 7.20%, 07/01/19.............................. 97,015
600,000 Baltimore County GO, Pension Fund, Pre-Refunded, 7.75%, 07/01/16.............................. 619,530
Baltimore County Mortgage Revenue, Refunding, Old Orchard Apartments Project,
1,000,000 Series A, MBIA Insured, 7.00%, 07/01/16...................................................... 1,043,830
3,000,000 Series A, MBIA Insured, 7.125%, 01/01/27..................................................... 3,148,440
Baltimore Economic Development Lease Revenue, Refunding,
1,640,000 Armistead Partnership, Series A, 6.75%, 08/01/02............................................. 1,769,970
3,225,000 Armistead Partnership, Series A, 7.00%, 08/01/11............................................. 3,455,491
1,000,000 Baltimore GO, Series B, 7.15%, 10/15/08....................................................... 1,158,710
1,850,000 Baltimore Port Facilities Revenue, Consolidated Coal Sales, Series A, 6.50%, 10/01/11......... 1,980,462
250,000 Bel Air COP, Parking Facilities, CGIC Insured, Pre-Refunded, 7.80%, 06/01/10.................. 282,943
350,000 Frederick County College Revenue, Hood College Project, 7.20%, 07/01/09....................... 374,399
500,000 Frederick County EDR, Refunding, Manekin Frederick Project, Series A, 7.50%, 12/01/14......... 555,070
200,000 Frederick County GO, Public Facilities, Pre-Refunded, 7.20%, 04/01/07......................... 222,782
10,000,000 Gaithersburg Hospital Facilities Improvement Revenue, Shady Grove Hospital, Series A,
Pre-Refunded, 8.25%, 09/01/21................................................................ 12,055,000
5,000,000 Gaithersburg Hospital Facilities Revenue, Refunding & Improvement, Shady Grove Hospital,
FSA Insured, 6.00%, 09/01/21................................................................. 5,004,150
3,420,000 Gaithersburg Nursing Home Revenue, Refunding, Shady Grove Adventist, Series A, Pre-Refunded,
9.00%, 09/01/22 ............................................................................. 3,655,364
3,000,000 Harford County Mortgage Revenue, Refunding, Greenbrier V Apartments Project, Series A,
FHA Insured, 6.50%, 11/01/26................................................................. 3,014,250
1,250,000 Howard County EDR, Refunding, 7.75%, 06/01/12................................................. 1,361,013
215,000 Howard County Metropolitan District, Series A, Pre-Refunded, 7.40%, 02/15/18.................. 238,194
300,000 Kent County College Revenue, Refunding, Washington College Project, 7.70%, 07/01/18........... 325,461
1,900,000 Maryland Environmental Services, COP, Water and Waste Facilities, Series A, 6.70%, 06/01/11... 2,028,801
650,000 Maryland Local Government Insurance Trust Capitalization Program, Series A, 7.125%, 08/01/09.. 710,346
350,000 Maryland State CDA, Department of Economic and Community Development, SF Program,
First Series, 7.00%, 04/01/14................................................................ 360,276
1,000,000 Maryland State CDA, Department of Economic and Community Development, SFHR Program,
Fourth Series, 7.30%, 04/01/17............................................................... 1,048,990
Maryland State CDA, Department of Housing and Community Development,
130,000 Infrastructure Financing, Series A, AMBAC Insured, 7.25%, 06/01/09........................... 140,845
2,000,000 MFH Mortgage, Series E, 7.10%, 05/15/28...................................................... 2,067,820
1,000,000 MFHR Mortgage, Series A, 7.80%, 05/15/32..................................................... 1,054,540
1,800,000 MFHR Mortgage, Series A, 6.85%, 05/15/33..................................................... 1,837,512
1,000,000 MFHR Mortgage, Series D, 7.70%, 05/15/20..................................................... 1,067,620
995,000 SF Program, First Series, 7.375%, 04/01/10................................................... 1,039,805
140,000 SF Program, First Series, 7.40%, 04/01/17.................................................... 145,998
750,000 SF Program, Second Series, 7.60%, 04/01/23................................................... 788,603
375,000 SF Program, Second Series, 7.85%, 04/01/29................................................... 396,953
300,000 SF Program, Third Series, 7.375%, 04/01/26................................................... 308,982
1,500,000 SF Program, Third Series, 7.25%, 04/01/27.................................................... 1,559,955
1,000,000 SF Program, Fourth Series, 7.45%, 04/01/32................................................... 1,039,680
1,990,000 SF Program, Fifth Series, 6.85%, 04/01/11.................................................... 2,075,630
30,000 SF Program, Sixth Series, 8.125%, 04/01/17................................................... 31,298

Maryland State Community Development Administration, MFHR,
$ 200,000 Department of Economics and Community Development, Series A, 7.375%, 05/15/26................ $ 205,174
30,000 Department of Housing and Community Development, Series A, 7.50%, 05/15/31................... 31,231
1,000,000 Maryland State EDC Lease Revenue, Hilton Street Facilities, Series A, 7.00%, 01/01/10......... 1,090,870
Maryland State Health and Higher Educational Facilities Authority Revenue,
750,000 Bon Secours Heartland, Issue A, Pre-Refunded, 7.375%, 09/01/17............................... 858,045
1,000,000 Doctors Community Hospital, Pre-Refunded, 8.75%, 07/01/12.................................... 1,204,140
250,000 Doctors Community Hospital, Pre-Refunded, 8.75%, 07/01/22.................................... 301,035
150,000 Franklin Square Hospital, MBIA Insured, 7.50%, 07/01/19...................................... 165,636
700,000 Good Samaritan Hospital, Pre-Refunded, 7.50%, 07/01/21....................................... 791,287
100,000 Hartford Memorial Hospital and Fallston General Hospital, 8.50%, 07/01/14.................... 105,556
500,000 Holy Cross Hospital, Series A, AMBAC Insured, 7.125%, 07/01/10............................... 551,480
100,000 Howard County General Hospital, Pre-Refunded, 7.00%, 07/01/17................................ 107,158
1,500,000 Johns Hopkins Hospital, Pre-Refunded, 7.00%, 07/01/23........................................ 1,695,405
1,700,000 Kernan Hospital, Connie Lee Insured, 6.10%, 07/01/24......................................... 1,713,209
1,095,000 Mercy Medical Center, Pre-Refunded, 8.00%, 07/01/20.......................................... 1,255,647
100,000 North Arundel Hospital, BIG Insured, Pre-Refunded, 7.875%, 07/01/21.......................... 111,729
3,000,000 Refunding, Doctors Community Hospital, 5.75%, 07/01/13....................................... 2,593,740
2,000,000 Refunding, Good Samaritan Hospital, 5.75%, 07/01/19.......................................... 1,881,420
150,000 Refunding, Johns Hopkins Hospital, 7.375%, 07/01/09.......................................... 160,287
100,000 Refunding, Johns Hopkins University, 7.375%, 07/01/08........................................ 108,068
1,000,000 Sinai Hospital of Baltimore, AMBAC Insured, Pre-Refunded, 7.00%, 07/01/19.................... 1,130,270
1,350,000 Maryland State IDA Financing, EDR, FSA Insured, 7.10%, 07/01/18............................... 1,497,272
6,000,000 Maryland State IDAR Financing, American Center Physics Headquarters, 6.625%, 01/01/17......... 6,118,260
4,655,000 Maryland State Stadium, Authority Lease Revenue, Convention Center Expansion, AMBAC Insured,
5.875%, 12/15/14............................................................................. 4,675,435
500,000 Maryland State Stadium Authority, Sports Facilities Lease Revenue, Series D, 7.60%, 12/15/19.. 548,185
5,400,000 Maryland State Transportation Facilities Authority Revenue, Refunding, Series 1992,
5.75%, 07/01/13 ............................................................................. 5,310,900
Maryland Water Quality Financing Administration Revenue, Revolving Loan Fund,
1,245,000 Series A, 7.25%, 09/01/11.................................................................... 1,388,549
1,000,000 Series A, 6.55%, 09/01/14.................................................................... 1,068,880
1,565,000 Series B, 6.70%, 09/01/13.................................................................... 1,705,787
Montgomery County Housing Opportunities Commission, MFMR,
1,580,000 Series A, 7.25%, 07/01/11.................................................................... 1,660,438
2,410,000 Series A, 7.00%, 07/01/23.................................................................... 2,479,866
Montgomery County Housing Opportunities Commission, SFMR,
2,055,000 Series A, 6.80%, 07/01/17.................................................................... 2,095,853
460,000 Series A, 7.50%, 07/01/17.................................................................... 485,728
195,000 Series A, 7.625%, 07/01/17................................................................... 202,369
275,000 Montgomery County Parking Revenue, Silver Spring Parking Lot District, Series A, Pre-Refunded,
7.00%, 06/01/08 ............................................................................. 295,419
500,000 Morgan State University Academic and Auxiliary Facilities Fees Revenue, Series A, MBIA Insured,
Pre-Refunded, 7.00%, 07/01/20................................................................ 565,135
Northeast Solid Waste Disposal Authority Revenue, Montgomery County Resources Recreation Project,
3,100,000 Series A, 6.20%, 07/01/10.................................................................... 3,131,434
6,000,000 Series A, 6.30%, 07/01/16.................................................................... 6,016,680
Ocean City, Refunding,
1,880,000 MBIA Insured, 5.75%, 03/15/12................................................................ 1,891,750
1,120,000 MBIA Insured, 5.75%, 03/15/13................................................................ 1,122,598
1,180,000 MBIA Insured, 5.75%, 03/15/14................................................................ 1,177,310
2,050,000 Prince George's County COP, Real Estate Acquisition Program II, MBIA Insured, 6.00%, 09/15/14. 2,088,028

$ 130,000 Prince George's County GO, Consolidated Public Improvement, Series A, Pre-Refunded,
7.20%, 02/01/08 ............................................................................. $ 143,367
Prince George's County Hospital Revenue,
3,500,000 Dimensions Health Corp., Pre-Refunded, 7.25%, 07/01/17....................................... 4,099,900
1,000,000 Dimensions Health Corp., Pre-Refunded, 7.00%, 07/01/22....................................... 1,156,890
5,500,000 Prince George's County Housing Authority, MFHR, Emerson House Project, Series A, 7.00%, 04/15/19 5,627,270
2,900,000 Prince George's County Housing Authority Mortgage Revenue, Refunding, New Keystone
Apartments Project, Series A, MBIA Insured, 6.80%, 07/01/25.................................. 2,966,091
2,750,000 Prince George's County IDA Lease Revenue, Upper Marlboro Justice Center Project, MBIA Insured,
5.80%, 06/30/14 ............................................................................. 2,751,760
500,000 Prince George's County, Maryland Parking Authority Revenue, Refunding, Justice Center Facilities
Project, 6.45%, 05/01/05..................................................................... 545,050
Prince George's County PCR, Refunding,
1,200,000 Potomac Electric Project, 6.00%, 09/01/22.................................................... 1,204,944
2,975,000 Potomac Electric Project, 6.375%, 01/15/23................................................... 3,110,065
1,570,000 Prince George's County Solid Waste Management System Revenue, Series 1990, Pre-Refunded,
7.00%, 06/30/08 ............................................................................. 1,774,430
1,145,000 Rockville Mortgage Revenue, Refunding, Summit Apartments Project, Series A, MBIA Insured,
5.70%, 01/01/26 ............................................................................. 1,068,514
Washington Suburban Sanitary District,
100,000 General Construction, Pre-Refunded, 7.25%, 12/01/09.......................................... 111,039
1,200,000 General Construction, Refunding, Pre-Refunded, 7.375%, 01/01/07.............................. 1,276,632
--------------
Total Investments (Cost $153,709,918)97.6%.................................................... 161,795,060
Other Assets and Liabilities, Net2.4%......................................................... 3,951,521
--------------
Net Assets100.0%.............................................................................. $165,746,581
==============

At August 31, 1995, the net unrealized appreciation based on
the cost of investments for income tax purposes of $153,709,918 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost................................................................ $ 8,799,487
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value................................................................ (714,345)
--------------
Net unrealized appreciation................................................................... $ 8,085,142
==============

</TABLE>

PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
BIG - Bond Investors Guaranty Insurance Co.
CDA - Community Development Authority/Agency
CGIC - Capital Guaranty Insurance Co.
COP - Certificate of Participation
EDC - Economic Development Corp.
EDR - Economic Development Revenue
FGIC - Financial Guaranty Insurance Co.
FHA - Federal Housing Authority
FSA - Financial Security Assistance
GO - General Obligation
IDA - Industrial Development Authority/Agency
IDAR - Industrial Development Authority/Agency Revenue
MBIA - Municipal Bond Investors Assurance Corp.
MFH - Multi-Family Housing
MFHR - Multi-Family Housing Revenue
MFMR - Multi-Family Mortgage Revenue
PCR - Pollution Control Revenue
SF - Single-Family
SFHR - Single-Family Housing Revenue
SFMR - Single-Family Mortgage Revenue

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

FRANKLIN TAX-FREE TRUST

Statement of Investments in Securities and Net Assets, August 31, 1995
(unaudited)

Face Value
Amount Franklin Missouri Tax-Free Income Fund (Note 1)
Long Term Investments 98.1%

<S> <C> <C>
$ 500,000 Audrain County Hospital Revenue, Refunding, Audrain Medical Center Project, AMBAC Insured,
7.35%, 11/01/08 ............................................................................. $ 566,625
600,000 Bi-State Development Agency, Missouri-Illinois Metropolitan District Revenue, Refunding,
Arch Parking Facility, 7.25%, 01/02/13....................................................... 613,152
3,000,000 Bi-State Development Agency, Missouri-Illinois Metropolitan No. 5, Refunding, American Commercial
Terminals, 7.75%, 06/01/10l ................................................................. 3,276,150
1,400,000 Bowling Green School District R1, Building Corp. Leasehold Revenue, MBIA Insured, 6.50%, 03/01/13 1,467,718
1,180,000 Christian County Reorganized School District No. R-6, AMBAC Insured, 7.05%, 03/01/11.......... 1,300,738
Franklin County Consolidated School District No. 2, GO,
500,000 FGIC Insured, Pre-Refunded, 7.20%, 03/01/05.................................................. 536,890
500,000 FGIC Insured, Pre-Refunded, 7.25%, 03/01/06.................................................. 537,475
Guam Airport Authority Revenue,
1,075,000 Refunding, Series A, 6.50%, 10/01/23......................................................... 1,078,859
500,000 Series B, 6.60%, 10/01/10.................................................................... 509,160
4,000,000 Series B, 6.70%, 10/01/23.................................................................... 4,028,800
3,000,000 Jackson County IDAR, St. Joseph's Health Care Center Corp., MBIA Insured, 6.50%, 07/01/19..... 3,136,740
880,000 Jackson County Lease COP, Longview Recreation Complex Project, Pre-Refunded, 8.00%, 11/01/07.. 963,582
370,000 Jefferson County Reorganized School District No. R-3, AMBAC Insured, 7.00%, 03/01/09.......... 397,432
Joplin Catholic Health Facilities Corp. Revenue, IDA, St. John's Regional Medical Center Project,
200,000 Refunding, Series 1987, MBIA Insured, 7.125%, 06/01/14....................................... 210,908
150,000 Series 1987, 7.125%, 06/01/14................................................................ 156,447
Joplin School District Building Corp., Leasehold Revenue, Capital Improvement Project,
200,000 FGIC Insured, Pre-Refunded, 7.40%, 09/01/03.................................................. 209,756
100,000 FGIC Insured, Pre-Refunded, 7.45%, 03/01/04.................................................. 104,926
605,000 Kansas City Airport Revenue, General Improvement, Series B, CGIC Insured, 6.875%, 09/01/12.... 650,581
3,345,000 Kansas City, IDA, MFHR, Mews Apartments Project, Series A, 6.30%, 07/01/20.................... 3,307,369
Kansas City MAC, Leasehold Revenue, Capital Improvement,
7,790,000 Citywide Infrastructure, Series B, CGIC Insured, 6.50%, 03/01/14............................. 8,204,584
1,750,000 Refunding, Roe Bartle, Series B-1, AMBAC Insured, 7.125%, 04/15/16........................... 1,899,695
2,905,000 Roe Bartle, Series B, AMBAC Insured, 6.625%, 04/15/15........................................ 3,104,980
1,665,000 Truman Medical Center, Series A, 7.00%, 11/01/11............................................. 1,773,175
1,850,000 Kansas City School District, Building Corp. Leasehold Revenue, Capital Improvement Project,
Series A, FGIC Insured, Pre-Refunded, 7.90%, 02/01/08........................................ 2,045,009
3,525,000 Kansas City Tax Increment Financing Commission, Tax Increment Revenue, Briarcliff West Project,
Series B, 7.00%, 11/01/14.................................................................... 3,643,405
1,800,000 Kansas City Water Revenue, 7th Issue, Series A, 7.00%, 12/01/08............................... 1,878,156
75,000 Lee's Summit, COP, 8.50%, 08/01/02............................................................ 79,228
d Lee's Summit, IDAR, John Knox Village Project,
1,000,000 6.55%, 08/15/10.............................................................................. 1,022,400
2,000,000 6.625%, 08/15/13............................................................................. 2,023,740
40,000 Marion County Nursing Home District Revenue, Refunding, Pre-Refunded, 9.00%, 08/01/03......... 43,629
1,000,000 Missouri School Board Association, COP, Lease Participation, North St. Francois County Project,
MBIA Insured, Pre-Refunded, 7.375%, 04/01/10................................................. 1,092,000
Missouri School Board Association, COP, Pooled Finance Program,
130,000 Series A-3, BIG Insured, 7.875%, 03/01/06.................................................... 137,326
225,000 Series A-5, BIG Insured, 7.375%, 03/01/06.................................................... 239,634
Missouri State Environmental Improvement and Energy Resources Authority, PCR,
950,000 Revolving Fund, Lee's Summit, Series B, 7.125%, 12/01/10..................................... 1,048,724
4,500,000 Revolving Fund, Series A, 6.55%, 07/01/14.................................................... 4,790,700
1,945,000 Revolving Fund, Springfield Project, Series A, 7.00%, 10/01/10............................... 2,131,953
1,000,000 Revolving Fund Program, Series A, CGIC Insured, 6.05%, 07/01/16.............................. 1,018,170
2,000,000 Revolving Fund Program, Series B, 7.20%, 07/01/16............................................ 2,271,780

Missouri State Environmental Improvement and Energy Resources Authority, PCR, National Rural
Association Electric Project,
$ 50,000 Series 1984 G-4, 8.25%, 11/15/14............................................................. $ 52,702
20,000 Series 1984 G-5, 7.90%, 11/15/14............................................................. 20,966
230,000 Series 1984 G-6, 7.90%, 11/15/14............................................................. 241,601
2,100,000 Series 1984 G-6, AMBAC Insured, 5.85%, 02/01/13.............................................. 2,090,781
2,390,000 Missouri State Environmental Improvement and Energy Resources Authority, Union Electric Project,
7.40%, 05/01/20 ............................................................................. 2,623,575
Missouri State Health and Educational Facilities Authority, Health Facilities Revenue,
2,000,000 Barnes Hospital, Pre-Refunded, 7.125%, 12/15/20.............................................. 2,290,780
100,000 Bethesda Health Group, Inc. Project, Pre-Refunded, 8.00%, 04/01/13........................... 110,238
2,250,000 Children's Mercy Hospital Project, MBIA Insured, 5.65%, 05/15/23............................. 2,170,508
3,500,000 Lake of The Ozarks General Hospital, 8.00%, 02/15/11......................................... 3,707,865
200,000 Memorial Community Hospital, Association of Jefferson City, 8.25%, 04/15/99.................. 206,790
125,000 Refunding, Charles E. Still Osteopathic Hospital Project, 7.625%, 02/01/08................... 126,595
865,000 Refunding, Heartland Health Systems Project, 8.125%, 10/01/10................................ 963,731
570,000 Refunding, St. John's Regional Medical Center, MBIA Insured, Pre-Refunded, 7.70%, 09/01/15... 605,614
2,500,000 Refunding & Improvement, Christian Health, Series A, FGIC Insured, Pre-Refunded,
6.875%, 02/15/21............................................................................ 2,829,400
950,000 Sisters of St. Mary's Health Care Project, BIG Insured, Pre-Refunded, 7.75%, 06/01/16........ 1,055,792
175,000 Spelman-St. Luke's Hospital Corp. Project, Pre-Refunded, 7.875%, 10/01/18.................... 196,413
Missouri State Health and Educational Facilities Authority Revenue,
5,000,000 Health Midwest, Series A, MBIA Insured, 6.40%, 02/15/15...................................... 5,194,400
700,000 Health Midwest, Series B, MBIA Insured, 6.10%, 06/01/11...................................... 721,609
1,990,000 Health Midwest, Series B, MBIA Insured, 6.25%, 06/01/14...................................... 2,071,889
1,100,000 Health Midwest, Series B, MBIA Insured, 6.25%, 02/15/22...................................... 1,124,519
2,745,000 Heartland Health System Project, AMBAC Insured, 6.35%, 11/15/17.............................. 2,845,165
1,000,000 Refunding, SSM Health Care, Series AA, MBIA Insured, 6.25%, 06/01/16......................... 1,026,250
50,000 Refunding, St. Louis University, Series A, AMBAC Insured, 7.875%, 06/01/12................... 53,386
300,000 Refunding & Improvement, Freeman Hospital Project, Pre-Refunded, 7.40%, 09/01/13............. 316,434
1,200,000 Refunding & Improvement, St. Luke's Hospital of Kansas City Project, MBIA Insured,
Pre-Refunded, 7.00%, 11/15/13............................................................... 1,382,184
Missouri State Housing Development Commission,
2,240,000 Series B, GNMA Secured, 6.40%, 12/01/24...................................................... 2,255,232
175,000 SFMR, Series A, GNMA Secured, 7.90%, 02/01/21................................................ 183,244
490,000 SFMR, Series A, GNMA Secured, 7.625%, 02/01/22............................................... 513,496
2,000,000 SFMR, Series B, GNMA Secured, 6.10%, 09/01/14................................................ 1,977,820
430,000 SFMR, Series B, GNMA Secured, 7.625%, 06/01/21............................................... 448,825
1,820,000 SFMR, Series B, GNMA Secured, 7.75%, 06/01/22................................................ 1,899,043
1,665,000 SFMR, Series C, GNMA Secured, 6.90%, 07/01/18................................................ 1,750,714
135,000 Missouri State Housing Development Commission, MFHR, FHA Insured, 8.50%, 12/01/29............. 143,180
Missouri State Regional Convention Center and Sports Complex Authority, Convention and
Sports Project,
2,000,000 Refunding, Series A, 5.50%, 08/15/21......................................................... 1,844,580
4,600,000 Series A, Pre-Refunded, 6.90%, 08/15/21...................................................... 5,280,524
Missouri State Western College Revenue,
1,250,000 Housing System, MBIA Insured, 5.875%, 10/01/24............................................... 1,242,175
5,000,000 Refunding, Student Housing, Pre-Refunded, 8.00%, 10/01/16.................................... 5,987,650
1,000,000 Moberly Combined Waterworks and Sewerage System, Refunding & Improvement Bonds,
FGIC Insured, Pre-Refunded, 7.50%, 08/01/15.................................................. 1,153,870
50,000 Moberly IDA, Hospital Revenue, Refunding, Moberly Regional Medical Center, Inc. Project,
Pre-Refunded, 8.75%, 03/01/16................................................................ 54,861
300,000 North Kansas City School District Facilities Authority, BIG Insured, 7.40%, 03/01/06.......... 318,864
$ 5,000,000 Phelps County Hospital Revenue, Refunding, Phelps County Regional Medical Center, Connie Lee
Insured, 6.00%, 05/15/13..................................................................... $ 5,030,000
250,000 Platte County Reorganized School District No. R-5, Pre-Refunded, 7.25%, 03/01/06.............. 268,430
Puerto Rico Commonwealth Aqueduct and Sewer Authority Revenue,
40,000 Refunding, Series 1985-A, FSA Insured, Pre-Refunded, 9.00%, 07/01/09......................... 52,109
500,000 Series 1988-A, 7.90%, 07/01/07............................................................... 555,190
375,000 Series 1988-A, 7.875%, 07/01/17.............................................................. 416,464
75,000 Puerto Rico Commonwealth Highway Authority Revenue, Series P, Pre-Refunded, 8.125%, 07/01/13.. 84,335
25,000 Puerto Rico Commonwealth IDC, General Purpose Revenues, 8.00%, 01/01/03....................... 25,008
Puerto Rico Commonwealth Infrastructure Financing Authority, Special Tax Revenue,
200,000 Series 1988-A, 7.90%, 07/01/07............................................................... 220,820
975,000 Series 1988-A, 7.75%, 07/01/08............................................................... 1,072,130
Puerto Rico Commonwealth Public Improvement GO,
25,000 Series 1986, Pre-Refunded, 7.90%, 07/01/11................................................... 26,576
120,000 Series A, Pre-Refunded, 7.75%, 07/01/13...................................................... 133,850
Puerto Rico Electric Power Authority Revenue, Refunding,
15,000 Series 1987-L, Pre-Refunded, 8.40%, 07/01/15................................................. 16,444
25,000 Series 1988-M, Pre-Refunded, 8.00%, 07/01/08................................................. 28,029
Puerto Rico Electric Power Authority Revenue, Water Resources,
1,110,000 Refunding, Series N, 7.125%, 07/01/14........................................................ 1,211,654
1,965,000 Refunding, Series N, Pre-Refunded, 7.125%, 07/01/14.......................................... 2,190,857
280,000 Series O, 7.125%, 07/01/14................................................................... 305,642
520,000 Series O, Pre-Refunded, 7.125%, 07/01/14..................................................... 579,769
2,000,000 Series R, 6.25%, 07/01/17.................................................................... 2,020,000
380,000 Puerto Rico HFC, MFMR, Portfolio A, Series 1, 7.50%, 04/01/22................................. 400,444
Puerto Rico HFC, SFMR,
160,000 Portfolio No. 1, Series A, GNMA Secured, 7.80%, 10/15/21..................................... 167,280
2,000,000 Portfolio No. 1, Series C, GNMA Secured, 6.85%, 10/15/23..................................... 2,075,260
500,000 Portfolio No. 1, Series D, GNMA Secured, 6.85%, 10/15/24..................................... 518,815
Puerto Rico Industrial, Medical and Environmental Facilities, PCFA Revenue,
350,000 Baxter Travenol Labs., Series A, 8.00%, 09/01/12............................................. 388,598
300,000 Upjohn Co. Project, 7.50%, 12/01/23.......................................................... 328,476
130,000 Puerto Rico Municipal Finance Agency, Series 1988-A, 8.25%, 07/01/08.......................... 142,940
Puerto Rico PBA, Guaranteed Public Education and Health Facilities,
175,000 Series H, Pre-Refunded, 7.875%, 07/01/16..................................................... 190,351
1,750,000 Series H, Pre-Refunded, 7.25%, 07/01/17...................................................... 1,921,098
980,000 Series J, Pre-Refunded, 7.00%, 07/01/19...................................................... 1,069,347
1,000,000 Raymore Missouri, CGIC Insured, 6.00%, 03/01/14 .............................................. 1,010,790
500,000 St. Charles County Community College, Pre-Refunded, 7.25%, 03/01/06........................... 561,075
1,000,000 St. Charles County Francis Howell School District, FGIC Insured, Pre-Refunded, 6.90%, 03/01/11 1,119,390
St. Charles Public Facility Authority, Leasehold Revenue,
3,000,000 Refunding, AMBAC Insured, 5.80%, 02/01/10.................................................... 3,034,830
1,500,000 Series 1990, AMBAC Insured, Pre-Refunded, 7.20%, 03/01/10.................................... 1,672,515
2,000,000 St. Louis Airport Revenue, Refunding & Improvement, Lambert-St. Louis International Airport,
FGIC Insured, 6.125%, 07/01/15............................................................... 2,041,400
St. Louis County Housing Authority, MFHR, Refunding,
1,000,000 Kensington Square Apartments Project, 6.55%, 03/01/14........................................ 1,023,490
2,750,000 Kensington Square Apartments Project, 6.65%, 03/01/20........................................ 2,814,268
St. Louis County IDA, Health Facilities Revenue,
1,930,000 Mother of Perpetual Help, 6.40%, 08/01/35.................................................... 2,001,314
295,000 Normandy Osteopathic Hospitals Project, Refunding and Improvement, First Mortgage,
9.125%, 08/01/13............................................................................. 311,196
35,000 St. Louis County Mortgage Revenue, GNMA Secured, 8.125%, 09/01/19............................. 37,032
St. Louis County Regional Convention and Sports Complex Authority, Convention and Sports Project,
$ 4,765,000 Refunding, Series B, 5.50%, 08/15/13......................................................... $ 4,435,929
1,000,000 Refunding, Series B, 5.50%, 08/15/16......................................................... 918,480
5,565,000 Refunding, Series B, 5.75%, 08/15/21......................................................... 5,182,795
5,050,000 Series B, Pre-Refunded, 7.00%, 08/15/21...................................................... 5,830,325
250,000 St. Louis Land Clearance RDA, Leasehold Revenue, Capital Improvement, Pre-Refunded,
7.60%, 08/15/08 ............................................................................. 273,642
St. Louis Municipal Finance Corp., Leasehold Revenue, Refunding,
1,000,000 Series A, 5.85%, 07/15/09.................................................................... 1,014,870
10,000,000 Series A, 6.00%, 07/15/13.................................................................... 10,110,300
470,000 St. Louis Parking Facilities Revenue, 6.625%, 12/15/21........................................ 484,202
375,000 St. Louis Public School District Building Corp., Leasehold Revenue, Capital Improvement,
Series 1989-A, FGIC Insured, 7.40%, 04/01/09................................................. 388,770
St. Louis Regional Convention and Sports Complex Authority,
3,700,000 Series C, 7.75%, 08/15/01.................................................................... 3,821,877
11,900,000 Series C, 7.90%, 08/15/21.................................................................... 12,609,953
19,000,000 Sikeston Electric Revenue, Refunding, MBIA Insured, 6.25%, 06/01/22........................... 19,524,970
250,000 Southwest University Housing System Revenue, FGIC Insured, Pre-Refunded, 7.00%, 10/01/10...... 269,350
5,000,000 Springfield Waterworks Revenue, Series A, 5.60%, 05/01/23..................................... 4,903,100
1,000,000 Stone County Reorganized School District No. 4, MBIA Insured, 5.75%, 03/01/15................. 995,350
300,000 Sullivan County Public Water Supply District No. 1, Waterworks Revenue, Refunding, 7.70%, 12/15/13 322,742
500,000 Washington County GO, Industrial Bonds, Pauwels Transformers Project, Series A, 7.60%, 12/01/09 531,690
2,000,000 West Plains IDA, Hospital Revenue, Ozarks Medical Center Project, Series A, 8.625%, 09/15/20.. 2,164,820
1,600,000 West Plains Improvement Authority, Leasehold Revenue, Civic Center, Inc. Project, FGIC Insured,
6.85%, 04/01/06 ............................................................................. 1,734,480
--------------
Total Long Term Investments (Cost $221,334,469)............................................... 233,169,722
--------------
e Short Term Investments.8%
Kansas City IDAR, Research Health Services System,
1,150,000 MBIA Insured, Daily VRDN and Put, 3.45%, 10/15/14............................................ 1,150,000
500,000 MBIA Insured, Weekly VRDN and Put, 3.45%, 04/15/15........................................... 500,000
100,000 Kansas City IDA, MFHR, Weekly VRDN and Put, 3.55%, 12/01/15................................... 100,000
--------------
Total Short Term Investments (Cost $1,750,000)................................................ 1,750,000
--------------
Total Investments (Cost $223,084,469) 98.9%................................................... 234,919,722
Other Assets and Liabilities, Net 1.1%........................................................ 2,648,401
--------------
Net Assets 100.0%............................................................................. $237,568,123
==============

At August 31, 1995, the net unrealized appreciation based on
the cost of investments for income tax purposes of $223,086,344 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost................................................................ $ 12,652,644
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value................................................................ (819,266)
--------------
Net unrealized appreciation................................................................... $ 11,833,378
==============
</TABLE>

PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
BIG - Bond Investors Guaranty Insurance Co.
CGIC - Capital Guaranty Insurance Co.
COP - Certificate of Participation
FGIC - Financial Guaranty Insurance Co.
FHA - Federal Housing Authority/Agency
FSA - Financial Security Assistance
GNMA - Government National Mortgage Association
GO - General Obligation
HFC - Housing Finance Corp.
IDA - Industrial Development Authority/Agency
IDAR - Industrial Development Authority/Agency Revenue
IDC - Industrial Development Corp.
MAC - Municipal Assistance Corp.
MBIA - Municipal Bond Investors Assurance Corp.
MFHR - Multi-Family Housing Revenue
MFMR - Multi-Family Mortgage Revenue
PBA - Public Building Authority
PCFA - Pollution Control Financing Authority
PCR - Pollution Control Revenue
RDA - Redevelopment Agency
SFMR - Single-Family Mortgage Revenue

dSee Note 1(f) regarding securities purchased on a when-issued basis.
eVariable rate demand notes (VRDN's) are tax-exempt obligations which contain a
floating or variable interest rate adjustment formula and an unconditional right
of demand to receive payment of the principal balance plus accrued interest upon
short notice prior to specified dates. The interest rate may change on specified
dates in relationship with changes in a designated rate (such as the prime
interest rate or U.S. Treasury bills rate).

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

FRANKLIN TAX-FREE TRUST

Statement of Investments in Securities and Net Assets, August 31, 1995 (unaudited)

Face Value
Amount Franklin North Carolina Tax-Free Income Fund (Note 1)
Long Term Investments 97.7%

<S> <C> <C>
$ 500,000 Albemarle GO, Water and Sewer, Unlimited Tax, Pre-Refunded, 7.10%, 05/01/07................... $ 555,380
1,075,000 Appalachian State University Revenue, Appalachian State Teachers College Utility System,
MBIA Insured, 6.10%, 05/15/13................................................................ 1,106,358
2,000,000 Buncombe County Metropolitan Sewage District System Revenue, Series B, 6.75%, 07/01/16........ 2,278,420
100,000 Charlotte Airport Revenue, 8.50%, 07/01/17.................................................... 107,977
2,250,000 Charlotte COP, Convention Facility Project, AMBAC Insured, Pre-Refunded, 7.00%, 12/01/11...... 2,593,440
Charlotte-Mecklenburg Hospital Authority, Health Care System Revenue, Refunding,
6,100,000 Series 1992, 6.25%, 01/01/20................................................................. 6,206,079
150,000 Series G, Pre-Refunded, 7.875%, 10/01/15..................................................... 164,192
350,000 Series I, Pre-Refunded, 7.80%, 10/01/18...................................................... 392,616
Charlotte Special Facilities Revenue, Piedmont Aviation, Inc. Project,
425,000 Douglas International Airport, 8.375%, 07/01/17.............................................. 427,078
1,405,000 Douglas International Airport, 9.00%, 07/01/17............................................... 1,452,658
200,000 Chowan County Hospital Revenue, Refunding, 7.625%, 10/01/10................................... 201,818
3,100,000 Coastal Solid Waste Disposal System Authority Revenue, Refunding, Regional Solid Waste
Management, 6.50%, 06/01/08.................................................................. 3,248,893
1,000,000 County of Cleveland GO, AMBAC Insured, Pre-Refunded, 7.10%, 06/01/06.......................... 1,132,780
1,450,000 Craven County Finance Corp. Revenue, Municipal Lease Purchase, COP, School Building Project,
8.00%, 06/01/10 ............................................................................. 1,556,474
1,400,000 Craven County Regional Medical Facility, MBIA Insured, Pre-Refunded, 7.20%, 10/01/19.......... 1,602,216
Cumberland County COP, Civic Center Project,
3,500,000 Series A, AMBAC Insured, 6.40%, 12/01/19..................................................... 3,680,075
3,765,000 Series A, AMBAC Insured, 6.40%, 12/01/24..................................................... 3,942,821
Cumberland County Hospital Facility System Revenue,
110,000 BIG Insured, Pre-Refunded, 7.875%, 10/01/14.................................................. 123,629
2,000,000 MBIA Insured, 6.00%, 10/01/21................................................................ 2,029,280
1,000,000 Dare County Utility System Revenue, MBIA Insured, 5.75%, 06/01/14............................. 1,011,880
Davie County GO,
350,000 North Carolina Water, Unlimited Tax, 7.10%, 04/01/10......................................... 378,536
250,000 North Carolina Water, Unlimited Tax, 7.10%, 04/01/11......................................... 269,330
2,000,000 Duplin County COP, Social Service Administrative Building, Solid Waste Project, FGIC Insured,
6.75%, 09/01/12 ............................................................................. 2,141,160
1,650,000 Durham COP, Series 1991, 6.875%, 04/01/09..................................................... 1,789,326
Durham County COP,
3,000,000 Hospital and Office Facilities Project, 6.00%, 05/01/14 ..................................... 3,066,030
1,700,000 Hospital and Office Facilities Project, 6.00%, 05/01/17 ..................................... 1,731,994
3,000,000 Durham County COP, Jail Facilities and Computer Equipment Project, 6.625%, 05/01/14........... 3,171,780
1,650,000 Fayetteville Public Works Commission Revenue, FGIC Insured, Pre-Refunded, 7.00%, 03/01/11..... 1,853,660
500,000 Fayetteville Sewer and Public Improvement, Pre-Refunded, 7.10%, 05/01/06...................... 556,280
750,000 Gaston County Industrial Facilities and PCFA Revenue, 7.70%, 10/01/12......................... 830,370
2,200,000 Gastonia Combined Utilities System Revenue, MBIA Insured, 6.10%, 05/01/19 .................... 2,255,198
1,725,000 Gastonia COP, Police Station Project, FGIC Insured, 5.70%, 08/01/15........................... 1,686,757
Greensboro COP,
1,610,000 Coliseum Arena Expansion Project, 6.75%, 12/01/09............................................ 1,731,603
350,000 Greensboro Center City Corp., Pre-Refunded, 7.90%, 07/01/09.................................. 391,283
500,000 Greensboro GO, Pre-Refunded, 6.90%, 05/01/08.................................................. 561,330
1,320,000 Greensboro HDC, Mortgage Revenue, Refunding, Series A, MBIA Insured, 6.70%, 01/01/24.......... 1,349,779
1,000,000 Guam Power Authority Revenue, Series A, 6.375%, 10/01/08...................................... 1,025,170
400,000 Halifax County Insured Facility, PCR, Solid Waste Disposal, Champion International Corp.,
8.15%, 11/01/19 ............................................................................. 437,116
200,000 Haywood County Insured Facility, PCR, Solid Waste Disposal, Champion International Corp.,
8.10%, 11/01/09 ............................................................................. 218,194
1,500,000 Highpoint Special Obligation Sales Tax Revenue, Solid Waste Management Project, 7.15%, 07/01/01 1,592,685
$ 3,155,000 Kinston Housing Authority Mortgage Revenue, Refunding, Kinston Towers Project, 6.75%, 12/01/18 $3,166,863
500,000 Lincoln County GO, Pre-Refunded, 6.90%, 06/01/08.............................................. 562,150
3,000,000 Martin County Industrial Facilities and PCFA Revenue, Refunding, 6.375%, 01/01/10............. 3,126,930
3,000,000 Mecklenburg County Public Improvement, 5.50%, 04/01/13........................................ 2,983,140
1,000,000 Mooresville Grade School District, COP, AMBAC Insured, 6.35%, 10/01/14........................ 1,034,750
1,000,000 New Hanover County Industrial Facilities and PCFA Revenue, Refunding, 6.70%, 07/01/19......... 1,043,820
North Carolina Eastern Municipal Power Agency System Revenue,
775,000 Refunding, Series 1987-A, 7.25%, 01/01/21.................................................... 800,955
1,000,000 Refunding, Series 1987-A, Pre-Refunded, 7.50%, 01/01/15...................................... 1,065,450
400,000 Refunding, Series 1988-A, Pre-Refunded, 8.00%, 01/01/21...................................... 441,612
750,000 Refunding, Series 1989-A, Pre-Refunded, 7.75%, 01/01/12...................................... 844,695
9,000,000 Refunding, Series 1991-A, 6.50%, 01/01/17.................................................... 8,998,920
3,000,000 Refunding, Series 1991-A, 6.50%, 01/01/18.................................................... 3,035,010
1,050,000 Series 1988-A, Pre-Refunded, 8.00%, 01/01/21................................................. 1,159,232
6,000,000 Series 1993-A, 6.40%, 01/01/21............................................................... 5,925,240
North Carolina Educational Facilities Finance Agency Revenue,
190,000 Highpoint College Project, 7.10%, 12/01/07................................................... 206,830
205,000 Highpoint College Project, 7.10%, 12/01/08................................................... 222,751
220,000 Highpoint College Project, 7.10%, 12/01/09................................................... 238,262
2,930,000 North Carolina HFA, MFR, Refunding, Series B, 6.90%, 07/01/24................................. 3,059,330
4,855,000 North Carolina HFA, Refunding, Series F, 6.70%, 01/01/27 ..................................... 5,008,952
North Carolina HFA, SFMR,
35,000 Series C, 8.00%, 03/01/17.................................................................... 36,181
110,000 Series H, 8.05%, 03/01/19.................................................................... 113,988
210,000 Series J, 7.40%, 03/01/22.................................................................... 218,297
515,000 Series M, 7.85%, 09/01/28.................................................................... 538,314
North Carolina HFA, SFR,
3,400,000 Refunding, Series S, 6.95%, 03/01/17......................................................... 3,557,182
1,100,000 Series AA, 6.25%, 03/01/17................................................................... 1,105,357
2,195,000 Series X, 6.65%, 09/01/19.................................................................... 2,246,517
North Carolina Medical Care Commission Health Care Facilities Revenue,
700,000 Gaston Health Care Support Project, 7.25%, 02/15/19.......................................... 738,472
1,250,000 Stanley Memorial Hospital, 7.80%, 10/01/19................................................... 1,343,688
North Carolina Medical Care Commission Hospital Revenue,
3,500,000 Halifax Memorial Hospital Project, 6.75%, 08/15/24........................................... 3,537,205
160,000 Memorial Mission Hospital Project, MBIA Insured, Pre-Refunded, 7.80%, 10/01/18............... 179,482
1,850,000 Presbyterian Hospital Project, Pre-Refunded, 7.375%, 10/01/20................................ 2,131,811
4,700,000 Refunding, Annie Pen Memorial Hospital Project, 7.50%, 08/15/21.............................. 4,884,005
100,000 Refunding, Carolina Medicorp Project, Series A, Pre-Refunded, 7.875%, 05/01/15............... 108,087
4,830,000 Refunding, North Carolina Baptist Hospitals Project, Series A, 6.00%, 06/01/22............... 4,741,176
250,000 Refunding, St. Joseph's Hospital Project, AMBAC Insured, Pre-Refunded, 7.25%, 10/01/14....... 276,518
3,000,000 Roanoke-Chowan Hospital Project, 7.75%, 10/01/19............................................. 3,166,170
195,000 Scotland Memorial Hospital, MBIA Insured, Pre-Refunded, 8.625%, 10/01/11..................... 222,846
1,000,000 Wayne Memorial Hospital Project, AMBAC Insured, 6.00%, 10/01/21.............................. 994,720
3,240,000 Wilson Memorial Hospital Project, AMBAC Insured, 6.50%, 11/01/20............................. 3,351,780
North Carolina Municipal Power Agency No. 1, Catawba Electric Revenue,
450,000 Refunding, Series 1988, Pre-Refunded, 7.875%, 01/01/19....................................... 495,900
10,500,000 Refunding, Series 1992, 6.25%, 01/01/17...................................................... 10,293,045
615,000 Series 1986, 7.00%, 01/01/18................................................................. 622,657
7,135,000 Series 1986, Pre-Refunded, 7.00%, 01/01/18................................................... 7,279,912
400,000 Northampton County Insured Facility, PCR, Solid Waste Disposal, Champion International Corp.,
8.05%, 11/01/04 ............................................................................. 436,592
1,000,000 Onslow County Combined Enterprise System Revenue, MBIA Insured, 6.00%, 06/01/15............... 1,022,930
Orange County GO,
$350,000 Series 1989, Pre-Refunded, 7.20%, 05/01/08................................................... $ 389,939
430,000 Series 1990, Pre-Refunded, 6.90%, 06/01/09................................................... 488,287
1,195,000 Pender County COP, Pre-Refunded, 7.70%, 06/01/11.............................................. 1,404,830
2,165,000 Person County COP, Person County Law Enforcement Center Project, Series 1991, MBIA Insured,
7.125%, 06/01/11............................................................................. 2,367,536
Pitt County COP,
2,750,000 FGIC Insured, 6.90%, 04/01/08................................................................ 2,988,343
750,000 FGIC Insured, 6.00%, 04/01/12................................................................ 762,000
Polk County School GO,
700,000 FGIC Insured, 6.70%, 05/01/08................................................................ 762,006
700,000 FGIC Insured, 6.70%, 05/01/09................................................................ 773,269
Puerto Rico Commonwealth Aqueduct and Sewer Authority Revenue,
1,000,000 Series 1988-A, 7.875%, 07/01/17.............................................................. 1,110,570
250,000 Series 1988-A, 7.00%, 07/01/19............................................................... 265,700
Puerto Rico Commonwealth GO,
8,050,000 6.45%, 07/01/17.............................................................................. 8,289,166
500,000 Public Improvement, Series 1987, Pre-Refunded, 7.25%, 07/01/12............................... 538,425
200,000 Series 1986, Pre-Refunded, 7.90%, 07/01/11................................................... 212,608
500,000 Series 1990, Pre-Refunded, 7.25%, 07/01/10................................................... 570,515
Puerto Rico Commonwealth Highway Authority Revenue,
100,000 Refunding, Series N, Pre-Refunded, 8.00%, 07/01/03........................................... 112,116
170,000 Series P, Pre-Refunded, 8.125%, 07/01/13..................................................... 191,158
1,250,000 Series R, 7.15%, 07/01/00.................................................................... 1,387,400
Puerto Rico Commonwealth Infrastructure Financing Authority, Special Tax Revenue,
250,000 Series 1988-A, 7.75%, 07/01/08............................................................... 274,905
250,000 Series 1988-A, 7.50%, 07/01/09............................................................... 273,270
Puerto Rico Electric Power Authority Revenue,
5,000,000 6.125%, 07/01/21............................................................................. 5,009,850
250,000 Refunding, Series 1988-M, Pre-Refunded, 8.00%, 07/01/08...................................... 280,290
160,000 Refunding, Series N, 7.125%, 07/01/14........................................................ 174,653
340,000 Refunding, Series N, Pre-Refunded, 7.125%, 07/01/14.......................................... 379,080
2,000,000 Refunding, Series U, 6.00%, 07/01/14......................................................... 1,988,640
850,000 Series 0, 7.125%, 07/01/14................................................................... 927,843
1,705,000 Series 0, Pre-Refunded, 7.125%, 07/01/14..................................................... 1,900,973
1,000,000 Series P, 7.00%, 07/01/21.................................................................... 1,105,180
1,000,000 Series T, 6.375%, 07/01/24................................................................... 1,017,470
410,000 Puerto Rico HFC, MFMR, Portfolio A, Series I, 7.50%, 04/01/22................................. 432,058
Puerto Rico HFC, SFMR,
220,000 Portfolio No. 1, Series A, GNMA Secured, 7.80%, 10/15/21..................................... 230,010
3,500,000 Portfolio No. 1, Series C, GNMA Secured, 6.85%, 10/15/23..................................... 3,631,705
300,000 Puerto Rico Industrial, Medical and Environmental Facilities, PCFA Revenue, Upjohn Co. Project,
7.50%, 12/01/23 ............................................................................. 328,476
125,000 Puerto Rico Municipal Finance Agency, Series 1988-A, 8.25%, 07/01/08.......................... 137,443
1,000,000 Puerto Rico PBA, Guaranteed Public Education and Health Facilities, Series J, Pre-Refunded,
7.25%, 07/01/17 ............................................................................. 1,097,770
Puerto Rico Telephone Authority Revenue,
1,885,000 Series L, Refunding, 6.00%, 01/01/12......................................................... 1,906,923
1,490,000 Series L, Refunding, 6.125%, 01/01/22........................................................ 1,499,953
1,455,000 Raeford HDC, First Lien Revenue, Refunding, Yadkin Trail, Series A, 6.00%, 07/15/22 .......... 1,417,025
Robeson County GO,
110,000 Refunding, 7.20%, 06/01/10................................................................... 118,021
115,000 Refunding, 7.20%, 06/01/11................................................................... 122,982
Robeson County GO, (cont.)
$120,000 Refunding, 7.20%, 06/01/12................................................................... $ 128,036
145,000 Refunding, Pre-Refunded, 7.80%, 06/01/11..................................................... 161,333
1,750,000 Robeson County Industrial Facilities and PCFA Revenue, Refunding, Campbell Soup Co. Project,
6.40%, 12/01/06 ............................................................................. 1,889,684
1,850,000 d Rutherford County COP, Public Facilities Project, FGIC Insured, 6.25%, 06/01/23............... 1,891,883
1,000,000 Scotland County COP, Jail/Courthouse Project, CGIC Insured, 6.75%, 03/01/11................... 1,065,990
1,000,000 Shelby Producing Facilities System Revenue, Capital Improvement, 6.625%, 06/01/17............. 1,038,450
Southern Pines GO,
150,000 Refunding, Pre-Refunded, 7.40%, 06/01/08..................................................... 165,152
200,000 Series 1990, Pre-Refunded, 6.90%, 03/01/08................................................... 223,444
400,000 Series 1990, Pre-Refunded, 6.90%, 03/01/09................................................... 446,887
1,000,000 Stokes County COP, MBIA Insured, 7.00%, 03/01/06.............................................. 1,096,050
50,000 University of North Carolina at Chapel Hill, Utility System Revenue, Pre-Refunded, 7.30%, 08/01/11 53,031
100,000 University of North Carolina at Charlotte Revenue, Refunding, Series K, Pre-Refunded,
7.375%, 01/01/03............................................................................. 108,986
250,000 University of North Carolina at Wilmington, Student Union System Revenue, AMBAC Insured,
6.90%, 01/01/07 ............................................................................. 271,854
250,000 Wake County Hospital Revenue, MBIA Insured, 7.40%, 10/01/16................................... 268,720
10,000,000 Wake County Industrial Facilities and PCFA Revenue, Carolina Power and Light Co. Project,
6.90%, 04/01/09 ............................................................................. 10,660,300
400,000 Wilmington City GO, Sanitary Sewer, 6.90%, 03/01/05........................................... 434,923
445,000 Winston Salem SFMR, 8.00%, 09/01/07........................................................... 473,047
--------------
Total Long Term Investments (Cost $214,088,245)............................................... 224,665,527
--------------
e Short Term Investments1.1%
North Carolina Medical Care Commission Hospital Revenue,
400,000 Aces Pooled Financing Project, Daily VRDN and Put, 3.65%, 04/01/12........................... 400,000
1,800,000 Aces Pooled Financing Project, Series A, Weekly VRDN and Put, 3.40%, 10/01/20................ 1,800,000
200,000 Duke University Hospital Project, Series C, Weekly VRDN and Put, 3.65%, 06/01/15............. 200,000
100,000 North Carolina Baptist Hospitals Project, Series B, Weekly VRDN and Put, 3.80%, 06/01/22..... 100,000
100,000 Wake County Industrial Facilities and PCFA Revenue, Carolina Power and Light Co., Series B,
Weekly VRDN and Put, 3.65%, 09/01/15........................................................ 100,000
--------------
Total Short Term Investments (Cost $2,600,000)................................................ 2,600,000
--------------

Total Investments (Cost $216,688,245) 98.8%................................................... 227,265,527
Other Assets and Liabilities, Net 1.2%........................................................ 2,728,513
--------------
Net Assets 100.0%............................................................................. $229,994,040
==============

At August 31, 1995, the net unrealized appreciation based on
the cost of investments for income tax purposes of $216,690,065 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost................................................................ $ 10,742,644
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value................................................................ (167,182)
--------------
Net unrealized appreciation................................................................... $ 10,575,462
==============

</TABLE>

PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
BIG - Bond Investors Guaranty Insurance Co.
CGIC - Capital Guaranty Insurance Co.
COP - Certificate of Participation
FGIC - Financial Guaranty Insurance Co.
GNMA - Government National Mortgage Association
GO - General Obligation
HDC - Housing Development Corp.
HFA - Housing Finance Agency/Authority
HFC - Housing Financial Corp.
MBIA - Municipal Bond Investors Assurance Corp.
MFMR - Multi-Family Mortgage Revenue
MFR - Multi-Family Revenue
PBA - Public Building Authority
PCFA - Pollution Control Financing Authority
PCR - Pollution Control Revenue
SFMR - Single-Family Mortgage Revenue
SFR - Single-Family Revenue

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

FRANKLIN TAX-FREE TRUST

Statement of Investments in Securities and Net Assets, August 31, 1995 (unaudited)

Face Value
Amount Franklin Texas Tax-Free Income Fund (Note 1)
Long Term Investments 99.0%

<S> <C> <C>
$ 2,250,000 Alliance Airport Authority, Inc., Texas Special Facilities Revenue, American Airlines, Inc. Project,
7.00%, 12/01/11............................................................................... $2,382,435
Austin Combined Utility System Revenue,
2,000,000 Refunding, AMBAC Insured, 7.00%, 05/15/16 .................................................... 2,154,700
800,000 Series A, AMBAC Insured, 6.75%, 11/15/07...................................................... 871,592
50,000 Series A, Pre-Refunded, 8.00%, 11/15/16 ...................................................... 58,614
2,000,000 Series C, Pre-Refunded, 7.30%, 05/15/17 ...................................................... 2,298,758
100,000 Bexar County HFC Revenue, GNMA Secured, 8.10%, 03/01/24........................................ 104,548
3,210,000 d Bexar Metropolitan Water District, Waterworks System Revenue, Refunding, MBIA Insured,
6.35%, 05/01/25............................................................................... 3,270,541
Brazos Higher Education Authority Revenue, Student Loan, Inc.,
1,000,000 Refunding, Series A-2, 6.80%, 12/01/04........................................................ 1,047,310
1,300,000 Series B-2, 8.25%, 06/01/23................................................................... 1,312,493
Brazos River Authority, PCR, Collateralized,
70,000 Houston Light and Power Co. Project, Series A, 7.875%, 11/01/18............................... 73,693
150,000 Texas Utilities Electric Co. Project, Series A, 7.875%, 03/01/17.............................. 157,461
500,000 Texas Utilities Electric Co. Project, Series A, 7.875%, 03/01/21.............................. 554,235
100,000 Brazos River Authority Revenue, Refunding, Collateralized, Houston Light and Power Co. Project,
Series A, 7.625%, 05/01/19.................................................................... 109,284
Brazos River Authority, Special Facilities Revenue, Lake Alan Henry,
1,200,000 AMBAC Insured, Pre-Refunded, 7.00%, 08/15/11.................................................. 1,352,568
1,000,000 AMBAC Insured, Pre-Refunded, 6.80%, 08/15/21.................................................. 1,117,540
Brownsville Utilities System Priority Revenue,
5,000,000 AMBAC Insured, 6.875%, 09/01/10............................................................... 5,340,850
50,000 Series A, Pre-Refunded, 8.00%, 09/01/14....................................................... 52,962
2,265,000 Caldwell County GO, Refunding, AMBAC Insured, Pre-Refunded, 7.00%, 08/15/15.................... 2,484,479
80,000 Cameron County HFC, Collateralized Mortgage Obligation, Refunding, Series B, FGIC Insured,
7.85%, 03/01/24............................................................................... 84,480
Cimarron MUD, Refunding, Waterworks and Sewer System, Asset Guaranteed,
2,775,000 Combined Tax and Revenue, 7.50%, 03/01/15..................................................... 2,999,803
1,225,000 Combined Tax and Revenue, Pre-Refunded, 7.50%, 03/01/15....................................... 1,375,418
4,000,000 Clinton ISD, Refunding, 7.00%, 03/01/15........................................................ 4,224,400
50,000 Coastal Water Authority, Water Conveyance System Revenue, Pre-Refunded, 8.20%, 12/15/07........ 54,427
1,750,000 Comal County Health Facilities Development Corp. Revenue, Refunding, McKenna Memorial Hospital,
FHA Insured, 7.375%, 01/15/21................................................................. 1,875,895
1,500,000 Coppell ISD, Refunding, 6.50%, 08/15/26........................................................ 1,548,795
1,470,000 Corpus Christi HFC, SFMR, Refunding, Series A, MBIA Insured, 7.70%, 07/01/11................... 1,568,505
Dallas Civic Center Convention Complex Revenue,
1,000,000 Refunding, Senior Lien, AMBAC Insured, 6.75%, 01/01/12........................................ 1,040,750
2,000,000 Senior Lien, AMBAC Insured, 7.00%, 01/01/10................................................... 2,139,360
Dallas-Ft. Worth International Airport Facilities Improvement Corp. Revenue,
1,000,000 American Airlines, Inc., 8.00%, 11/01/24...................................................... 1,077,240
2,000,000 Delta Airlines, Inc., 7.625%, 11/01/21........................................................ 2,110,680
1,015,000 Dallas-Ft. Worth Regional Airport Revenue, American Special Facilities, 7.25%, 11/01/12........ 1,015,477
160,000 Dallas HFC, SFMR, GNMA Secured, 7.85%, 12/01/10................................................ 167,602
500,000 Dallas Housing Corp. Capital Projects Revenue, Refunding, Section 8, Assisted Projects,
7.70%, 08/01/05............................................................................... 523,575
1,250,000 Denison Hospital Authority Revenue, Texoma Medical Center, Inc. Project, 7.00%, 08/15/14....... 1,264,200
2,000,000 Ector County Hospital District Revenue, Medical Center Hospital, 7.30%, 04/15/12............... 2,116,200
El Paso County HFC, SFMR, Refunding,
60,000 Series 1988, GNMA Secured, 8.20%, 09/01/20.................................................... 63,125
705,000 Series A, 8.75%, 10/01/11..................................................................... 739,496
1,295,000 Ft. Worth HFC, HMR, Refunding, Series A, 8.50%, 10/01/11....................................... 1,393,407
$ 25,000 Ft. Worth HFC, SFMR, GNMA Secured, 8.25%, 12/01/11............................................. $ 25,530
100,000 Gonzales County Hospital District, GO, Refunding, MBIA Insured, 7.65%, 02/15/07................ 108,023
1,200,000 Gulf Coast Waste Disposal Authority, PCR, Union Carbide Chemical and Plastic Co., 7.45%, 08/01/04 1,235,328
1,000,000 Gulf Coast Waste Disposal Authority Revenue, Champion International Corp., Series A,
6.875%, 12/01/28.............................................................................. 1,027,579
5,000,000 Harris County Health Facilities Development Corp., Health Care System Revenue, Sisters of Charity,
7.10%, 07/01/21............................................................................... 5,332,099
Harris County Health Facilities Development Corp., Hospital Revenue,
225,000 Memorial Hospital System, AMBAC Insured, 7.00%, 06/01/12...................................... 237,093
45,000 The Herman Trust, Pre-Refunded, 9.00%, 10/01/17............................................... 50,175
750,000 Harris County Health Facilities Development Corp. Revenue, Herman Hospital Project, FSA Insured,
7.00%, 10/01/14............................................................................... 803,662
500,000 Harris County Health Facilities Development Corp., Special Facilities Revenue, Texas Medical Center
Project, MBIA Insured, 7.375%, 05/15/20....................................................... 553,669
50,000 Harris County Hospital District Mortgage Revenue, Refunding, Pre-Refunded, 8.50%, 04/01/15..... 52,294
80,000 Harris County MUD No. 208, Waterworks and Sewer System, Unlimited Tax, Pre-Refunded,
8.00%, 11/01/13............................................................................... 88,683
70,000 Harris County Public Facilities Corp., Detention Facility Mortgage Revenue, Series 1988, MBIA Insured,
Pre-Refunded, 7.75%, 12/15/07................................................................. 78,744
Harris County, Toll Road,
1,750,000 Multimode Senior Lien, Series A, Pre-Refunded, 7.30%, 08/15/07................................ 1,882,213
2,250,000 Multimode Senior Lien, Series A, Pre-Refunded, 7.40%, 08/15/17................................ 2,423,115
830,000 Multimode Senior Lien, Series C, Pre-Refunded, 8.125%, 08/15/17............................... 928,762
250,000 Senior Lien Revenue, Refunding, Pre-Refunded, 8.70%, 08/15/17................................. 278,525
250,000 Hidalgo County Health Services Corp. Revenue, Refunding, Mission Hospital, Series B, BIG Insured,
7.35%, 08/01/25............................................................................... 272,560
2,000,000 Houston Airport System Revenue, Sub Lien, Series B, FGIC Insured, 6.625%, 07/01/22............. 2,116,500
Houston Water and Sewer System Revenue,
50,000 Exchange, Prior Lien, Pre-Refunded, 8.125%, 12/01/17.......................................... 55,189
2,930,000 Exchange, Prior Lien, Series A, MBIA Insured, Pre-Refunded, 7.125%, 12/01/16.................. 3,102,225
100,000 Exchange, Prior Lien, Series A, Pre-Refunded, 7.125%, 12/01/16................................ 105,878
5,000,000 dJunior Lien, Refunding, Series A, MBIA Insured, 6.20%, 12/01/20............................... 5,078,900
285,000 Irving Hospital Authority Revenue, Irving Health Care System, Series 1990, FGIC Insured,
Pre-Refunded, 7.25%, 07/01/15................................................................. 314,537
125,000 Keller Waterworks and Sewer System Revenue, Refunding, AMBAC Insured, Pre-Refunded,
7.70%, 01/01/10............................................................................... 138,209
50,000 La Joya ISD, Unlimited Tax, Refunding, Hidalgo County, Pre-Refunded, 8.30%, 08/01/99........... 51,962
200,000 Laredo Airport, Certificates of Obligation, Limited Tax, AMBAC Insured, 7.00%, 08/01/09........ 213,144
400,000 Laredo International Toll Bridge System Revenue, 7.40%, 10/01/06............................... 455,792
2,000,000 Leon County PCR, Refunding, Nucor Corp. Project, Series A, 7.375%, 08/01/09.................... 2,202,940
Lower Colorado River Authority Revenue, Refunding,
75,000 Priority, MBIA Insured, Pre-Refunded, 7.625%, 01/01/16........................................ 82,151
1,500,000 Priority, Series A, AMBAC Insured, Pre-Refunded, 7.00%, 01/01/11.............................. 1,699,185
205,000 Series B, AMBAC Insured, 7.00%, 01/01/11...................................................... 223,255
295,000 Series B, AMBAC Insured, Pre-Refunded, 7.00%, 01/01/11........................................ 334,173
1,000,000 Lower Neches Valley Authority IDC, Marine Terminal Revenue, Refunding, Mobil Oil Refining Corp.
Project, 6.85%, 05/01/12...................................................................... 1,036,520
10,000 Lubbock HFC, SFMR, Refunding, Mortgage Extension Program, Series B, BIG Insured,
8.875%, 12/01/12.............................................................................. 10,312
Matagorda County Navigation District No. 1, PCR, Central Power and Light Co. Project,
1,200,000 Collateralized, 7.50%, 12/15/14.............................................................. 1,316,832
1,500,000 Refunding, MBIA Insured, 6.10%, 07/01/28..................................................... 1,504,800

Matagorda County Navigation District No. 1 Revenue, Refunding, Collateralized,
Houston Light and Power Co.,
$ 100,000 Series B, 7.70%, 02/01/19..................................................................... $ 106,735
1,500,000 Series C, FGIC Insured, 7.125%, 07/01/19...................................................... 1,619,565
50,000 Metropolitan Health Facilities Development Corp. Revenue, Refunding & Improvement, Wilson N. Jones
Memorial Hospital Project, Pre-Refunded, 7.75%, 01/01/05....................................... 53,398
1,000,000 Midland County Hospital District Revenue, Midland Memorial Hospital, 7.50%, 06/01/16........... 1,041,900
Montgomery County Library, Refunding,
775,000 FGIC Insured, 6.75%, 09/01/10................................................................. 825,034
825,000 FGIC Insured, 6.75%, 09/01/11................................................................. 873,378
285,000 North Harris Co., Junior College District, FGIC Insured, 7.20%, 08/15/10....................... 310,593
500,000 North Texas Municipal Water District, Regional Waste Water Revenue, Refunding & Improvement,
MBIA Insured, Pre-Refunded, 7.20%, 06/01/10................................................... 559,215
Panhandle-Plains Higher Education Authority, Inc., Student Loan Revenue,
2,600,000 Refunding, Series B, 9.00%, 06/01/21.......................................................... 2,702,076
1,500,000 Series B, 9.00%, 06/01/21..................................................................... 1,557,630
1,000,000 Series B, 8.75%, 06/01/23..................................................................... 1,100,850
100,000 Richardson GO, Limited Tax, Series 1989, Pre-Refunded, 7.00%, 03/01/08 ........................ 103,538
Sabine River Authority, PCR, Refunding, Collateralized,
1,715,000 Texas Utility Electric Co. Project, 7.75%, 04/01/16........................................... 1,768,594
1,200,000 Texas Utility Electric Co. Project, FGIC Insured, 6.55%, 10/01/22............................. 1,246,428
San Antonio Electric and Gas Revenue,
100,000 Refunding, 7.00%, 02/01/09.................................................................... 106,574
150,000 Refunding, Pre-Refunded, 7.00%, 02/01/09...................................................... 164,631
20,000 San Antonio Sewer Improvement Revenue, Prior Lien, Pre-Refunded, 7.90%, 05/01/14............... 21,515
San Antonio Water Revenue,
50,000 Prior Lien, Pre-Refunded, 7.90%, 05/01/11..................................................... 52,054
2,750,000 Prior Lien, Pre-Refunded, 7.125%, 05/01/16.................................................... 3,045,130
300,000 Refunding, Prior Lien, Series A, Pre-Refunded, 7.35%, 05/01/07................................ 327,891
350,000 South Padre Island, Certificate of Obligation, Pre-Refunded, 7.875%, 03/01/10.................. 398,262
50,000 Texarkana Health Facilities Development Corp., Hospital Revenue, Refunding & Improvement,
Wadley Regional Medical Center Project, 8.50%, 10/01/12....................................... 52,801
500,000 Texas City IDC, Marine Terminal Revenue, Refunding, Arco Pipe Line Co. Project, 7.375%, 10/01/20 603,360
Texas HFA, SFMR,
45,000 Series 1986-A, 8.25%, 03/01/16................................................................ 45,965
35,000 Series 1987-B, 8.20%, 03/01/16................................................................ 36,056
1,410,000 Texas Housing Agency Residential Development Revenue, Series A, 7.60%, 07/01/16 ............... 1,471,194
55,000 Texas Municipal Power Agency Revenue, Pre-Refunded, 8.00%, 09/01/12............................ 58,285
1,335,000 Texas National Research Laboratory Commission Financing Corp. Lease Revenue, Superconducting
Super Collider Project, Pre-Refunded, 7.10%, 12/01/21......................................... 1,542,018
500,000 Texas Public Finance Authority Building Revenue, Series B, MBIA Insured, Pre-Refunded,
7.00%, 02/01/10............................................................................... 559,330
1,720,000 Texas State Department of Housing and Community Affairs, HMR, Refunding, Series A, GNMA
Secured, 6.95%, 07/01/23...................................................................... 1,784,569
1,770,000 Texas State Higher Education Coordinating Board, College Student Loan Revenue, Senior Lien,
7.70%, 10/01/25............................................................................... 1,873,173
Texas State National Research Laboratory Commission, GO,
1,000,000 Superconducting Super Collider Project, Pre-Refunded, 7.125%, 04/01/11........................ 1,128,030
400,000 Superconducting Super Collider Project, Pre-Refunded, 7.125%, 04/01/20........................ 451,212
Texas State Turnpike Authority Revenue, Dallas North Tollway,
225,000 Series 1989, Pre-Refunded, 7.125%, 01/01/15................................................... 237,256
2,270,000 Series 1990, AMBAC Insured, 7.125%, 01/01/15.................................................. 2,509,349
50,000 Texas State Turnpike Authority Revenue, Mountain Creek Lake Bridge, 7.00%, 01/01/07............ 51,243
$ 950,000 Texas Water Resources Finance Authority Revenue, 7.625%, 08/15/08.............................. $ 1,021,811
90,000 Travis County HFC, SFMR, GNMA Secured, 8.20%, 04/01/22......................................... 93,165
550,000 Trinity River Authority, Regional Waste Water System Improvement Revenue, AMBAC Insured,
Pre-Refunded, 7.10%, 08/01/16................................................................. 614,818
250,000 Trinity River Authority, Tex Big Bear Creek Interceptor, System Control, MBIA Insured, 7.40%, 02/01/09 269,038
University of Texas, Financing System Revenue, Refunding,
1,000,000 Series A, 7.00%, 08/15/07..................................................................... 1,111,120
2,000,000 Series B, 6.75%, 08/15/13..................................................................... 2,145,700
500,000 Waco Health Facilities Development Corp., Hospital Revenue, Hillcrest Baptist Medical Center Project,
MBIA Insured, 7.125%, 09/01/14................................................................ 542,865
1,300,000 Weatherford Utility System Revenue, MBIA Insured, 7.00%, 09/01/11.............................. 1,398,306
160,000 Webb County GO, Limited Tax, CGIC Insured, Pre-Refunded, 7.25%, 02/15/09....................... 175,211
1,000,000 West Side Calhoun County Navigation District, Solid Waste Disposal Revenue, Union Carbide
Chemical and Plastics Co. Project, 8.20%, 03/15/21............................................ 1,112,600
50,000 Wichita County, Wichita Falls General Hospital Revenue, Refunding, 7.50%, 09/01/09............. 52,564
1,000,000 Wylie ISD, Refunding, 7.00%, 08/15/24.......................................................... 1,118,140
200,000 Ysleta GO, ISD, Unlimited Tax, AMBAC Insured, Pre-Refunded, 7.10%, 08/15/05.................... 220,098
--------------
Total Long Term Investments (Cost $118,936,117)................................................ 127,811,724
--------------
e Short Term Investments.6%
400,000 Harris County Health Facilities Development Corp., Refunding, Special Facilities Revenue,
MBIA Insured, Daily VRDN and Put, 3.55%, 02/15/22............................................. 400,000
350,000 Lubbock Health Facilities Development Corp. Revenue, St. Joseph Health System, Series A,
Daily VRDN and Put, 3.45%, 07/01/13........................................................... 350,000
--------------
Total Short Term Investments (Cost $750,000)................................................... 750,000
--------------
Total Investments (Cost $119,686,117)99.6%..................................................... 128,561,724
Other Assets and Liabilities, Net.4%........................................................... 523,522
--------------
Net Assets 100.0%.............................................................................. $129,085,246
==============

At August 31, 1995, the net unrealized appreciation based on the cost of investments
for income tax purposes of $119,686,117 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost................................................................. $ 8,876,707
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value................................................................. (1,100)
--------------
Net unrealized appreciation.................................................................... $ 8,875,607
==============
</TABLE>

PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
BIG - Bond Investors Guaranty Insurance Co.
CGIC - Capital Guaranty Insurance Co.
FGIC - Financial Guaranty Insurance Co.
FHA - Federal Housing Agency/Authority
FSA - Financial Security Assistance
GNMA - Government National Mortgage Association
GO - General Obligation
HFA - Housing Finance Agency/Authority
HFC - Housing Financial Corp.
HMR - Home Mortgage Revenue
IDC - Industrial Development Corp.
ISD - Independent School District
MBIA - Municipal Bond Investors Assurance Corp.
MUD - Municipal Utility District
PCR - Pollution Control Revenue
SFMR - Single-Family Mortgage Revenue

dSee Note 1(f) regarding securities purchased on a when-issued basis.
eVariable rate demand notes (VRDNs) are tax-exempt obligations which contain a
floating or variable interest rate adjustment formula and an unconditional right
of demand to receive payment of the principal balance plus accrued interest upon
short notice prior to specified dates. The interest rate may change on specified
dates in relationship with changes in a designated rate (such as the prime
interest rate or U.S. Treasury bills rate).

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

FRANKLIN TAX-FREE TRUST

Statement of Investments in Securities and Net Assets, August 31, 1995 (unaudited)

Face Value
Amount Franklin Virginia Tax-Free Income Fund (Note 1)
Long Term Investments 99.6%
<S> <C> <C>
$ 5,000,000 Albermarle County IDAR, Refunding, Martha Jefferson Hospital, 5.875%, 10/01/13................. $4,915,100
1,125,000 Albermarle County IDAR, University of Virginia Health Services Foundation, 6.50%, 10/01/22..... 1,145,734
1,690,000 Alexandria IDAR, Alexandria/Arlington Waste Resource Recovery, 7.40%, 01/01/08................. 1,714,505
1,375,000 Appomattox River Water Authority Revenue, Refunding, Pre-Refunded, 7.50%, 10/01/13............. 1,454,173
2,085,000 Arlington County GO, 6.00%, 08/01/13........................................................... 2,152,220
2,000,000 Arlington County IDA, Hospital Facility Revenue, Arlington Hospital, Series A, Pre-Refunded,
7.125%, 09/01/21.............................................................................. 2,309,160
100,000 Ashland GO, Refunding, Pre-Refunded, 7.75%, 08/01/12........................................... 111,519
Augusta County IDAR,
1,000,000 Augusta Hospital Corp. Project, AMBAC Insured, 6.625%, 09/01/12............................... 1,052,120
5,000,000 Augusta Hospital Corp. Project, Pre-Refunded, 7.00%, 09/01/21................................. 5,726,150
1,230,000 Blacksburg Polytechnic Institute, Sanitation Authority Sewer System Revenue, 6.25%, 11/01/12... 1,256,507
950,000 Campbell County Utilities Services Authority, Water and Sewer Revenue, MBIA Insured, Pre-Refunded,
7.25%, 10/01/19............................................................................... 1,071,448
2,000,000 Charlottesville IDAR, Martha Jefferson Hospital, Pre-Refunded, 7.375%, 10/01/20................ 2,304,660
5,190,000 d Chesapeake Bay Bridge and Tunnel Commission District Revenue, Refunding, General Resolution,
MBIA Insured, 6.375%, 07/01/22................................................................ 5,309,474
Chesapeake Hospital Authority Facilities Revenue,
2,500,000 Chesapeake General Hospital, 8.20%, 07/01/05.................................................. 2,836,650
450,000 Chesapeake General Hospital, BIG Insured, Pre-Refunded, 7.625%, 07/01/18...................... 499,815
245,000 Chesapeake IDA, Nursing Home Revenue, Sentara Life Care Corp. Project, 8.00%, 11/01/17......... 269,623
3,940,000 Chesapeake IDA, Public Facilities Lease Revenue, Chesapeake Jail Project, MBIA Insured
6.00%, 06/01/12............................................................................... 4,033,496
50,000 Chesapeake Water and Sewer System Revenue, Pre-Refunded, 7.75%, 07/01/17....................... 54,185
50,000 Chesterfield County COP, Pre-Refunded, 7.90%, 12/15/01......................................... 53,509
2,000,000 Covington-Alleghany County IDA, Alleghany Hospital Facilities Revenue, Pre-Refunded,
6.875%, 04/01/22.............................................................................. 2,278,900
5,000,000 Covington-Alleghany County IDA, PCR, Refunding, Westvaco Corp. Project, 6.65%, 09/01/18........ 5,304,200
2,000,000 Danville COP, Social Services, 7.625%, 04/01/13................................................ 2,198,560
Danville GO,
655,000 Series 1991, 6.75%, 02/01/10.................................................................. 698,420
705,000 Series 1991, 6.75%, 02/01/11.................................................................. 748,343
5,000,000 Danville IDA, Hospital Revenue, Refunding, Danville Regional Medical Center, FGIC Insured,
6.50%, 10/01/24............................................................................... 5,241,200
500,000 Danville IDA, Solid Waste Disposal Revenue, International Paper Co., 6.50%, 03/01/19........... 515,505
1,000,000 Fairfax County EDA, Parking Revenue, Huntington Metrorail, 7.00%, 09/01/10..................... 1,086,280
1,500,000 Fairfax County EDA, Resource Recovery Revenue, Ogden Martin System of Fairfax, Inc. Project,
Series 1988-A, 7.75%, 02/01/11................................................................ 1,643,760
150,000 Fairfax County IDAR, Refunding, Fairfax Hospital Association, Series A, Pre-Refunded,
7.875%, 10/01/17.............................................................................. 160,745
4,700,000 Fairfax County Redevelopment and Housing Authority, MFR, Cedar Ridge Apartments,
GNMA Secured, 6.30%, 12/20/27................................................................. 4,673,727
1,000,000 Fairfax County Sewer Revenue, Series A, AMBAC Insured, Pre-Refunded, 7.00%, 11/15/16........... 1,121,250
2,500,000 Fairfax County Water Authority Revenue, Series 1989, Pre-Refunded, 7.25%, 01/01/27............. 2,824,000
2,040,000 Frederick County IDA Lease Revenue, Government Complex Facilities Project, MBIA Insured,
6.50%, 12/01/09............................................................................... 2,193,122
250,000 Frederick Winchester Sewer Service Authority Revenue, Refunding, AMBAC Insured, Pre-Refunded,
7.20%, 10/01/08............................................................................... 281,498
165,000 Fredericksburg IDA, Crossover Revenue, Refunding, Mary Washington Hospital, AMBAC Insured,
Pre-Refunded, 7.80%, 07/01/14................................................................. 184,028
35,000 Front Royal and Warren County IDAR, Refunding, Mortgage, Heritage Hall No. 13, FHA Insured,
8.25%, 07/15/05............................................................................... 35,623

Guam Airport Authority Revenue, Refunding,
$ 830,000 Series A, 6.375%, 10/01/10.................................................................... $ 840,707
1,000,000 Series A, 6.50%, 10/01/23..................................................................... 1,003,590
3,000,000 Halifax County IDA, Exempt Facilities Revenue, Old Dominion Electric Cooperative Project,
6.50%, 12/01/12............................................................................... 3,124,260
Hampton Museum Revenue,
1,200,000 Series 1989, Pre-Refunded, 7.50%, 01/01/14.................................................... 1,340,316
1,000,000 Series 1990, Pre-Refunded, 7.30%, 01/01/14.................................................... 1,129,430
955,000 Hampton Redevelopment and Housing Authority, MFHR, Magruder Pines Apartment Project,
7.125%, 05/01/08.............................................................................. 963,032
1,500,000 Hampton Roads Medical College General Revenue, Refunding, Series A, 6.875%, 11/15/16........... 1,577,835
3,500,000 Hampton Roads Sanitation District, Primary Pledge Sewer Revenue, Pre-Refunded, 7.20%, 07/01/09. 3,919,790
2,000,000 Hanover County IDA, Hospital Revenue, Bon Secours Health Systems Projects, MBIA Insured,
5.50%, 08/15/25............................................................................... 1,853,800
275,000 Henrico County IDA, Hospital Facilities Revenue, Bon Secours Health System, St. Mary's Hospital,
Series A, Pre-Refunded, 7.875%, 08/15/18...................................................... 307,956
Henrico County IDAR,
250,000 Bon Secours, Maryview Nursing Center, Series B, Pre-Refunded, 7.625%, 08/15/18................ 278,245
870,000 Bon Secours, St. Mary's Hospital, Series C, 7.50%, 09/01/07................................... 955,217
Henry County Public Service Authority, Water and Sewer Revenue,
300,000 FGIC Insured, Pre-Refunded, 7.75%, 11/15/18................................................... 316,158
1,500,000 FGIC Insured, Pre-Refunded, 7.20%, 11/15/19................................................... 1,708,620
1,250,000 Leesburg Utilities System Revenue, MBIA Insured, 6.30%, 07/01/17............................... 1,294,288
650,000 Loudoun County Sanitation Authority, Water and Sewer System Revenue, AMBAC Insured,
Pre-Refunded, 7.50%, 01/01/10................................................................. 727,084
190,000 Lynchburg IDA, Hospital Facilities Revenue, Refunding, First Mortgage, Centra Health, Inc.,
8.125%, 01/01/16.............................................................................. 206,006
1,155,000 Lynchburg IDAR, Refunding, Randolph Macon Women's College, Pre-Refunded, 7.125%, 09/01/17...... 1,272,706
50,000 Manassas GO, Series 1988-A, Pre-Refunded, 7.20%, 03/01/06...................................... 53,304
500,000 Manassas IDA, Hospital Revenue, Prince William Hospital, Pre-Refunded, 8.125%, 04/01/19........ 570,690
1,180,000 Martinsville IDA, Hospital Facility Revenue, Memorial Hospital of Martinsville and Henry,
7.00%, 01/01/11............................................................................... 1,235,672
4,500,000 Mecklenburg County IDAR, Exempt Facility, Series A, 7.35%, 05/01/08............................ 4,721,670
1,000,000 Metropolitan Washington D.C. Airports, General Airport Authority Revenue, Series A, 7.60%, 10/01/14 1,093,910
150,000 Nelson County Service Authority, Water and Sewer Revenue, FGIC Insured, Pre-Refunded,
7.875%, 07/01/18.............................................................................. 156,452
2,075,000 Norfolk GO, MBIA Insured, 5.75%, 06/01/14...................................................... 2,058,338
Norfolk IDAR,
50,000 Children's Hospital of the Kings' Daughters, Inc., Series A, 8.375%, 06/01/12................. 53,828
3,500,000 Children's Hospital of the Kings' Group, Inc., AMBAC Insured, Pre-Refunded, 7.00%, 06/01/11... 4,001,515
20,000 Medical Center Hospital Project, Series A, 7.00%, 11/01/07.................................... 21,019
30,000 Medical Center Hospital Project, Series A, Pre-Refunded, 7.00%, 11/01/07...................... 31,805
360,000 Northern Virginia Transportation District Commission, Commuter Rail Revenue, Railway Express
Project, CGIC Insured, 7.00%, 07/01/05........................................................ 398,426
1,000,000 Peninsula Airport Commission Revenue, Airport Improvement, 7.25%, 07/15/11..................... 1,099,500
5,480,000 Peninsula Ports Authority, Coal Terminal Revenue, Refunding, Coal Terminal Association Project,
7.375%, 06/01/20.............................................................................. 5,810,060
50,000 Peninsula Ports Authority Hospital Revenue, Refunding, Whittaker Memorial Hospital Project,
FHA Insured Mortgage, 8.70%, 08/01/23......................................................... 53,934
6,000,000 Peninsula Ports Authority Revenue, Refunding, Riverside Health System Project, Series A,
6.625%, 07/01/18.............................................................................. 6,261,660
50,000 Portsmouth Public Utility, GO, Refunding, Pre-Refunded, 7.50%, 11/01/12........................ 54,665
2,200,000 Prince William County IDA, Commuter Parking Facilities Project, Pre-Refunded, 7.25%, 03/01/11.. 2,484,108
$2,750,000 Prince William County Service Authority, Water and Sewer Systems Revenue, FGIC Insured,
6.00%, 07/01/29............................................................................... $2,749,698
Puerto Rico Commonwealth Aqueduct and Sewer Authority Revenue,
1,000,000 Series A, 7.90%, 07/01/07..................................................................... 1,110,379
2,700,000 Series A, 7.875%, 07/01/17.................................................................... 2,998,538
1,500,000 Series A, 7.00%, 07/01/19..................................................................... 1,594,200
Puerto Rico Commonwealth Electric Power Authority Revenue, Water Resources,
55,000 Refunding, Series L, Pre-Refunded, 8.40%, 07/01/15............................................ 60,296
600,000 Refunding, Series M, Pre-Refunded, 8.00%, 07/01/08............................................ 672,696
1,500,000 Series P, 7.00%, 07/01/21..................................................................... 1,657,770
Puerto Rico Commonwealth GO,
10,000 Public Improvement, Refunding, 7.125%, 07/01/02............................................... 10,634
5,000 Public Improvement, Refunding, Pre-Refunded, 7.125%, 07/01/02................................. 5,372
75,000 Public Improvement, Series 1988, Pre-Refunded, 7.75%, 07/01/13................................ 83,656
25,000 Series 1986, Pre-Refunded, 7.90%, 07/01/11.................................................... 26,575
1,000,000 Series 1990, Pre-Refunded, 7.30%, 07/01/20.................................................... 1,145,539
Puerto Rico Commonwealth Highway Authority Revenue,
2,000,000 Refunding, Series R, 7.20%, 07/01/01.......................................................... 2,247,020
225,000 Series P, Pre-Refunded, 8.125%, 07/01/13...................................................... 253,003
1,000,000 Series Q, Pre-Refunded, 8.00%, 07/01/18....................................................... 1,174,269
40,000 Puerto Rico Commonwealth IDC, General Purpose Revenues, 8.00%, 01/01/03........................ 40,012
Puerto Rico Commonwealth Infrastructure Financing Authority, Special Tax Revenue,
350,000 Series 1988-A, 7.90%, 07/01/07................................................................ 386,435
750,000 Series 1988-A, 7.75%, 07/01/08................................................................ 824,714
Puerto Rico HFC Revenue,
20,000 FHA Mortgage Insured, Section 8 Assisted, 6th Portfolio, Pre-Refunded, 7.75%, 12/01/26........ 23,851
2,460,000 MFM, Series A-1, 7.50%, 04/01/22.............................................................. 2,592,348
330,000 Puerto Rico HFC, SFMR, GNMA Secured, Series B-1, 7.65%, 10/15/22............................... 348,652
Puerto Rico Industrial, Medical and Environmental Facilities, PCFA Revenue,
300,000 Baxter Travenol Labs., Series A, 8.00%, 09/01/12.............................................. 333,084
250,000 Upjohn Co. Project, 7.50%, 12/01/23........................................................... 273,730
185,000 Puerto Rico Municipal Finance Agency, Series 1988-A, 8.25%, 07/01/08........................... 203,415
Puerto Rico PBA, Guaranteed, Public Education and Health Facilities,
175,000 Series H, Pre-Refunded, 7.875%, 07/01/16...................................................... 190,351
1,925,000 Series J, Pre-Refunded, 7.25%, 07/01/17....................................................... 2,113,207
5,000,000 Puerto Rico Telephone Authority Revenue, Series L, 6.125%, 01/01/22............................ 5,033,400
Richmond Metropolitan Authority, Expressway Revenue,
2,000,000 AMBAC Insured, 7.00%, 10/15/13................................................................ 2,162,180
2,500,000 Refunding, Series A, FGIC Insured, 6.375%, 07/15/16........................................... 2,589,500
3,890,000 Refunding, Series A, FGIC Insured, 5.75%, 07/15/22............................................ 3,785,981
5,000,000 Series B, FGIC Insured, 6.25%, 07/15/22....................................................... 5,101,650
2,000,000 Richmond Public Improvement GO, Series A, 6.25%, 01/15/21...................................... 2,024,460
175,000 Richmond Public Utilities Revenue, Series A, Pre-Refunded, 8.00%, 01/15/18..................... 193,443
2,500,000 Richmond Redevelopment and Housing Authority Mortgage Revenue, Refunding, MF, Series A,
FHA Insured, 6.50%, 04/01/27.................................................................. 2,509,300
3,000,000 Roanoke IDAR, Roanoke Memorial Hospital, Pre-Refunded, 7.50%, 07/01/20......................... 3,455,370
4,250,000 South Boston IDAR, Halifax-Community Hospital, Inc. Project, 7.375%, 09/01/11.................. 4,486,938
Southeastern Public Service Authority Revenue, Senior Regional Solid Waste System,
1,000,000 Refunding, Series B, BIG Insured, Pre-Refunded, 7.00%, 07/01/13............................... 1,112,960
40,000 Series B, Pre-Refunded, 9.00%, 07/01/05....................................................... 42,458
10,000 Series B, Pre-Refunded, 9.25%, 07/01/15....................................................... 10,634
945,000 Staunton IDA, Facilities Revenue, Refunding, Mary Baldwin College, Series B, 8.00%, 11/01/17... 1,030,409
200,000 Suffolk GO, Series 1988, Pre-Refunded, 7.40%, 08/01/05......................................... 216,038
$ 370,000 Suffolk IDAR, Louise Obici Memorial Hospital, 7.875%, 01/01/05................................. $ 395,608
1,000,000 University of Virginia, Hospital Revenue, Refunding, Series D, Pre-Refunded, 7.15%, 06/01/17... 1,095,990
50,000 Virginia Beach Development Authority, General Hospital Facility Revenue, Series A, Pre-Refunded,
8.75%, 12/01/17............................................................................... 55,850
Virginia College Building Authority, Educational Facilities Revenue,
750,000 Hampton University Project, Series A, Pre-Refunded, 7.75%, 04/01/14........................... 847,628
1,750,000 Marymount University Project, 7.00%, 07/01/22................................................. 1,819,703
2,345,000 Refunding, Washington and Lee University Project, 5.75%, 01/01/19............................. 2,332,853
200,000 Virginia Education Loan Authority, Guaranteed, Student Loan Program Revenue, Series B,
8.00%, 03/01/04............................................................................... 207,582
900,000 Virginia Polytechnic Institute Revenue, Dormitory and Dining Hall, BIG Insured, 7.00%, 06/01/09 973,278
400,000 Virginia Port Authority Revenue, Commonwealth Port Fund, 8.20%, 07/01/08....................... 445,228
Virginia State HDA, Commonwealth Mortgage,
1,000,000 Series A, 7.10%, 01/01/17..................................................................... 1,048,430
5,500,000 Series A, 7.15%, 01/01/33..................................................................... 5,729,845
5,000 Series A-1, 8.10%, 01/01/17................................................................... 5,203
5,000,000 Series B-1, 7.20%, 07/01/17................................................................... 5,363,250
650,000 Series B-2, 7.625%, 07/01/17.................................................................. 674,382
110,000 Series B-3, 7.625%, 01/01/17.................................................................. 114,574
250,000 Series B-3, 7.375%, 07/01/17.................................................................. 263,273
2,000,000 Series B-3, 6.80%, 01/01/27................................................................... 2,026,320
5,000,000 Series B-4, 6.85%, 07/01/17................................................................... 5,130,500
2,000,000 Series B-4, 6.55%, 01/01/27................................................................... 1,989,200
5,000,000 dSeries D-1, 6.40%, 07/01/17................................................................. 5,063,400
800,000 Series D-1, 7.50%, 07/01/17................................................................... 831,712
1,500,000 Series D-2, 7.35%, 07/01/17................................................................... 1,559,355
1,000,000 Series D-3, 7.375%, 07/01/17.................................................................. 1,048,310
1,000,000 Series H-2, 6.55%, 01/01/17................................................................... 1,016,660
9,000,000 Virginia State HDA, MF, Series F, 7.10%, 05/01/13.............................................. 9,464,400
2,000,000 Virginia State Resources Authority, Sewer System Revenue, Refunding, Harrisonburg Rockingham
Region, Series A, 6.00%, 05/01/22............................................................. 2,005,880
Virginia State Resources Authority, Water and Sewer System Revenue,
1,000,000 Lot #7, Rapidan Service Authority, 7.125%, 10/01/16........................................... 1,065,110
400,000 Pooled Loan Program, Series A, 7.35%, 11/01/16................................................ 429,980
100,000 Pooled Loan Program, Series A, 7.45%, 11/01/16................................................ 107,720
100,000 Pooled Loan Program, Series A, 7.85%, 11/01/17................................................ 109,189
190,000 Pooled Loan Program, Series A, Pre-Refunded, 7.35%, 11/01/16.................................. 212,633
Virginia State Resources Authority, Water System Revenue,
1,000,000 Refunding, Series A, 6.125%, 04/01/19......................................................... 1,009,340
85,000 Series 1988, Pre-Refunded, 7.875%, 10/01/18................................................... 95,401
Virginia State Transportation Board, Transportation Contract Revenue,
9,000,000 Refunding, U.S. Route 28 Project, 6.50%, 04/01/18............................................. 9,352,440
475,000 U.S. Route 28 Project, Pre-Refunded, 7.80%, 03/01/16.......................................... 525,317
2,500,000 U.S. Route 58 Corridor Development Program, 6.00%, 05/15/19................................... 2,506,550
3,295,000 Washington County IDA, College Facilities Revenue, Emory and Henry College Project,
6.375%, 04/01/23.............................................................................. 3,324,128
3,000,000 Washington County IDA, Hospital Facilities Revenue, First Mortgage, Johnston Memorial Hospital,
7.00%, 07/01/22............................................................................... 3,175,440
5,450,000 West Point IDA, Solid Waste Disposal Revenue, Refunding, Chesapeake Corp. Project, Series B,
6.25%, 03/01/19............................................................................... 5,458,230

$2,000,000 Winchester IDA, Educational Facilities Revenue, Refunding, First Mortgage, Shenandoah University
Project, Asset Guaranteed, 6.80%, 10/01/24.................................................... $ 2,148,040
600,000 Winchester IDA, Hospital Facility Revenue, First Mortgage, Winchester Medical Center, Inc.,
Pre-Refunded, 8.125%, 01/01/14................................................................ 620,178
--------------
Total Long Term Investments (Cost $245,708,146)................................................ 260,961,080
--------------

e Short Term Investments.8%
1,000,000 Loudoun County IDA, Residential Care Facility Revenue, Falcons Landing Project, Series B,
Daily VRDN and Put, 3.55%, 11/01/24........................................................... 1,000,000
1,200,000 Peninsula Port Facilities Authority Revenue, Refunding, Shell Oil Co., Series A, Daily VRDN and Put,
3.40%, 12/01/05............................................................................... 1,200,000
--------------
Total Short Term Investments (Cost $2,200,000)................................................. 2,200,000
--------------
Total Investments (Cost $247,908,146) 100.4%................................................... 263,161,080
Liabilities in Excess of Other Assets, Net (.4)%............................................... (1,137,119)
--------------
Net Assets 100.0%.............................................................................. $262,023,961
==============

At August 31, 1995, the net unrealized appreciation based on the
cost of investments for income tax purposes of $247,908,146 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost................................................................. $ 15,386,720
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value................................................................. (133,786)
--------------
Net unrealized appreciation.................................................................... $ 15,252,934
==============
</TABLE>

PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
BIG - Bond Investors Guaranty Insurance Co.
CGIC - Capital Guaranty Insurance Co.
COP - Certificate of Participation
EDA - Economic Development Authority
FGIC - Financial Guaranty Insurance Co.
FHA - Federal Housing Authority
GNMA - Government National Mortgage Association
GO - General Obligation
HDA - Housing Development Authority
HFC - Housing Financial Corp.
IDA - Industrial Development Authority
IDAR - Industrial Development Authority Revenue
IDC - Industrial Development Corp.
MBIA - Municipal Bond Investors Assurance Corp.
MF - Multi-Family
MFHR - Multi-Family Housing Revenue
MFM - Multi-Family Mortgage
MFR - Multi-Family Revenue
PBA - Public Building Authority
PCFA - Pollution Control Financing Authority
PCR - Pollution Control Revenue
SFMR - Single-Family Mortgage Revenue

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

FRANKLIN TAX-FREE TRUST

Financial Statements

Statements of Assets and Liabilities
August 31, 1995 (unaudited)

Franklin Franklin Franklin Franklin Franklin
Alabama Florida Georgia Kentucky Louisiana
Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free
Income Fund Income Fund Income Fund Income Fund Income Fund
--------- ---------- --------- -------- ---------
Assets:
Investments in securities:
<S> <C> <C> <C> <C> <C>
At identified cost........................... $166,255,873 $1,195,287,129 $114,252,131 $33,945,374 $ 96,652,961
========= ========== ========= ======== =========
At value..................................... 175,030,236 1,272,704,811 121,005,571 34,635,364 102,781,363
Cash........................................ 283,373 250,419 98,557 23,775 226,796
Receivables:
Interest..................................... 2,983,846 23,731,222 1,739,627 526,478 1,714,476
Investment securities sold................... -- 10,168,750 103,000 -- 10,194
Capital shares sold.......................... 319,699 2,385,421 146,240 48,264 56,594
--------- ---------- --------- -------- ---------
Total assets................................. 178,617,154 1,309,240,623 123,092,995 35,233,881 104,789,423
--------- ---------- --------- -------- ---------
Liabilities:
Payables:
Distributions payable to shareholders........ 249,875 1,928,265 191,447 49,670 151,168
Management fees.............................. 84,605 510,009 61,521 17,218 53,968
Distribution fees............................ 22,570 168,291 15,185 2,770 13,564
Shareholder servicing costs.................. 1,634 12,099 2,655 471 1,635
Capital shares repurchased................... 18,940 1,043,690 155,595 7,203 64,361
Accrued expenses and other liabilities...... 5,552 20,817 6,824 6,894 16,509
--------- ---------- --------- -------- ---------
Total liabilities............................ 383,176 3,683,171 433,227 84,226 301,205
--------- ---------- --------- -------- ---------
Net assets, at value......................... $178,233,978 $1,305,557,452 $122,659,768 $35,149,655 $104,488,218
========= ========== ========= ======== =========
Net assets consist of:
Undistributed net investment income......... $ 345,092 $ 3,493,634 $ 57,088 $ 12,762 $ 233,182
Unrealized appreciation on investments...... 8,774,363 77,417,682 6,753,440 689,990 6,128,402
Accumulated net realized loss............... (1,304,791) (4,754,788) (1,381,430) (879,900) (3,148,031)
Class I capital shares...................... 169,989,642 1,227,315,311 116,877,345 35,326,803 101,115,916
Class II capital shares..................... 429,672 2,085,613 353,325 -- 158,749
--------- ---------- --------- -------- ---------
Net assets, at value......................... $178,233,978 $1,305,557,452 $122,659,768 $35,149,655 $104,488,218
========= ========== ========= ======== =========
Class I shares:
Net assets, at value........................ $177,802,619 $1,303,465,780 $122,304,825 $35,149,655 $104,328,343
========= ========== ========= ======== =========
Shares outstanding.......................... 15,438,212 112,808,248 10,420,596 3,257,853 9,345,260
========= ========== ========= ======== =========
Net asset value per share*.................. $11.52 $11.55 $11.74 $10.79 $11.16
========= ========== ========= ======== =========
Class II shares:
Net assets, at value........................ $ 431,359 $ 2,091,672 $ 354,943 -- $ 159,875
========= ========== ========= ======== =========
Shares outstanding.......................... 37,366 180,097 30,149 -- 14,275
========= ========== ========= ======== =========
Net asset value per share*.................. $11.54 $11.61 $11.77 -- $11.20
========= ========== ========= ======== =========

*Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.

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

FRANKLIN TAX-FREE TRUST Financial Statements (cont.)

Statements of Assets and Liabilities (cont.)
August 31, 1995 (unaudited)

Franklin Franklin Franklin Franklin Franklin
Maryland Missouri North Carolina Texas Virginia
Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free
Income Fund Income Fund Income Fund Income Fund Income Fund
--------- --------- --------- --------- ---------
Assets:
Investments in securities:
<S> <C> <C> <C> <C> <C>
At identified cost............................ $153,709,918 $223,084,469 $216,688,245 $119,686,117 $247,908,146
========= ========= ========= ========= =========
At value..................................... 161,795,060 234,919,722 227,265,527 128,561,724 263,161,080
Cash......................................... 71,086 62,096 18,199 80,620 122,791
Receivables:
Interest...................................... 3,001,207 3,497,591 3,658,668 2,153,230 4,648,546
Investment securities sold.................... 1,074,146 2,307,333 -- 6,737,723 607,625
Capital shares sold........................... 171,843 248,486 429,286 25,932 110,778
--------- --------- --------- --------- ---------
Total assets.................................. 166,113,342 241,035,228 231,371,680 137,559,229 268,650,820
--------- --------- --------- --------- ---------
Liabilities:
Payables:
Investment securities purchased:
Regular delivery............................. -- -- 873,124 -- --
When-issued basis (Note 1)................... -- 2,983,800 -- 8,186,242 6,013,125
Distributions payable to shareholders......... 230,384 323,033 321,108 188,647 367,309
Management fees............................... 79,476 109,356 106,196 64,192 119,118
Distribution fees............................. 19,892 29,986 29,221 17,182 34,131
Shareholder servicing costs................... 2,987 3,602 4,494 520 2,988
Capital shares repurchased.................... 27,939 10,365 37,580 12,917 76,588
Accrued expenses and other liabilities....... 6,083 6,963 5,917 4,283 13,600
--------- --------- --------- --------- ---------
Total liabilities............................. 366,761 3,467,105 1,377,640 8,473,983 6,626,859
--------- --------- --------- --------- ---------
Net assets, at value.......................... $165,746,581 $237,568,123 $229,994,040 $129,085,246 $262,023,961
========= ========= ========= ========= =========
Net assets consist of:
Undistributed net investment income.......... $ 259,108 $ 276,768 $ 3,750 $ 235,575 $ 488,124
Unrealized appreciation on investments....... 8,085,142 11,835,253 10,577,282 8,875,607 15,252,934
Accumulated net realized loss................ (1,343,586) (1,636,017) (4,053,804) (819,256) (1,535,869)
Class I capital shares....................... 158,401,787 226,602,526 222,767,111 120,788,285 247,107,337
Class II capital shares...................... 344,130 489,593 699,701 5,035 711,435
--------- --------- --------- --------- ---------
Net assets, at value.......................... $165,746,581 $237,568,123 $229,994,040 $129,085,246 $262,023,961
========= ========= ========= ========= =========
Class I shares:
Net assets, at value......................... $165,398,297 $237,076,683 $229,289,352 $129,080,129 $261,306,006
========= ========= ========= ========= =========
Shares outstanding........................... 14,748,359 20,305,426 19,823,205 11,253,428 22,608,331
========= ========= ========= ========= =========
Net asset value per share*................... $11.21 $11.68 $11.57 $11.47 $11.56
========= ========= ========= ========= =========
Class II shares:
Net assets, at value......................... $ 348,284 $ 491,440 $ 704,688 $ 5,117 $ 717,955
========= ========= ========= ========= =========
Shares outstanding........................... 30,976 42,000 60,698 444 61,862
========= ========= ========= ========= =========
Net asset value per share*................... $11.24 $11.70 $11.61 $11.52 $11.61
========= ========= ========= ========= =========

*Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.

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

FRANKLIN TAX-FREE TRUST Financial Statements (cont.)

Statements of Operations
for the six months ended August 31, 1995 (unaudited)

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

FRANKLIN TAX-FREE TRUST Financial Statements (cont.)

Statements of Operations (cont.)
for the six months ended August 31, 1995 (unaudited)

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

FRANKLIN TAX-FREE TRUST Financial Statements (cont.)

Statements of Changes in Net Assets for the six months ended August 31, 1995
(unaudited) and the year ended February 28, 1995

Franklin Alabama Franklin Florida Franklin Georgia
Tax-Free Income Fund Tax-Free Income Fund Tax-Free Income Fund
-------------------- ---------------------- --------------------
Six months Year Six months Year Six months Year
ended ended ended ended ended ended
8/31/95 2/28/95 8/31/95 2/28/95 8/31/95 2/28/95
--------- --------- ---------- ---------- --------- ---------
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C> <C> <C>
Net investment income... $5,041,222 $ 9,963,892 $ 38,782,519 $ 78,641,179 $ 3,395,340 $ 6,693,192
Net realized gain
(loss) from security
transactions.............. 483,664 (1,785,827) 2,923,088 (6,760,745) 245,023 (1,426,675)
Net unrealized
appreciation
(depreciation)
on investments............ 2,659,066 (6,044,705) 20,531,354 (45,647,422) 1,771,401 (3,279,116)
--------- --------- ---------- ---------- --------- ---------
Net increase in net
assets resulting
from operations........... 8,183,952 2,133,360 62,236,961 26,233,012 5,411,764 1,987,401
Distributions to
shareholders from
undistributed net
investment income:
Class I.................. (5,019,619) (9,804,407) (38,818,799) (76,589,571) (3,434,960) (6,715,463)
Class II................. (3,118) -- (17,051) -- (1,938) --
Increase (decrease) in
net assets from capital
share transactions
(Note 2).................. 5,021,894 (692,543) 17,137,906 (46,207,701) 3,913,566 617,009
--------- --------- ---------- ---------- --------- ---------
Net increase
(decrease) in
net assets................ 8,183,109 (8,363,590) 40,539,017 (96,564,260) 5,888,432 (4,111,053)
Net assets:
Beginning of period........ 170,050,869 178,414,459 1,265,018,435 1,361,582,695 116,771,336 120,882,389
--------- --------- ---------- ---------- --------- ---------
End of period.............. $178,233,978 $170,050,869 $1,305,557,452 $1,265,018,435 $122,659,768 $116,771,336
========= ========= ========== ========== ========= =========
Undistributed net
investment income
included in net assets:
Beginning of period........ $ 326,607 $ 167,122 $ 3,546,965 $ 1,495,357 $ 98,646 $ 120,917
========= ========= ========== ========== ========= =========
End of period............ $ 345,092 $ 326,607 $ 3,493,634 $ 3,546,965 $ 57,088 $ 98,646
========= ========= ========== ========== ========= =========

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

FRANKLIN TAX-FREE TRUST Financial Statements (cont.)

Statements of Changes in Net Assets (cont.)
for the six months ended August 31, 1995 (unaudited)
and the year ended February 28, 1995

Franklin Kentucky Franklin Louisiana Franklin Maryland
Tax-Free Income Fund Tax-Free Income Fund Tax-Free Income Fund
------------------ -------------------- --------------------
Six months Year Six months Year Six months Year
ended ended ended ended ended ended
8/31/95 2/28/95 8/31/95 2/28/95 8/31/95 2/28/95
-------- -------- --------- --------- --------- ---------
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C> <C> <C>
Net investment income........ $ 979,845 $ 1,795,371 $ 3,121,217 $ 6,456,910 $ 4,506,611 $ 8,856,066
Net realized gain (loss) from
security transactions.......... (94,136) (759,461) 105,678 (3,100,285) (403,261) (302,688)
Net unrealized appreciation
(depreciation) on
investments.................... 881,452 (805,246) 1,161,597 (2,523,882) 4,690,181 (6,128,504)
-------- -------- --------- --------- --------- ---------
Net increase in net
assets resulting
from operations................ 1,767,161 230,664 4,388,492 832,743 8,793,531 2,424,874
Distributions to shareholders
from undistributed net
investment income:
Class I....................... (988,164) (1,815,911) (3,102,279) (6,308,597) (4,545,422) (8,652,494)
Class II...................... -- -- (173) -- (2,100) --
Increase (decrease) in net
assets from capital share
transactions (Note 2).......... 1,539,354 6,359,314 (1,777,613) (5,515,489) 8,355,995 2,689,253
-------- -------- --------- --------- --------- ---------
Net increase (decrease)
in net assets.................. 2,318,351 4,774,067 (491,573) (10,991,343) 12,602,004 (3,538,367)
Net assets:
Beginning of period............. 32,831,304 28,057,237 104,979,791 115,971,134 153,144,577 156,682,944
-------- -------- --------- --------- --------- ---------
End of period................... $35,149,655 $32,831,304 $104,488,218 $104,979,791 $165,746,581 $153,144,577
======== ======== ========= ========= ========= =========

Undistributed net investment income included in net assets:

Beginning of period............. $ 21,081 $ 41,621 $ 214,417 $ 66,104 $ 300,019 $ 96,447
======== ======== ========= ========= ========= =========
End of period................. $ 12,762 $ 21,081 $ 233,182 $ 214,417 $ 259,108 $ 300,019
======== ======== ========= ========= ========= =========

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

FRANKLIN TAX-FREE TRUST Financial Statements (cont.)

Statements of Changes in Net Assets (cont.)
for the six months ended August 31, 1995 (unaudited)
and the year ended February 28, 1995

Franklin Missouri Franklin North Carolina
Tax-Free Income Fund Tax-Free Income Fund
-------------------- --------------------
Six months Year Six months Year
ended ended ended ended
8/31/95 2/28/95 8/31/95 2/28/95
--------- --------- --------- ---------
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C>
Net investment income....................................... $ 6,573,899 $ 12,903,117 $ 6,264,304 $ 12,172,662
Net realized gain (loss) from security transactions......... 801,509 (1,832,356) (1,067,908) (2,746,697)
Net unrealized appreciation (depreciation) on investments..... 3,767,162 (8,063,083) 5,010,806 (7,384,751)
--------- --------- --------- ---------
Net increase in net assets resulting from operations.......... 11,142,570 3,007,678 10,207,202 2,041,214
Distributions to shareholders from undistributed net
investment income:
Class I...................................................... (6,474,272) (12,863,835) (6,384,294) (12,187,559)
Class II .................................................... (2,241) -- (2,179) --
Increase in net assets from capital share
transactions (Note 2)........................................ 5,460,560 9,149,155 9,909,815 10,870,334
--------- --------- --------- ---------
Net increase (decrease) in net assets......................... 10,126,617 (707,002) 13,730,544 723,989
Net assets:
Beginning of period.......................................... 227,441,506 228,148,508 216,263,496 215,539,507
--------- --------- --------- ---------
End of period................................................ $237,568,123 $227,441,506 $229,994,040 $216,263,496
========= ========= ========= =========
Undistributed net investment income included in net assets:
Beginning of period.......................................... $ 179,382 $ 140,100 $ 125,919 $ 140,816
========= ========= ========= =========
End of period................................................ $ 276,768 $ 179,382 $ 3,750 $ 125,919
========= ========= ========= =========

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

FRANKLIN TAX-FREE TRUST Financial Statements (cont.)

Statements of Changes in Net Assets (cont.)
for the six months ended August 31, 1995 (unaudited)
and the year ended February 28, 1995

Franklin Texas Franklin Virginia
Tax-Free Income Fund Tax-Free Income Fund
-------------------- --------------------
Six months Year Six months Year
ended ended ended ended
8/31/95 2/28/95 8/31/95 2/28/95
--------- --------- --------- ---------
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C>
Net investment income....................................... $3,867,850 $8,273,562 $7,442,650 $ 14,841,432
Net realized gain (loss) from security transactions......... 420,418 (1,211,703) 1,834,415 (3,093,260)
Net unrealized appreciation (depreciation) on investments..... 2,161,911 (5,076,016) 3,273,111 (7,958,005)
--------- --------- --------- ---------
Net increase in net assets resulting from operations.......... 6,450,179 1,985,843 12,550,176 3,790,167
Distributions to shareholders from undistributed net
investment income:
Class I...................................................... (3,907,705) (8,088,325) (7,437,620) (14,680,932)
Class II..................................................... (39) -- (4,336) --
Increase (decrease) in net assets from capital share
transactions (Note 2)........................................ (4,141,571) (11,897,120) 951,032 5,942,403
--------- --------- --------- ---------
Net increase (decrease) in net assets......................... (1,599,136) (17,999,602) 6,059,252 (4,948,362)
Net assets:
Beginning of period.......................................... 130,684,382 148,683,984 255,964,709 260,913,071
--------- --------- --------- ---------
End of period................................................ $129,085,246 $130,684,382 $262,023,961 $255,964,709
========= ========= ========= =========
Undistributed net investment income included in net assets:
Beginning of period.......................................... $ 275,469 $90,232 $ 487,430 $ 326,930
========= ========= ========= =========
End of period................................................ $ 235,575 $ 275,469 $ 488,124 $ 487,430
========= ========= ========= =========

The accompanying notes are an integral part of these financial statements.
</TABLE>

FRANKLIN TAX-FREE TRUST

Notes to Financial Statements (unaudited)

1. SIGNIFICANT ACCOUNTING POLICIES

Franklin Tax-Free Trust (the Trust) is an open-end management investment company
(mutual fund), registered under the Investment Company Act of 1940 as amended.
The Trust currently consists of twenty-seven separate funds (the Funds). This
report pertains only to the ten Funds included in the accompanying financial
statements. Each of the Funds issues a separate series of the Trust's shares and
maintains a totally separate investment portfolio. The Trust's Franklin Maryland
Tax-Free Income Fund is non-diversified although all other Funds included in
this report are diversified.

All of the funds within this report except the Franklin Kentucky Tax-Free Income
Fund offer two classes of shares, Class I and Class II. Class I shares are sold
with a higher front-end sales charge than Class II shares. Each class of shares
may be subject to a contingent deferred sales charge and has the same rights,
except with respect to the effect of the respective sales charges, the
distribution fees borne by each class, voting rights on matters affecting a
single class and the exchange privilege of each class.

The offering of Class II shares began May 1, 1995, at which time all previously
outstanding shares became Class I shares. Realized and unrealized gains or
losses and net investment income, other than class specific expenses, are
allocated daily to each class of shares based upon the relative proportion of
net assets of each class.

The following is a summary of significant accounting policies consistently
followed by the Funds in the preparation of their financial statements. The
policies are in conformity with generally accepted accounting principles for
investment companies.

a. Security Valuations:

Tax-free bonds generally trade in the over-the-counter market rather than on a
national securities exchange. Often there are no transactions in a particular
security on any given day. In the absence of a recorded 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 Trust 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 Trustees. Other securities for which market
quotations are not available, if any, are valued in accordance with procedures
established by the Board of Trustees.

b. Municipal Bonds or Notes with "Puts":

The Trust has purchased municipal bonds or notes with the right to resell the
bonds or notes to the seller at an agreed upon price or yield on a specified
date or within a specified period (which will be prior to the maturity date of
the bonds or notes). Such a right to resell is commonly known as a "put". In
determining the weighted average maturity of the Fund's portfolio, municipal
bonds and notes as to which the Fund holds a put are deemed to mature on the
first day on which the put may be exercisable.

c. Income Taxes:

The Trust intends to continue to qualify for the tax treatment applicable to
regulated investment companies under the Internal Revenue Code and to make the
requisite distributions to its shareholders which will be sufficient to relieve
it from income and excise taxes. Therefore, no income tax provision is required.
Each Fund is treated as a separate entity in the determination of compliance
with the Internal Revenue Code.

d. Security Transactions:

Security transactions are accounted for on the date the securities are purchased
or sold (trade date). Realized gains and losses on security transactions are
determined on the basis of specific identification for both financial statement
and income tax purposes.

e. Investment Income, Expenses and Distributions:

Distributions to shareholders are recorded on the ex-dividend date. Interest
income and estimated expenses are accrued daily. Bond discount and premium, if
any, are amortized as required by the Internal Revenue Code. The Funds normally
declare dividends from their net investment income daily and distribute monthly.
Daily allocations of net investment income will commence on the date following
receipt of an investor's funds. Dividends are normally declared each day the New
York Stock Exchange is open for business and are equal to an amount per day set
from time to time by the Board of Trustees, and are payable to shareholders of
record at the beginning of business on the ex-date. Once each month, dividends
are reinvested in additional shares of the Funds or paid in cash as requested by
the shareholders.

Net realized capital losses differ for financial statement and tax purposes
primarily due to differing treatment of wash sale transactions.

f. Securities Purchased on a When-Issued or Delayed Delivery Basis:

The Funds may trade securities on a when-issued or delayed delivery basis, with
payment and delivery scheduled for a future date. These transactions are subject
to market fluctuations and are subject to the risk that the value at delivery
may be more or less than the trade date purchase price. Although the Funds will
generally purchase these securities with the intention of acquiring such
securities, they may sell such securities before the settlement date. These
securities are identified on the accompanying Statement of Investments in
Securities and Net Assets. The Funds have set aside sufficient investment
securities as collateral for these purchase commitments.

1. SIGNIFICANT ACCOUNTING POLICIES (cont.)
g. Expense Allocation:

Common expenses incurred by the Trust are allocated among the Funds based on the
ratio of net assets of each Fund to the combined net assets. In all other
respects, expenses are charged to each Fund as incurred on a specific
identification basis.

2. TRUST SHARES

At August 31, 1995, there was an unlimited number of no par value shares of
beneficial interest authorized. Transactions in each of the Fund's shares were
as follows:

Franklin Alabama Franklin Florida Franklin Georgia Franklin Kentucky
Tax-Free Income Fund Tax-Free Income Fund Tax-Free Income Fund Tax-Free Income Fund
------------------ ------------------- ------------------- ----------------
Class I Shares: Shares Amount Shares Amount Shares Amount Shares Amount
-------- ---------- --------- ---------- -------- --------- ------- ---------
Six months ended
August 31, 1995
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold ............ 875,661 $10,034,214 5,982,361 $68,645,054 688,024 $ 8,029,364 199,931 $2,141,008
Shares issued in
reinvestment of
distributions ........... 167,973 1,922,431 850,779 9,758,407 138,990 1,620,813 43,370 463,806
Shares redeemed......... (615,230) (7,048,621) (5,329,367) (61,201,369) (550,622) (6,426,045) (101,094) (1,085,332)
Changes from exercise
of exchange privilege:
Shares sold .......... 97,212 1,119,613 2,466,562 28,305,179 192,592 2,245,661 21,455 229,527
Shares redeemed ...... (125,381) (1,435,415) (2,655,276) (30,454,978) (163,480) (1,909,552) (19,452) (209,655)
-------- ---------- --------- ---------- -------- --------- ------- ---------
Net increase ......... 400,235 $ 4,592,222 1,315,059 $15,052,293 305,504 $ 3,560,241 144,210 $1,539,354
======== ========== ========= ========== ======== ========= ======= =========
Year ended
February 28,1995
Shares sold ............ 1,621,119 $18,242,951 8,411,182 $94,636,747 1,231,961 $14,088,149 671,028 $7,024,240
Shares issued in
reinvestment of
distributions ........... 321,962 3,596,571 1,678,619 18,812,041 271,984 3,100,210 83,222 857,832
Shares redeemed ........ (1,856,828) (20,777,303) (14,722,572) (164,615,468) (1,410,178) (15,991,452) (202,303) (2,068,311)
Changes from exercise
of exchange privilege:
Shares sold .......... 277,491 3,096,607 7,643,987 84,296,915 609,634 6,889,684 126,907 1,299,879
Shares redeemed ...... (440,080) (4,851,369) (7,161,104) (79,337,936) (658,706) (7,469,582) (74,987) (754,326)
-------- ---------- --------- ---------- -------- --------- ------- ---------
Net increase
(decrease) ............... (76,336) $ (692,543) (4,149,888) $(46,207,701) 44,695 $ 617,009 603,867 $6,359,314
======== ========== ========= ========== ======== ========= ======= =========

Franklin Alabama Franklin Florida Franklin Georgia
Tax-Free Income Fund Tax-Free Income Fund Tax-Free Income Fund
------------------ ------------------- -------------------
Class II Shares: Shares Amount Shares Amount Shares Amount
-------- ---------- --------- ---------- -------- ---------
Period ended
August 31, 1995*
Shares sold ............ 37,247 $ 428,307 183,383 $ 2,123,962 30,048 $ 352,148
Shares issued in
reinvestment of
distributions ........... 119 1,365 542 6,245 101 1,177
Shares redeemed......... -- -- (3,817) (44,469) -- --
Changes from exercise of
exchange privilege:
Shares redeemed ...... -- -- (11) (125) -- --
-------- ---------- --------- ---------- -------- ---------
Net increase ......... 37,366 $ 429,672 180,097 $ 2,085,613 30,149 $ 353,325
======== ========== ========= ========== ======== =========

*For the period May 1,1995 to August 31, 1995.

2. TRUST SHARES (cont.)
Franklin Louisiana Franklin Maryland Franklin Missouri
Tax-Free Income Fund Tax-Free Income Fund Tax-Free Income Fund
------------------ ------------------- -------------------
Class I Shares: Shares Amount Shares Amount Shares Amount
-------- --------- -------- --------- -------- ----------
Six months ended August 31, 1995
<S> <C> <C> <C> <C> <C> <C>
Shares sold ................................. 373,364 $4,143,200 974,652 $10,791,605 1,048,596 $12,152,635
Shares issued in reinvestment of distributions 112,462 1,247,935 200,331 2,216,780 243,815 2,824,529
Shares redeemed ............................. (497,779) (5,534,911) (615,272) (6,803,560) (845,917) (9,819,814)
Changes from exercise of exchange privilege:
Shares sold ................................ 24,725 274,671 340,572 3,784,557 130,289 1,506,203
Shares redeemed ............................ (185,156) (2,067,257) (178,409) (1,977,517) (146,074) (1,692,586)
-------- --------- -------- --------- -------- ----------
Net increase (decrease)..................... (172,384) $(1,936,362) 721,874 $ 8,011,865 430,709 $ 4,970,967
======== ========= ======== ========= ======== ==========
Year ended February 28,1995
Shares sold ................................. 854,957 $9,422,663 2,014,838 $21,713,304 2,751,161 $31,262,645
Shares issued in reinvestment of distributions 219,711 2,397,694 375,143 4,013,270 483,780 5,454,450
Shares redeemed ............................. (1,403,612) (15,248,084) (2,108,990) (22,501,921) (2,353,075) (26,324,898)
Changes from exercise of exchange privilege:
Shares sold ................................ 154,135 1,665,053 607,151 6,459,413 459,895 5,203,959
Shares redeemed ............................ (342,794) (3,752,815) (658,216) (6,994,813) (575,966) (6,447,001)
-------- --------- -------- --------- -------- ----------

Net increase (decrease)..................... (517,603) $(5,515,489) 229,926 $ 2,689,253 765,795 $ 9,149,155
======== ========= ======== ========= ======== ==========

Franklin Louisiana Franklin Maryland Franklin Missouri
Tax-Free Income Fund Tax-Free Income Fund Tax-Free Income Fund
------------------ ------------------- -------------------
Class II Shares: Shares Amount Shares Amount Shares Amount
-------- --------- -------- --------- -------- ----------
Period ended August 31, 1995*
Shares sold ................................. 14,270 $ 158,696 30,871 $ 342,964 41,868 $ 488,061
Shares issued in reinvestment of distributions 5 53 105 1,166 132 1,532
-------- --------- -------- --------- -------- ----------
Net increase................................ 14,275 $ 158,749 30,976 $ 344,130 42,000 $ 489,593
======== ========= ======== ========= ======== ==========
*For the period May 1,1995 to August 31, 1995.

Franklin North Carolina Franklin Texas Franklin Virginia
Tax-Free Income Fund Tax-Free Income Fund Tax-Free Income Fund
------------------- ------------------- -------------------
Class I Shares: Shares Amount Shares Amount Shares Amount
-------- --------- -------- ---------- -------- ----------
Six months ended August 31, 1995
<S> <C> <C> <C> <C> <C> <C>
Shares sold ................................. 1,399,906 $16,122,023 280,750 $ 3,192,213 1,080,286 $12,380,216
Shares issued in reinvestment of distributions 263,259 3,029,533 131,113 1,491,357 287,145 3,290,169
Shares redeemed ............................. (902,021) (10,391,808) (706,859) (8,043,984) (1,267,665) (14,544,207)
Changes from exercise of exchange privilege:
Shares sold ................................ 281,061 3,235,090 96,273 1,091,613 292,177 3,351,117
Shares redeemed ............................ (242,013) (2,784,724) (165,113) (1,877,805) (367,783) (4,237,698)
-------- --------- -------- ---------- -------- ----------
Net increase (decrease)..................... 800,192 $ 9,210,114 (363,836) $ (4,146,606) 24,160 $ 239,597
======== ========= ======== ========== ======== ==========
Year ended February 28, 1995
Shares sold ................................. 2,715,182 $30,691,925 667,569 $ 7,515,729 2,483,253 $27,919,274
Shares issued in reinvestment of distributions 509,168 5,703,591 256,909 2,876,711 576,775 6,439,101
Shares redeemed ............................. (2,201,068) (24,612,803) (1,759,301) (19,709,523) (2,505,456) (27,915,451)
Changes from exercise of exchange privilege:
Shares sold ................................ 778,419 8,699,625 220,974 2,467,493 581,315 6,485,601
Shares redeemed ............................ (859,389) (9,612,004) (453,684) (5,047,530) (632,522) (6,986,122)
-------- --------- -------- ---------- -------- ----------
Net increase (decrease)..................... 942,312 $10,870,334 (1,067,533) $(11,897,120) 503,365 $ 5,942,403
======== ========= ======== ========== ======== ==========

2. TRUST SHARES (cont.)
Franklin North Carolina Franklin Texas Franklin Virginia
Tax-Free Income Fund Tax-Free Income Fund Tax-Free Income Fund
------------------- ------------------- -------------------
Class II Shares: Shares Amount Shares Amount Shares Amount
-------- --------- -------- ---------- -------- ----------
Period ended August 31, 1995*
Shares sold ................................. 60,612 $ 698,715 444 $ 5,035 61,607 $ 708,504
Shares issued in reinvestment of distributions 86 986 -- -- 255 2,931
-------- --------- -------- ---------- -------- ----------
Net increase................................ 60,698 $ 699,701 444 $ 5,035 61,862 $ 711,435
======== ========= ======== ========== ======== ==========
*For the period May 1,1995 to August 31, 1995.

3. DISTRIBUTIONS AND CAPITAL LOSS CARRYOVERS

At February 28, 1995, for tax purposes, the Funds had accumulated net capital
loss carryovers as follows:

Franklin Franklin Franklin Franklin Franklin
Maryland Missouri North Carolina Texas Virginia
Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free
Income Fund Income Fund Income Fund Income Fund Income Fund
--------- -------- --------- -------- --------
Expiring in: 1999 ......................................... $ 25,303 $ 4,884 $ 33,686 $-- $ 6,967
2000 ......................................... 125 13,989 41,699 -- --
2001 ......................................... 249,775 299,374 147,462 -- 164,306
2002 ......................................... 359,934 275,178 14,532 -- 105,751
2003 ......................................... 305,188 1,842,226 2,746,697 1,239,674 3,093,260
--------- -------- --------- -------- --------
$ 940,325 $2,435,651 $2,984,076 $1,239,674 $3,370,284
========= ======== ========= ======== ========

For tax purposes, the aggregate cost of securities is higher (and unrealized
appreciation is lower) than for financial reporting purposes at August 31,1995
by $750 in the Franklin Alabama Tax-Free Income Fund, $1,875 in the Franklin
Missouri Tax-Free Income Fund and $1,820 in the Franklin North Carolina Tax-Free
Income.

4. PURCHASES AND SALES OF SECURITIES

Aggregate purchases and sales of securities (excluding purchases and sales of
short-term securities) for the six months ended August 31, 1995 were as follows:

Sales ................................................ $10,676,319 $79,602,910 $ 5,465,400 $ 7,931,495 $ 2,344,717
========== ========== ========= ========= =========
Franklin Franklin Franklin Franklin Franklin
Maryland Missouri North Carolina Texas Virginia
Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free
Income Fund Income Fund Income Fund Income Fund Income Fund
---------- ---------- ---------- ---------- ---------
Purchases ............................................ $14,825,721 $16,338,890 $38,973,043 $12,699,267 $26,500,718
========== ========== ========== ========== =========
Sales ................................................ $ 7,448,979 $11,046,333 $29,860,266 $14,571,535 $21,832,181
========== ========== ========== ========== =========

</TABLE>

5. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES

Franklin Advisers, Inc., under the terms of a management agreement, provides
investment advice, administrative services, office space and facilities to each
Fund, and receives fees computed monthly on the net assets of each Fund on the
last day of the month at an annualized rate of 5/8 of 1% of the first $100
million of net assets, 1/2 of 1% of net assets in excess of $100 million up to
and including $250 million, and 45/100 of 1% of net assets in excess of $250
million. The terms of the management agreement provide that aggregate annual
expenses of the Funds be limited to the extent necessary to comply with the
limitations set forth in the laws, regulations and administrative
interpretations of the states in which the Funds' shares are registered. The
Funds' expenses did not exceed these limitations; however, for the six months
ended August 31, 1995, Franklin Advisers, Inc. agreed in advance to waive
$85,119 of the management fees for the Franklin Kentucky Tax-Free Income Fund.

In its capacity as underwriter for the shares of the Funds, Franklin/Templeton
Distributors, Inc. receives commissions on sales of the Funds' shares.
Commissions are deducted from the gross proceeds received from the sale of the
Funds' shares, and as such are not expenses of the Funds. Franklin/Templeton
Distributors, Inc. may also make payments, out of its own resources, to the
dealers for certain sales of Class I and Class II shares. Commissions received
by Franklin/Templeton Distributors, Inc. and the amounts paid to other dealers
for the six months ended August 31, 1995 were as follows:

Franklin Franklin Franklin Franklin Franklin
Alabama Florida Georgia Kentucky Louisiana
Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free
Income Fund Income Fund Income Fund Income Fund Income Fund
---------------- ---------------- -------------- -------- --------------
Class I Class II Class I Class II Class I
Class II Class I Class I Class II
------- ----- -------- ------ ------- ----- -------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total commissions received ... $341,759 $4,420 $2,083,669 $21,585 $288,866 $3,605 $84,331 $157,833 $1,569
======= ===== ======== ====== ======= ===== ======== ======= =====
Paid to other dealers......... $324,348 $8,644 $2,003,556 $42,119 $272,294 $7,113 $78,999 $147,587 $3,203
======= ===== ======== ====== ======= ===== ======== ======= =====

Franklin Franklin Franklin Franklin Franklin
Maryland Missouri North Carolina Texas Virginia
Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free
Income Fund Income Fund Income Fund Income Fund Income Fund
--------------- ------------- -------------- ------------- --------------
Class I Class II Class I Class II Class I Class II Class I Class II Class I Class II
------- ----- ------- ----- ------- ------ ------- ----- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total commissions received ..... $412,309 $3,395 $456,847 $5,023 $556,639 $ 7,272 $113,658 $42 $437,180 $ 7,392
======= ===== ======= ===== ======= ====== ======= ===== ======= ======
Paid to other dealers........... $389,437 $6,907 $430,781 $9,360 $530,022 $14,117 $106,403 $80 $412,994 $14,316
======= ===== ======= ===== ======= ====== ======= ===== ======= ======
</TABLE>

Franklin/Templeton Distributors, Inc. also received contingent deferred sales
charge of $20,301 relating to transactions in the Franklin Florida Tax-Free
Income Fund Class I shares.

Under the terms of a shareholder servicing agreement with Franklin/Templeton
Investor Services, Inc., the Trust pays costs on a per shareholder account
basis. Shareholder servicing costs incurred by the Funds for the six months
ended August 31, 1995 aggregated $257,085, of which $225,810 was paid to
Franklin/Templeton Investor Services, Inc.

Under the terms of a Distribution Plan pursuant to Rule 12b-1 of the Investment
Company Act of 1940, the Franklin Kentucky Tax-Free Income Fund reimburses
Franklin/Templeton Distributors, Inc. in an amount up to .10% per annum of the
fund's average daily net assets for costs incurred in the promotion, offering
and marketing of the fund's shares. Fees incurred by the Franklin Kentucky
Tax-Free Income Fund under the agreement aggregated $11,931 for the six months
ended August 31, 1995.

Under the terms of a Distribution Plan pursuant to Rule 12b-1 of the Investment
Company Act of 1940, which was effective May 1, 1994 for Class I shares and May
1, 1995 for Class II shares, the Funds except the Franklin Kentucky Tax-Free
Income Fund, will reimburse Franklin/Templeton Distributors, Inc., in an amount
up to a maximum of 0.10% and 0.65% per annum, respectively, of the average daily
net assets of each class for costs incurred in the promotion, offering and
marketing of the Class I and II shares. Fees incurred by these funds under the
agreement aggregated $1,050,164 for the six months ended August 31, 1995.

Certain officers and trustees of the Trust are also officers and/or directors of
Franklin/Templeton Distributors, Inc., Franklin Advisers, Inc. and
Franklin/Templeton Investor Services, Inc., all wholly-owned subsidiaries of
Franklin Resources, Inc.

6. CREDIT RISK

Although each of the Funds, other than the Franklin Maryland Tax-Free Income
Fund, has a diversified investment portfolio, all of its investments are in the
securities of issuers within those respective states,Guam and Puerto Rico. Such
concentration may subject the Funds more significantly to economic changes
occurring within those states and territories.

7. FINANCIAL HIGHLIGHTS

Selected data for each share of beneficial interest outstanding throughout the
years, by Fund, are as follows:
<TABLE>
<CAPTION>

Per Share Operating Performance Ratios/Supplemental Data

Net Distri- Distri- Ratio of Net
Net Asset Net Realized & butions butions Net Asset Ratio of Investment
Year Value at Invest- Unrealized Total From From Net From Total Value Net Assets at Expenses Income Portfolio
Ended Beginning ment Gain (Loss) Investment InvestmentCapital Distri- at End Total End of Year to Average to Average Turnover
Feb.28 of Year Income on SecuritiesOperations Income Gains butions of Year Return++(in 000's) Net Assets+++Net Assets Rate

Franklin Alabama Tax-Free Income Fund:
Class I Shares:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1991 $10.74 $.71 $.068 $ .778 $(.768) $ -- $(.768) $10.75 7.27% $ 50,182 .70% 6.45% 28.36%
1992 10.75 .66 .346 1.006 (.756) -- (.756) 11.00 9.51 96,254 .71 6.21 1.21
1993 11.00 .68 .714 1.394 (.684) -- (.684) 11.71 12.84 144,480 .68 6.04 11.27
1994 11.71 .66 .094 .754 (.664) -- (.664) 11.80 6.35 178,414 .64 5.62 14.87
1995 11.80 .66 (.500) .160 (.650) -- (.650) 11.31 1.54 170,051 .72 5.88 19.85
19951 11.31 .33 .209 .539 (.329) -- (.329) 11.52 4.82 177,803 .72* 5.76* 6.25
Class II Shares:**
19952 11.36 .20 .174 .374 (.194) -- (.194) 11.54 3.31 431 1.23* 5.19* 6.25
Franklin Florida Tax-Free Income Fund:
Class I Shares:
1991 10.73 .73 .091 .821 (.801) -- (.801) 10.75 7.69 605,720 .57 6.76 10.80
1992 10.75 .71 .348 1.058 (.768) -- (.768) 11.04 10.02 886,110 .54 6.60 16.69
1993 11.04 .71 .647 1.357 (.717) -- (.717) 11.68 12.45 1,164,827 .54 6.30 11.72
1994 11.68 .70 .086 .786 (.696) -- (.696) 11.77 6.63 1,361,583 .52 5.90 11.77
1995 11.77 .69 (.436) .254 (.674) -- (.674) 11.35 2.36 1,265,018 .59 6.15 14.34
19951 11.35 .35 .197 .547 (.347) -- (.347) 11.55 4.88 1,303,466 .60 *6.04* 6.30
Class II Shares:**
19952 11.37 .22 .226 .446 (.206) -- (.206) 11.61 3.95 2,092 1.13* 5.52* 6.30
Franklin Georgia Tax-Free Income Fund:
Class I Shares:
1991 10.90 .72 .098 .818 (.778) -- (.778) 10.94 7.53 32,011 .56 6.53 1.20
1992 10.94 .65 .349 .999 (.759) -- (.759) 11.18 9.32 68,546 .72 6.11 6.18
1993 11.18 .68 .658 1.338 (.668) -- (.668) 11.85 12.09 91,017 .71 5.91 17.10
1994 11.85 .66 .154 .814 (.664) -- (.664) 12.00 6.77 120,882 .69 5.48 16.75
1995 12.00 .66 (.458) .202 (.662) -- (.662) 11.54 1.87 116,771 .76 5.76 36.17
19951 11.54 .33 .205 .535 (.335) -- (.335) 11.74 4.69 122,305 .77* 5.66* 4.66
Class II Shares:**
19952 11.57 .20 .198 .398 (.198) -- (.198) 11.77 3.46 355 1.29* 5.30* 4.66
Franklin Kentucky Tax-Free Income Fund:
Class I Shares:
1992 10.00 .15 .164 .314 (.014) -- (.014) 10.30 8.37 3,032 -- 3.52* 53.90
1993 10.30 .57 .832 1.402 (.652) -- (.652) 11.05 13.81 11,678 -- 6.11 18.41
1994 11.05 .63 .164 .794 (.664) -- (.664) 11.18 7.07 28,057 -- 5.73 13.22
1995 11.18 .61 (.625) (.015) (.625) -- (.625) 10.54 .11 32,831 .29 5.94 32.92
19951 10.54 .31 .250 .560 (.310) -- (.310) 10.79 5.38 35,150 .33* 5.75* 23.61
Franklin Louisiana Tax-Free Income Fund:
Class I Shares:
1991 10.58 .71 .182 .892 (.792) -- (.792) 10.68 8.50 35,862 .56 6.60 .76
1992 10.68 .67 .326 .996 (.776) -- (.776) 10.90 9.49 72,923 .70 6.33 10.51
1993 10.90 .69 .668 1.358 (.668) -- (.668) 11.57 12.61 95,368 .70 6.18 23.37
1994 11.57 .67 (.005) .665 (.675) -- (.675) 11.56 5.63 115,971 .68 5.70 17.63
1995 11.56 .66 (.549) .111 (.641) -- (.641) 11.03 1.14 104,980 .75 5.98 32.28
19951 11.03 .33 .129 .459 (.329) -- (.329) 11.16 4.21 104,328 .80* 5.96* .72
Class II Shares:**
19952 11.01 .19 .194 .384 (.194) -- (.194) 11.20 3.51 160 1.35* 4.95* .72
Franklin Maryland Tax-Free Income Fund:
Class I Shares:
1991 10.31 .68 .096 .776 (.716) -- (.716) 10.37 7.57 33,421 .54 6.50 12.14
1992 10.37 .64 .300 .940 (.710) -- (.710) 10.60 9.21 71,538 .71 6.15 16.65
1993 10.60 .65 .672 1.322 (.652) -- (.652) 11.27 12.64 115,873 .71 6.00 14.73
1994 11.27 .64 .092 .732 (.642) -- (.642) 11.36 6.40 156,683 .66 5.58 18.38
1995 11.36 .63 (.453) .177 (.617) -- (.617) 10.92 1.78 153,145 .73 5.86 20.30
19951 10.92 .31 .296 .606 (.316) -- (.316) 11.21 5.62 165,398 .74* 5.68* 4.84
Class II Shares:**
19952 10.93 .191 .305 .496 (.186) -- (.186) 11.24 4.56 348 1.25* 5.08* 4.84
Franklin Missouri Tax-Free Income Fund:
Class I Shares:
1991 10.64 .69 .154 .844 (.744) -- (.744) 10.74 7.96 55,560 .72 6.42 40.08
1992 10.74 .65 .409 1.059 (.729) -- (.729) 11.07 10.04 110,940 .71 6.21 16.40
Franklin Missouri Tax-Free Income Fund: (cont.)
Class I Shares: (cont.)
1993 $11.07 $.68 $.676 $1.356 $(.676) $-- $(.676) $11.75 12.40% $164,122 .67% 6.03% 10.28%
1994 11.75 .66 .206 .866 (.676) -- (.676) 11.94 7.29 228,149 .64 5.55 11.02
1995 11.94 .65 (.501) .149 (.649) -- (.649) 11.44 1.44 227,442 .70 5.75 19.84
19951 11.44 .33 .233 .563 (.323) -- (.323) 11.68 4.97 237,077 .71* 5.65* 4.82
Class II Shares:**
19952 11.47 .20 .220 .420 (.190) -- (.190) 11.70 3.68 491 1.22* 5.12* 4.82
Franklin North Carolina Tax-Free Income Fund:
Class I Shares:
1991 10.79 .70 .124 .824 (.742) (.012) (.754) 10.86 7.66 50,328 .74 6.37 7.99
1992 10.86 .64 .352 .992 (.732) -- (.732) 11.12 9.28 106,960 .71 6.03 3.16
1993 11.12 .67 .754 1.424 (.664) -- (.664) 11.88 12.97 156,517 .67 5.86 8.48
1994 11.88 .65 .054 .704 (.664) -- (.664) 11.92 5.81 215,540 .63 5.44 3.86
1995 11.92 .65 (.550) .100 (.650) -- (.650) 11.37 1.06 216,263 .70 5.75 25.05
19951 11.37 .32 .209 .529 (.329) -- (.329) 11.57 4.70 229,289 .71* 5.60* 13.75
Class II Shares:**
19952 11.41 .20 .194 .394 (.194) -- (.194) 11.61 3.48 705 1.22* 5.06* 13.75
Franklin Texas Tax-Free Income Fund:
Class I Shares:
1991 10.74 .73 .104 .834 (.804) -- (.804) 10.77 7.81 29,036 .40 6.46 .55
1992 10.77 .67 .370 1.040 (.780) -- (.780) 11.03 9.84 123,722 .70 6.14 6.44
1993 11.03 .69 .661 1.351 (.691) -- (.691) 11.69 12.41 139,389 .66 6.15 12.33
1994 11.69 .69 .032 .722 (.692) -- (.692) 11.72 6.09 148,684 .65 5.85 20.18
1995 11.72 .68 (.487) .193 (.663) -- (.663) 11.25 1.80 130,684 .73 6.05 6.36
19951 11.25 .34 .221 .561 (.341) -- (.341) 11.47 5.05 129,080 .75* 5.93* 9.93
Class II Shares:**
19952 11.27 .26 .192 .452 (.202) -- (.202) 11.52 4.04 5 1.27* 4.87* 9.93
Franklin Virginia Tax-Free Income Fund:
Class I Shares:
1991 10.63 .69 .136 .826 (.756) -- (.756) 10.70 7.82 82,662 .72 6.38 2.56
1992 10.70 .66 .362 1.022 (.742) -- (.742) 10.98 9.71 152,615 .68 6.17 4.33
1993 10.98 .67 .704 1.374 (.664) -- (.664) 11.69 12.67 211,171 .65 5.98 5.74
1994 11.69 .67 .136 .806 (.676) -- (.676) 11.82 6.80 260,913 .62 5.65 6.86
1995 11.82 .66 (.499) .161 (.651) -- (.651) 11.33 1.56 255,965 .69 5.86 21.73
19951 11.33 .33 .229 .559 (.329) -- (.329) 11.56 4.99 261,306 .70* 5.74* 8.55
Class II Shares:**
19952 11.35 .20 .254 .454 (.194) -- (.194) 11.61 4.03 718 1.21* 5.19* 8.55

</TABLE>

*Annualized

**Ratios have been calculated using the daily average net assets during the
period.

1For the six months ended August 31, 1995.

2For the period May 1, 1995 to August 31, 1995.

+For the period September 10, 1991 (effective date of registration) to February
29, 1992.

++Total return measures the change in value of an investment over the periods
indicated. It is not annualized. It does not include the maximum initial sales
charge or the deferred contingent sales charge, and assumes reinvestment of
dividends and capital gains, if any, at net asset value. Prior to May 1, 1994,
dividends were reinvested at the maximum offering price.

+++During the periods indicated below, Franklin Advisers Inc., the investment
manager, agreed in advance to waive a portion of the management fees and made
payments of other expenses incurred by the Funds. Had such action not been
taken, the ratios of expenses to average net assets would have been as follows:

Ratio of Expenses to
Average Net Assets
--------------
Franklin Alabama Tax-Free Income Fund:
1991 .................................... .72%
Franklin Georgia Tax-Free Income Fund:
1991 .................................... .74
Franklin Kentucky Tax-Free Income Fund:
1992 ................................... .82*
1993 .................................... .81
1994 .................................... .71
1995 .................................... .80
19951 ................................... .83*
Ratio of Expenses to
Average Net Assets
--------------
Franklin Louisiana Tax-Free Income Fund:
1991 .................................... .72%
Franklin Maryland Tax-Free Income Fund:
1991 .................................... .73
Franklin Texas Tax-Free Income Fund:
1991 .................................... .75

Franklin Tax-Free Trust #2

APPENDIX
DESCRIPTION OF GRAPHIC MATERIAL OMITTED FROM EDGAR FILING
(PURSUANT TO ITEM 304 (a) OF REGULATION S-T)

GRAPHIC MATERIAL (1)

This chart shows in pie chart format the fund's securities quality breakdown, as
a percentage of the fund's total net assets.

<TABLE>
<CAPTION>
Quality Breakdown on 8/31/95
<S> <C>
AAA 58.6%
AA 4.4%
A 9.6%
BBB 27.4%
</TABLE>

GRAPHIC MATERIAL (2)

This bar chart shows the comparison between the fund's distribution rate of
5.39% and the taxable equivalent distribution rate of 9.39%, for the Class I
shares.

GRAPHIC MATERIAL (3)

This bar chart shows the comparison between the fund's distribution rate of
4.94% and the taxable equivalent distribution rate of 8.61%, for the Class II
shares.

GRAPHIC MATERIAL (4)

This chart shows in pie chart format the fund's securities quality breakdown, as
a percentage of the fund's total net assets.

<TABLE>
<CAPTION>
Quality Breakdown on 8/31/95
<S> <C>
AAA 49.5%
AA 6.6%
A 10.0%
BBB 31.1%
Below Investment Grade 2.8%
</TABLE>

GRAPHIC MATERIAL (5)

This bar chart shows the comparison between the fund's distribution rate of
5.67% and the taxable equivalent distribution rate of 9.39%, for the Class I
shares.

GRAPHIC MATERIAL (6)

This bar chart shows the comparison between the fund's distribution rate of
5.22% and the taxable equivalent distribution rate of 8.64%, for the Class II
shares.

GRAPHIC MATERIAL (7)

This chart shows in pie chart format the fund's securities quality breakdown, as
a percentage of the fund's total net assets.

<TABLE>
<CAPTION>
Quality Breakdown on 8/31/95
<S> <C>
AAA 65.5%
AA 15.4%
A 8.3%
BBB 6.5%
BB 4.3%
</TABLE>

GRAPHIC MATERIAL (8)

This bar chart shows the comparison between the fund's distribution rate of
5.38% and the taxable equivalent distribution rate of 9.47%, for the Class I
shares.

GRAPHIC MATERIAL (9)

This bar chart shows the comparison between the fund's distribution rate of
4.95% and the taxable equivalent distribution rate of 8.71%, for the Class II
shares.

GRAPHIC MATERIAL (10)

This chart shows in pie chart format the fund's securities quality breakdown, as
a percentage of the fund's total net assets.

<TABLE>
<CAPTION>
Quality Breakdown on 8/31/95
<S> <C>
AAA 51.1%
AA 17.5%
A 18.1%
BBB 10.1%
BB 3.2%
</TABLE>

GRAPHIC MATERIAL (11)

This bar chart shows the comparison between the fund's distribution rate of
5.43% and the taxable equivalent distribution rate of 9.56%.

GRAPHIC MATERIAL (12)

This chart shows in pie chart format the fund's securities quality breakdown, as
a percentage of the fund's total net assets.

<TABLE>
<CAPTION>
Quality Breakdown on 8/31/95
<S> <C>
AAA 46.1%
AA 3.1%
A 22.7%
BBB 16.2%
BB 11.9%
</TABLE>

GRAPHIC MATERIAL (13)

This bar chart shows the comparison between the fund's distribution rate of
5.56% and the taxable equivalent distribution rate of 9.79%, for the Class I
shares.

GRAPHIC MATERIAL (14)

This bar chart shows the comparison between the fund's distribution rate of
5.09% and the taxable equivalent distribution rate of 8.96%, for the Class II
shares.

GRAPHIC MATERIAL (15)

This chart shows in pie chart format the fund's securities quality breakdown, as
a percentage of the fund's total net assets.

<TABLE>
<CAPTION>
Quality Breakdown on 8/31/95
<S> <C>
AAA 46.5%
AA 18.8%
A 25.9%
BBB 8.8%
</TABLE>

GRAPHIC MATERIAL (16)

This bar chart shows the comparison between the fund's distribution rate of
5.33% and the taxable equivalent distribution rate of 9.76%, for the Class I
shares.

GRAPHIC MATERIAL (17)

This bar chart shows the comparison between the fund's distribution rate of
4.86% and the taxable equivalent distribution rate of 8.90%, for the Class II
shares.

GRAPHIC MATERIAL (18)

This chart shows in pie chart format the fund's securities quality breakdown, as
a percentage of the fund's total net assets.

<TABLE>
<CAPTION>
Quality Breakdown on 8/31/95
<S> <C>
AAA 59.9%
AA 12.7%
A 12.5%
BBB 14.9%
</TABLE>

GRAPHIC MATERIAL (19)

This bar chart shows the comparison between the fund's distribution rate of
5.21% and the taxable equivalent distribution rate of 9.17%, for the Class I
shares.

GRAPHIC MATERIAL (20)

This bar chart shows the comparison between the fund's distribution rate of
4.77% and the taxable equivalent distribution rate of 8.40%, for the Class II
shares.

GRAPHIC MATERIAL (21)

This chart shows in pie chart format the fund's securities quality breakdown, as
a percentage of the fund's total net assets.

<TABLE>
<CAPTION>
Quality Breakdown on 8/31/95
<S> <C>
AAA 36.7%
AA 19.4%
A 35.6%
BBB 7.5%
Below Investment Grade 0.8%
</TABLE>

GRAPHIC MATERIAL (22)

This bar chart shows the comparison between the fund's distribution rate of
5.36% and the taxable equivalent distribution rate of 9.62%, for the Class I
shares.

GRAPHIC MATERIAL (23)

This bar chart shows the comparison between the fund's distribution rate of
4.91% and the taxable equivalent distribution rate of 8.82%, for the Class II
shares.

GRAPHIC MATERIAL (24)

This chart shows in pie chart format the fund's securities quality breakdown, as
a percentage of the fund's total net assets.

<TABLE>
<CAPTION>
Quality Breakdown on 8/31/95
<S> <C>
AAA 67.6%
AA 10.6%
A 7.5%
BBB 12.6%
BB 1.7%
</TABLE>

GRAPHIC MATERIAL (25)

This bar chart shows the comparison between the fund's distribution rate of
5.61% and the taxable equivalent distribution rate of 9.29%, for the Class I
shares.

GRAPHIC MATERIAL (26)

This bar chart shows the comparison between the fund's distribution rate of
5.15% and the taxable equivalent distribution rate of 8.53%, for the Class II
shares.

GRAPHIC MATERIAL (27)

This chart shows in pie chart format the fund's securities quality breakdown, as
a percentage of the fund's total net assets.

<TABLE>
<CAPTION>
Quality Breakdown on 8/31/95
<S> <C>
AAA 38.6%
AA 31.5%
A 21.2%
BBB 8.7%
</TABLE>

GRAPHIC MATERIAL (28)

This bar chart shows the comparison between the fund's distribution rate of
5.37% and the taxable equivalent distribution rate of 9.44%, for the Class I
shares.

GRAPHIC MATERIAL (29)

This bar chart shows the comparison between the fund's distribution rate of
4.91% and the taxable equivalent distribution rate of 8.63%, for the Class II
shares.