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TABLE OF CONTENTS PAGE
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MESSAGE FROM THE CHAIRMAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
MANAGER'S DISCUSSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
FUND REPORTS
Franklin Arizona Insured
Tax-Free Income Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Franklin Florida Insured
Tax-Free Income Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Franklin Insured Tax-Free
Income Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Franklin Massachussetts Insured
Tax-Free Income Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Franklin Michigan Insured
Tax-Free Income Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Franklin Minnesota Insured
Tax-Free Income Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Franklin Ohio Insured
Tax-Free Income Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SPECIAL FEATURE: PORTFOLIO TALK
FRANKLIN'S MUNICIPAL BOND DEPARTMENT . . . . . . . . . . . . . . . . . . . . . . . . . . 34
STATEMENT OF INVESTMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
NOTES TO FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
REPORT OF INDEPENDENT AUDITORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
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MESSAGE FROM THE CHAIRMAN
April 14, 1995
Dear Shareholder:
This is the tenth annual report of the Franklin Tax-Free Trust for the fiscal
year ended February 28, 1995.
Calendar year 1994 was the worst for bonds since the Trust's inception in 1985.
In fact, the 20-year U.S. Treasury bond recorded its poorest performance since
1967.(1) Concerns about rising inflation, brought on by continued strong
economic growth, prompted the Federal Reserve Board to raise interest rates six
times during the Trust's fiscal year. Bond prices declined across all
maturities, as did the share values of the funds in the Franklin Tax-Free
Trust.
By the end of February 1995, however, the Federal Reserve Board's dedication to
slowing economic growth by raising interest rates appeared to be having the
intended effect -- economic growth had stabilized at a sustainable level, while
inflation remained subdued.
Although the Fed's actions caused significant short-term volatility, its
commitment to fighting inflation should benefit the Trust and its shareholders
over the long run.
Following the stellar performance of bonds in the early 1990s, 1994 came as a
reminder that bond prices can fall as well as rise. Although rising interest
rates generally cause bond prices to fall, they also bring higher bond yields.
This could ultimately lead to higher distributions of tax-free income for the
Trust's shareholders.
Periods of volatility also provide us with a glimpse of how mutual funds can
lower the risks of investing. 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.
These advantages of mutual fund investing -- diversification and professional
management -- became even more apparent recently, in light of the municipal
bankruptcy filing of Orange County, California.(2) This situation might have
devastated individual bondholders, but the direct impact on Franklin's
1. Source: Ibbotson Associates. Based on one-year total returns of long-term
government bonds from January 1926 to December 1994.
2. The Orange County and related bankruptcy proceedings are ongoing, and the
funds' managers continue to monitor proceedings.
1
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tax-free income funds has been minimal to date, because most of our funds are
widely diversified.(3)
For another reason to look at the potential benefits of mutual funds, consider
this: Investors in individual municipal bonds suffered declines of 15% or more
during 1994, while those invested in diversified, long-term municipal debt
funds fared a little better, averaging declines of approximately 7%.(4) As
you'll see in the fund reports that follow, for the year ended February 28,
1995, the majority of the funds in the Trust outperformed the average
performance of other municipal bond funds in their respective categories,
according to Lipper Analytical Services, Inc.
As we've said in past reports, Franklin's tax-free funds practice a
conservative investment strategy, focusing on providing our shareholders with a
high level of current income exempt from federal and, in most cases, state and
local income taxes.(5) The funds' managers maintain a long-term investment
approach, and we encourage shareholders to do the same.
Looking forward, the prospects of a slowing economy and a presidential election
in 1996 should stabilize or even lower interest rates, which bodes well for
tax-free investors in 1995.
On the pages that follow, you'll find specific information about each fund, as
well as additional information from our portfolio managers about the current
state of and outlook for the municipal bond market. In addition, an in-depth
conversation with senior members of our Municipal Bond Department can be found
on page 34 of this report.
As always, we welcome your questions, appreciate your trust and support, and
look forward to serving you in the years to come.
Sincerely,
Charles B. Johnson
Chairman
3. Most of Franklin's tax-free income funds are diversified; however, a few are
classified as non-diversified under the Investment Company Act of 1940. The
risks of investing in a non-diversified fund, such as increased susceptibility
to adverse economic or regulatory developments are described in each fund's
prospectus.
4. Source: Average individual municipal bond figures calculated by Delphi
Hanover Corp.; average municipal bond mutual fund figures according to Lipper
Analytical Services, Inc., a nationally recognized mutual fund research
company, are based on cumulative total return from 12/31/93 to 12/31/94.
5. For investors subject to federal or state alternative minimum tax, all or a
portion of these dividends may be subject to such tax, depending on the fund.
Distributions of capital gains and of ordinary income from accrued market
discount, if any, are generally taxable.
2
<PAGE>
TAX-FREE INVESTING
A penny saved is a penny earned, or so the saying goes. But with regular
federal income tax taking up to 39.6% of your investment income, it can be hard
to save those pennies in the first place.
Fortunately, there is a solution to today's high tax bite: Franklin's tax-free
income funds. As a tax-free income fund shareholder, you earn monthly income
dividends free from regular federal income tax and, in many cases, state and
local taxes as well.*
LOOK AT IT IN DOLLARS AND SENSE
Tax-free income can make quite an impact on the dollar amount you take home.
Of course, the yields used in the example below are for illustrative purposes
only and do not represent the yield or past or future performance of any
Franklin or Templeton fund. What they do represent is the advantage of tax-free
investing. Investors in the maximum regular federal income tax bracket of 39.6%
would need to earn 9.11% in a taxable investment to keep the same amount of
income earned with a 5.5% tax-free yield.
A TAXING SITUATION
- -------------------------------------------------------------------------------
With a $100,000 fully taxable investment
yielding 7.5%, you might earn $7,500
annually, but you could*. . .
KEEP ONLY: $5,175 KEEP ONLY: $4,800 KEEP ONLY: $4,530
31% Federal Tax Rate 36% Federal Tax Rate 39.6% Federal Tax Rate
FRANKLIN'S SOLUTION
- -------------------------------------------------------------------------------
With a $100,000 tax-free investment
yielding 5.5%, that income could be
free from regular federal income tax.*
EARN AND KEEP:
$5,500
*For investors subject to federal or state alternative minimum tax, all or a
portion of these dividends may be subject to such tax, depending on the fund.
Distributions of capital gains and of ordinary income from accrued market
discount, if any, are generally taxable. The example assumes a fixed rate of
return, no fluctuation in principal, and the stated federal income tax rates.
State and local tax rates are not reflected. Franklin fund dividends and share
price will vary with market conditions. The example assumes two different
yields (tax-free 5.5% and taxable 7.5%) because a taxable investment's higher
yield compensates for taxes incurred on the earned income.
3
<PAGE>
MANAGER'S DISCUSSION
Dear Shareholder:
Nineteen ninety-four reminded all of us that volatility is a fundamental market
condition. Not only did we see an unprecedented six interest rate increases
during the year, we also witnessed the largest municipal bankruptcy filing in
history by Orange County, California. The municipal bond market experienced
unusual volatility in 1994, despite a significant decrease in the municipal
bond supply, which was expected to drive prices higher.
The first two months of 1995, however, have brought welcome news. After raising
interest rates 75 basis points (three-quarters of a percentage point) in
November 1994, the Federal Reserve Board raised rates once more at their
February meeting. Investors perceived that the latest increase might be the
last. In addition, the economic news following this latest hike has been fairly
positive -- economic growth has slowed, inflation has remained subdued, and the
securities markets have reacted favorably, with the Dow Jones Industrial
Average breaking the 4,000 mark for the first time in history. Of more interest
to us is the municipal bond market which, in recent weeks, appears to be
recovering. In the first two months of 1995, for example, municipal bond prices
have increased 6.7%.(1) In managing Franklin's tax-free funds, we seek to
provide our shareholders with a high level of current income exempt from
federal income taxes and, in many cases, state and local taxes as well.(2)
To achieve this goal, we generally purchase current coupon bonds at a slight
discount. We also practice a "buy and hold" strategy, choosing to hang onto
higher coupon bonds (even when they trade at a premium) for the higher income
they provide to shareholders. This helps us to maintain a low portfolio
turnover, potentially shielding the fund from capital gains, which are taxable
to shareholders. In contrast, many municipal bond funds that seek capital
appreciation trade their securities more actively to capture capital gains --
and pass on the tax implications to their shareholders.
We believe that our strategy also helps to protect the funds from extreme price
volatility. Since bonds that trade at a premium are generally slower to react
to market fluctuations, the large percentage of such bonds in our portfolios
helped to dampen the effects of the uncertain bond market in 1994. In short, we
1. Source: Bond Buyer 40 Index
2. For investors subject to federal or state alternative minimum tax, all or a
portion of these dividends may be subject to such tax, depending on the fund.
Distributions of capital gains and of ordinary income from accrued market
discount, if any, are generally taxable.
4
<PAGE>
believe that our investment approach provides portfolios that pay a high level
of tax-free income while enjoying comparatively stable share prices.
For our insured tax-free funds, we continue to purchase only high quality,
insured municipal bonds for each fund's portfolio. The insured bonds in each
portfolio continue to be insured by private municipal bond insurance companies
as to the scheduled payment of principal and interest.(3) This insurance
feature has earned these funds ratings of "AAAf" -- the highest mutual fund
rating possible -- from Standard & Poor's. These ratings, while not
guaranteeing the funds' market values or share prices, or signifying approval
of the shares by Standard & Poor's, reflect the credit quality of the portfolio
as described in each fund's prospectus. Of course, such ratings are subject to
change.
Looking forward, we believe 1995 will be a promising year for fixed income
markets, as it appears that interest rates may stabilize. We also expect the
supply of newly issued municipal bonds to be roughly $140 to $150 billion in
1995 -- slightly less than last year, and significantly lower than in 1993.
Additionally, tax-free yields remain attractive relative to the taxable yields
available from Treasuries and other fixed-income securities. For example, the
current yield-to-maturity available from the Bond Buyer 40 (an index of 40
municipal bonds) was 6.42% on February 28, 1995. For investors in the maximum
federal income tax bracket of 39.6%, this tax-free yield equals a yield of
10.63% from a taxable investment -- considerably higher than the yields
available on taxable bonds of comparable quality. For example, the 10-year
Treasury note and 30-year Treasury bond yielded 7.22% and 7.42%, respectively,
on February 28, 1995. Because of the relatively high yields and reduced supply
available, we expect municipal bonds to perform well in 1995.
Sincerely,
Thomas J. Kenny
Senior Vice President - Director,
Municipal Bond Department
3. Fund shares are not insured by any U.S. government agency. Insurance relates
only to the payment of principal and interest on the portfolio's securities. It
does not eliminate market risks to the fund's share price or insure the value
of the shares. Terms of the insurance are more fully described in the
prospectus, and no representation is made as to any insurer's ability to meet
its commitments.
5
<PAGE>
FRANKLIN ARIZONA INSURED TAX-FREE INCOME FUND
FUND OBJECTIVE:
To provide high current income exempt from regular federal and Arizona state
personal income taxes through a portfolio consisting primarily of insured
Arizona municipal bonds.(1)
The fund's fiscal year was difficult for municipal bonds and other fixed-income
investments. Rising interest rates caused prices of most bonds to decline, and
the derivative-induced bankruptcy of Orange County, California added to the
volatility in the municipal bond market.
On a positive note, higher rates enabled us to sell some of the fund's lower
coupon securities and purchase newer securities offering higher yields. As a
result, the fund's average coupon rose from 5.42% on February 28, 1994, to
5.95% on February 28, 1995. Because of the fund's higher income, we were able
to increase its monthly dividend from 4.5 cents per share to 4.6 cents per
share, effective with the December 1994 distribution.(2)
Higher rates also helped increase the fund's 30-day yield, which at 5.70% on
February 28, 1995, was significantly higher than the yield of the average
Arizona municipal bond fund. The fund's yield placed it second among 34 Arizona
municipal bond funds, as measured by Lipper Analytical Services, Inc.(3)
According to Lipper, the average Arizona municipal bond fund offered a 30-day
yield of 4.97% on February 28, 1995.
We remain conservative in our management of the fund. One hundred percent of
the fund's securities are AAA quality. And, although each bond in the portfolio
is either insured or secured by a pledge of U.S. government securities, we are
nevertheless very selective about our investments.(4) We evaluate each issue on
an individual basis, favoring highly
1. For investors subject to 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.
The risks of investing in a non-diversified fund, such as increased
susceptibility to adverse economic or regulatory developments, are described in
the prospectus.
2. Dividends will vary, depending on the fund's income, and past distributions
are not indicative of future trends.
3. The fund was ranked #2 out of 34 Arizona municipal bond funds for yield for
the 30-day period ended February 28, 1995. For total return, the fund was
ranked #17 of 25 funds for the one-year period ended February 28, 1995, as
measured by Lipper Analytical Services, Inc. Lipper rankings do not include
sales charges; past and present expense limitations increased the fund's total
returns. Rankings may have been different if these factors had been considered.
Past performance cannot guarantee future results.
4. Fund shares are not insured by any U.S. government agency. Insurance relates
only to the payment of principal and interest on the portfolio's securities. It
does not eliminate market risks to the fund's share price or insure the value
of the shares. Terms of the insurance are more fully described in the
prospectus, and no representation is made as to any insurer's ability to meet
its commitments.
6
<PAGE>
rated "essential service" bonds. These securities tend to have a more reliable
income stream, as they are backed by dependable revenue generated from schools,
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. Like all mutual
funds, however, the principal value of the fund's holdings as well as the price
of its shares will fluctuate with market conditions.
We also seek to reduce the fund's risk by investing its assets across a variety
of municipalities. On February 28, 1995, the fund's assets spanned a broad
range of cities and counties throughout Arizona. Additionally, we purchase
securities from a variety of municipal sectors, as the pie chart to the right
illustrates.
Our outlook for the fund is positive. Recent economic reports indicate that
U.S. economic growth has stabilized at a healthy and sustainable level, while
inflation has remained subdued. More positive signs of a slowing economy should
eventually result in a gradual decline in interest rates, which should have a
positive effect on bond prices and thus, on the fund's price per share.
In addition, a reduced supply of municipal bonds in Arizona (issuance in the
state was down 63.4% in 1994 from the previous year) should make the state's
bonds attractive investments. Arizona continues to be one of the fastest
growing states in the nation, as its low housing costs, competitive wages, and
a pro-business regulatory environment continue to attract employers. As the
housing market strengthens, construction has become one of the fastest-growing
sectors of the state's economy, with services and manufacturing close behind.(5)
(See Appendix for description of Graphic Material 1)
5. Source: Standard & Poor's Creditweek Municipal, 7/11/94.
7
<PAGE>
PERFORMANCE SUMMARY
The Franklin Arizona Insured Tax-Free Income Fund's share price, as measured by
net asset value, declined from $10.28 on February 28, 1994, to $9.80 on
February 28, 1995.
The fund continued to meet its objective of providing high current income to
its shareholders. For the one-year period ended February 28, 1995, your fund
paid monthly income distributions totaling 54.3 cents ($0.543) per share.(6)
Due to increased income in the fund's portfolio, we were able to raise the
monthly dividend from 4.5 cents ($0.045) per share to 4.6 cents ($0.046) per
share, effective with the December 1994 distribution. Dividends will vary
depending 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 5.40%,
based on an annualization of the monthly dividend of 4.6 cents ($0.046) per
share and the maximum offering price of $10.23 on February 28, 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 Arizona state personal income tax bracket of 43.8%, you would have
to earn 9.61% from a taxable investment to match your fund's tax-free
distribution rate.
(See Appendix for description of Graphic Material 2)
Based on the dividend income and change in share price, the fund posted a total
return of +0.94% for the one-year period ended February 28, 1995. Total return
measures the change in value of an investment during the periods indicated,
assuming reinvestment of dividends and capital gains, if any. This calculation
does not include the maximum initial sales charge, and past performance is not
predictive of future results.
The chart on page 9 illustrates that since its inception on April 30, 1993, the
Franklin Arizona Insured Tax-Free Income Fund has underperformed both the
Consumer Price Index (CPI) and the unmanaged Lehman Brothers Municipal Bond
Index. The
6. Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions may vary depending on the
date you purchased your shares and any account activity during the month.
Income distributions and total return calculations include all accrued income
earned by the fund during the reporting period.
8
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Lehman Brothers index has inherent performance differentials over the fund, as
it holds no cash in its portfolio and is not subject to any sales charges or
management expenses. In addition, the index includes over 25,000 municipal
securities from across the country, while your fund consists primarily of
insured Arizona municipal bonds. Of course, one cannot invest directly in an
index.
Management maintains a long-term perspective and encourages shareholders to do
the same. While the fund may experience volatility from time to time, the
fund's managers believe that its performance will be rewarding over the long
term.
(See Appendix for description of Graphic Material 3)
*This performance graph assumes an initial $10,000 investment and includes the
maximum 4.25% initial sales charge, all fund expenses and account fees. It also
assumes that your dividends and capital gains were reinvested at net asset
value. The Lehman Brothers Municipal Bond Index includes price appreciation or
depreciation and distributions as a percentage of the original investment. Past
performance is not predictive of future results.
FRANKLIN ARIZONA INSURED TAX-FREE INCOME FUND
Periods ended February 28, 1995
<TABLE>
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SINCE
INCEPTION
1-YEAR (4/30/93)
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<S> <C> <C> <C>
Cumulative Total Return(7) 0.94% 6.91%
Average Annual Total Return(8) -3.38% 1.30%
Distribution Rate(9) 5.40%
Taxable Equivalent Distribution Rate(10) 9.61%
30-Day Standardized Yield(11) 5.70%
Taxable Equivalent Yield(10) 10.14%
</TABLE>
7. Cumulative total returns measure the change in value of an investment over
the periods indicated and do not include the current, maximum 4.25% initial
sales charge. See note below.
8. Average annual total returns represent the average annual change in value of
an investment over the specified periods and reflect the current maximum 4.25%
initial sales charge stated in the prospectus. See note below.
9. Distribution rate is based on an annualization of the fund's 4.6 cents per
share monthly dividend and the maximum offering price of $10.23 on February 28,
1995.
10. Taxable equivalent distribution rate and yield assume the 1995 maximum
combined federal and Arizona state income tax bracket of 43.8%, based on the
maximum federal income tax rate of 39.6%.
11. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended February 28, 1995.
Note: Prior to July 1, 1994, the fund's shares were offered at a higher initial
sales charge. Thus actual total returns for purchasers of shares during that
period would have been somewhat different than noted above. All total return
calculations assume reinvestment of dividends and capital gains, if any, 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 is not predictive of future results.
The fund's manager has agreed in advance to waive a portion of the management
fees, which reduces operating expenses and increases distribution rate, yield
and total return to shareholders. Without these reductions, the fund's
distribution rate and total return would have been lower, and yield for the
period would have been 4.88%. The fee waiver may be discontinued at any time.
The risks of investing in a non-diversified fund, such as increased
susceptibility to adverse economic or regulatory developments, are described in
the prospectus.
9
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FRANKLIN FLORIDA INSURED TAX-FREE INCOME FUND
FUND OBJECTIVE:
To provide high current income exempt from regular federal income taxes through
a portfolio consisting primarily of insured Florida municipal bonds.(1) The
fund's shares are also free from Florida's intangibles tax.
The fund's fiscal year was difficult for municipal bonds and other fixed-income
investments. Rising interest rates caused prices of most bonds to decline, and
the derivative-induced bankruptcy of Orange County, California added to the
volatility in the municipal bond market.
On a positive note, higher rates enabled us to sell some of the fund's lower
coupon securities and purchase higher yielding current coupon bonds. As a
result, the fund's average coupon rose from 5.45% on February 28, 1994, to
5.91% on February 28, 1995. Higher rates also helped increase the fund's 30-day
yield, which at 5.47% on February 28, 1995, was higher than the yield of the
average Florida municipal bond fund. According to Lipper Analytical Services,
Inc., a nationally recognized mutual fund research organization, the average
Florida municipal bond fund offered a 30-day yield of 5.12% on February 28,
1995.(2)
We remain conservative in our management of the fund. One hundred percent of
the fund's securities are AAA quality. And, although each bond in the portfolio
is either insured or secured by a pledge of U.S. government securities, we are
nevertheless very selective about our investments.(3) We evaluate each issue on
an individual basis, favoring highly rated "essential service" bonds. These
securities tend to have a more reliable income stream, as they
1. For investors subject to 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.
The risks of investing in a non-diversified fund, such as increased
susceptibility to adverse economic or regulatory developments, are described in
the prospectus.
2. The fund was ranked #16 out of 68 Florida municipal bond funds for yield for
the 30-day period ended February 28, 1995. For total return, the fund was
ranked #32 of 53 funds for the one-year period ended February 28, 1995, as
measured by Lipper Analytical Services, Inc. Lipper rankings do not include
sales charges; past and present expense limitations increased the fund's total
returns. Rankings may have been different if these factors had been considered.
Past performance cannot guarantee future results.
3. Fund shares are not insured by any U.S. government agency. Insurance relates
only to the payment of principal and interest on the portfolio's securities. It
does not eliminate market risks to the fund's share price or insure the value
of the shares. Terms of the insurance are more fully described in the
prospectus, and no representation is made as to any insurer's ability to meet
its commitments.
10
<PAGE>
are backed by dependable revenue generated from schools, 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. Like all mutual funds,
however, the principal value of the fund's holdings as well as the price of its
shares will fluctuate with market conditions.
We also seek to reduce the fund's risk by investing its assets across a variety
of municipalities and sectors. On February 28, 1995, the fund's assets spanned
a broad range of cities and counties throughout Florida. We also purchase
securities from a variety of municipal sectors, as the pie chart to the right
illustrates.
(See Appendix for description of Graphic Material 4)
Our outlook for the fund is positive. Recent economic reports indicate that
U.S. economic growth has stabilized at a healthy and sustainable level, while
inflation has remained subdued. More positive signs of a slowing economy should
eventually result in a gradual decline in interest rates, which should have a
positive effect on bond prices and thus, on the fund's price per share.
In addition, Florida remains one of the fastest-growing states in the country.
Since the recession of 1990-1991, Florida has outpaced the nation in both
employment and personal income growth.(4) Recently, we have seen strong retail
interest in Florida insured bonds, which should help to support prices of
Florida municipal securities.
4. Standard & Poor's Creditweek Municipal, 4/25/94.
11
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PERFORMANCE SUMMARY
The Franklin Florida Insured Tax-Free Income Fund's share price, as measured by
net asset value, declined from $10.07 on February 28, 1994, to $9.53 on
February 28, 1995.
The fund continued to meet its objective of providing high current income to
its shareholders. For the one-year period ended February 28, 1995, your fund
paid monthly income distributions totaling 52.8 cents ($0.528) per share.(5)
Dividends will vary depending 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 5.31%,
based on an annualization of the monthly dividend of 4.4 cents ($0.044) per
share and the maximum offering price of $9.95 on February 28, 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 8.79% from a taxable
investment to match your fund's tax-free distribution rate.
(See Appendix for description of Graphic Material 5)
Based on the dividend income and change in share price, the fund posted a total
return of +0.21% for the year ended February 28, 1995. Total return measures
the change in value of an investment during the periods indicated, assuming
reinvestment of dividends and capital gains, if any. This calculation does not
include the maximum initial sales charge, and past performance is not
predictive of future results.
The chart on page 13 illustrates that since its inception on April 30, 1993,
the Franklin Florida Insured Tax-Free Income Fund has underperformed both the
Consumer Price Index (CPI) and the unmanaged Lehman Brothers Municipal Bond
Index. The
5. Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions may vary depending on the
date you purchased your shares and any account activity during the month.
Income distributions and total returns include all accrued income earned by the
fund during the reporting period.
12
<PAGE>
Lehman Brothers index has some inherent performance differentials over any
fund, as the index holds no cash in its portfolio and involves no sales charges
or management expenses. In addition, the index includes municipal securities
from across the country, while your fund is composed primarily of insured
Florida municipal bonds. Of course, one cannot invest directly in an index.
Management maintains a long-term perspective and encourages shareholders to do
the same. While the fund may experience volatility from time to time, the
fund's managers believe that its performance will be rewarding over the long
term.
(See Appendix for description of Graphic Material 6)
*This performance graph assumes an initial $10,000 investment and includes the
maximum 4.25% initial sales charge, all fund expenses and account fees. It also
assumes that your dividends and capital gains were reinvested at net asset
value. The Lehman Brothers Municipal Bond Index includes price appreciation or
depreciation and distributions as a percentage of the original investment. Past
performance is not predictive of future results.
FRANKLIN FLORIDA INSURED TAX-FREE INCOME FUND
Periods ended February 28, 1995
<TABLE>
<CAPTION>
SINCE
INCEPTION
1-YEAR (4/30/93)
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Cumulative Total Return(6) 0.21% 4.07%
Average Annual Total Return(7) -4.08% -0.17%
Distribution Rate(8) 5.31%
Taxable Equivalent Distribution Rate(9) 8.79%
30-Day Standardized Yield(10) 5.47%
Taxable Equivalent Yield(9) 9.06%
</TABLE>
6. Cumulative total returns measure the change in value of an investment over
the periods indicated and do not include the current, maximum 4.25% initial
sales charge. See note below.
7. Average annual total returns represent the average annual change in value of
an investment over the specified periods indicated and reflect the current,
maximum 4.25% initial sales charge stated in the prospectus. See note below.
8. Distribution rate is based on an annualization of the fund's 4.4 cents per
share monthly dividend and the maximum offering price of $9.95 on February 28,
1995.
9. Taxable equivalent distribution rate and yield assume the 1995 maximum
federal income tax rate of 39.6%.
10. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended February 28, 1995.
Note: Prior to July 1, 1994, the fund's shares were offered at a higher initial
sales charge. Thus actual total returns for purchasers of shares during that
period would have been somewhat different than noted above. All total return
calculations assume reinvestment of dividends and capital gains, if any, 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 is not predictive of future results.
The fund's manager has agreed in advance to waive a portion of the management
fees, which reduces operating expenses and increases distribution rate, yield
and total return to shareholders. Without these reductions, the fund's
distribution rate and total return would have been lower, and yield for the
period would have been 4.86%. The fee waiver may be discontinued at any time.
The risks of investing in a non-diversified fund, such as increased
susceptibility to adverse economic or regulatory developments, are described in
the prospectus.
13
<PAGE>
FRANKLIN INSURED TAX-FREE INCOME FUND
FUND OBJECTIVE:
To provide high current income exempt from regular federal income taxes through
a portfolio consisting primarily of insured municipal bonds.(1)
The fund's fiscal year was difficult for municipal bonds and other fixed-income
investments. Rising interest rates caused prices of most bonds to decline, and
the derivative-induced bankruptcy of Orange County, California added to the
volatility in the municipal bond market.
On a positive note, higher rates enabled us to sell some of the fund's lower
coupon securities and purchase higher yielding current coupon bonds. As a
result, the fund's average coupon rose slightly from 6.95% on February 28,
1994, to 7.01% on February 28, 1995. Due to the fund's increased level of
income, we're pleased to report that, effective with the March 1995
distribution, its monthly dividend was increased to 5.9 cents from its previous
level of 5.8 cents per share.(2)
While our investment strategy focuses on income rather than total return, the
fund reported a respectable total return of +2.07% for the fiscal year --
almost double that of the average total return of other national insured
municipal bond funds. According to Lipper Analytical Services, Inc., a
nationally recognized mutual fund research organization, the average total
return of national insured municipal bond funds was +1.06% for the year ended
February 28, 1995.(3) The fund's total return placed it fifth among 40 national
insured municipal bond funds.
We remain conservative in our management of the fund. One hundred percent of
the fund's securities are AAA quality. And, although each bond in the portfolio
is either insured or secured by a pledge of U.S. government securities, we are
nevertheless
1. The fund's dividends are generally subject to state and local taxes, if any.
For investors subject to federal or state 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.
2. Dividends will vary, depending on the fund's income, and past distributions
are not indicative of future trends.
3. The fund was ranked #5 out of 40 insured municipal bond funds for total
return for the one-year period, and #7 out of 22 funds for the five-year
period ended February 28, 1995. Lipper rankings do not include sales charges,
and past expense limitations increased the fund's total returns. Rankings may
have been different if these factors had been considered. Past performance
cannot guarantee future results.
14
<PAGE>
very selective about our investments.(4) We evaluate each issue on an
individual basis, favoring highly rated "essential service" bonds. These
securities tend to have a more reliable income stream, as they are backed by
dependable revenue generated from utilities, schools 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. Like all mutual funds, however, the
principal value of the fund's holdings as well as the price of its shares will
fluctuate with market conditions.
We also seek to reduce the fund's risk through diversification. On February 28,
1995, the fund's 688 positions were spread across a broad range of U.S. states
and territories. We also purchase securities from a variety of municipal
sectors, as the chart to the right illustrates.
Our outlook for the fund is positive. Recent economic reports indicate that
U.S. economic growth has stabilized at a healthy and sustainable level, while
inflation has remained subdued. More signs of a slowing economy should
eventually result in a gradual decline in interest rates, which should
positively affect bond prices and thus, the fund's price per share.
(See Appendix for description of Graphic Material 7)
We expect municipal bonds to remain an attractive investment given their high
credit quality and their high tax-free yields relative to those offered by
taxable investments of comparable quality. For example, 10-year U.S. Treasuries
yielded 7.22% on February 28, 1995. In comparison, the Bond Buyer 40 Index
offered a tax-free yield of 6.42%, which equals a taxable yield of 10.63% for
investors in the maximum federal income tax bracket of 39.6%.
4. Fund shares are not insured by any U.S. government agency. Insurance relates
only to the payment of principal and interest on the portfolio's securities. It
does not eliminate market risks to the fund's share price or insure the value
of the shares. Terms of the insurance are more fully described in the
prospectus, and no representation is made as to any insurer's ability to meet
its commitments.
15
<PAGE>
PERFORMANCE SUMMARY
The Franklin Insured Tax-Free Income Fund's share price, as measured by net
asset value, declined from $12.45 on February 28, 1994, to $11.97 on February
28, 1995.
The fund continued to meet its objective of providing high current income to
its shareholders. For the one-year period ended February 28, 1995, your fund
paid monthly income distributions totaling 70.8 cents ($0.708) per share.(5)
Due to the effects of five years of falling interest rates, the fund's monthly
dividend amount was adjusted from 6.0 cents ($0.060) per share to 5.8 cents
($0.058) per share, effective with the September 1994 distribution. However,
recent increases in interest rates have enabled us to raise the monthly
dividend amount to 5.9 cents ($0.059) per share, effective with the March 1995
distribution. Dividends will vary depending 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 5.66%,
based on an annualization of the new monthly dividend of 5.9 cents ($0.059) per
share and the maximum offering price of $12.50 on February 28, 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 9.37% from a taxable investment to
match your fund's tax-free distribution rate.
(See Appendix for description of Graphic Material 8)
Based on the dividend income and change in share price, the fund posted a total
return of +2.07% for the year ended February 28, 1995. Total return measures
the change in value of an investment during the periods indicated, assuming
reinvestment of dividends and capital gains, if any. This calculation does not
include the maximum initial sales charge and past performance is not predictive
of future results.
The chart on page 17 illustrates that since its inception on April 3, 1985, the
Franklin Insured Tax-Free Income Fund has far outperformed the Consumer Price
Index (CPI) -- keeping your purchasing power well ahead of inflation. The fund
generally followed
5. Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions may vary depending on the
date you purchased your shares and any account activity during the month.
Income distributions and total return calculations include all accrued income
earned by the fund during the reporting period.
16
<PAGE>
the performance of the unmanaged Lehman Brothers Municipal Bond Index. Of
course, the Lehman Brothers index has some inherent performance differentials
over any fund, as the index holds no cash in its portfolio and involves no
sales charges or management expenses. Additionally, the index consists of
uninsured municipal bonds, which generally offer higher yields than the insured
bonds in which the fund concentrates its assets. And, of course, one cannot
invest directly in an index.
Management maintains a long-term perspective and encourages shareholders to do
the same. While the fund may experience volatility from time to time, the
fund's managers believe that its performance will be rewarding over the long
term. For example, as the table to the right demonstrates, the fund has
provided an average annual return of +8.42% since its inception in 1985.
(See Appendix for description of Graphic Material 9)
*This performance graph assumes an initial $10,000 investment and includes the
maximum 4.25% initial sales charge, all fund expenses and account fees. It also
assumes that your dividends and capital gains were reinvested at net asset
value. The Lehman Brothers Municipal Bond Index includes price appreciation or
depreciation and distributions as a percentage of the original investment. Past
performance is not predictive of future results.
FRANKLIN INSURED TAX-FREE INCOME FUND
Periods ended February 28, 1995
<TABLE>
<CAPTION>
SINCE
INCEPTION
1-YEAR 5-YEAR (4/3/85)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return(6) 2.07% 45.91% 132.67%
Average Annual Total Return(7) -2.25% 6.92% 8.42%
Distribution Rate(8) 5.66%
Taxable Equivalent Distribution Rate(9) 9.37%
30-Day Standardized Yield(10) 5.15%
Taxable Equivalent Yield(9) 8.53%
</TABLE>
6. Cumulative total returns measure the change in value of an investment over
the periods indicated and do not include the current, maximum 4.25% initial
sales charge. See note below.
7. Average annual total return represents the average annual change in value of
an investment over the stated periods. The figures assume reinvestment of
dividends and capital gains at net asset value and have been restated to
reflect the current, maximum 4.25% initial sales charge. See note below.
8. Distribution rate is based on an annualization of the fund's 5.9 cents per
share monthly dividend and the maximum offering price of $12.50 on February 28,
1995.
9. Taxable equivalent distribution rate and yield assume the 1995 maximum
federal income tax rate of 39.6%
10. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended February 28, 1995.
Note: Prior to July 1, 1994, fund shares were offered at a lower initial sales
charge, with dividends reinvested at the offering price. Thus, actual total
returns for purchasers of shares during that period would have been 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. 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 total
returns.
17
<PAGE>
FRANKLIN MASSACHUSETTS INSURED TAX-FREE INCOME FUND
FUND OBJECTIVE:
To provide high current income exempt from regular federal and Massachusetts
state personal income taxes through a portfolio consisting primarily of
Massachusetts insured municipal bonds.(1)
The fund's fiscal year was difficult for municipal bonds and other fixed-income
investments. Rising interest rates caused prices of most bonds to decline, and
the derivative-induced bankruptcy of Orange County, California added to the
volatility in the municipal bond market.
The fund's average maturity fell slightly during the fiscal year, beginning the
period at 19 years, and ending the year at 17.3 years. The fund's average
coupon remained almost unchanged, falling from 6.97% to 6.96%. Towards the end
of the fiscal year, we began selling some of the fund's bonds and purchasing
newer, current coupon bonds. Should this trend continue, modest dividend
increases are possible in the future.
While our investment strategy focuses on income rather than total return, the
fund reported a total return of +1.86% for the fiscal year -- more than triple
the average total return of other Massachusetts tax-free income funds.
According to Lipper Analytical Services, Inc., a nationally recognized mutual
fund research organization, the average total return of Massachusetts municipal
bond funds was +0.53% for the year ended February 28, 1995.(2) The fund's total
return placed it third out of 36 |Massachusetts municipal bond funds, as
measured by Lipper.
We remain conservative in our management of the fund. One hundred percent of
the fund's securities are AAA quality. And, although each bond in the portfolio
is either insured or secured by a pledge of U.S. government securities, we are
nevertheless
1. For investors subject to 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.
2. The fund was ranked #3 out of 36 insured municipal bond funds for total
return for the one-year period, and #13 out of 18 funds for the five-year
period ended February 28, 1995.
Lipper rankings do not include sales charges, and past expense limitations
increased the fund's total returns. Rankings may have been different if these
factors had been considered. Past performance cannot guarantee future results.
18
<PAGE>
very selective about our investments.(3) We evaluate each issue on an
individual basis, favoring highly rated "essential service" bonds. These
securities tend to have a more reliable income stream, as they are backed by
dependable revenue generated from utilities, schools 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. Like all mutual funds, however, the
principal value of the fund's holdings as well as the price of its shares will
fluctuate with market conditions.
We also seek to reduce the fund's risk through diversification. On February 28,
1995, the fund's assets spanned a broad range of cities and counties throughout
Massachusetts. Additionally, we purchase securities from a variety of municipal
sectors, as the pie chart to the right illustrates.
(See Appendix for description of Graphic Material 10)
Our outlook for the fund is positive. Recent economic reports indicate that
U.S. economic growth has stabilized at a healthy and sustainable level, while
inflation has remained subdued. More signs of a slowing economy should
eventually result in a gradual decline in interest rates, which should
positively affect bond prices and thus, the fund's price per share.
Massachusetts' credit rating was raised to A+ from A in late 1993, reflecting
continued improvement in the state's financial management.(4) The state
continues to recover strongly from the recession of the early 1990s, with
economic expansion occurring primarily in the construction and service sectors.
While the pace of recovery has begun to slow, it is expected to continue
through 1998.(5)
3. Fund shares are not insured by any U.S. government agency. Insurance relates
only to the payment of principal and interest on the portfolio's securities. It
does not eliminate market risks to the fund's share price or insure the value
of the shares. Terms of the insurance are more fully described in the
prospectus, and no representation is made as to any insurer's ability to meet
its commitments.
4. Source: Standard & Poor's Creditweek Municipal, 6/20/94.
5. Source: Standard & Poor's Creditweek Municipal, 6/20/94.
19
<PAGE>
PERFORMANCE SUMMARY
The Franklin Massachusetts Insured Tax-Free Income Fund's share price, as
measured by net asset value, declined from $11.81 on February 28, 1994, to
$11.34 on February 28, 1995.
The fund continued to meet its objective of providing high current income to
its shareholders. For the one-year period ended February 28, 1995, your fund
paid monthly income distributions totaling 66.1 cents ($0.661) per share.(6)
Due to the effects of almost five years of falling interest rates, the monthly
dividend amount was adjusted from 5.6 cents ($0.056) per share to 5.5 cents
($0.055) per share, effective with the April 1994 distribution. Dividends will
vary depending 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 5.57%,
based on an annualization of the current monthly dividend of 5.5 cents ($0.055)
per share and the maximum offering price of $11.84 on February 28, 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 Massachusetts state personal income tax bracket of 46.8%, you would
have to earn 10.48% from a taxable investment to match your fund's tax-free
distribution rate.
(See Appendix for description of Graphic Material 11)
Based on the dividend income and change in share price, the fund posted a total
return of +1.86% for the one-year period ended February 28, 1995. Total return
measures the change in value of an investment during the periods indicated and
assumes reinvestment of dividends and capital gains, if any. This calculation
does not include the maximum initial sales charge, and past performance is not
predictive of future results.
The chart on the following page illustrates that since its inception on April
3, 1985, the Franklin Massachusetts Insured Tax-Free Income Fund has
consistently outpaced the Consumer Price Index (CPI) -- keeping your purchasing
power well ahead
6. Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions may vary depending on the
date you purchased your shares and any account activity during the month.
Income distributions and total return calculations include all accrued income
earned by the fund during the reporting period.
20
<PAGE>
of inflation. The fund, however, underperformed the unmanaged Lehman Brothers
Municipal Bond Index during the same period. The Lehman Brothers index has
inherent performance differentials over the fund, as the index holds no cash in
its portfolio and involves no sales charges or management expenses. In
addition, the index consists primarily of uninsured municipal securities from
across the country, while your fund is composed primarily of insured
Massachusetts municipal bonds. And, of course, one cannot invest directly in an
index.
Management maintains a long-term perspective and encourages shareholders to do
the same. While the fund may experience volatility from time to time, the
fund's managers believe that its performance will be rewarding over the long
term. For example, the fund has provided an average annual total return of
+7.46% since its inception in 1985.
(See Appendix for description of Graphic Material 12)
*This performance graph assumes an initial $10,000 investment and includes the
maximum 4.25% initial sales charge, all fund expenses and account fees. It also
assumes that your dividends and capital gains were reinvested at net asset
value. The Lehman Brothers Municipal Bond Index includes price appreciation or
depreciation and distributions as a percentage of the original investment. Past
performance is not predictive of future results.
FRANKLIN MASSACHUSETTS INSURED
TAX-FREE INCOME FUND
Periods ended February 28, 1995
<TABLE>
<CAPTION>
SINCE
INCEPTION
1-YEAR 5-YEAR (4/3/85)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return(7) 1.86% 44.17% 113.10%
Average Annual Total Return(8) -2.44% 6.65% 7.46%
Distribution Rate(9) 5.57%
Taxable Equivalent Distribution Rate(10) 10.47%
30-Day Standardized Yield(11) 5.11%
Taxable Equivalent Yield(10) 9.61%
</TABLE>
7. Cumulative total returns measure the change in value of an investment over
the periods indicated and do not include the current, maximum 4.25% initial
sales charge. See note below.
8. Average annual total return represents the average annual change in value of
an investment over the stated periods. The figures assume reinvestment of
dividends and capital gains at net asset value and have been restated to
reflect the current, maximum 4.25% initial sales charge. See note below.
9. Distribution rate is based on an annualization of the fund's 5.5 cents per
share monthly dividend and the maximum offering price of $11.84 on February 28,
1995.
10. Taxable equivalent distribution rate and yield assume the 1995 maximum
combined federal and Massachusetts state personal income tax rate of 46.8%,
based on the maximum federal income tax rate of 39.6%.
11. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended February 28, 1995.
Note: Prior to July 1, 1994, fund shares were offered at a lower initial sales
charge, with dividends reinvested at the offering price. Thus, actual total
returns for purchasers of shares during that period would have been 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. 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 total returns.
21
<PAGE>
FRANKLIN MICHIGAN INSURED TAX-FREE INCOME FUND
FUND OBJECTIVE:
To provide high current income exempt from regular federal and Michigan state
personal income taxes through a portfolio consisting primarily of insured
Michigan municipal bonds.(1)
The fund's fiscal year was difficult for municipal bonds and other fixed-income
investments. Rising interest rates caused prices of most bonds to decline, and
the derivative-induced bankruptcy of Orange County, California added to the
volatility in the municipal bond market.
The fund's average maturity fell slightly during the fiscal year, beginning the
period at 17 years, and ending the year at 15.8 years. The fund's average
coupon remained almost unchanged, falling from 6.81% to 6.80%. Towards the end
of the fiscal year, we began selling some of the fund's pre-refunded bonds and
purchasing newer, higher yielding current coupon bonds. Should this trend
continue, modest future dividend increases are possible.
While our investment strategy focuses on income rather than total return, the
fund reported a total return of +1.90% for the fiscal year -- above the average
total return of other Michigan municipal bond funds. According to Lipper
Analytical Services, Inc., a nationally recognized mutual fund research
organization, the average total return of Michigan municipal bond funds was
+1.25% for the year ended February 28, 1995.(2)
We remain conservative in our management of the fund. One hundred percent of
the fund's securities are AAA quality. And, although each bond in the portfolio
is either insured or secured by a pledge of U.S. government securities, we are
nevertheless very selective about our investments.(3) We evaluate each issue on
an individual basis, favoring highly rated "essential service" bonds. These
securities tend to have a more reliable income stream, as they are backed by
dependable revenue generated from
1. For investors subject to 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.
2. The fund was ranked #10 out of 33 Michigan municipal bond funds for total
return for the one-year period, and #6 out of 11 funds for the five-year period
ended February 28, 1995. Lipper rankings do not include sales charges, and past
expense limitations increased the fund's total returns. Rankings may have been
different if these factors had been considered. Past performance cannot
guarantee future results.
3. Fund shares are not insured by any U.S. government agency. Insurance relates
only to the payment of principal and interest on the portfolio's securities. It
does not eliminate market risks to the fund's share price or insure the value
of the shares. Terms of the insurance are more fully described in the
prospectus, and no representation is made as to any insurer's ability to meet
its commitments.
22
<PAGE>
schools, 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.
Like all mutual funds, however, the principal value of the fund's holdings as
well as the price of its shares will fluctuate with market conditions.
We also seek to reduce the fund's risk through diversification. On February 28,
1995, the fund's 283 positions were invested in a broad range of cities and
counties throughout Michigan. We also purchase securities from a variety of
municipal sectors, as the chart to the right illustrates.
(See Appendix for description of Graphic Material 13)
Our outlook for the fund is positive. Recent economic reports indicate that
economic growth has stabilized at a healthy and sustainable level, while
inflation has remained subdued. More signs of a slowing economy should
eventually result in a gradual decline in interest rates, which should
positively affect bond prices and thus, the fund's price per share.
Michigan continues to experience above-average growth in employment and income
levels. Increased domestic car sales helped to reduce the state's unemployment
rate to 5.9% -- the first time in 28 years that this number fell below the
national average. One of the most impressive signs of the local economy's
strength was in existing home sales. While half of the nation experienced
double digit declines in existing home sales due to rising interest rates,
Michigan home sales grew by 5.7% in 1994.(4)
With regard to Michigan's municipal bonds, the state's issuance declined 48% in
1994 to $3.8 billion, its lowest level in five years.(4) Given this lack of new
supply, Michigan municipal bonds should enjoy strong demand in the near future.
4. Source: Standard & Poor's Creditweek Municipal, 2/14/94
23
<PAGE>
PERFORMANCE SUMMARY
The Franklin Michigan Insured Tax-Free Income Fund's share price, as measured
by net asset value, declined from $12.24 on February 28, 1994, to $11.76 on
February 28, 1995.
The fund continued to meet its objective of providing high current income to
shareholders. For the one-year period ended February 28, 1995, your fund paid
monthly income distributions totaling 68.5 cents ($0.685) per share.(6) Due to
almost five years of declining interest rates, the monthly dividend amount was
adjusted from 5.8 cents ($0.058) per share to 5.7 cents ($0.057) per share,
effective with the April 1994 distribution. Dividends will vary depending 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 5.57%,
based on an annualization of the current monthly dividend of 5.7 cents ($0.057)
per share and the maximum offering price of $12.28 on February 28, 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 Michigan state personal income tax bracket of 42.3%, you would have
to earn 9.65% from a taxable investment to match your fund's tax-free
distribution rate.
(See Appendix for description of Graphic Material 14)
Based on the dividend income and change in share price, the fund posted a total
return of +1.90% for the year ended February 28, 1995. Total return measures
the change in value of an investment during the periods indicated, assuming
reinvestment of dividends and capital gains, if any. This calculation does not
include the maximum initial sales charge, and past performance is not
predictive of future results.
The chart on the following page illustrates that since its inception on April
3, 1985, the Franklin Michigan Insured Tax-Free Income Fund has consistently
outpaced the Consumer Price Index (CPI) -- keeping your purchasing power well
ahead of inflation. The fund underperformed the unmanaged Lehman Brothers
Municipal Bond Index for the same period.
6. Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions may vary depending on the
date you purchased your shares and any account activity during the month.
Income distributions and total return calculations include all accrued income
earned by the fund during the reporting period.
24
<PAGE>
The Lehman Brothers index has inherent performance differentials over the fund,
as the index holds no cash in its portfolio and involves no sales charges or
management expenses. In addition, the index includes uninsured municipal
securities from across the country, while your fund is composed primarily of
insured Michigan municipal bonds. Of course, one cannot invest directly in an
index.
Management maintains a long-term perspective and encourages shareholders to do
the same. While the fund may experience volatility from time to time, the
fund's managers believe that its performance will be rewarding over the long
term. For example, as the table to the right illustrates, the fund has provided
an average annual return of +7.91% since its inception.
(See Appendix for description of Graphic Material 15)
*This performance graph assumes an initial $10,000 investment and includes the
maximum 4.25% initial sales charge, all fund expenses and account fees. It also
assumes that your dividends and capital gains were reinvested at net asset
value. The Lehman Brothers Municipal Bond Index includes price appreciation or
depreciation and distributions as a percentage of the original investment. Past
performance is not predictive of future results.
FRANKLIN MICHIGAN INSURED TAX-FREE INCOME FUND
Periods ended February 28, 1995
<TABLE>
<CAPTION>
SINCE
INCEPTION
1-YEAR 5-YEAR (4/3/85)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return(7) 1.90% 44.93% 122.05%
Average Annual Total Return(8) -2.40% 6.77% 7.91%
Distribution Rate(9) 5.57%
Taxable Equivalent Distribution Rate(10) 9.65%
30-Day Standardized Yield(11) 5.03%
Taxable Equivalent Yield(10) 8.72%
</TABLE>
7. Cumulative total returns measure the change in value of an investment over
the periods indicated and do not include the current, maximum 4.25% initial
sales charge. See note below.
8. Average annual total return represents the average annual change in value of
an investment over the stated periods. The figures assume reinvestment of
dividends and capital gains at net asset value and have been restated to
reflect the current, maximum 4.25% initial sales charge. See note below.
9. Distribution rate is based on an annualization of the fund's 5.7 cents per
share monthly dividend and the maximum offering price of $12.28 on February 28,
1995.
10. Taxable equivalent distribution rate and yield assume the 1995 maximum
federal and Michigan state personal income tax rate of 42.3%.
11. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended February 28, 1995.
Note: Prior to July 1, 1994, fund shares were offered at a lower initial sales
charge, with dividends reinvested at the offering price. Thus, actual total
returns for purchasers of shares during that period would have been 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. 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 total returns.
25
<PAGE>
FRANKLIN MINNESOTA INSURED TAX-FREE INCOME FUND
FUND OBJECTIVE:
To provide high current income exempt from regular federal and Minnesota state
personal income taxes through a portfolio consisting primarily of insured
Minnesota municipal bonds.(1)
The fund's fiscal year was difficult for municipal bonds and other fixed-income
investments. Rising interest rates caused prices of most bonds to decline, and
the derivative-induced bankruptcy of Orange County, California added to the
volatility in the municipal bond market.
The fund's average maturity fell slightly during the fiscal year, beginning the
period at 17 years, and ending the fiscal year at 16.8 years. The fund's
average coupon remained almost unchanged, falling from 6.76% to 6.71%.
While our investment strategy focuses on income rather than total return, the
fund reported a total return of +2.15% for the fiscal year -- more than double
the average total return of other Minnesota municipal bond funds. According to
Lipper Analytical Services, Inc., a nationally recognized mutual fund research
organization, the average total return of other Minnesota municipal bond funds
was +1.07% for the year ended February 28, 1995.(2) The fund's total return
placed it fifth among 29 Minnesota municipal bond funds, as measured by Lipper.
We remain conservative in our management of the fund. One hundred percent of
the fund's securities are AAA quality. And, although each bond in the portfolio
is either insured or secured by a pledge of U.S. government securities, we are
nevertheless very selective about our investments.(3) We evaluate each issue on
an individual basis, favoring highly rated "essential service" bonds. These
securities
1. For investors subject to federal or state 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.
2. The fund was ranked #5 out of 29 Minnesota municipal bond funds for total
return for the one-year period, and #8 out of 16 funds for the five-year period
ended February 28, 1995. Lipper rankings do not include sales charges, and past
expense limitations increased the fund's total returns. Rankings may have been
different if these factors had been considered. Past performance cannot
guarantee future results.
3. Fund shares are not insured by any U.S. government agency. Insurance relates
only to the payment of principal and interest on the portfolio's securities. It
does not eliminate market risks to the fund's share price or insure the value
of the shares. Terms of the insurance are more fully described in the
prospectus, and no representation is made as to any insurer's ability to meet
its commitments.
26
<PAGE>
tend to have a more reliable income stream, as they are backed by dependable
revenue generated from schools, 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. Like all mutual funds, however, the principal value
of the fund's holdings as well as the price of its shares will fluctuate with
market conditions.
We also seek to reduce the fund's risk through diversification. On February 28,
1995, the fund's 194 positions spanned a broad range of cities and counties
throughout Minnesota. Additionally, we purchase securities from a variety of
municipal sectors, as the chart to the right illustrates.
(See Appendix for description of Graphic Material 16)
Our outlook for the fund is positive. Recent economic reports indicate that
U.S. economic growth has stabilized at a healthy and sustainable level, while
inflation has remained subdued. More signs of a slowing economy should
eventually result in a gradual decline in interest rates, which should
positively affect bond prices and thus, the fund's price per share.
We expect Minnesota's economy to remain strong into 1995. The state maintains a
diversified economy, with services, trade, manufacturing and agriculture as the
primary sectors. Employment in 1994 grew at 2.7%, slightly outpacing the
national average of 2.4%.(4)
Minnesota's general obligation credit rating was recently upgraded by Fitch and
by Moody's, two major bond rating services, to AAA and Aa1, respectively. This
bodes well for future state bond issuance, as higher credit ratings generally
mean lower bond interest rates -- a definite plus for state government.
4. Source: Standard & Poor's Creditweek Municipal, 1/16/95.
27
<PAGE>
PERFORMANCE SUMMARY
The Franklin Minnesota Insured Tax-Free Income Fund's share price, as measured
by net asset value, declined from $12.33 on February 28, 1994, to $11.88 on
February 28, 1995.
The fund continued to meet its objective of providing high current income to
its shareholders. For the one-year period ended February 28, 1995, your fund
paid monthly income distributions totaling 68.4 cents ($0.684) per share.(5)
Due to decreased income in the fund's portfolio, the monthly dividend amount
was adjusted from 5.8 cents ($0.058) per share to 5.6 cents ($0.056) per share,
effective with the September 1994 distribution. Dividends will vary depending
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 5.41%,
based on an annualization of the current monthly dividend of 5.6 cents ($0.056)
per share and the maximum offering price of $12.41 on February 28, 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 Minnesota state personal income tax bracket of 44.7%, you would
have to earn 9.78% from a taxable investment to match your fund's tax-free
distribution rate.
(See Appendix for description of Graphic Material 17)
Based on the dividend income and change in share price, the fund posted a total
return of +2.15% for the year ended February 28, 1995. Total return measures
the change in value of an investment during the periods indicated, assuming
reinvestment of dividends and capital gains, if any. This calculation does not
include the maximum initial sales charge, and past performance is not
predictive of future results.
The chart on the following page illustrates that since its inception on April
3, 1985, the Franklin Minnesota Insured Tax-Free Income Fund has consistently
outpaced the Consumer Price Index (CPI) -- keeping your purchasing power well
ahead of inflation. The fund underperformed the unmanaged Lehman
5. Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions may vary depending on the
date you purchased your shares and any account activity during the month.
Income distributions and total return calculations include all accrued income
earned by the fund during the reporting period.
28
<PAGE>
Brothers Municipal Bond Index for the same period. The Lehman Brothers index
has inherent performance differentials over the fund, as it holds no cash in
its portfolio and involves no sales charges or management expenses. In
addition, the index includes uninsured municipal securities from across the
country, while your fund is composed primarily of insured Minnesota municipal
bonds. Of course, one cannot invest directly in an index.
Management maintains a long-term perspective and encourages shareholders to do
the same. While the fund may experience volatility from time to time, the
fund's managers believe that its performance will be rewarding over the long
term. For example, as the table to the right illustrates, the fund has provided
an average annual total return of +8.04% since its inception.
(See Appendix for description of Graphic Material 18)
*This performance graph assumes an initial $10,000 investment and includes the
maximum 4.25% initial sales charge, all fund expenses and account fees. It also
assumes that your dividends and capital gains were reinvested at net asset
value. The Lehman Brothers Municipal Bond Index includes price appreciation or
depreciation and distributions as a percentage of the original investment. Past
performance is not predictive of future results.
FRANKLIN MINNESOTA INSURED TAX-FREE INCOME FUND
Periods ended February 28, 1995
<TABLE>
<CAPTION>
SINCE
INCEPTION
1-YEAR 5-YEAR (4/3/85)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return(5) 2.15% 42.36% 124.70%
Average Annual Total Return(6) -2.21% 6.38% 8.04%
Distribution Rate(7) 5.41%
Taxable Equivalent Distribution Rate(8) 9.78%
30-Day Standardized Yield(9) 5.04%
Taxable Equivalent Yield(8) 9.11%
</TABLE>
5. Cumulative total returns measure the change in value of an investment over
the periods indicated and do not include the current, maximum 4.25% initial
sales charge. See note below.
6. Average annual total return represents the average annual change in value of
an investment over the stated periods. The figures assume reinvestment of
dividends and capital gains at net asset value and have been restated to
reflect the current, maximum 4.25% initial sales charge. See note below.
7. Distribution rate is based on an annualization of the fund's 5.6 cents per
share monthly dividend and the maximum offering price of $12.41 on February 28,
1995.
8. Taxable equivalent distribution rate and yield assume the 1995 maximum
combined federal and Minnesota state personal income tax rate of 44.7%.
9. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended February 28, 1995.
Note: Prior to July 1, 1994, fund shares were offered at a lower initial sales
charge, with dividends reinvested at the offering price. Thus, actual total
returns for purchasers of shares during that period would have been 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. 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 total
returns.
29
<PAGE>
FRANKLIN OHIO INSURED TAX-FREE INCOME FUND
FUND OBJECTIVE:
To provide high current income exempt from regular federal and
Ohio state personal income taxes through a portfolio consisting primarily of
insured Ohio municipal bonds.(1)
The fund's fiscal year was difficult for municipal bonds and other fixed-income
investments. Rising interest rates caused prices of most bonds to decline, and
the derivative-induced bankruptcy of Orange County, California added to the
volatility in the municipal bond market.
During the first half of the fund's fiscal year, the fund's average maturity
fell slightly, from 18 to 17 years. More recently, the average maturity has
risen slightly, to end the fiscal year at 17.3 years.
The fund's average coupon remained almost unchanged, rising slightly from 6.76%
to 6.78%. Towards the end of the fiscal year, we sold some of the fund's bonds
and purchased newer, current coupon bonds. Modest dividend increases are
possible in the future, should this trend continue.
While our investment strategy focuses on income rather than total return, the
fund reported a total return of +1.77% for the fiscal year -- significantly
above the average total return of other Ohio municipal bond funds. According to
Lipper Analytical Services, Inc., a nationally recognized mutual fund research
organization, the average total return of other Ohio municipal bond funds was
+1.11% for the year ended February 28, 1995.(2) The fund's total return placed
it eighth out of 38 Ohio municipal bond funds.
We remain conservative in our management of the fund. One hundred percent of
the fund's securities are AAA quality. And, although each bond in the portfolio
is either insured or secured by a pledge of U.S. government securities, we are
nevertheless very selective about our investments.(3) We evaluate
1. For investors subject to 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.
2. The fund was ranked #8 out of 38 Ohio municipal bond funds for total return
for the one-year period, and #7 out of 15 funds for the five- year period ended
February 28, 1995. Lipper rankings do not include sales charges, and past
expense limitations increased the fund's total returns. Rankings may have been
different if these factors had been considered. Past performance cannot
guarantee future results.
3. Fund shares are not insured by any U.S. government agency. Insurance relates
only to the payment of principal and interest on the portfolio's securities. It
does not eliminate market risks to the fund's share price or insure the value
of the shares. Terms of the insurance are more fully described in the
prospectus, and no representation is made as to any insurer's ability to meet
its commitments.
30
<PAGE>
each issue on an individual basis, favoring highly rated "essential service"
bonds. These securities tend to have a more reliable income stream, as they are
backed by dependable revenue generated from schools, 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. Like all mutual funds,
however, the principal value of the fund's holdings as well as the price of the
fund's shares will fluctuate with market conditions.
We also seek to reduce the fund's risk through diversification. On February 28,
1995, the fund held 272 positions, spanning a broad range of cities and
counties throughout Ohio. Additionally, we purchase securities from a variety
of municipal sectors, as the chart to the right illustrates.
Our outlook for the fund is positive. Recent economic reports indicate that
U.S. economic growth has stabilized at a healthy and sustainable level, while
inflation has remained subdued. More signs of a slowing economy should
eventually result in a gradual decline in interest rates, which should
positively affect bond prices and thus, the fund's price per share.
(See Appendix for description of Graphic Material 19)
Ohio continued to show increased economic growth through 1994, particularly in
the housing, manufacturing, export, auto, and auto-related industries. Ohio's
improved economy has enabled it to begin restoring its depleted financial
reserves -- during 1994, the state deposited $21 million into its Budget
Stabilization Fund, and plans are being made to deposit an additional $260
million in 1995.(4) These funds are available due to higher than expected
revenue and decreased expenditures in 1994.
4. Source: Standard & Poor's Creditweek Municipal, 1/23/95.
31
<PAGE>
PERFORMANCE SUMMARY
The Franklin Ohio Insured Tax-Free Income Fund's share price, as measured by
net asset value, declined from $12.40 on February 28, 1994, to $11.90 on
February 28, 1995.
The fund continued to meet its objective of providing high current income to
its shareholders. For the one-year period ended February 28, 1995, your fund
paid monthly income distributions totaling 69.0 cents ($0.690) per share.(5)
Due to decreased income in the fund's portfolio, the monthly dividend amount
was adjusted from 5.8 cents ($0.058) per share to 5.7 cents ($0.057) per share,
effective with the September 1994 distribution. Dividends will vary depending
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 5.50%,
based on an annualization of the monthly dividend of 5.7 cents ($0.057) per
share and the maximum offering price of $12.43 on February 28, 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 Ohio state personal income tax bracket of 44.1%, you would have to
earn 9.84% from a taxable investment to match your fund's tax-free distribution
rate.
(See Appendix for description of Graphic Material 20)
Based on the dividend income and change in share price, the fund posted a total
return of +1.77% for the year ended February 28, 1995. Total return measures
the change in value of an investment during the periods indicated, assuming
reinvestment of dividends and capital gains, if any. This calculation does not
include the maximum initial sales charge, and past performance is not
predictive of future results.
The chart on the following page illustrates that since its inception on April
3, 1985, the Franklin Ohio Insured Tax-Free Income Fund has consistently
outpaced the Consumer Price Index (CPI) -- keeping your purchasing power well
ahead of inflation. The
5. Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions may vary depending on the
date you purchased your shares and any account activity during the month.
Income distributions and total return calculations include all accrued income
earned by the fund during the reporting period.
32
<PAGE>
fund underformed the unmanaged Lehman Brothers Municipal Bond Index for the
same period. The Lehman Brothers index has inherent performance differentials
over the fund, as it holds no cash in its portfolio and involves no sales
charges or management expenses. In addition, the index includes uninsured
municipal securities from across the country, while your fund is composed
primarily of insured Ohio municipal bonds. Of course, one cannot invest
directly in an index.
Management maintains a long-term perspective and encourages shareholders to do
the same. While the fund may experience volatility from time to time, its
managers believe that its performance will be rewarding over the long term. As
the table to the right illustrates, the fund has provided an average annual
return of +7.94% since its inception.
(See Appendix for description of Graphic Material 21)
*This performance graph assumes an initial $10,000 investment and includes the
maximum 4.25% initial sales charge, all fund expenses and account fees. It also
assumes that your dividends and capital gains were reinvested at net asset
value. The Lehman Brothers Municipal Bond Index includes price appreciation or
depreciation and distributions as a percentage of the original investment. Past
performance is not predictive of future results.
FRANKLIN OHIO INSURED TAX-FREE INCOME FUND
Periods ended February 28, 1995
<TABLE>
<CAPTION>
SINCE
INCEPTION
1-YEAR 5-YEAR (4/3/85)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return(6) 1.77% 45.22% 122.77%
Average Annual Total Return(7) -2.55% 6.81% 7.94%
Distribution Rate(8) 5.50%
Taxable Equivalent Distribution Rate(9) 9.84%
30-Day Standardized Yield(10) 5.03%
Taxable Equivalent Yield(9) 9.00%
</TABLE>
6. Cumulative total returns measure the change in value of an investment over
the periods indicated and do not include the current, maximum 4.25% initial
sales charge. See note below.
7. Average annual total return represents the average annual change in value of
an investment over the stated periods. The figures assume reinvestment of
dividends and capital gains at net asset value and have been restated to reflect
the current, maximum 4.25% initial sales charge. See note below.
8. Distribution rate is based on an annualization of the fund's 5.7 cents per
share monthly dividend and the maximum offering price of $12.43 on February 28,
1995.
9. Taxable equivalent distribution rate and yield assume the 1995 maximum
combined federal and Ohio state personal income tax rate of 44.1%, based on the
maximum federal income tax rate of 39.6%.
10. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended February 28, 1995.
Note: Prior to July 1, 1994, fund shares were offered at a lower initial sales
charge, with dividends reinvested at the offering price. Thus, actual total
returns for purchasers of shares during that period would have been 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. 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 total returns.
33
<PAGE>
PORTFOLIO TALK
Last year, rising interest rates affected the performance of fixed-income
investments across the board. Municipal securities were no exception, and many
tax-conscious investors may be concerned about the current outlook for the
municipal market.
In the following interview, Tom Kenny, senior vice president of Franklin's
Municipal Bond Department, and portfolio managers Sheila Amoroso, Andrew
Jennings, Sr., and Bernie Schroer discuss rising interest rates and the current
municipal market environment. They also talk about the "plain vanilla"
investment approach that has made Franklin a well-respected name in the
tax-free mutual fund arena.
SOME OF THE SENIOR MEMBERS OF FRANKLIN'S MUNICIPAL BOND TEAM - FRONT ROW (L-R)
TOM KENNY, MARK ORSI, SHEILA AMOROSO, STELLA WONG. BACK ROW (L-R) JEFF WILSON,
TOM WALSH, RAFAEL COSTAS, ANDREW JENNINGS, SR., BERNIE SCHROER, DON DUERSON.
34
<PAGE>
WHAT IS YOUR GENERAL OVERVIEW OF THE MUNICIPAL BOND MARKET?
Tom Kenny: In 1992 and 1993, the municipal bond market saw a record
supply of new issues and refinancings, and investor demand was very
strong. That changed in 1994, when both the supply and demand for
municipal securities were significantly lower due to rising interest
rates.
Looking ahead, I think investors will start to aggressively buy
municipal securities again. But, relative to 1992 or 1993, the supply
of new municipal issues will continue to be much lower. It goes back
to basic economics; if there are more buyers than supply, then prices
will move up. That could result in a stronger municipal market in the
upcoming year.
WHAT ABOUT THE PERFORMANCE OF THE MUNICIPAL MARKET IN 1994?
Andrew Jennings: Because of the rapid rise in interest rates, last
year was difficult for bond funds. In fact, in terms of total return,
it was the worst year for the 20-year Treasury bond since 1967.(1) In
light of these difficult market conditions, we believe that the
performance of Franklin's tax-free income funds held up relatively
well.
DID THE PERFORMANCE OF FRANKLIN'S TAX-FREE INCOME FUNDS MEET YOUR EXPECTATIONS?
Tom: Yes, relative to the overall market. Past performance cannot
guarantee future results; however, our tax-free income fund
shareholders continued to enjoy attractive yields.
In addition, we believe our conservative management philosophy
resulted in stronger performance than that of many other tax-free
income funds. For example, most of Franklin's tax-free income funds
outperformed their peers during the year ended February 28, 1995,
according to Lipper Analytical Services, Inc., a nationally recognized
mutual fund research organization. Of course, each Franklin tax-free
income fund's performance is unique, and some funds' returns may not
have exceeded their category averages. I encourage investors to
contact Franklin Templeton Fund Information at 1-800/DIAL BEN
(1-800/342-5236) for specific performance figures related to
Franklin's tax-free income funds.
WHAT MAKES FRANKLIN'S TAX-FREE INCOME FUNDS STAND OUT FROM OTHER TAX-ADVANTAGED
INVESTMENTS AVAILABLE TODAY?
Tom: I think Franklin's conservative investment philosophy
differentiates our funds from many of today's investment alternatives.
We believe our tax-free income fund shareholders have come to rely on
the fact that, with Franklin, what you see is what you get.
WHAT IS FRANKLIN'S TAX-FREE INVESTMENT PHILOSOPHY?
Andrew: Two goals guide Franklin's tax-free income fund management
approach. We have always managed our tax-free income funds with an
emphasis on maximizing tax-free income and maintaining greater price
stability than other tax-free income funds with similar objectives.(2)
Of course, it's impossible to eliminate price volatility completely
because municipal securities are always reacting to a variety of
factors, such as interest rate movements.
Sheila Amoroso: That's why Franklin takes a very "plain vanilla"
investment approach when it comes to managing our tax-free income
funds.
WHAT DO YOU MEAN BY "PLAIN VANILLA"?
Andrew: Municipal securities are generally considered to be among the
safest investments available in terms of credit risk, but they are
still extremely complicated. Investors need only look at the recent
publicity surrounding derivative securities, and other elaborate
hedging techniques that have increased volatility, for evidence of the
complex nature of some municipal investments out there.
Sheila: Franklin avoids these riskier securities and investment
techniques, because we don't want to expose our shareholders'
investments to an undue amount of risk. Many exotic securities, such
as derivatives, are extremely sensitive to interest rate movements and
can significantly increase a fund's price volatility. As a result,
Franklin chooses not to use derivatives in its tax-free portfolios.(3)
1. Source: Ibbotson Associates. Based on one-year total returns of long-term
government bonds from January 1926 to December 1994.
2. For investors subject to federal or state alternative minimum tax, all or a
portion of these dividends may be subject to such tax, depending on the fund.
Distributions of capital gains and of ordinary income from accrued market
discount, if any, are generally taxable. Most of Franklin's tax-free income
funds have the objective of seeking as high a level of current income as is
consistent with prudent management, while seeking preservation of shareholders'
capital. Of course, all bond funds, including Franklin's, involve investment
risks, and there is no assurance that any fund's investment objectives will
be met.
3. Franklin's tax-free income funds may use the following investments which
Franklin does not classify as derivative securities because they are highly
liquid and do not involve borrowing or leveraging a fund's portfolio: variable
rate demand notes; purchases of fixed income securities on a when-issued basis;
zero coupon bonds; certificates of participation on municipal leases; and/or
other transactions, which in the fund manager's opinion, are highly liquid and
do not involve leverage. Please read the funds' prospectuses for details of
these permissible investments.
35
<PAGE>
HAS FRANKLIN'S INVESTMENT STRATEGY CHANGED NOW THAT INTEREST RATES HAVE BEEN
RISING?
Andrew: No. We focus on the same objectives no matter what interest
rates are doing.
Bernie Schroer: That's right. And in light of today's market,
shareholders may want to consider dollar cost averaging when
purchasing shares of a fund. Over the long-term, they can take
advantage of short-term price movements by purchasing more shares of a
fund when prices are lower.(4)
Tom: Franklin's commitment to research is really the backbone of its
success in the tax-free mutual fund market. This commitment doesn't
change just because interest rates are changing. Shareholders in our
tax-free income funds have one of the industry's largest municipal
research teams dedicated to searching for the most attractive
securities on the market.(5)
Most of Franklin's tax-free income funds purchase only municipal
securities within the top four credit ratings of such national rating
agencies as Standard & Poor's, Moody's, or Fitch.(6) Our funds can
also invest in non-rated securities, which are deemed to be of
comparable credit quality by the funds' portfolio managers.(7)
Franklin, however, treats every municipal security as a non-rated
issue. We thoroughly examine each prospective issue and assign every
security an internal Franklin rating. Often, we'll go to the
prospective project's site and examine its creditworthiness firsthand.
And our research doesn't end when we purchase a bond; we constantly
monitor our portfolio holdings. National rating services only review
individual bonds periodically. Generally, by the time a municipal
security receives a new national rating, it will already be reflected
in the issue's price. Franklin tries to stay ahead of the industry
by closely monitoring each municipal security that we own in our
tax-free income portfolios.
DO YOU THINK TAX-FREE MUTUAL FUNDS STILL MAKE SENSE FOR INVESTORS?
Andrew: Yes. Franklin's tax-free income fund shareholders have one of
the most respected municipal research departments working for them --
an important consideration in today's market. They also enjoy the
standard benefits of investing in a mutual fund: monthly dividends,
easy access to their money, and diversification.(8)
Bernie: Franklin is the largest open-end municipal bond fund manager
in the nation, with more than $38 billion in municipal securities
under management.(9) Our tax-free income funds' diversification is a
major advantage for shareholders.(8) For example, Orange County's
recent bankruptcy might have devastated individual bondholders, but the
direct impact on Franklin's tax-free income funds has been minimal to
date, because most of our funds are widely diversified.(10) Investing
in a Franklin tax-free income fund spreads our shareholders' risk over
a variety of securities, reducing the impact any one issue or
municipality can have on the overall portfolio.(11)
Tom: Investors may be concerned about the bond market's volatility
over the past year, but they should maintain a long-term perspective.
There will always be short-term price movements in a bond fund. That's
why Franklin's tax-free income funds are managed for income first,
while seeking preservation of shareholders' capital. Over the long
run, Franklin's tax-free income funds can offer investors a strong
investment choice. I think our shareholders have found that tax-free
mutual funds are one of the most effective and convenient ways to
participate in the municipal securities market.
To learn more about Franklin's Tax-Free Income Funds, ask your
investment representative or call Franklin Templeton Fund Information
at 1-800/DIAL BEN (1-800/342-5236).
4. Dollar cost averaging involves continuous investment in securities,
regardless of fluctuating price levels. Investors should consider their
financial ability to continue purchases through periods of low price levels or
changing economic conditions. Such a plan does not assure a profit and does not
protect against loss in a declining market.
5. Source: Research & Ratings Review, Volume II, Issue 8, February 28, 1994.
Franklin's municipal research team ranks 2nd out of 1,000 investment advisory
firms in terms of the number of municipal bond analysts, in a survey by TMS
Holdings, Inc. As of December 31, 1994, this ranking was unchanged.
6. Bond credit ratings reflect the rating agency's assessment of the credit
quality of the bonds, and are subject to change. Ratings do not reflect the
yield or market price of the bonds, nor approval by the rating agency.
7. All but two Franklin tax-free income funds follow this investment policy.
Franklin High Yield Tax-Free Income Fund and Franklin California High Yield
Municipal Fund invest primarily in higher-yielding, lower-rated securities. The
risks of investing in lower-rated securities are described in these funds'
prospectuses.
8. Most of Franklin's tax-free income funds are diversified; however, a few are
classified as non-diversified under the Investment Company Act of 1940. The
risks of investing in a non-diversified fund, such as increased susceptibility
to adverse economic or regulatory developments, are described in each fund's
individual prospectus.
9. Strategic Insight: December 31, 1994.
10. The Orange County and related bankruptcy proceedings are ongoing, and the
funds' managers continue to monitor the proceedings.
11. Because many Franklin tax-free income funds concentrate their investments
in a single state, these funds may be subject to greater risk of adverse
economic changes in their respective states than funds with greater
geographical diversification.
36
<PAGE>
FRANKLIN TAX-FREE TRUST
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN ARIZONA INSURED TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS 99.0%
Arizona State Power Authority, Power Resources Revenue,
$ 600,000 Refunding, Hoover Uprating Project, MBIA Insured, 5.375%, 10/01/13 .......................... $ 557,058
100,000 Refunding, Hoover Uprating Project, MBIA Insured, 5.25%, 10/01/17 ........................... 89,426
400,000 Casa Grande Excise Tax Revenue, FGIC Insured, 6.00%, 04/01/10 .................................. 402,200
100,000 Flagstaff Street & Highway User Revenue, Junior Lien, FGIC Insured, 5.90%, 07/01/10 ............ 101,097
500,000 Maricopa County, IDA, Health Facilities Revenue, Refunding, Evangelist Lutheran Samaritan
Project, AMBAC Insured, 5.35%, 12/01/18 ....................................................... 447,490
Maricopa County School District No. 3, Tempe Elementary,
700,000 Refunding, AMBAC Insured, 6.00%, 07/01/13 ................................................... 702,205
125,000 Refunding & Improvement, FGIC Insured, 5.40%, 07/01/12 ...................................... 117,491
700,000 Maricopa County School District No. 11, Peoria Unified, Refunding, AMBAC Insured, 6.10%,
07/01/10....................................................................................... 722,456
15,000 Maricopa County School District No. 28, Kyrene Elementary, Series D, FGIC Insured, 6.00%,
07/01/13....................................................................................... 15,108
570,000 Maricopa County School District No. 31, Series A, AMBAC Insured, 6.20%, 07/01/13 ............... 585,806
175,000 Maricopa County School District No. 41, Series A, FGIC Insured, Pre-Refunded, 5.40%, 07/01/13 .. 179,011
Maricopa County School District No. 68, Alhambra Elementary,
500,000 Refunding & Improvement, AMBAC Insured, 5.125%, 07/01/13 .................................... 453,795
100,000 Refunding & Improvement, AMBAC Insured, 5.625%, 07/01/13 .................................... 94,268
235,000 Maricopa County School District No. 98, Fountain Hills, MBIA Insured, 6.20%, 07/01/10 .......... 245,465
100,000 Maricopa County Stadium District Revenue, Series A, MBIA Insured, 5.50%, 07/01/13 .............. 94,267
500,000 Maricopa County UHSD No. 216, 1988 Project, FGIC Insured, 5.30%, 07/01/11 ...................... 468,295
700,000 Maricopa County USD No. 80, Chandler, Refunding, FGIC Insured, 5.85%, 07/01/13 ................. 691,411
100,000 Mesa GO, Refunding, MBIA Insured, 5.00%, 07/01/03 .............................................. 97,014
610,000 Mohave County Hospital District No. 1, Refunding, Kingman Regional Medical Center Project,
FGIC Insured, 6.50%, 06/01/15 ................................................................. 629,563
290,000 Navajo County PCR, Refunding, Arizona Public Services Co., Series A, AMBAC Insured, 5.50%,
08/15/28 ...................................................................................... 261,493
100,000 Northern Arizona University Revenues, Refunding, Series A, AMBAC Insured, 5.75%, 06/01/07 ...... 100,060
100,000 Peoria GO, Projects of 1990, AMBAC Insured, 6.25%, 07/01/12 .................................... 101,043
1,000,000 Phoenix Civic Improvement Corporation, Municipal Facilities Excise Tax Revenue, MBIA Insured,
6.90%, 07/01/21 ............................................................................... 1,060,380
1,000,000 Phoenix Civic Improvement Corporation, Water Systems Revenue, Junior Lien, FGIC Insured,
5.50%, 07/01/24 ............................................................................... 912,110
110,000 Phoenix GO, Refunding, Series B, MBIA Insured, 5.50%, 07/01/16 ................................. 102,422
925,000 Pima County IDA, SFMR, GNMA Secured, 6.625%, 11/01/14 .......................................... 935,425
300,000 Pima County USD No. 1, Tucson Project, Series E, FGIC Insured, 5.40%, 07/01/13 ................. 280,761
100,000 Pima County USD No. 6, Marana School, Series A, FGIC Insured, 5.75%, 07/01/12 .................. 97,530
Puerto Rico Commonwealth GO,
845,000 MBIA Insured, 6.45%, 07/01/17 .............................................................. 880,051
800,000 Refunding, MBIA Insured, 5.25%, 07/01/18 ................................................... 716,824
800,000 Puerto Rico Electric Power Authority Revenue, Series R, FSA Insured, 6.25%, 07/01/17 ........... 810,608
Salt River Project, Agricultural Improvement and Power District, Electric System Revenue,
350,000 Refunding, Series A, FGIC Insured, 5.50%, 01/01/19 ......................................... 321,713
1,500,000 Refunding, Series D, FGIC Insured, 6.25%, 01/01/27 ......................................... 1,518,060
120,000 Series C, MBIA Insured, 5.75%, 01/01/20 .................................................... 113,191
250,000 dSanta Cruz County USD, No. 1, Nogales, Series B, AMBAC Insured, 6.10%, 07/01/14 ................ 251,953
360,000 dSierra Vista Municipal Property Corporation Facilities Revenue, AMBAC Insured, 6.15%, 01/01/15 . 361,458
375,000 Tucson Airport, Inc., Authority Revenue, Refunding, MBIA Insured, 5.70%, 06/01/13 .............. 358,590
650,000 Tucson GO, Series G, 1984, FGIC Insured, 6.25%, 07/01/18 ....................................... 662,071
150,000 Tucson Street and Highway User Revenue, Refunding, Junior Lien, MBIA Insured, 5.50%, 07/01/12 .. 140,139
100,000 Tucson Water Revenue, Refunding, Series A, FGIC Insured, 5.75%, 07/01/18 ....................... 94,479
University of Arizona COP, Administrative & Packaging Facility,
500,000 MBIA Insured, 6.00%, 07/15/16 .............................................................. 489,355
1,625,000 MBIA Insured, 6.00%, 07/15/23 .............................................................. 1,581,694
</TABLE>
The accompanying notes are an integral part of these
financial statements.
37
<PAGE>
FRANKLIN TAX-FREE TRUST
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995
(CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN ARIZONA INSURED TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
$ 120,000 University of Arizona Medical Center Corp., Hospital Revenue, Refunding, MBIA Insured,
5.00%, 07/01/21 ............................................................................... $ 101,011
200,000 Yavapai County Community College District, Refunding, FGIC Insured, 5.40%, 07/01/10 ............ 187,496
250,000 Yavapai County, Elementary School District No. 6, Cottonwood-Oak Creek, 1993 Project,
AMBAC Insured, Series B, 6.70%, 07/01/09 ...................................................... 263,215
775,000 Yavapai County, Elementary School District No. 028, Refunding, Camp Verde, FGIC Insured,
6.00%, 07/01/09 ............................................................................... 796,071
425,000 Yuma and La Paz Counties Community College District, Refunding, Arizona Western
College, AMBAC Insured, 5.40%, 07/01/10 ....................................................... 400,455
-----------
TOTAL LONG TERM INVESTMENTS (COST $20,661,645) ........................................... 20,593,084
-----------
eSHORT TERM INVESTMENTS 2.4%
200,000 Maricopa County IDA, Hospital Facilities Revenue, Samaritan Health Services, Daily VRDN and
Put, 3.80%, 12/01/08 .......................................................................... 200,000
100,000 Pinal County IDA, PCR, Daily VRDN and Put, 3.75%, 12/01/09 ..................................... 100,000
200,000 Puerto Rico Commonwealth, Government Development Bank, Refunding, Weekly VRDN and Put,
3.90%, 12/01/15 ............................................................................... 200,000
-----------
TOTAL SHORT TERM INVESTMENTS (COST $500,000) ............................................ 500,000
-----------
TOTAL INVESTMENTS (COST $21,161,645) 101.4% ........................................ 21,093,084
LIABILITIES IN EXCESS OF OTHER ASSETS, NET (1.4) % ................................. (298,625)
-----------
NET ASSETS 100.0% .................................................................. $20,794,459
===========
At February 28, 1995, the net unrealized depreciation based on the cost of investments
for income tax purposes of $21,161,645 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ............................................................... $ 345,821
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ............................................................... (414,382)
-----------
Net unrealized depreciation .................................................................. $ (68,561)
===========
</TABLE>
PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
COP - Certificate of Participation
FGIC - Financial Guaranty Insurance Co.
FSA - Financial Security Assistance
GNMA - Government National Mortgage Association
IDA - Industrial Development Authority
GO - General Obligation
MBIA - Municipal Bond Investors Assurance Corp.
PCR - Pollution Control Revenue
SFMR - Single Family Mortgage Revenue
UHSD - Unified High School District
USD - Unified School District
dSee Note 1 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.
38
<PAGE>
FRANKLIN TAX-FREE TRUST
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN FLORIDA INSURED TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS 97.0%
$ 100,000 Apopka Utility System Revenue, Refunding, FGIC Insured, 6.00%, 12/01/13 ........................ $ 100,356
250,000 Boca Raton Community, RDA, Tax Increment Revenue, Mizner Park Project,
FGIC Insured, 5.50%, 03/01/14 ................................................................. 236,485
100,000 Charlotte County Utility Revenue, Refunding, FGIC Insured, 5.25%, 10/01/12 ..................... 92,124
100,000 Citrus County Capital Improvement Revenue, Refunding, MBIA Insured, 5.375%, 07/01/11 ........... 94,238
2,435,000 Citrus County PCR, Refunding, Florida Power Co., MBIA Insured, 6.625%, 01/01/27 ................ 2,544,526
1,000,000 Clay County Utilities System Revenue, Series B, FGIC Insured, 5.25%, 11/01/13 .................. 913,280
150,000 Cocoa Beach Utilities Revenue, Refunding, MBIA Insured, 5.50%, 11/01/13 ........................ 142,281
1,000,000 Florida State Board of Education GO, Capital Outlay, Series E, MBIA Insured, 5.80%, 06/01/24 ... 960,510
1,000,000 Florida State Correctional Privatization Community COP, Correctional Facilities, Bay County,
MBIA Insured, 6.00%, 08/01/15 ................................................................. 1,003,200
850,000 Fort Pierce Utilities Authority Revenue, Refunding, AMBAC Insured, 5.25%, 10/01/12 ............. 783,054
2,000,000 Hernando County Water and Sewer Revenue, Refunding & Improvement, FGIC Insured, 6.00%,
06/01/19 ...................................................................................... 1,989,660
1,500,000 Hillsborough County IDA, IDR, University Community Hospital, MBIA Insured, 5.80%, 08/15/24 ..... 1,434,795
100,000 Indian River County, Water and Sewer Revenue, Series A, Refunding, FGIC Insured, 5.50%,
09/01/15....................................................................................... 93,812
200,000 Jacksonville Beach Utilities Revenue, Refunding, MBIA Insured, 5.50%, 10/01/20 ................. 185,036
100,000 Jacksonville Excise Tax Revenue, FGIC Insured, 5.75%, 10/01/20 ................................. 93,895
110,000 Juno Beach, Public Improvement Revenue, Refunding, AMBAC Insured, 5.50%, 04/01/14 .............. 104,036
135,000 Key West Sewer Revenue, Refunding, FGIC Insured, 5.60%, 10/01/14 ............................... 129,122
350,000 Kissimmee Utility Authority Electric System Revenue, Refunding & Improvement, FGIC Insured,
5.50%, 10/01/15 ............................................................................... 328,283
1,415,000 Lake Clarke Shores, Utility Systems Revenue, Refunding & Improvement, FGIC Insured, 5.80%,
10/01/18 ...................................................................................... 1,377,729
500,000 Lakeland Utility Tax Revenue, Refunding & Improvement, Series A, FGIC Insured, 6.00%, 10/01/17 . 501,210
100,000 Lakeland Wastewater Improvement Revenue, Refunding, MBIA Insured, 5.50%, 10/01/16 .............. 93,875
1,770,000 Lee County Capital and Transportation Facilities Revenue, Refunding, Series A, MBIA Insured,
5.55%, 10/01/18 ............................................................................... 1,667,995
1,000,000 Martin County Consolidated Utilities Systems Revenue, Refunding & Improvement, FGIC Insured,
6.00%, 10/01/24 ............................................................................... 997,200
Martin County Water and Waste Water System Revenue,
500,000 Martin Downs System, FGIC Insured, 5.625%, 10/01/13 ........................................ 481,315
900,000 Refunding, Series A, FGIC Insured, 5.70%, 10/01/23 ......................................... 856,197
2,000,000 Miramar Wastewater Improvement Assessment Revenue, FGIC Insured, 6.75%, 10/01/25 ............... 2,119,220
450,000 Naples Hospital Revenue, Refunding, Naples Community Hospital, Inc. Project,
MBIA Insured, 5.25%, 10/01/09 ................................................................. 423,329
Orange County Health Facilities Authority Revenue,
2,400,000 Refunding, Orlando Regional Healthcare Hospital, Series A, MBIA Insured, 6.00%, 11/01/24 ... 2,376,792
1,000,000 Sunbelt Adventist Health, Series B, CGIC Insured, 6.75%, 11/15/21 .......................... 1,041,160
1,000,000 Orange County Public Services Tax Revenue, FGIC Insured, 6.00%, 10/01/24 ....................... 993,100
500,000 Orange County Sales Tax Revenue, FGIC Insured, 6.125%, 01/01/19 ................................ 502,570
1,875,000 Orlando and Orange County Expressway Authority Revenue, Refunding, Senior Lien,
FGIC Insured, 5.50%, 07/01/18 ................................................................. 1,755,713
1,520,000 Orlando Utilities Commission, Water and Electric Revenue, Series A, MBIA Insured, 5.50%,
10/01/26....................................................................................... 1,381,057
1,900,000 Osceola County School Board COP, Series A, AMBAC Insured, 6.00%, 06/01/19 ...................... 1,883,014
100,000 Palm Beach County, Administration Complex Revenue, Refunding, FGIC Insured, 5.25%, 06/01/11 .... 93,161
1,000,000 Palm Beach County, Criminal Justice Facilities Revenue, FGIC Insured, 6.00%, 06/01/15 .......... 1,002,320
1,000,000 Pinellas County Sewer Revenue, FGIC Insured, 6.00%, 10/01/24 ................................... 1,000,660
1,000,000 Puerto Rico Electric Power Authority Revenue, Series P, CGIC Insured, 7.00%, 07/01/21 .......... 1,053,900
545,000 Sanford Water and Sewer Revenue, Refunding, AMBAC Insured, 5.25%, 10/01/14 ..................... 499,449
Sarasota County Utility System Revenue,
500,000 FGIC Insured, 6.50%, 10/01/14 .............................................................. 525,295
100,000 Refunding, FGIC Insured, 5.50%, 10/01/22 ................................................... 92,914
</TABLE>
The accompanying notes are an integral part of these
financial statements.
39
<PAGE>
FRANKLIN TAX-FREE TRUST
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995
(CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN FLORIDA INSURED TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
$ 500,000 Sarasota-Manatee Airport Authority Revenue, Refunding, MBIA Insured, 5.625%, 08/01/14 .......... $ 482,525
555,000 Sebring Water and Waste Water Revenue, AMBAC Insured, 5.50%, 01/01/23 .......................... 515,506
Seminole County School Board COP,
1,000,000 Series A, MBIA Insured, 6.125%, 07/01/14 .................................................. 1,014,980
1,000,000 Series A, MBIA Insured, 6.125%, 07/01/19 .................................................. 1,006,790
1,000,000 St. Lucie County Utilities System Revenue, Refunding, FGIC Insured, 5.50%, 10/01/15 ............ 943,570
410,000 St. Petersburg Beach GO, AMBAC Insured, 5.25%, 10/01/13 ........................................ 377,122
200,000 St. Petersburg Health Facilities Authority Revenue, Allegany Health System Loan Program,
MBIA Insured, 5.75%, 12/01/21 ................................................................. 191,312
Stuart Utilities Revenue,
500,000 FGIC Insured, 6.70%, 10/01/14 .............................................................. 528,290
500,000 FGIC Insured, 6.80%, 10/01/24 .............................................................. 528,170
1,710,000 Sumter County Capital Improvement Revenue, Refunding, MBIA Insured, 5.375%, 06/01/19 ........... 1,557,981
490,000 Titusville, Water and Sewer Revenue, MBIA Insured, 6.20%, 10/01/14 ............................. 502,583
200,000 University of Florida, University Housing Revenues, MBIA Insured, 5.50%, 07/01/23 .............. 185,670
100,000 Venice Utility Revenue, Refunding, MBIA Insured, 5.50%, 07/01/14 ............................... 94,974
Vero Beach Electric Revenue,
200,000 Refunding, Series A, MBIA Insured, 5.50%, 12/01/13 ......................................... 190,330
1,000,000 Refunding, Series A, MBIA Insured, 5.375%, 12/01/21 ........................................ 907,320
Volusia County, Health Facilities Authority Revenue, Hospital Facilities, Memorial Health,
1,000,000 Refunding & Improvement, AMBAC Insured, 5.75%, 11/15/13 .................................... 974,220
1,000,000 Refunding & Improvement, AMBAC Insured, 5.75%, 11/15/20 .................................... 957,270
500,000 West Melbourne Water and Sewer Revenue, Refunding & Improvement, FGIC Insured, 6.75%, 10/01/14 . 535,064
-----------
TOTAL LONG TERM INVESTMENTS (COST $45,980,712) ........................................... 45,441,545
-----------
eSHORT TERM INVESTMENTS .9%
100,000 Hillsborough County IDA, PCR, Refunding, Tampa Electric Co., Daily VRDN and Put, 3.60%,
05/15/18 ...................................................................................... 100,000
300,000 Pinellas County Health Facility Authority Revenue, Refunding, Pooled Hospital Loan Project,
Daily VRDN and Put, 3.75%, 12/01/15 ........................................................... 300,000
-----------
TOTAL SHORT TERM INVESTMENTS (COST $400,000) ............................................. 400,000
-----------
TOTAL INVESTMENTS (COST $46,380,712) 97.9% .......................................... 45,841,545
OTHER ASSETS AND LIABILITIES, NET 2.1% .............................................. 1,004,959
-----------
NET ASSETS 100.0% ................................................................... $46,846,504
===========
At February 28, 1995, the net unrealized depreciation based on the cost of investments
for income tax purposes of $46,380,712 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ............................................................... $ 720,302
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ............................................................... (1,259,469)
-----------
Net unrealized depreciation .................................................................. $ (539,167)
===========
</TABLE>
The accompanying notes are an integral part of these
financial statements.
40
<PAGE>
FRANKLIN TAX-FREE TRUST
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995
(CONT.)
FRANKLIN FLORIDA INSURED TAX-FREE INCOME FUND
- --------------------------------------------------------------------------------
PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
CGIC - Capital Guaranty Insurance Co.
COP - Certificate of Participation
FGIC - Financial Guaranty Insurance Corp.
GO - General Obligation
IDA - Industrial Development Authority
IDR - Industrial Development Revenue
MBIA - Municipal Bond Investors Assurance Corp.
PCR - Pollution Control Revenue
RDA - Redevelopment Agency
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.
41
<PAGE>
FRANKLIN TAX-FREE TRUST
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN INSURED TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS 98.3%
ALABAMA 2.5%
Alabama HFA, SFMR,
$ 5,270,000 HMR Program, Series A-1, GNMA Secured, 7.80%, 10/01/20 ................................... $ 5,506,781
1,385,000 Series 1986-A, MBIA Insured, 7.125%, 10/01/14 ............................................ 1,422,658
1,000,000 Alabama State Board Educational Revenue, Southern Union State Junior College, MBIA Insured,
6.50%, 07/01/12 ............................................................................. 1,050,630
100,000 Alabama Water Authority, PCR, AMBAC Insured, 6.25%, 08/15/14 ................................. 101,048
2,000,000 Alabama Water PCA, Series A, AMBAC Insured, 5.60%, 08/15/16 .................................. 1,869,860
1,715,000 Auburn Governmental Utility Services Corp., Waste Water Revenue, Merscot-Auburn L.P., FGIC
Insured, 7.30%, 01/01/12 .................................................................... 1,801,745
Daphne Utilities Board, Water, Gas and Sewer Revenue,
4,030,000 Refunding, Series 1990-B, FGIC Insured, 7.30%, 06/01/10 .................................. 4,326,568
2,000,000 Series B, Capital Improvement Bonds, FGIC Insured, 7.35%, 06/01/20 ....................... 2,142,300
1,100,000 Druit Community Hospital Health Care Authority, Facilities Revenue, MBIA Insured,
Pre-Refunded, 7.875%, 06/01/07 .............................................................. 1,190,486
2,285,000 Houston County Health Care Authority, Hospital Revenue, Refunding, Alabama Medical Center,
MBIA Insured, 5.50%, 10/01/19 ............................................................... 2,095,208
300,000 Huntsville Health Care Facilities Authority Revenue, Series A, MBIA Insured, 6.375%,
06/01/22..................................................................................... 303,384
1,035,000 Ketchikan GO, AMBAC Insured, 5.50%, 11/15/13 ................................................. 962,943
1,500,000 Marshall County Limited Obligation, AMBAC Insured, Pre-Refunded, 7.00%, 02/01/12 ............. 1,661,775
500,000 Mobile Board of Water and Sewer Commissioners, Water and Sewer Utilities Revenue, Series A,
FGIC Insured, Pre-Refunded, 9.375%, 01/01/12 ................................................ 557,720
5,000,000 Morgan County, Decatur Health Care Authority, Hospital Revenue, Refunding, Decatur General
Hospital, Connie Lee Insured, 6.375%, 03/01/24 .............................................. 4,977,000
1,960,000 Phenix City GO, Refunding, AMBAC Insured, 5.75%, 03/01/13 .................................... 1,921,270
1,000,000 Saraland Water and Sewer Utilities Revenue, FGIC Insured, Pre-Refunded, 8.75%, 12/01/07 ...... 1,050,830
4,000,000 University of Alabama, University Hospital Revenues, Refunding, Huntsville, Series A, MBIA
Insured, 5.50%, 05/01/18 .................................................................... 3,680,880
5,000,000 West Jefferson IDB, PCR, Refunding, Alabama Power Co., Miller Plant Co., Series C, MBIA
Insured, 6.05%, 05/01/23 .................................................................... 4,939,550
-----------
41,562,636
-----------
ALASKA 3.8%
Alaska Energy Authority Power Revenue, Bradley Lake Hydro Project,
5,795,000 MBIA Insured, 7.25%, 07/01/21 ............................................................ 6,193,580
5,000,000 Series 1, BIG Insured, 7.25%, 07/01/09 ................................................... 5,342,950
4,765,000 Series 1, BIG Insured, 7.25%, 07/01/16 ................................................... 5,073,057
3,205,000 Series 1, BIG Insured, 6.25%, 07/01/21 ................................................... 3,229,871
18,500,000 Alaska Energy Utilities Revenue, City and Boro of Sitka, Refunding, CGIC Insured, 6.75%,
07/01/20 .................................................................................... 19,383,005
Anchorage Electric Utility Revenue,
5,000,000 Refunding, Senior Lien, Series A, MBIA Insured, 7.125%, 06/01/06 ......................... 5,419,550
830,000 Refunding, Senior Lien, Series A, MBIA Insured, Pre-Refunded, 7.625%, 12/01/06 ........... 876,405
1,000,000 Refunding, Senior Lien, Series A, MBIA Insured, Pre-Refunded, 7.625%, 12/01/15 ........... 1,055,910
Anchorage GO,
2,765,000 General Purpose, AMBAC Insured, Pre-Refunded, 7.30%, 08/01/10 ............................ 3,048,772
5,000,000 Refunding, AMBAC Insured, 7.20%, 06/01/17 ................................................ 5,263,450
1,500,000 Series A, FGIC Insured, Pre-Refunded, 7.75%, 05/01/06 .................................... 1,582,410
2,000,000 Anchorage School District, Series A, MBIA Insured, 6.30%, 02/01/12 ........................... 2,013,160
5,100,000 Anchorage Water Revenue, Refunding, Senior Lien, MBIA Insured, 7.25%, 08/01/14 ............... 5,392,587
500,000 University of Alaska, COP, Series 1990, CGIC Insured, 7.375%, 10/01/07 ....................... 550,025
250,000 University of Alaska Revenues, Series B, AMBAC Insured, 6.50%, 10/01/17 ...................... 254,460
-----------
64,679,192
-----------
</TABLE>
The accompanying notes are an integral part of these
financial statements.
42
<PAGE>
FRANKLIN TAX-FREE TRUST
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995
(CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN INSURED TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
ARIZONA 2.4%
Arizona State Municipal Financing Program, COP,
$ 2,250,000 Phoenix Water, Series 10, BIG Insured, Pre-Refunded, 7.90%, 08/01/17 ..................... $ 2,428,920
6,000,000 Series 1986-20, BIG Insured, ETM 08/01/07, 7.70%, 08/01/10 ............................... 6,916,680
10,000,000 Series 1986-26, BIG Insured, 7.70%, 08/01/05 ............................................. 10,869,400
2,200,000 Chandler Water and Sewer Revenue, Refunding, FGIC Insured, 7.00%, 07/01/12 ................... 2,353,032
Cochise County USD No. 68, Sierra Vista,
500,000 Refunding, FGIC Insured, 7.50%, 07/01/10 ................................................. 580,985
3,000,000 Series B, FGIC Insured, Pre-Refunded, 7.625%, 07/01/10 ................................... 3,378,960
25,000 Maricopa County Hospital District No. 1, Hospital Facilities Revenue, Refunding, FGIC Insured,
Pre-Refunded, 7.625%, 06/30/12 .............................................................. 26,025
300,000 Maricopa County IDA, Hospital Facility Revenue, Samaritan Health Services, Series A,
Refunding, MBIA Insured, 7.00%, 12/01/16 .................................................... 335,340
Maricopa County USD No. 80, Chandler,
775,000 FGIC Insured, Pre-Refunded, 7.20%, 07/01/07 .............................................. 857,708
825,000 FGIC Insured, Pre-Refunded, 7.20%, 07/01/08 .............................................. 913,044
500,000 FGIC Insured, Pre-Refunded, 7.25%, 07/01/09 .............................................. 554,515
1,000,000 Maricopa County USD No. 98, Fountain Hills, Series A, FGIC Insured, Pre-Refunded, 7.10%,
07/01/10 .................................................................................... 1,088,610
1,000,000 Maricopa UHSD No. 216, Refunding & Improvement, FGIC Insured, 6.70%, 07/01/11 ................ 1,083,670
1,000,000 Mesa IDA, Health Care Facilities Revenue, Refunding, Western Health Network, Inc., Series B-2,
BIG Insured, 7.50%, 01/01/08 ................................................................ 1,083,070
500,000 Mohave County USD No. 1, Lake Havasu Project, Series 1991-B, AMBAC Insured, 5.375%,
07/01/11 .................................................................................... 468,705
890,000 Phoenix GO, Refunding, Series B, MBIA Insured, 5.50%, 07/01/16 ............................... 828,688
Pima County Sewer Revenue,
230,000 FGIC Insured, 6.75%, 07/01/15 ............................................................ 251,926
270,000 FGIC Insured, Pre-Refunded, 6.75%, 07/01/15 .............................................. 280,614
Salt River Project, Agricultural Improvement and Power District, Electric System Revenue,
1,150,000 Refunding, Series A, FGIC Insured, 5.50%, 01/01/19 ....................................... 1,057,057
300,000 Series A, MBIA Insured, 6.50%, 01/01/22 .................................................. 305,472
5,000,000 Tucson Local Development Corp., Leasehold Revenue, Series F, FGIC Insured, Pre-Refunded,
7.30%, 07/01/10 ............................................................................. 5,405,750
------------
41,068,171
------------
ARKANSAS .4%
Arkansas State Development Finance Authority Water Revenue,
1,400,000 Series A, MBIA Insured, Pre-Refunded, 7.00%, 06/01/14 .................................... 1,550,584
2,000,000 Series A, Revolving Loan Fund, MBIA Insured, Pre-Refunded, 6.40%, 06/01/15 ............... 2,163,020
North Little Rock Electric System Revenue,
500,000 Murray Lock and Dam Hydro-Electric Project, MBIA Insured, Pre-Refunded, 9.50%, 07/01/15 .. 523,535
2,000,000 Refunding, Series A, MBIA Insured, 6.50%, 07/01/10 ....................................... 2,121,760
25,000 Pulaski County Health Facilities Board Hospital Revenue, St. Vincent's Infirmary, MBIA
Insured, Pre-Refunded, 10.00%, 09/01/12 ..................................................... 29,909
------------
6,388,808
------------
CALIFORNIA 2.1%
3,750,000 California State Public Works, Board Lease Revenue, University of California Projects,
Series A, AMBAC Insured, 6.40%, 12/01/16 .................................................... 3,825,675
15,000,000 gCorona COP, Corona Community Hospital Project, Pre-Refunded, 9.425%, 09/01/20 ................ 19,592,250
250,000 Oakland RDA, Refunding, Central District Redevelopment, AMBAC Insured, 5.50%, 02/01/14 ....... 233,290
3,250,000 Riverside RDA, Refunding, Casa Blanca Project, Series A, MBIA Insured, 5.625%, 08/01/23 ...... 3,017,885
1,000,000 San Diego, Regional Building Authority Lease Revenue, Refunding, San Miguel Fire Protection,
Series A, MBIA Insured, 5.65%, 01/01/20 ..................................................... 939,090
</TABLE>
The accompanying notes are an integral part of these
financial statements.
43
<PAGE>
FRANKLIN TAX-FREE TRUST
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995
(CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN INSURED TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
CALIFORNIA (CONT.)
$ 70,000 San Jose RDA, Merged Area Redevelopment Project, Series A, AMBAC Insured, Pre-Refunded,
6.90%, 08/01/11 ............................................................................. $ 74,705
1,000,000 Santee Public Financing Authority Revenue, Redevelopment, Refinancing, City Hall Project,
MBIA Insured, 5.45%, 02/01/14 ............................................................... 918,150
2,250,000 Stockton East Water District, 1992 Project, Series A, AMBAC Insured, 6.40%, 04/01/22 ......... 2,292,728
4,630,000 Suisun-Solano Water Authority Revenue, Refunding, CGIC Insured, 5.55%, 05/01/17 .............. 4,238,487
-----------
35,132,260
-----------
COLORADO 4.8%
3,500,000 Adams and Weld Counties GO, Brighton School District No. 27-J, Unlimited Tax, MBIA Insured,
6.30%, 12/01/12 ............................................................................. 3,570,980
1,000,000 Arapahoe County Building Finance Corp., COP, CGIC Insured, 7.50%, 12/01/10 ................... 1,076,740
8,695,000 Arapahoe County COP, Refunding, CGIC Insured, 6.625%, 12/01/16 ............................... 9,219,656
1,250,000 Aspen GO, Housing Bonds, Series 1990-A, FGIC Insured, Pre-Refunded, 7.25%, 04/15/20 .......... 1,280,013
1,500,000 Castle Pines Metropolitan District, Refunding & Improvement, Series 1990, CGIC Insured,
7.625%, 12/01/15 ............................................................................ 1,670,445
2,400,000 Colorado Association of School Boards, COP, Pueblo School District No. 60, Project A, MBIA
Insured, 7.25%, 12/01/09 .................................................................... 2,566,416
Colorado Health Facilities Authority Revenue,
1,175,000 Community Provider Project, Series 1991-A, CGIC Insured, 7.25%, 07/15/17 ................. 1,257,368
1,750,000 Refunding, Sisters of Charity Health Care, Series A, AMBAC Insured, 6.00%, 05/15/22 ...... 1,731,293
3,000,000 Rose Medical Center, MBIA Insured, Pre-Refunded, 7.00%, 08/15/21 ......................... 3,343,980
Colorado Post Secondary Educational Facilities Authority Revenue,
1,000,000 Connie Lee Insured, 6.625%, 06/01/13 ..................................................... 1,038,660
1,000,000 Refunding, University of Denver Project, Connie Lee Insured, 6.00%, 03/01/10 ............. 998,020
2,700,000 University of Denver Project, Connie Lee Insured, 6.25%, 03/01/12 ........................ 2,742,552
2,700,000 University of Denver Project, Connie Lee Insured, 6.25%, 03/01/18 ........................ 2,733,210
1,000,000 Colorado Springs Utilities Revenue, Refunding & Improvement, Series A, MBIA Insured, 5.125%,
11/15/18 .................................................................................... 887,710
Colorado State Board of Agriculture Revenue, University of Aux Facilities,
800,000 Refunding & Improvement, MBIA Insured, 6.40%, 03/01/11 ................................... 833,528
1,000,000 Refunding & Improvement, MBIA Insured, 6.40%, 03/01/17 ................................... 1,027,450
2,000,000 Colorado Water Resources and Power Development Authority Revenue, Series A, FGIC Insured,
6.70%, 11/01/12 ............................................................................. 2,107,220
1,500,000 Denver City and County Board, Water Commissioner, COP, FGIC Insured, 6.625%, 11/15/11 ........ 1,593,270
3,000,000 Denver City and County Hospital Revenue, Children's Hospital Association Project, FGIC
Insured, 6.00%, 10/01/15 .................................................................... 2,982,300
2,000,000 Denver City and County Revenue, Mercy Medical Center Project, MBIA Insured, Pre-Refunded,
7.75%, 05/01/14 ............................................................................. 2,195,580
1,445,000 Denver City and County SFMR, GNMA Secured, Series A, 8.125%, 12/01/20 ........................ 1,504,563
2,000,000 Douglas County School District No. 1, Douglas and Elbert Counties COP, Series D, FGIC Insured,
6.80%, 12/01/11 ............................................................................. 2,143,160
990,000 El Paso County SFMR, Series 1990-A, GNMA Secured, 8.00%, 09/01/22 ............................ 1,039,906
3,600,000 Garfield, Pitkin and Eagle Counties, Reorganized School District No. 1, MBIA Insured, 6.60%,
12/15/14 .................................................................................... 3,750,696
2,000,000 Goldsmith Metropolitan District, Refunding, MBIA Insured, 6.125%, 12/01/12 ................... 2,021,220
1,000,000 Havana Water and Sanitary District Sewer Revenue, CGIC Insured, Pre-Refunded, 7.375%,
09/15/14 .................................................................................... 1,086,000
2,000,000 Inverness Water and Sanitation District GO, Arapahoe and Douglas Counties, Refunding &
Improvement, BIG Insured, Pre-Refunded, 8.125%, 12/01/05 .................................... 2,131,660
Jefferson County COP,
2,000,000 MBIA Insured, 7.125%, 12/01/10 ........................................................... 2,165,140
5,000,000 Refunding, MBIA Insured, 6.65%, 12/01/08 ................................................. 5,335,100
</TABLE>
The accompanying notes are an integral part of these
financial statements.
44
<PAGE>
FRANKLIN TAX-FREE TRUST
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995
(CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN INSURED TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
COLORADO (CONT.)
$ 5,000,000 Jefferson County School District No. R-1, AMBAC Insured, 6.25%, 12/15/12 ..................... $ 5,098,250
565,000 Jefferson County SFMR, Refunding, Series A, MBIA Insured, 8.875%, 10/01/13 ................... 612,528
3,000,000 La Plata County School District No. R-9, Durango City, FGIC Insured, 6.55%, 11/01/12 ......... 3,141,360
1,000,000 Morgan County PCR, Refunding, First Mortgage, Public Service Co., Series A, MBIA Insured,
5.50%, 06/01/12 ............................................................................. 951,800
1,600,000 Parker Water and Sanitation District, Water and Sewer Revenue, Refunding, FGIC Insured,
6.20%, 10/01/15 ............................................................................. 1,625,376
2,500,000 Regional Transportation District, Sales Tax Revenue, Refunding & Improvement, FGIC Insured,
6.25%, 11/01/12 ............................................................................. 2,565,275
------------
80,028,425
------------
CONNECTICUT .5%
Connecticut Health and Educational Facilities Authority Revenue,
2,000,000 Danbury Hospital, Series E, MBIA Insured, 6.50%, 07/01/14 ................................ 2,065,820
2,000,000 Trinity College, Series D, FGIC Insured, 6.125%, 07/01/24 ................................ 1,995,720
2,900,000 Yale-New Haven Hospital, Issue I, MBIA Insured, 7.10%, 07/01/25 .......................... 3,066,982
2,000,000 New Haven Air Rights Parking Facility Revenue, Refunding, MBIA Insured, 6.50%, 12/01/15 ...... 2,068,340
------------
9,196,862
------------
DELAWARE .3%
1,000,000 Delaware State EDA, PCR, Refunding, Series B, AMBAC Insured, 6.75%, 05/01/19 ................. 1,049,240
2,900,000 Delaware State Health Facilities Authority Revenue, Refunding, Medical Center, MBIA Insured,
7.00%, 10/01/15 ............................................................................. 3,044,101
250,000 Delaware Transportation Authority System Revenue, MBIA Insured, Pre-Refunded, 7.75%,
07/01/08 .................................................................................... 274,735
------------
4,368,076
------------
DISTRICT OF COLUMBIA .3%
1,000,000 District of Columbia GO, Refunding, Series B, FGIC Insured, Pre-Refunded, 7.75%, 06/01/04 .... 1,056,150
965,000 District of Columbia HFA, RMR, Series 1986-1, FGIC Insured, 7.75%, 09/01/16 .................. 1,007,122
2,000,000 District of Columbia Revenue, Howard University, Series A, MBIA Insured, 8.00%, 10/01/17 ..... 2,120,720
150,000 District of Columbia, Series A, AMBAC Insured, Pre-Refunded, 7.50%, 06/01/10 ................. 167,906
------------
4,351,898
------------
FLORIDA 2.6%
1,800,000 Cape Coral Franchise Fees Revenue, AMBAC Insured, 5.40%, 12/01/13 ............................ 1,673,550
2,750,000 Dade County Health Facilities Authority, Hospital Revenue, Mt. Sinai Medical Center Project,
CGIC Insured, Pre-Refunded, 8.40%, 12/01/17 ................................................. 3,046,505
200,000 Dade County Seaport Revenue, Refunding, Series E, MBIA Insured, 8.00%, 10/01/08 .............. 242,826
15,000 Dade County, Series DD, MBIA Insured, 7.75%, 10/01/18 ........................................ 15,840
725,000 Florida HFA, SFMR, Series 1, FGIC Insured, 8.00%, 12/15/13 ................................... 758,553
2,000,000 Florida North Port Utility Revenue, FGIC Insured, 6.20%, 10/01/12 ............................ 2,047,680
200,000 Florida State Municipal Power Agency Revenue, Refunding, Stanton Project, MBIA Insured,
6.00%, 10/01/15 ............................................................................. 200,090
Florida Turnpike Authority Revenue,
3,000,000 Series A, AMBAC Insured, Pre-Refunded, 7.20%, 07/01/11.................................... 3,379,920
710,000 Series A, FGIC Insured, 6.35%, 07/01/22 .................................................. 724,143
1,290,000 Series A, FGIC Insured, Pre-Refunded, 6.35%, 07/01/22 .................................... 1,392,142
25,000 Fort Myers Utility Revenue, Refunding, Series A, BIG Insured, 6.00%, 10/01/19 ................ 24,872
3,000,000 Hillsborough County IDAR, University Community Hospital, MBIA Insured, 5.80%, 08/15/24 ....... 2,869,590
100,000 Miami, Refunding, MBIA Insured, Pre-Refunded, 7.40%, 04/01/05 ................................ 110,364
2,800,000 Naples Hospital Revenue, Refunding, Naples Community Hospital, Inc. Project, MBIA Insured,
5.25%, 10/01/09 ............................................................................. 2,634,044
1,000,000 Opa-Locka Capital Improvement Revenue, Refunding, FGIC Insured, 6.125%, 01/01/24 ............. 1,008,150
960,000 Orange City Utilities System Revenue, Refunding & Improvement, AMBAC Insured, 7.20%,
10/01/17 .................................................................................... 1,015,162
</TABLE>
The accompanying notes are an integral part of these
financial statements.
45
<PAGE>
FRANKLIN TAX-FREE TRUST
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995
(CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN INSURED TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
FLORIDA (CONT.)
$ 100,000 Orange County Capital Improvement Revenue, Series B, MBIA Insured, Pre-Refunded, 7.70%,
10/01/18 .................................................................................... $ 110,738
1,000,000 Orange County Health Facilities Authority, Hospital Revenue, Orlando Regional Health Care,
Series A, Refunding, MBIA Insured, 6.00%, 11/01/24 .......................................... 990,330
Orlando and Orange County Expressway Authority Revenue,
100,000 Junior Lien, FGIC Insured, 6.50%, 07/01/10 ............................................... 107,347
225,000 Junior Lien, FGIC Insured, 6.50%, 07/01/12 ............................................... 240,255
2,765,000 Refunding, Senior Lien, FGIC Insured, 5.25%, 07/01/23 .................................... 2,446,334
15,000 Orlando Waste Water System Revenue, Refunding, Series A, AMBAC Insured, Pre-Refunded,
7.375%, 10/01/11 ............................................................................ 15,901
1,000,000 Osceola County Transportation Revenue, Parkway Project, MBIA Insured, 6.10%, 04/01/17 ........ 1,008,940
4,000,000 Palm Beach County Solid Waste Authority Revenue, BIG Insured, 8.375%, 07/01/10 ............... 4,401,200
1,000,000 Panama City Water and Sewer Revenue, Refunding & Improvement, AMBAC Insured, 5.625%,
06/01/19 .................................................................................... 945,000
1,000,000 Polk County IDAR, Winter Haven Hospital, Series 2, MBIA Insured, 6.25%, 09/01/15 ............. 1,020,010
Port Orange Water and Sewer Revenue,
635,000 Refunding, Junior Lien, AMBAC Insured, 5.375%, 10/01/12 .................................. 596,830
2,700,000 Refunding, Junior Lien, AMBAC Insured, 5.25%, 10/01/21 ................................... 2,406,348
1,970,000 Royal Palm Beach Utilities System Revenue, Series B, AMBAC Insured, Pre-Refunded, 8.875%,
10/15/15 .................................................................................... 2,197,535
2,010,000 Sarasota-Manatee Airport Authority Revenue, Refunding, MBIA Insured, 5.625%, 08/01/14 ........ 1,939,751
250,000 Sumter County School District Revenue, Multi-District Loan Program, CGIC Insured, 7.15%,
11/01/15..................................................................................... 286,995
2,000,000 Tamarac Water and Sewer Utility Revenue, AMBAC Insured, Pre-Refunded, 8.25%, 10/01/11 ........ 2,145,320
1,200,000 Temple Terrace Water and Sewer Revenue, FGIC Insured, 6.25%, 10/01/12 ........................ 1,229,676
-----------
43,231,941
-----------
GEORGIA 1.2%
2,860,000 Bartow County Water and Sewage Revenue, Refunding, AMBAC Insured, Pre-Refunded, 8.00%,
09/01/15 .................................................................................... 3,186,126
1,535,000 Brunswick Water and Sewer Revenue, Refunding & Improvement, MBIA Insured, 6.10%, 10/01/14 .... 1,561,325
Burke County Development Authority PCR, Georgia Power Co.,
325,000 FGIC Insured, 10.125%, 06/01/15 .......................................................... 335,277
2,000,000 Vogtle Plant, 7th Series, MBIA Insured, 6.625%, 10/01/24 ................................. 2,050,560
1,000,000 Cherokee County Water and Sewage Revenue, Refunding, MBIA Insured, 6.90%, 08/01/18 ........... 1,101,700
1,500,000 Columbia County Water and Sewage Revenue, Refunding, AMBAC Insured, 6.25%, 06/01/12 .......... 1,521,975
1,060,000 Fitzgerald Housing Authority Mortgage Revenue, Refunding, Bridge Creek, Series A,
MBIA Insured, 6.50%, 07/01/24 ............................................................... 1,069,339
Fulton de Kalb Hospital Authority Revenue, COP,
200,000 Grady Memorial Hospital Project, AMBAC Insured, Pre-Refunded, 6.90%, 01/01/15 ............ 220,888
300,000 Refunding, MBIA Insured, 5.50%, 01/01/20 ................................................. 271,785
5,000,000 Georgia Municipal Electric Authority, Power Revenue, Series EE, AMBAC Insured, 6.65%,
01/01/21..................................................................................... 5,079,900
3,250,000 Macon-Bibb County Hospital Authority Revenue, Medical Center, FGIC Insured, Pre-Refunded,
7.00%, 08/01/14 ............................................................................. 3,555,955
1,000,000 Marietta, City Development Authority Revenue, Life College, Inc. Project, CGIC Insured,
7.20%, 12/01/09.............................................................................. 1,072,790
10,000 Metropolitan Atlanta Rapid Transit Authority, Sales Tax Revenue, Series J, FGIC Insured,
Pre-Refunded, 8.00%, 07/01/18 ............................................................... 11,098
-----------
21,038,718
-----------
</TABLE>
The accompanying notes are an integral part of these
financial statements.
46
<PAGE>
FRANKLIN TAX-FREE TRUST
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995
(CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN INSURED TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
HAWAII 1.1%
Hawaii County GO,
$ 1,000,000 Refunding & Improvement, Series A, FGIC Insured, 5.60%, 05/01/12 ......................... $ 958,460
1,000,000 Refunding & Improvement, Series A, FGIC Insured, 5.60%, 05/01/13 ......................... 957,110
5,000,000 Hawaii State Airports System Revenue, Second Series, FGIC Insured, 7.50%, 07/01/20 ........... 5,350,450
Hawaii State Department of Budget and Finance, Special Purposes Mortgage Revenue,
3,000,000 Hawaii Electric Co., MBIA Insured, 6.55%, 12/01/22 ....................................... 3,042,660
335,000 Refunding, Queens Medical Center Project, FGIC Insured, 6.50%, 07/01/12 .................. 339,931
4,000,000 Refunding, St. Francis Medical Centers, CGIC Insured, 6.50%, 07/01/22 .................... 4,055,240
Hawaii State Harbor Capital Improvement Revenue,
535,000 FGIC Insured, 6.40%, 07/01/05 ............................................................ 561,723
605,000 FGIC Insured, 6.40%, 07/01/06 ............................................................ 630,779
610,000 FGIC Insured, 6.40%, 07/01/07 ............................................................ 631,551
825,000 Honolulu, City and County, MFHR, Hale Pauahi Project, Series A, FHA Mortgage Insured, MBIA
Insured, 8.70%, 12/01/28 .................................................................... 865,483
Kauai County GO,
385,000 Refunding, MBIA Insured, Pre-Refunded, 7.40%, 08/01/06 ................................... 414,156
415,000 Refunding, MBIA Insured, Pre-Refunded, 7.45%, 08/01/07 ................................... 447,071
445,000 Refunding, MBIA Insured, Pre-Refunded, 7.45%, 08/01/08 ................................... 479,390
-----------
18,734,004
-----------
IDAHO .1%
1,000,000 Idaho State University at Boise Revenues, Student Fee, MBIA Insured, 6.50%, 04/01/19 ......... 1,023,710
-----------
ILLINOIS 6.0%
500,000 Aurora Hospital Facilities Revenue, Refunding, Mercy Center for Health Care Services,
Series 1985-A, AMBAC Insured, 9.625%, 10/01/09 .............................................. 524,770
40,000 Aurora, Series B, MBIA Insured, Pre-Refunded, 7.25%, 01/01/19 ................................ 43,419
615,000 Aurora SFMR, GNMA Secured, AMBAC Insured, 7.80%, 12/01/15 .................................... 634,373
270,000 Bloomingdale Waterworks and Sewer Revenue, MBIA Insured, 7.80%, 05/01/06 ..................... 279,242
1,350,000 Cary Waterworks and Sewerage Revenue, Series A, MBIA Insured, 6.40%, 05/01/17 ................ 1,361,394
100,000 Central Lake County Joint Action Water Agency Interim Revenue, Series A, AMBAC Insured,
Pre-Refunded, 7.00%, 05/01/19 ............................................................... 110,044
320,000 Chicago Board Education Lease, Series A, Refunding, MBIA Insured, 6.25%, 01/01/09 ............ 330,141
Chicago Central Public Library,
2,000,000 Refunding, Series 1987, MBIA Insured, Pre-Refunded, 8.00%, 01/01/11 ...................... 2,147,280
3,500,000 Series 1989, AMBAC Insured, Pre-Refunded, 7.60%, 01/01/08 ................................ 3,870,230
1,800,000 Series B, AMBAC Insured, 6.70%, 01/01/06 ................................................. 1,941,804
1,800,000 Series B, AMBAC Insured, 6.75%, 01/01/07 ................................................. 1,941,516
100,000 Chicago Heights, MBIA Insured, 7.40%, 12/01/03 ............................................... 112,533
Chicago Public Building Commission Revenue,
1,600,000 Community College District No. 508, Series A, MBIA Insured, ETM 01/01/04, 7.70%, 01/01/08 1,746,496
4,000,000 Community College District No. 508, Series B, BIG Insured, ETM 01/01/03, 8.75%, 01/01/07 . 4,363,040
Chicago Waste Water Transmission Revenue,
100,000 AMBAC Insured, Pre-Refunded, 7.20%, 11/15/19 ............................................. 110,449
7,640,000 Refunding & Improvement, FGIC Insured, Pre-Refunded, 7.375%, 01/01/12 .................... 7,967,068
1,500,000 Cicero GO, CGIC Insured, 6.90%, 12/01/12 ..................................................... 1,605,090
Cook County Community College District No. 508, COP,
7,470,000 FGIC Insured, 8.50%, 01/01/02 ............................................................ 8,719,432
5,000,000 FGIC Insured, 8.75%, 01/01/05 ............................................................ 6,125,300
225,000 Cook County, Series B, FGIC Insured, 5.50%, 11/15/22 ......................................... 200,727
4,935,000 Decatur Hospital Revenue, Decatur Memorial Hospital, Series B, MBIA Insured, 6.85%, 10/01/16 . 5,128,797
</TABLE>
The accompanying notes are an integral part of these
financial statements.
47
<PAGE>
FRANKLIN TAX-FREE TRUST
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995
(CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN INSURED TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
ILLINOIS (CONT.)
$ 750,000 Des Plains Hospital Facility Revenue, Refunding, Holy Family Hospital, AMBAC Insured, 9.25%,
01/01/14 .................................................................................... $ 792,000
2,000,000 Evergreen Park, Village of, Hospital Facility Revenue, Refunding, Little Co. of Mary Hospital,
Inc., MBIA Insured, 7.75%, 02/15/09 ......................................................... 2,138,240
500,000 Franklin Park Alternate Revenue, AMBAC Insured, Pre-Refunded, 6.85%, 07/01/22 ................ 559,930
Illinois Health Facilities Authority Revenue,
4,452,000 Community Provider Pooled Loan, Series A, CGIC Insured, 7.35%, 08/15/10 .................. 4,772,856
4,050,000 Franciscan Sisters Health Care Corp., MBIA Insured, Pre-Refunded, 7.875%, 09/01/18 ....... 4,410,207
2,685,000 Methodist Health Services Corp., Series G, BIG Insured, 8.00%, 08/01/15 .................. 2,956,722
4,280,000 Michael Reese Hospital, Series A, CGIC Insured, ETM 02/15/00, 7.60%, 02/15/05 ............ 4,793,643
280,000 Refunding, Franciscan Sisters Health Care Corp., MBIA Insured, Pre-Refunded, 9.25%,
09/01/11 ................................................................................ 292,135
384,000 Refunding, Series B, MBIA Insured, ETM 08/15/01, 7.90%, 08/15/03 ......................... 442,172
47,000 Series 1990, CGIC Insured, 7.75%, 08/15/10 ............................................... 55,995
37,000 Series B, Community Provider Pooled Program, MBIA Insured, 7.90%, 08/15/03 ............... 38,313
2,444,000 Series B, MBIA Insured, 7.90%, 08/15/03 .................................................. 2,517,662
1,000,000 Silver Cross Hospital, MBIA Insured, 7.00%, 08/15/21 ..................................... 1,049,890
7,000,000 University of Chicago Hospital Project, BIG Insured, Pre-Refunded, 8.10%, 08/01/14 ....... 7,637,140
2,583,000 Unrefunded, Series 1990, CGIC Insured, ETM 08/15/10, 7.75%, 08/15/10 ..................... 2,832,492
5,750,000 Illinois State COP, CGIC Insured, 6.95%, 07/01/13 ............................................ 6,150,660
Joliet GO,
560,000 Series 1987, BIG Insured, Pre-Refunded, 8.00%, 01/01/09 .................................. 608,434
605,000 Series 1987, BIG Insured, Pre-Refunded, 8.00%, 01/01/10 .................................. 657,326
650,000 Series 1987, BIG Insured, Pre-Refunded, 8.00%, 01/01/11 .................................. 706,219
200,000 Kane County Public Building Commission, Community College Facilities Revenue,
Elgin Community College District No. 509, FGIC Insured, Pre-Refunded, 7.00%, 12/01/10 ....... 216,216
300,000 Macon County and Decatur COP, Decatur Public Building Commission, FGIC Insured, 6.50%,
01/01/06 .................................................................................... 318,897
1,735,000 Northwest Suburban Municipal Joint Action Water Agency, Illinois Water Supply System Revenue,
Refunding, MBIA Insured, Pre-Refunded, 7.375%, 05/01/15 ..................................... 1,823,103
2,000,000 Onterie Center Project, HFC, Mortgage Revenue, Refunding, Series A, MBIA Insured, 7.05%,
07/01/27..................................................................................... 2,082,020
300,000 Regional Transportation Authority, Series A, AMBAC Insured, 7.20%, 11/01/20 .................. 341,202
2,040,000 Southwestern Development Authority, Capital Improvement Revenue, McKendre College Project,
CGIC Insured, 7.375%, 02/01/11 .............................................................. 2,157,524
1,500,000 St. Clair County Public Building Commission Revenue, MBIA Insured, ETM 12/01/01, 8.00%,
12/01/05 .................................................................................... 1,574,400
------------
101,188,543
------------
INDIANA 2.4%
1,000,000 Carroll County Consolidated School Building Corp., Refunding, First Mortgage, AMBAC Insured,
7.625%, 01/01/04 ............................................................................ 1,086,840
Fort Wayne Hospital Authority Revenue, Ancillary System, Inc.,
250,000 Parkview Memorial Hospital Project, Series A, FGIC Insured, 7.50%, 11/15/11 .............. 269,525
2,000,000 Refunding, Series C, BIG Insured, Pre-Refunded, 8.125%, 07/01/18 ......................... 2,261,940
100,000 Series A, BIG Insured, Pre-Refunded, 9.125%, 07/01/15 .................................... 103,562
Indiana Health Facility Financing Authority Hospital Revenue,
10,000,000 Bartholomew County Hospital Project, CGIC Insured, Pre-Refunded, 7.75%, 08/15/20 ......... 11,396,500
3,500,000 Community Hospitals of Indiana, MBIA Insured, 7.00%, 07/01/21 ............................ 3,667,790
250,000 Refunding & Improvement, Community Hospital Project, MBIA Insured, 6.40%, 05/01/12 ....... 253,425
100,000 Indiana Municipal Power Agency, Power Supply System Revenue, Refunding, Series A, AMBAC
Insured, Pre-Refunded, 7.25%, 01/01/15 ...................................................... 104,182
10,000,000 Indianapolis Airport Authority, International Airport Revenue, BIG Insured, 8.30%, 07/01/18 .. 11,000,900
500,000 Indianapolis Gas Utility Revenue, Refunding, Series B, FGIC Insured, 4.00%, 06/01/15 ......... 368,995
</TABLE>
The accompanying notes are an integral part of these
financial statements.
48
<PAGE>
FRANKLIN TAX-FREE TRUST
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995
(CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN INSURED TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
INDIANA (CONT.)
$ 500,000 Jasper County PCR, Refunding, Northern Indiana Public Service, MBIA Insured, 7.10%,
07/01/17 .................................................................................... $ 528,835
1,000,000 Marion County Convention and Recreational Facilities Authority, Excise Tax Revenue, Lease
Rental, Series B, AMBAC Insured, Pre-Refunded, 7.00%, 06/01/21 .............................. 1,112,030
6,000,000 Monroe County Hospital Authority Revenue, Refunding, Bloomington Hospital Project, BIG
Insured, 7.125%, 05/01/11 ................................................................... 6,302,280
1,500,000 Patoka Lake Regional Water and Sewer District, Waterworks Revenue, Series A, AMBAC Insured,
6.45%, 01/01/15 ............................................................................. 1,516,110
Rockport PCR,
900,000 American Electric Power Generating Co. Project, Series A, FGIC Insured, 9.375%, 09/01/14 . 939,537
185,000 Refunding, Michigan Power Co., Series B, FGIC Insured, 7.60%, 03/01/16 .................... 206,047
------------
41,118,498
------------
IOWA .7%
4,040,000 Davenport Hospital Facility Revenue, Mercy Hospital Project, MBIA Insured, 6.625%, 07/01/14 .. 4,191,460
200,000 Davenport Hospital Revenue, St. Lukes Hospital, Series A, AMBAC Insured, 7.40%, 07/01/20 ..... 218,928
5,025,000 Des Moines Urban Renewal and Tax Increment Revenue, Refunding, FGIC Insured, 7.90%,
06/01/14 .................................................................................... 5,308,561
2,155,000 Greater Iowa, Housing Assistance Corp., Mortgage Revenue, Refunding, Logan Park Project,
Series A, MBIA Insured, 6.50%, 01/01/24 ..................................................... 2,173,986
------------
11,892,935
------------
KANSAS .5%
3,350,000 Burlington PCR, Refunding, Kansas Gas & Electric Co. Project, MBIA Insured, 7.00%, 06/01/31 .. 3,532,173
1,595,000 Cowley and Shawnee Counties, SFMR, GNMA Secured, AMBAC Insured, 7.35%, 12/01/11 .............. 1,679,120
2,000,000 Wichita Hospital Revenue, Refunding & Improvement, St. Francis, MBIA Insured, 6.25%,
10/01/10 .................................................................................... 2,066,740
1,000,000 Wichita Water and Sewer Utility Revenue, Refunding & Improvement, Series B, FGIC Insured,
6.00%, 10/01/12 ............................................................................. 987,140
------------
8,265,173
------------
KENTUCKY .7%
2,000,000 Danville Multi-City Lease Revenue, Sewer and Drain System, MBIA Insured, Pre-Refunded, 6.75%,
03/01/11 .................................................................................... 2,207,520
1,000,000 Jefferson County Health Facilities Revenue, Jewish Hospital Services, Inc., AMBAC Insured,
6.55%, 05/01/22 ............................................................................. 1,021,250
665,000 Kenton County Hospital Facility Revenue, St. Elizabeth Medical Center Project, AMBAC Insured,
Pre-Refunded, 9.30%, 11/01/10 ............................................................... 698,822
2,375,000 Kentucky EDA Finance, Hospital Facilities Revenue, St. Elizabeth Medical Center Project,
Series A, FGIC Insured, 6.00%, 12/01/22 ..................................................... 2,312,205
1,000,000 Kentucky EDA Finance, Medical Center Revenue, Refunding & Improvement, Ashland Hospital
Corp., Series A, CGIC Insured, 6.125%, 02/01/12 ............................................. 1,001,760
115,000 Kentucky HFC, MFMR, Series A, BIG Insured, 8.875%, 07/01/19 .................................. 117,878
Louisville and Jefferson County, Metropolitan Sewer District Revenue,
2,000,000 AMBAC Insured, 6.75%, 05/15/25 ........................................................... 2,107,280
100,000 FGIC Insured, Pre-Refunded, 7.35%, 05/01/19 .............................................. 111,612
2,000,000 Northern Kentucky University, COP, Student Housing Facilities, CGIC Insured, 7.25%, 01/01/12 . 2,150,360
------------
11,728,687
------------
LOUISIANA .8%
100,000 Alexandria Utilities Revenue, FGIC Insured, Pre-Refunded, 8.15%, 05/01/06 .................... 109,292
Calcasieu Parish Memorial Hospital Service District Revenue,
1,000,000 Lake Charles Memorial Hospital Project, BIG Insured, Pre-Refunded, 8.40%, 12/01/12 ....... 1,105,100
850,000 Lake Charles Memorial Hospital Project, BIG Insured, Pre-Refunded, 7.50%, 12/01/18 ....... 905,803
15,000 East Baton Rouge Parish, Sales and Use Tax Public Improvement, MBIA Insured, 7.25%, 02/01/12 . 15,730
</TABLE>
The accompanying notes are an integral part of these
financial statements.
49
<PAGE>
FRANKLIN TAX-FREE TRUST
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995
(CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN INSURED TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
LOUISIANA (CONT.)
$ 200,000 Greater New Orleans Expressway Commission Revenue, Refunding & Improvement, BIG Insured,
Pre-Refunded, 7.80%, 11/01/12 ............................................................... $ 215,272
1,500,000 Jefferson Parish Hospital Service Revenue, District No. 2, Refunding, East Jefferson General
Hospital, MBIA Insured, Pre-Refunded, 8.00%, 07/01/16 ....................................... 1,592,925
1,700,000 Jefferson Sales Tax District, Special Sales Tax Revenue, Refunding, Series A, BIG Insured,
Pre-Refunded, 8.00%, 07/01/05 ............................................................... 1,886,575
300,000 Lafayette Public Improvement, Sales Tax Revenue, Refunding, FGIC Insured, Pre-Refunded, 8.00%,
03/01/08 .................................................................................... 330,006
230,000 Louisiana HFA, SFMR, Series 1985-A, FGIC Insured, 9.375%, 02/01/15 ........................... 238,170
3,000,000 Louisiana Public Facilities Authority Revenue, College and University of Loyola, FGIC Insured,
Pre-Refunded, 8.50%, 12/01/09 ............................................................... 3,241,050
150,000 Louisiana Regional Transit Authority Revenue, Refunding, FGIC Insured, 8.00%, 12/01/13 ....... 166,977
1,500,000 Louisiana State GO, Series A, CGIC Insured, Pre-Refunded, 7.375%, 05/01/05 ................... 1,575,315
400,000 Louisiana State, Refunding, Series B, MBIA Insured, 5.625%, 08/01/13 ......................... 383,396
500,000 New Orleans Public Improvement, FGIC Insured, 7.50%, 09/01/21 ................................ 542,795
650,000 Terrebonne Parish Hospital Service District No. 1 Revenue, Refunding, Terrebonne General
Medical Center Project, BIG Insured, Pre-Refunded, 9.40%, 04/01/15 .......................... 665,867
------------
12,974,273
------------
MAINE .6%
Ellsworth GO,
635,000 MBIA Insured, 5.25%, 11/01/12 ............................................................ 578,377
655,000 MBIA Insured, 5.25%, 11/01/13 ............................................................ 594,786
2,000,000 Maine Health and Higher Educational Facilities Authority Hospital Revenue,
Eastern Maine Health Care, FGIC Insured, 6.625%, 10/01/11 ................................... 2,084,020
2,000,000 Maine Health and Higher Educational Facilities Authority Revenue, Series B, FSA Insured,
7.00%, 07/01/24 ............................................................................. 2,121,800
Maine State Turnpike Authority Revenue,
525,000 MBIA Insured, 6.00%, 07/01/14 ............................................................ 519,619
2,500,000 MBIA Insured, 6.00%, 07/01/18 ............................................................ 2,456,625
Old Orchard Beach,
1,180,000 MBIA Insured, 6.65%, 09/01/11 ............................................................ 1,257,290
535,000 MBIA Insured, 6.65%, 09/01/12 ............................................................ 570,043
------------
10,182,560
------------
MARYLAND .4%
Maryland State Health and Higher Educational Facilities Authority Revenue,
2,000,000 Montgomery General Hospital, Connie Lee Insured, 5.625%, 07/01/18 ........................ 1,840,520
200,000 University of Maryland Medical System, Series B, FGIC Insured, ETM 07/01/12, 7.00%,
07/01/22 ................................................................................ 226,972
Maryland State Housing and Community Development Administration Department, Infrastructure
Financing,
2,000,000 Series A, AMBAC Insured, 6.625%, 06/01/12 ................................................ 2,041,920
820,000 Series A, AMBAC Insured, 6.70%, 06/01/22 ................................................. 834,555
1,600,000 Morgan State University Revenue, Series A, MBIA Insured, Pre-Refunded, 7.00%, 07/01/20 ....... 1,768,272
------------
6,712,239
------------
MASSACHUSETTS 6.1%
3,700,000 Boston Water and Sewer Commission Revenue, Series A, FGIC Insured, 6.00%, 11/01/21 ........... 3,622,596
250,000 Groton-Dunstable Regional School District, AMBAC Insured, Pre-Refunded, 6.60%, 02/01/07 ...... 272,598
Massachusetts Bay Transportation Authority,
2,370,000 Series A, FGIC Insured, 5.75%, 03/01/22 .................................................. 2,257,828
100,000 Series A, MBIA Insured, Pre-Refunded, 7.625%, 03/01/15 ................................... 112,779
</TABLE>
The accompanying notes are an integral part of these
financial statements.
50
<PAGE>
FRANKLIN TAX-FREE TRUST
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995
(CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN INSURED TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
MASSACHUSETTS (CONT.)
$ 3,000,000 Massachusetts Municipal Wholesale Electric Co., Power Supply System Revenue, Refunding,
Series A, AMBAC Insured, 6.00%, 07/01/18 .................................................... $ 2,981,070
4,000,000 Massachusetts Port Authority Revenue, Series A, FGIC Insured, 6.00%, 07/01/23 ................ 3,836,880
1,000,000 Massachusetts State College Building Authority Project Revenue, Refunding, Series A, MBIA
Insured, Pre-Refunded, 7.25%, 05/01/16 ...................................................... 1,049,980
60,000 Massachusetts State Consolidated Loan, Series C, AMBAC Insured, Pre-Refunded, 7.00%,
06/01/09 .................................................................................... 65,495
Massachusetts State Health and Educational Facilities Authority Revenue,
1,500,000 Berkshire Health Systems, Series A, MBIA Insured, 6.75%, 10/01/19 ........................ 1,532,175
1,500,000 Beverly Hospital, Series E, MBIA Insured, Pre-Refunded, 7.70%, 07/01/20 .................. 1,706,175
5,000,000 Brandeis University, Series C, MBIA Insured, 6.80%, 10/01/19 ............................. 5,181,300
1,100,000 Capital Asset Program F-1, MBIA Insured, 7.30%, 10/01/18 ................................. 1,179,420
12,555,000 Fallon Health Care System, Series A, CGIC Insured, 6.75%, 06/01/20 ....................... 13,042,511
2,000,000 Lahey Clinic Medical Center, Series B, MBIA Insured, 5.375%, 07/01/23 .................... 1,776,040
8,220,000 Massachusetts General Hospital, Series F, AMBAC Insured, 6.25%, 07/01/20 ................. 8,268,662
1,000,000 Massachusetts Medical Center, Series A, AMBAC Insured, 7.10%, 07/01/21 ................... 1,066,360
1,085,000 Mclean Hospital, Series C, FGIC Insured, 6.625%, 07/01/15 ................................ 1,124,125
100,000 Mt. Auburn Hospital, Series A, MBIA Insured, Pre-Refunded, 7.875%, 07/01/18 .............. 110,212
15,400,000 New England Medical Center Hospital, Series F, FGIC Insured, 6.625%, 07/01/25 ............ 15,955,324
8,500,000 North Eastern University, Series E, MBIA Insured, 6.55%, 10/01/22 ........................ 8,755,000
2,000,000 Refunding, Stonehill College, Series E, MBIA Insured, 6.60%, 07/01/20 .................... 2,067,160
5,250,000 Refunding, Valley Regional Health Systems, Series C, Connie Lee Insured, 6.375%, 07/01/14 5,289,323
2,000,000 Refunding, Youville Hospital, Series B, MBIA Insured, 6.00%, 02/15/25 .................... 1,929,940
6,520,000 Massachusetts State HFA Projects, Refunding, Series A, AMBAC Insured, 6.15%, 10/01/15 ........ 6,444,694
Massachusetts State Industrial Finance Agency Revenue,
3,000,000 Babson College, Series A, MBIA Insured, 6.50%, 10/01/22 .................................. 3,072,720
5,000,000 Jewish Philanthropies, Series A, AMBAC Insured, 6.375%, 02/01/15 ......................... 5,091,950
2,000,000 Monson GO, School District, Series 1990, MBIA Insured, Pre-Refunded, 7.70%, 10/15/10 ......... 2,286,040
2,300,000 Palmer GO, Series B, AMBAC Insured, Pre-Refunded, 7.70%, 10/01/10 ............................ 2,627,290
------------
102,705,647
------------
MICHIGAN .7%
100,000 Chippewa Valley School Building and Site, FGIC Insured, Pre-Refunded, 6.375%, 05/01/06 ....... 107,750
4,000,000 Detroit Sewerage Disposal Revenue, FGIC Insured, 6.625%, 07/01/21 ............................ 4,124,400
2,000,000 Kalamazoo Hospital Finance Authority, Hospital Facilities Revenue, Refunding & Improvement,
Bronson Methodist Church, Series A, MBIA Insured, 6.375%, 05/15/17 .......................... 2,033,460
500,000 gMichigan State Comprehensive Transportation Revenue, Refunding, Series 1986-II, Pre-Refunded,
7.75%, 08/01/11 ............................................................................. 523,975
1,000,000 Michigan State HDA, Rental Housing Revenue, Series A, Refunding, AMBAC Insured, 5.90%,
04/01/23 .................................................................................... 956,440
595,000 Michigan State HDA, SFMR, Series 1986-A, FGIC Insured, 8.00%, 10/01/06 ....................... 612,737
2,500,000 Michigan State Hospital Finance Authority Revenue, Refunding, St. John Hospital, Series A,
AMBAC Insured, 6.00%, 05/15/13 .............................................................. 2,469,775
Michigan State Strategic Fund Limited Obligation Revenue,
200,000 Refunding, Detroit Edison Co. Project, FGIC Insured, 6.875%, 12/01/21 .................... 211,040
250,000 Refunding, Detroit Edison Co. Project, Series BB, AMBAC Insured, 7.00%, 05/01/21 ......... 277,435
------------
11,317,012
------------
MINNESOTA 1.1%
800,000 Minneapolis Convention Center, Sales Tax Revenue, AMBAC Insured, Pre-Refunded, 7.75%,
04/01/11 .................................................................................... 842,432
4,000,000 Minneapolis-St. Paul Housing Finance Board, MFMR, GNMA Secured, Mortgage Loan, Riverside
Plaza Project, 8.20%, 12/20/18 .............................................................. 4,203,000
</TABLE>
The accompanying notes are an integral part of these
financial statements.
51
<PAGE>
FRANKLIN TAX-FREE TRUST
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995
(CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN INSURED TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
MINNESOTA (CONT.)
$ 200,000 Northern Municipal Power Agency, Minnesota Electric System Revenue, Refunding, Series B,
AMBAC Insured, 5.50%, 01/01/18 .............................................................. $ 187,640
1,200,000 Washington County Governmental Housing, Scandia II, Series B, FGIC Insured, 6.30%, 07/01/24 .. 1,221,768
2,415,000 Washington County, Raymie Johnson Apartments, Series C, Refunding, FGIC Insured, 6.30%,
01/01/20 .................................................................................... 2,458,808
8,775,000 Western Minnesota Municipal Power Agency, Power Supply Revenue, Series A, MBIA Insured,
6.125%, 01/01/16 ............................................................................ 8,775,702
------------
17,689,350
------------
MISSISSIPPI .1%
Harrison County Correctional Facilities Finance Authority, Special Obligation Revenue,
1,000,000 FGIC Insured, Pre-Refunded, 8.30%, 09/01/05 .............................................. 1,098,040
1,000,000 FGIC Insured, Pre-Refunded, 8.30%, 09/01/06 .............................................. 1,098,040
200,000 Harrison County Waste Water Management District Revenue, Refunding, Wastewater Treatment
Facilities, Series A, FGIC Insured, 8.50%, 02/01/13 ......................................... 259,096
20,000 Mississippi HFC, SFMR, Refunding, Series A, FGIC Insured, 7.70%, 10/15/08 .................... 20,729
------------
2,475,905
------------
MISSOURI 2.8%
2,000,000 Branson Reorganization School District No. R-4, Refunding & Improvement, CGIC Insured, 6.20%,
03/01/06 .................................................................................... 2,038,720
1,000,000 Cape Girardeau County IDA, Health Care Facilities Revenue, Refunding, Southeast Missouri
Hospital Association, MBIA Insured, 5.25%, 06/01/16 ......................................... 885,350
200,000 Jackson County Consolidated School District No. 2, Series A, AMBAC Insured, Pre-Refunded,
6.65%, 03/15/11 ............................................................................. 211,078
4,000,000 Kansas City School District Building Corp., Leasehold Revenue, Capital Improvement Project,
Series A, FGIC Insured, Pre-Refunded, 7.90%, 02/01/08 ....................................... 4,395,680
2,000,000 Missouri Economic Development, Export and Infrastructure Board Lease Revenue, Mental Health
Office Building Division, CGIC Insured, 6.30%, 12/01/08 ..................................... 2,086,960
1,535,000 Missouri HDC, Series 1990-B, GNMA Secured, 7.75%, 06/01/22 ................................... 1,603,722
1,000,000 Missouri Health and Educational Facilities Authority, Health Facilities Revenue, Heartland
Health System Project, AMBAC Insured, 6.35%, 11/15/17 ....................................... 1,019,430
7,500,000 Missouri Health and Educational Facilities Authority Health Revenue, Sisters of St. Mary's
Health Care Project, BIG Insured, Pre-Refunded, 7.75%, 06/01/16 ............................. 8,259,375
1,000,000 Missouri School Board Lease Association, COP, Series R-III, School District Project, MBIA
Insured, 6.875%, 03/01/11 ................................................................... 1,045,470
2,000,000 Phelps County Hospital Revenue, Refunding, Phelps County Regional Medical Center, Connie Lee
Insured, 6.00%, 05/15/13 .................................................................... 1,962,920
8,575,000 Sikeston Electric Revenue, Refunding, MBIA Insured, 6.25%, 06/01/22 .......................... 8,681,845
2,850,000 St. Charles County Public Facilities Authority Leasehold Revenue, FGIC Insured, 6.375%,
03/15/07 .................................................................................... 2,990,306
2,000,000 St. Louis Airport Revenue, Refunding & Improvement, Lambert-St. Louis International Airport,
FGIC Insured, 6.125%, 07/01/15 .............................................................. 2,004,700
705,000 St. Louis County Mortgage Revenue, GNMA Secured, 8.125%, 09/01/19 ............................ 749,119
2,025,000 St. Louis Municipal Finance Corp., Leasehold Revenue, Refunding & Improvement, FGIC Insured,
6.25%, 02/15/12 ............................................................................. 2,079,149
2,000,000 St. Louis Public School District Building Corp., Leasehold Revenue, Series A, FGIC Insured,
7.40%, 04/01/09 ............................................................................. 2,092,440
2,950,000 St. Louis School District GO, Refunding, FGIC Insured, 6.00%, 04/01/12 ....................... 2,981,742
1,250,000 Washington GO, Pauwels Transformers Project, Series A, FGIC Insured, 7.60%, 12/01/09 ......... 1,330,275
------------
46,418,281
------------
</TABLE>
The accompanying notes are an integral part of these
financial statements.
52
<PAGE>
FRANKLIN TAX-FREE TRUST
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995
(CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN INSURED TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
MONTANA 1.4%
Forsyth PCR,
$ 4,475,000 Refunding, Puget Sound Power and Light Project, AMBAC Insured, 6.80%, 03/01/22 ........... $ 4,698,571
5,000,000 Refunding, Washington Water Co., Series A, MBIA Insured, 7.125%, 12/01/13 ................ 5,325,050
750,000 Helena Water Revenue, Series C, FGIC Insured, 6.65%, 11/01/12 ................................ 793,328
8,500,000 Montana State Board Investment Workers Compensation Program, MBIA Insured, 6.875%, 06/01/20 .. 9,044,680
1,000,000 Montana State University Revenue, Higher Education Facilities, Acquisition and Improvement,
Series C, MBIA Insured, 6.00%, 11/15/14 ..................................................... 999,890
3,000,000 Montana Water System Revenue, Butte-Silver Bow Project, FGIC Insured, 6.50%, 11/01/14 ........ 3,137,430
-------------
23,998,949
-------------
NEBRASKA .9%
2,500,000 Cass County School District No. 001, Plattsmouth Community Schools, FGIC Insured, 6.35%,
12/01/19 .................................................................................... 2,542,625
2,500,000 Lancaster County Hospital, Authority No. 1 Revenue, Bryan Memorial Hospital Project, MBIA
Insured, 6.70%, 06/01/22 .................................................................... 2,591,875
2,000,000 Lincoln Hospital Revenue, Refunding, Lincoln General Hospital, Series A, CGIC Insured,
6.20%, 12/01/14 ............................................................................. 1,995,240
Municipal Energy Agency of Nebraska, Power Supply System Revenue,
2,000,000 Refunding, Series A, AMBAC Insured, 6.00%, 04/01/15 ...................................... 1,988,360
1,350,000 Refunding, Series A, AMBAC Insured, 6.00%, 04/01/17 ...................................... 1,341,765
Nebraska Investment Finance Authority, SFMR,
645,000 Refunding, Series 1, GNMA Secured, MBIA Insured, 8.125%, 08/15/38 ........................ 675,412
3,470,000 Refunding, Series B, FGIC Insured, 8.00%, 07/15/17 ....................................... 3,699,714
385,000 Refunding, Series R1-A, FGIC Insured, 8.00%, 07/15/17 .................................... 403,160
-------------
15,238,151
-------------
NEVADA .7%
4,000,000 Clark County School District, Series A, MBIA Insured, 7.00%, 06/01/10 ........................ 4,403,680
250,000 Clark County, Series A, AMBAC Insured, 6.50%, 06/01/17 ....................................... 262,678
1,250,000 North Las Vegas, FGIC Insured, Pre-Refunded, 7.125%, 04/01/11 ................................ 1,386,350
Reno Hospital Revenue,
25,000 Refunding, St. Mary's Regional Medical Center, Series A, MBIA Insured, 7.75%, 07/01/07 ... 27,234
4,000,000 Refunding, St. Mary's Regional Medical Center, Series A, MBIA Insured, Pre-Refunded,
7.80%, 07/01/12 ......................................................................... 4,412,360
1,695,000 Sparks Public Safety, GO, AMBAC Insured, 7.50%, 10/01/09 ..................................... 1,833,024
-------------
12,325,326
-------------
NEW HAMPSHIRE .6%
New Hampshire Higher Educational and Health Facilities Authority Revenue,
2,000,000 Concord Hospital, FGIC Insured, 7.00%, 10/01/12 .......................................... 2,145,720
4,000,000 Refunding, University System, MBIA Insured, 6.25%, 07/01/20 .............................. 4,007,920
4,000,000 University System, MBIA Insured, Pre-Refunded, 7.50%, 07/01/09 ............................... 4,439,920
-------------
10,593,560
-------------
NEW JERSEY 2.5%
6,000,000 Camden County Municipal Utilities Authority, Sewer Revenue, FGIC Insured, 8.25%, 12/01/17 .... 6,581,940
3,000,000 Essex County Improvement Authority Lease, Jail and Youth House Projects, AMBAC Insured,
7.00%, 12/01/24 ............................................................................. 3,213,120
90,000 Hoboken Union City, Weehawken Sewer Authority Revenue, MBIA Insured, Pre-Refunded,
7.25%, 08/01/19 ............................................................................. 99,352
5,000,000 Hudson County Correctional Facility, COP, BIG Insured, Pre-Refunded, 7.60%, 12/01/21 ......... 5,538,400
</TABLE>
The accompanying notes are an integral part of these
financial statements.
53
<PAGE>
FRANKLIN TAX-FREE TRUST
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995
(CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN INSURED TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
NEW JERSEY (CONT.)
Lacey Municipal Utilities Authority Water Revenue,
$ 2,500,000 MBIA Insured, 6.10%, 12/01/23 ............................................................ $ 2,486,275
3,255,000 MBIA Insured, 6.25%, 12/01/24 ............................................................ 3,273,423
1,500,000 Refunding, Series A, MBIA Insured, 5.50%, 12/01/19 ....................................... 1,378,515
1,700,000 Mantua Township, New Jersey School District, COP, MBIA Insured, Pre-Refunded, 7.25%,
06/30/10 .................................................................................... 1,911,038
2,000,000 Mount Laurel Township Municipal Utilities Authority System Revenue, Refunding, Series A,
MBIA Insured, 6.00%, 07/01/15 ............................................................... 2,022,540
New Jersey Health Care Facilities Financing Authority Revenue,
1,350,000 Burdette Tomlin Memorial Hospital, Series C, FGIC Insured, Pre-Refunded, 8.125%,
07/01/12 ................................................................................ 1,471,973
2,000,000 Community Medical Center, Series D, MBIA Insured, 6.00%, 07/01/19 ........................ 1,979,600
2,860,000 Jersey Shore Memorial Hospital, Series B, AMBAC Insured, Pre-Refunded, 8.00%, 07/01/18 ... 3,173,971
2,600,000 Jersey Shore Memorial Hospital, Series C, MBIA Insured, Pre-Refunded, 7.875%, 07/01/12 ... 2,822,612
3,000,000 Muhlenberg Regional Medical Center, Series B, AMBAC Insured, 8.00%, 07/01/18 ............. 3,273,360
485,000 New Jersey HFA, Home Buyer Revenue, Series C, MBIA Insured, 7.375%, 10/01/17 ................. 506,044
300,000 New Jersey State Turnpike Authority Revenue, Refunding, Series C, AMBAC Insured, 6.50%,
01/01/16 .................................................................................... 320,631
100,000 North Bergen Township Municipal Utilities Authority Sewer Revenue, FGIC Insured, Pre-Refunded,
7.625%, 12/15/19 ........................................................................... 108,994
2,235,000 Ocean County Utilities Authority, Waste Water Revenue, Refunding, FGIC Insured, Pre-Refunded,
8.70%, 01/01/11 ............................................................................. 2,354,528
------------
42,516,316
------------
NEW MEXICO .8%
3,600,000 Albuquerque Airport Revenue, Series B, AMBAC Insured, 7.00%, 07/01/16 ........................ 3,648,312
1,100,000 Albuquerque Hospital System Revenue, Southwest Community Health Services, Series B, MBIA
Insured, 9.25%, 08/01/12 .................................................................... 1,143,175
5,000,000 Farmington PCR, Refunding, Public Service Co. of New Mexico, Series A, AMBAC Insured, 6.375%,
12/15/22 .................................................................................... 5,070,100
2,000,000 Gallup PCR, Refunding, Plains Electric Generation, MBIA Insured, 6.65%, 08/15/17 ............. 2,070,680
New Mexico Mortgage Finance Authority, SFMR,
95,000 Series 1985-A, FGIC Insured, 9.25%, 07/01/12 ............................................. 98,167
1,575,000 Series 1987-C, FGIC Insured, 8.625%, 07/01/17 ............................................ 1,641,875
------------
13,672,309
------------
NEW YORK 6.4%
900,000 Central Square School District, FGIC Insured, 6.50%, 06/15/10 ................................ 952,821
2,900,000 MAC for the City of New York, Series 61, MBIA Insured, 6.875%, 07/01/07 ...................... 3,055,266
Metropolitan Transportation Authority Service Contract,
10,000 Refunding, Commuter Facilities, Series M, AMBAC Insured, Pre-Refunded, 7.50%, 07/01/17 ... 10,972
1,585,000 Refunding, Series K, AMBAC Insured, Pre-Refunded, 7.50%, 07/01/17 ........................ 1,739,125
New York City GO,
1,000,000 Series B, FGIC Insured, Pre-Refunded, 7.25%, 08/01/11 .................................... 1,078,590
105,000 Series C, Subseries C-1, MBIA Insured, 6.625%, 08/01/12 .................................. 110,502
New York City Municipal Water Finance Authority, Water and Sewer System Revenue,
2,500,000 Refunding, Series B, AMBAC Insured, 5.375%, 06/15/19 ..................................... 2,262,950
430,000 Series A, FGIC Insured, 6.75%, 06/15/14 .................................................. 447,054
895,000 Series A, FGIC Insured, Pre-Refunded, 6.75%, 06/15/14 .................................... 967,155
2,000,000 Series A, MBIA Insured, Pre-Refunded, 7.25%, 06/15/15 .................................... 2,229,200
5,000,000 Series B, FGIC Insured, Pre-Refunded, 7.625%, 06/15/17 ................................... 5,478,700
13,000,000 Series C, AMBAC Insured, 6.20%, 06/15/21 ................................................. 13,067,080
10,000,000 Series C, AMBAC Insured, 6.50%, 06/15/21 ................................................. 10,208,400
</TABLE>
The accompanying notes are an integral part of these
financial statements.
54
<PAGE>
FRANKLIN TAX-FREE TRUST
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995
(CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN INSURED TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
NEW YORK (CONT.)
New York State Dormitory Authority Revenues,
$ 4,000,000 Brooklyn Law School, CGIC Insured, 6.40%, 07/01/11 ....................................... $ 4,108,360
8,655,000 City University System, Series C, FGIC Insured, 7.00%, 07/01/14 .......................... 9,149,979
6,620,000 Pooled Capital Program, FGIC Insured, 7.80%, 12/01/05 .................................... 7,183,362
1,500,000 Refunding, Mt. Sinai School of Medicine, MBIA Insured, 6.75%, 07/01/15 ................... 1,564,665
New York State Energy Research and Development Authority Facilities Revenue,
5,000,000 Consolidated Edison Co., Series A, MBIA Insured, 6.75%, 01/15/27 ......................... 5,137,200
3,500,000 Refunding, Series B, MBIA Insured, 5.25%, 08/15/20 ....................................... 3,076,990
1,000,000 New York State Energy Research and Development Authority Gas Facilities Revenue, Brooklyn
Union Gas, Series II, MBIA Insured, 7.00%, 12/01/20 ......................................... 1,033,480
New York State Energy Research and Development Authority, PCR,
2,000,000 Central Hudson Gas, Series A, FGIC Insured, 7.375%, 10/01/14 ............................. 2,159,120
3,500,000 Refunding, Niagara Mohawk Power Corp., Series A, FGIC Insured, 6.625%, 10/01/13 .......... 3,644,655
5,000,000 Refunding, Rochester Gas and Electric Project, Series B, MBIA Insured, 6.50%, 05/15/32 ... 5,068,350
New York State Medical Care Facilities Financing Agency Revenue,
3,000,000 North Shore University Hospital, Mortgage Project, Series A, MBIA Insured, 7.20%,
11/01/20 ................................................................................ 3,215,970
5,000,000 St. Lukes Hospital, Series B, MBIA Insured, Pre-Refunded, 7.45%, 02/15/29 ................ 5,608,350
New York State Urban Development Corp. Revenue, Correctional Facilities,
3,400,000 Series D, AMBAC Insured, Pre-Refunded, 7.50%, 01/01/12 ................................... 3,698,316
15,000 Series D, AMBAC Insured, Pre-Refunded, 7.75%, 01/01/13 ................................... 16,414
9,000,000 Niagara Frontier Transportation Authority, Airport Revenue, Greater Buffalo International
Airport, Series A, AMBAC Insured, 6.25%, 04/01/24 ........................................... 9,006,570
1,000,000 Suffolk County Water Authority Waterworks Revenue, AMBAC Insured, Pre-Refunded, 7.00%,
06/01/16 .................................................................................... 1,106,430
1,560,000 gTriborough Bridge and Tunnel Authority Revenues, Series T, Pre-Refunded, 7.00%, 01/01/20 ..... 1,734,860
------------
108,120,886
------------
NORTH CAROLINA
North Carolina Municipal Power Agency No. 1, Catawba Electric Revenue,
80,000 MBIA Insured, 6.50%, 01/01/10 ............................................................ 81,978
20,000 MBIA Insured, ETM 01/01/07, 6.50%, 01/01/10 .............................................. 21,213
500,000 Refunding, MBIA Insured, 5.75%, 01/01/20 ................................................. 477,715
------------
580,906
------------
NORTH DAKOTA
150,000 North Dakota State Building Authority Lease Revenue, Series B, Department of Corrections and
Rehabilitation, AMBAC Insured, Pre-Refunded, 7.40%, 06/01/10 ................................ 165,654
300,000 North Dakota State Building Authority Revenue, Refunding, Series A, AMBAC Insured, 6.75%,
06/01/11 .................................................................................... 314,055
------------
479,709
------------
OHIO 2.2%
2,000,000 Akron Waterworks Mortgage Revenue, AMBAC Insured, 6.55%, 03/01/12 ............................ 2,081,780
5,000,000 Clermont County, Refunding, Building and Road Improvement, AMBAC Insured, 5.60%, 09/01/14 .... 4,755,400
Cleveland Waterworks, First Mortgage Revenue,
3,000,000 Series 1992-F, AMBAC Insured, 6.50%, 01/01/11 ............................................ 3,115,770
2,750,000 Series 1992-F, AMBAC Insured, Pre-Refunded, 6.50%, 01/01/21 .............................. 2,999,783
1,080,000 Cuyahoga County Hospital Revenue, Metrohealth Systems Project, MBIA Insured, 6.00%, 02/15/19 . 1,059,782
3,000,000 Lucas County Hospital Revenue, St. Vincent Medical Center, MBIA Insured, 6.625%, 08/15/22 .... 3,224,640
12,720,000 Montgomery County Hospital Facilities Revenue, Refunding, Kettering Medical Center Facilities,
MBIA Insured, 7.50%, 04/01/14 ............................................................... 13,579,745
</TABLE>
The accompanying notes are an integral part of these
financial statements.
55
<PAGE>
FRANKLIN TAX-FREE TRUST
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995
(CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN INSURED TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
OHIO (CONT.)
$ 4,305,000 Ohio HFA, SFMR, Series D, GNMA Secured, 7.05%, 09/01/16 ...................................... $ 4,406,813
1,750,000 Ohio Waterworks Mortgage Revenue, Series A, MBIA Insured, 6.30%, 10/15/21 .................... 1,789,463
------------
37,013,176
------------
OKLAHOMA 2.9%
14,000,000 Comanche County Hospital Authority Revenue, Refunding, Series A, Connie Lee Insured, 5.50%,
07/01/13 .................................................................................... 13,006,840
930,000 Grady County Home Finance Authority, SFMR, Refunding, Series A, FGIC Insured, 6.70%,
01/01/12 .................................................................................... 959,100
3,300,000 Jenks Public Works Authority Revenue, Refunding, AMBAC Insured, 7.80%, 07/01/11 .............. 3,616,767
300,000 McGee Creek Authority Water Revenue, MBIA Insured, 6.00%, 01/01/23 ........................... 297,162
5,000,000 Moore Public Works Authority Revenue, Refunding, AMBAC Insured, 7.60%, 07/01/06 .............. 5,515,700
1,310,000 Muskogee, SFMR, HFA, FGIC Insured, 7.60%, 12/01/10 ........................................... 1,355,300
30,000 Oklahoma Baptist University Authority Revenue, Refunding, Series A, FGIC Insured,
Pre-Refunded, 8.00%, 12/01/05 ............................................................... 33,602
2,000,000 Oklahoma State Municipal Power Authority Supply System Revenue, Series A, FGIC Insured,
Pre-Refunded, 6.00%, 01/01/28 ............................................................... 2,090,660
2,000,000 Oklahoma State Turnpike Authority Revenue, Series A, AMBAC Insured, 6.00%, 01/01/12 .......... 2,011,120
1,255,000 Owasso Public Works Authority, Public Improvement Revenue, CGIC Insured, 7.40%, 11/01/07 ..... 1,348,209
Pottawatomie County Development Authority Water Revenue,
5,000,000 North Deer Creek Reservoir Project, AMBAC Insured, 5.90%, 07/01/26 ....................... 4,669,500
250,000 North Deer Creek Reservoir Project, AMBAC Insured, Pre-Refunded, 7.375%, 07/01/26 ........ 280,615
3,275,000 Tulsa Airport Improvements Trust, General Revenue Consolidated, MBIA Insured, 7.50%,
06/01/08 .................................................................................... 3,488,006
Tulsa County HFAR,
5,605,000 Series A, GNMA Secured, 8.30%, 12/01/19 .................................................. 5,989,167
380,000 Series D, GNMA Secured, 6.95%, 12/01/22 .................................................. 392,745
3,270,000 Tulsa Industrial Authority Revenue, Holland Hall School Project, CGIC Insured, 6.75%,
12/01/14 .................................................................................... 3,404,103
------------
48,458,596
------------
OREGON .8%
1,500,000 Deschutes and Jefferson Counties School District No. 2-J, Redmond, MBIA Insured, 5.60%,
06/01/09 .................................................................................... 1,475,310
6,025,000 Portland Hospital Facilities Authority Revenue, Legacy Health System, Series A, AMBAC Insured,
6.70%, 05/01/21 ............................................................................. 6,304,922
Washington County, Unified Sewer Agency Revenue,
1,000,000 Series 1, AMBAC Insured, 6.125%, 10/01/12 ................................................ 1,019,870
1,000,000 Senior Lien, Series A, AMBAC Insured, 6.125%, 10/01/12 ................................... 1,019,870
3,000,000 Western Lane Hospital District, Hospital Facilities Authority Revenue, Refunding, Sisters of
St. Joseph of Peace, MBIA Insured, 5.875%, 08/01/12 ......................................... 2,966,010
------------
12,785,982
------------
PENNSYLVANIA 3.2%
1,000,000 Allegheny County Hospital Development Authority Revenue, St. Francis Medical Center Project,
Refunding, AMBAC Insured, Pre-Refunded, 8.125%, 06/01/13 .................................... 1,062,090
3,000,000 Bristol Township, Bucks County GO, FGIC Insured, Pre-Refunded, 7.875%, 09/01/16 .............. 3,145,860
3,900,000 Butler County Hospital Authority Revenue, North Hills Passavant Hospital, CGIC Insured,
7.00%, 06/01/22 ............................................................................. 4,144,764
5,000,000 Cambria County Hospital Development Authority Revenue, Refunding & Improvement, Conemaugh
Valley Hospital, Series B, Connie Lee Insured, 6.375%, 07/01/18 ............................. 5,022,050
3,000,000 Dauphin County Hospital Authority Revenue, Refunding, Harrisburg Hospital, MBIA Insured,
8.25%, 07/01/14 ............................................................................. 3,239,910
1,500,000 Delaware River Port Authority, Pennsylvania and New Jersey River Bridges Revenue,
Refunding, AMBAC Insured, 7.375%, 01/01/07 .................................................. 1,630,680
200,000 Exeter Township School District, FGIC Insured, 6.50%, 05/15/06 ............................... 208,112
</TABLE>
The accompanying notes are an integral part of these
financial statements.
56
<PAGE>
FRANKLIN TAX-FREE TRUST
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995
(CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN INSURED TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
PENNSYLVANIA (CONT.)
$ 1,200,000 Harrisburg RDAR, Capital Improvement, Series A, FGIC Insured, 7.875%, 11/02/16 ............... $ 1,271,928
100,000 Lehigh County General Purpose Authority Revenues, Hospital Healtheast, Inc., Series A,
Refunding, MBIA Insured, 7.00%, 07/01/15 .................................................... 105,840
8,000,000 Montgomery County IDAR, PCR, Refunding, Series B, MBIA Insured, 6.70%, 12/01/21 .............. 8,265,600
500,000 Pennslyvania Convention Center Authority Revenue, Series A, FGIC Insured, ETM 09/01/17,
6.00%, 09/01/19 ............................................................................. 503,190
100,000 Pennsylvania State Higher Educational Facilities Authority, College and University Revenues,
Hahnemann University Project, MBIA Insured, 7.20%, 07/01/19 ................................. 107,226
2,740,000 Pennsylvania State Pooled Finance Authority, Lease Revenue, Capital Improvement, Series B,
MBIA Insured, 8.00%, 11/01/09 ............................................................... 2,974,928
Pennsylvania State Turnpike Commission Revenue,
500,000 Refunding, Series P, AMBAC Insured, 6.00%, 12/01/17 ...................................... 495,050
300,000 Series E, MBIA Insured, Pre-Refunded, 7.55%, 12/01/17 .................................... 336,606
2,500,000 Series K, MBIA Insured, Pre-Refunded, 7.50%, 12/01/12 .................................... 2,799,825
2,000,000 Philadelphia City GO, Refunding, Series 1986, FGIC Insured, Pre-Refunded, 8.25%, 02/15/09 .... 2,108,740
11,300,000 Philadelphia Municipal Authority Revenue, Justice Lease, Series B, FGIC Insured, Pre-Refunded,
7.125%, 11/15/18 ............................................................................ 12,743,236
1,000,000 Philadelphia Water and Wastewater Revenue, Refunding, CGIC Insured, 5.50%, 06/15/15 .......... 919,730
90,000 Pittsburg Water and Sewer Authority System Revenue, Refunding, FGIC Insured, ETM 09/01/05,
7.25%, 09/01/14 ............................................................................. 99,517
10,000 Scranton-Lackawanna Health and Welfare Authority Revenue, Community Medical Center Project,
BIG Insured, 7.875%, 07/01/10 ............................................................... 10,880
1,690,000 Westmoreland IDAR, Refunding, South West Health System Project, AMBAC Insured, Pre-Refunded,
7.25%, 07/01/11 ............................................................................. 1,749,708
1,500,000 York County Hospital Authority Revenue, Series 1991, AMBAC Insured, Pre-Refunded, 7.00%,
07/01/21 .................................................................................... 1,664,115
------------
54,609,585
------------
RHODE ISLAND 1.4%
2,100,000 Kent County Water Authority, General Revenue, Series A, MBIA Insured, 6.35%, 07/15/14 ........ 2,125,179
620,000 Newport GO, Refunding, Series B, FGIC Insured, 5.125%, 05/15/10 .............................. 573,345
5,000,000 Providence PBA General Revenue, Series A, CGIC Insured, 7.25%, 12/15/10 ...................... 5,456,100
Rhode Island Convention Center Authority Revenue,
2,000,000 Series A, AMBAC Insured, 5.75%, 05/15/20 ................................................. 1,849,940
350,000 Series A, MBIA Insured, Pre-Refunded, 6.65%, 05/15/12 .................................... 382,596
3,335,000 Rhode Island Health and Education Building Authority, Series A, CGIC Insured, Pre-Refunded,
7.50%, 09/15/19 ............................................................................. 3,714,823
Rhode Island Health and Educational Building Corp. Revenue, Higher Educational Facilities,
3,000,000 Connie Lee Insured, 6.30%, 03/15/20 ...................................................... 2,944,410
2,000,000 Roger Williams Facility, Connie Lee Insured, 7.25%, 11/15/24 ............................. 2,129,660
2,000,000 Rhode Island Port Authority and Economic Development Corp. Revenue, Shepard Building
Project, Series B, AMBAC Insured, 6.75%, 06/01/25 ........................................... 2,087,800
250,000 Rhode Island State, Refunding, Series A, FGIC Insured, 6.25%, 06/15/07 ....................... 260,135
2,000,000 West Warwick GO, MBIA Insured, Pre-Refunded, 7.25%, 09/01/11 ................................. 2,272,140
------------
23,796,128
------------
SOUTH CAROLINA .6%
250,000 Charleston Waterworks and Sewer Revenue, Refunding & Improvement, AMBAC Insured, 6.00%,
01/01/16 .................................................................................... 247,048
2,910,000 Cherokee County COP, Peachtree Centre Project, CGIC Insured, 7.05%, 09/01/11 ................. 3,155,895
250,000 Edgefield County School District, Refunding, FSA Insured, 8.50%, 02/01/01 .................... 290,060
50,000 Greenville Hospital System Facilities Revenue, Series A, FGIC Insured, 7.50%, 05/01/16 ....... 51,966
200,000 North Charleston Sewer District Revenue, MBIA Insured, Pre-Refunded, 7.75%, 08/01/18 ......... 221,030
</TABLE>
The accompanying notes are an integral part of these
financial statements.
57
<PAGE>
FRANKLIN TAX-FREE TRUST
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995
(CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN INSURED TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
SOUTH CAROLINA (CONT.)
Piedmont Municipal Power Agency, South Carolina Electric Revenue,
$ 990,000 Refunding, AMBAC Insured, Pre-Refunded, 9.25%, 01/01/19 .................................. $ 1,056,815
200,000 Refunding, FGIC Insured, 6.25%, 01/01/21 ................................................. 206,232
2,000,000 Refunding, Series A, AMBAC Insured, Pre-Refunded, 7.60%, 01/01/18 ........................ 2,177,920
3,000,000 Richard County Hospital Facilities Revenue, Community Provider, Pooled Loan Program, Series A,
CGIC Insured, 7.125%, 07/01/17 .............................................................. 3,237,600
South Carolina Public Service Authority Electric Revenue, Electric System Expansion,
150,000 Refunding, Series A, MBIA Insured, 7.75%, 07/01/15 ....................................... 156,174
100,000 Refunding, Series C, AMBAC Insured, 7.30%, 07/01/21 ....................................... 104,785
------------
10,905,525
------------
SOUTH DAKOTA .7%
1,355,000 Heartland Consumer Power District, Electric System Revenue, Refunding,........................
MBIA Insured, Pre-Refunded, 7.625%, 01/01/16 ................................................ 1,440,663
2,000,000 Lawrence County, COP, Courthouse, CGIC Insured, 7.65%, 07/01/10 .............................. 2,213,920
2,560,000 Sioux Falls Medical Clinic Revenue, AMBAC Insured, 8.00%, 09/01/08 ........................... 2,601,805
2,720,000 South Dakota State Lease Revenue, Series A, CGIC Insured, 6.75%, 12/15/16 .................... 2,893,699
2,220,000 South Dakota State University Revenue, Housing and Auxiliary Facilities, Refunding, Series A,
MBIA Insured, 5.50%, 04/01/17 ............................................................... 2,019,512
------------
11,169,599
------------
TENNESSEE .2%
1,480,000 Greater Tennessee Housing Assistance Corp., Mortgage Revenue, Refunding, Series A, MBIA
Insured, 6.00%, 07/01/24 .................................................................... 1,415,087
1,500,000 Memphis-Shelby County Airport Authority Revenue, Refunding, MBIA Insured, 5.65%, 09/01/15 .... 1,421,640
200,000 Metropolitan Nashville Airport Authority Revenue, Series C, FGIC Insured, 6.60%, 07/01/15 .... 207,082
------------
3,043,809
------------
TEXAS 9.8%
Austin Combined Utility System Revenue,
1,000,000 BIG Insured, Pre-Refunded, 8.625%, 11/15/17 .............................................. 1,201,130
50,000 Refunding, Series A, FGIC Insured, 6.00%, 05/15/15 ....................................... 49,879
3,000,000 Series A, BIG Insured, Pre-Refunded, 8.00%, 11/15/16 ..................................... 3,442,710
5,000,000 Bexar County Health Facilities Development Corp., Hospital Revenue, Refunding, Southwest
Methodist Church, AMBAC Insured, 6.625%, 11/01/15 ........................................... 5,124,200
4,080,000 Bexar County HFC Revenue, GNMA Secured, Series A, 8.20%, 04/01/22 ............................ 4,295,628
3,450,000 Brazos River Authority PCR, Texas Utilities Electric Co. Project, Series A, AMBAC Insured,
6.05%, 04/01/25 ............................................................................. 3,307,239
Brazos River Authority Revenue, Refunding, Houston Light and Power Co. Project,
2,000,000 Series A, AMBAC Insured, 6.70%, 03/01/17 ................................................. 2,066,660
3,360,000 Series D, FGIC Insured, 7.75%, 10/01/15 .................................................. 3,644,491
1,000,000 Brownsville Utility System Priority Revenue, Series B, FGIC Insured, Pre-Refunded, 7.50%,
09/01/09 .................................................................................... 1,061,290
12,230,000 Coastal Bend Health Facilities Development Corp., Series B, AMBAC Insured, 6.30%, 01/01/17 ... 12,272,927
7,000,000 Coastal Water Authority, Water Conveyance System Revenue, Series 1987, MBIA Insured,
Pre-Refunded, 8.125%, 12/15/17 .............................................................. 7,581,490
1,010,000 Dallas HFC, SFMR, GNMA Secured, 7.85%, 12/01/10 .............................................. 1,059,005
1,320,000 East Texas HFC, SFMR, Series 1990, GNMA Secured, 7.85%, 12/01/10 ............................. 1,401,800
1,520,000 Faulkey Gully MUD, Refunding, Waterworks and Sewerage System, AMBAC Insured, 6.625%,
03/01/07 .................................................................................... 1,582,305
200,000 Fort Bend County, Permanent Improvement, FGIC Insured, Pre-Refunded, 6.60%, 09/01/07 ......... 217,172
2,700,000 Grand Prairie Health Facilities, Refunding, Dallas/Fort Worth Medical Center Project, AMBAC
Insured, 6.875%, 11/01/10 ................................................................... 2,874,717
</TABLE>
The accompanying notes are an integral part of these
financial statements.
58
<PAGE>
FRANKLIN TAX-FREE TRUST
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995
(CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN INSURED TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
TEXAS (CONT.)
Harris County Hospital District Mortgage Revenue,
$ 2,350,000 Refunding, AMBAC Insured, 7.40%, 02/15/10 ................................................ $ 2,666,451
3,000,000 Refunding, BIG Insured, Pre-Refunded, 8.50%, 04/01/15 .................................... 3,179,700
3,000,000 Harris County Public Facilities Corp., Detention Facility Mortgage Revenue, MBIA Insured,
Pre-Refunded, 7.80%, 12/15/11 ............................................................... 3,340,470
Harris County Toll Road,
35,000 Series A, FGIC Insured, 6.50%, 08/15/11 .................................................. 36,553
165,000 Series A, FGIC Insured, Pre-Refunded, 6.50%, 08/15/11 .................................... 180,338
1,580,000 Series A, Senior Lien, AMBAC Insured, 6.50%, 08/15/17 .................................... 1,632,772
240,000 Series B, Senior Lien, AMBAC Insured, 6.625%, 08/15/17 ................................... 245,945
1,250,000 Series B, Senior Lien, AMBAC Insured, Pre-Refunded, 6.625%, 08/15/17 ..................... 1,324,125
Houston Airport System Revenue,
8,000,000 Series A, MBIA Insured, 6.375%, 12/01/22 ................................................. 8,141,120
2,500,000 Sub Lien, Series A, FGIC Insured, 6.75%, 07/01/21 ........................................ 2,578,175
1,000,000 Sub Lien, Series B, FGIC Insured, 6.625%, 07/01/22 ....................................... 1,042,330
Houston Water and Sewer System Revenue,
6,000,000 gPrior Lien, Pre-Refunded, 8.125%, 12/01/17 ............................................... 6,597,060
1,450,000 Refunding, Junior Lien, FGIC Insured, Pre-Refunded, 9.375%, 12/01/13 ..................... 1,530,156
1,000,000 Refunding, Junior Lien, Series C, AMBAC Insured, 6.375%, 12/01/17 ........................ 1,016,250
500,000 Refunding, Junior Lien, Series C, MBIA Insured, 5.75%, 12/01/15 .......................... 478,940
2,300,000 Irving Hospital Authority Revenue, Irving Health Care System, Series 1990, FGIC Insured,
7.25%, 07/01/15 ............................................................................. 2,441,381
Lower Colorado River Authority Priority Revenue,
2,000,000 BIG Insured, Pre-Refunded, 7.75%, 01/01/10 ............................................... 2,091,580
1,600,000 MBIA Insured, Pre-Refunded, 7.625%, 01/01/16 ............................................. 1,741,168
1,585,000 Lubbock HFC, SFMR, Refunding, Mortgage Extension Program, Series B, BIG Insured, 8.875%,
12/01/12 .................................................................................... 1,652,870
Matagorda County Navigation District No. 1 Revenue,
200,000 PCR, Central P & L Co. Project, AMBAC Insured, 7.50%, 12/15/14 ........................... 216,962
2,000,000 Refunding, Houston Light & Power Co., Series C, FGIC Insured, 7.125%, 07/01/19 ........... 2,112,860
100,000 Refunding, Houston Light & Power Co., Series E, FGIC Insured, 7.20%, 12/01/18 ............ 106,252
2,000,000 Metro Health Facilities Development Corp., Hospital Revenue, The Wilson N. Jones Memorial
Hospital, Refunding, Connie Lee Insured, 5.60%, 01/01/17 .................................... 1,834,980
North Central Health Facility Development Corp. Revenue,
200,000 Refunding, Methodist Hospital of Dallas, Series A, BIG Insured, 9.50%, 10/01/15 .......... 209,886
2,000,000 Refunding, Presbyterian Health Care Project, Series A, BIG Insured, Pre-Refunded, 8.875%,
12/01/15 ................................................................................ 2,236,940
6,000,000 Palo Duro River Authority, Refunding, CGIC Insured, 6.375%, 08/01/08 ......................... 6,120,180
105,000 Park Ten MUD, Waterworks and Sewer System, FGIC Insured, Pre-Refunded, 9.25%, 03/01/09 ....... 109,815
Sabine River Authority, PCR,
3,250,000 Refunding, Collateralized, Texas Utilities Electric Co. Project, FGIC Insured, 6.55%,
10/01/22 ................................................................................ 3,314,513
2,000,000 Texas Utility Co. Project, Collateralized, FGIC Insured, 7.75%, 04/01/16 ................. 2,093,420
9,900,000 San Antonio Electric and Gas System Revenue, Series A, FGIC Insured, Pre-Refunded, 8.00%,
02/01/16 .................................................................................... 10,883,070
5,200,000 San Antonio Water Revenue, Refunding, MBIA Insured, 6.50%, 05/15/10 .......................... 5,418,296
2,500,000 San Patricio County COP, MBIA Insured, 6.60%, 04/01/07 ....................................... 2,614,475
10,450,000 Tarrant County HFC, SFMR, GNMA Secured, Series A, 8.00%, 07/01/21 ............................ 11,123,607
Texas Health Facilities Development Corp. Hospital Revenue,
2,500,000 Refunding, All Saints Episcopal Hospitals, Series B, MBIA Insured, 6.25%, 08/15/22 ....... 2,503,650
4,885,000 Refunding, All Saints Episcopal Hospitals, Series B, MBIA Insured, 6.375%, 08/15/23 ...... 4,923,592
2,000,000 Refunding, Cook-Fort Worth Medical Center Project, FGIC Insured, Pre-Refunded, 8.125%,
06/01/18 ................................................................................ 2,219,580
</TABLE>
The accompanying notes are an integral part of these
financial statements.
59
<PAGE>
FRANKLIN TAX-FREE TRUST
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995
(CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN INSURED TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
TEXAS (CONT.)
Texas State Turnpike Authority Revenue,
$ 100,000 Dallas North Tollway, AMBAC Insured, Pre-Refunded, 7.125%, 01/01/15 ...................... $ 108,947
50,000 Dallas North Tollway, FGIC Insured, 7.125%, 01/01/15 ..................................... 53,243
5,995,000 Texas Water Resources Financial Authority Revenue, AMBAC Insured, 7.50%, 08/15/13 ............ 6,392,289
4,245,000 Travis County HFC, SFMR, GNMA Secured, 8.20%, 04/01/22 ....................................... 4,398,287
100,000 Trinity River Authority, Waste Water System Revenue, AMBAC Insured, Pre-Refunded, 7.10%,
08/01/16 .................................................................................... 109,330
220,000 Waco Health Facilities Development Corp., Hospital Revenue, Hillcrest Baptist Medical Center
Project, MBIA Insured, Pre-Refunded, 9.20%, 09/01/14 ........................................ 229,482
1,965,000 Webb County, Limited Tax GO, CGIC Insured, Pre-Refunded, 7.25%, 02/15/09 ..................... 2,121,198
-------------
164,554,881
-------------
UTAH 2.7%
6,250,000 Emery County PCR, Refunding, Series A, AMBAC Insured, 5.65%, 11/01/23 ........................ 5,705,938
Intermountain Power Agency, Special Obligation,
7,500,000 Refunding, Second Crossover Series 1986-C, FGIC Insured, 7.25%, 07/01/17 ................. 7,839,450
6,230,000 Refunding, Fifth Crossover Series, FGIC Insured, 7.00%, 07/01/15 ......................... 6,549,599
Intermountain Power Agency, Supply Revenue,
2,000,000 Refunding, Series 1987-C, AMBAC Insured, Pre-Refunded, 8.375%, 07/01/12 .................. 2,189,220
6,300,000 Refunding, Series 1987-D, AMBAC Insured, 8.375%, 07/01/12 ................................ 6,868,386
3,350,000 Layton City Municipal Building Facilities Authority Revenue, BIG Insured, Pre-Refunded, 7.25%,
08/01/10 .................................................................................... 3,593,512
5,000,000 Provo City Energy System Revenue, Series A, FGIC Insured, Pre-Refunded, 7.625%, 11/01/12 ..... 5,527,200
40,000 Provo Electric System Revenue, Refunding, Series 1984-A, AMBAC Insured, ETM 09/15/00,
10.375%, 09/15/15 ........................................................................... 54,810
5,000 Salt Lake County Water Conservancy District Revenue, Series A, MBIA Insured, ETM 10/01/02,
10.875%, 10/01/02 ........................................................................... 6,139
1,080,000 Utah State Board of Regents, Student Loan Revenue, Series H, AMBAC Insured, 6.70%, 11/01/15 .. 1,109,981
660,000 Utah State Municipal Finance Corp., Local Government Revenue, St. George Water, FGIC
Insured, Pre-Refunded, 6.90%, 06/01/08 ...................................................... 725,650
2,935,000 Washington County Water Conservancy District, MBIA Insured, 8.20%, 02/01/18 .................. 3,182,919
Weber County Municipal Building Authority, Lease Revenue,
825,000 CGIC Insured, Pre-Refunded, 7.20%, 06/01/05 .............................................. 891,751
875,000 CGIC Insured, Pre-Refunded, 7.20%, 06/01/06 .............................................. 945,796
950,000 CGIC Insured, Pre-Refunded, 7.20%, 06/01/07 ............................................... 1,026,865
-------------
46,217,216
-------------
VERMONT 1.1%
Burlington Electric System Revenue,
1,000,000 Series 1986-A, MBIA Insured, 7.25%, 07/01/06 ............................................. 1,050,900
6,000,000 Series 1986-A, MBIA Insured, 7.375%, 07/01/12 ............................................ 6,259,860
2,205,000 State of Vermont, COP, MBIA Insured, 7.25%, 06/15/11 ......................................... 2,366,208
6,630,000 Vermont Home Mortgage, Series 1989-B, MBIA Insured, 7.60%, 12/01/24 .......................... 6,992,263
1,000,000 Vermont Municipal Bond Bank, Series 2, FSA Insured, 6.25%, 12/01/19 .......................... 1,004,940
-------------
17,674,171
-------------
VIRGINIA .6%
4,500,000 Chesapeake Bay Bridge and Tunnel Commission, District Revenue, Refunding, General
Resolution, MBIA Insured, 5.75%, 07/01/25 ................................................... 4,319,055
5,000,000 Chesapeake IDA, Public Facilities, Lease Revenue, Chesapeake Jail Project, MBIA Insured,
6.00%, 06/01/12 ............................................................................. 5,044,150
1,000,000 Danville IDA, Danville Regional Medical Center, FGIC Insured, 6.50%, 10/01/24 ................ 1,027,770
</TABLE>
The accompanying notes are an integral part of these
financial statements.
60
<PAGE>
FRANKLIN TAX-FREE TRUST
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995
(CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN INSURED TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
VIRGINIA (CONT.)
$ 85,000 Southeastern Public Service Authority Revenue, Refunding, Senior Regional Waste System, BIG
Insured, Pre-Refunded, 7.00%, 07/01/13 ...................................................... $ 92,892
--------------
10,483,867
--------------
WASHINGTON 9.9%
Benton County PUD No. 1, Electric Revenue,
5,700,000 Refunding, AMBAC Insured, 6.75%, 11/01/11 ................................................ 5,945,556
400,000 Refunding, AMBAC Insured, Pre-Refunded, 9.375%, 11/01/04 ................................. 416,644
1,600,000 Benton County School District No. 400, Richland, AMBAC Insured, Pre-Refunded, 7.875%,
12/01/00 .................................................................................... 1,684,800
150,000 Chelan County PUD No. 1, Columbia River, Rock Island Hydro-Electric System Revenue,
Series 1985-A, AMBAC Insured, 9.75%, 06/01/15 ............................................... 154,868
190,000 Chelan County PUD No. 1, Rocky Reach Hydro-Electric System Revenue, Series 1985-A,
FGIC Insured, 9.20%, 07/01/13 ............................................................... 196,494
2,000,000 Clallam County PUD No. 1, Revenue, Refunding, AMBAC Insured, 6.50%, 01/01/08 ................. 2,111,120
1,420,000 Cowlitz and Clark Counties School District No. 404-102, Woodland, AMBAC Insured,
Pre-Refunded, 6.75%, 12/01/11 ............................................................... 1,547,743
850,000 Everett COP, Series A, AMBAC Insured, 7.25%, 04/01/09 ........................................ 913,572
2,000,000 Grant County PUD No. 2, Wanapum Hydro-Electric Revenue, Series B, AMBAC Insured, 6.75%,
01/01/23..................................................................................... 2,065,380
2,245,000 Grays Harbor County PUD No. 001, Electric Revenue, Refunding, AMBAC Insured, 7.10%,
01/01/06 .................................................................................... 2,366,904
1,500,000 King County Public Hospital District No. 001, Hospital Facilities Revenue, Valley Medical
Center, AMBAC Insured, 7.25%, 09/01/15 ...................................................... 1,638,360
3,375,000 King County School District No. 411, Issaquah, Refunding, AMBAC Insured, 6.50%, 12/01/09 ..... 3,481,988
1,015,000 Kitsap County School District No. 100-C, Refunding, MBIA Insured, 6.60%, 12/01/08 ............ 1,061,690
2,105,000 Kittitas County School District No. 404, AMBAC Insured, 6.80%, 12/01/11 ...................... 2,193,347
5,000,000 Marysville Water and Sewer Revenue, Refunding, MBIA Insured, 6.10%, 12/01/12 ................. 4,962,000
1,040,000 Mason County School District No. 402, Pioneer, MBIA Insured, 6.60%, 12/01/11 ................. 1,075,298
Seatac Storm Water Revenue,
490,000 MBIA Insured, 5.40%, 12/01/00 ............................................................ 498,889
570,000 MBIA Insured, 5.75%, 12/01/03 ............................................................ 586,490
2,890,000 MBIA Insured, 6.50%, 12/01/13 ............................................................ 2,979,706
Seattle Metropolitan Sewer System Revenue,
3,000,000 Series S, AMBAC Insured, Pre-Refunded, 7.375%, 01/01/30 .................................. 3,245,190
6,000,000 Series W, MBIA Insured, 6.30%, 01/01/33 .................................................. 6,003,660
Snohomish County PUD No. 1, Electric Revenue,
4,250,000 Generation System, FGIC Insured, ETM 01/01/13, 6.65%, 01/01/16 ........................... 4,580,693
15,950,000 Generation System, Series 1986-A, BIG Insured, Pre-Refunded, 7.375%, 01/01/19 ............ 16,961,868
9,000,000 Refunding, BIG Insured, Pre-Refunded, 8.00%, 01/01/15 .................................... 9,662,760
5,000,000 Spokane Public Facilities District, Hotel, Motel and Sales Use Tax Revenue, Multi-Purpose
Arena Project, AMBAC Insured, 6.50%, 01/01/18 ............................................... 5,120,550
14,000,000 Spokane Regional Solid Waste Management System Revenue, Series B, AMBAC Insured,
Pre-Refunded, 7.625%, 01/01/11 .............................................................. 15,492,960
Tacoma Electric System Revenue,
6,000,000 AMBAC Insured, Pre-Refunded, 8.00%, 01/01/11 ............................................. 6,582,840
500,000 Refunding, AMBAC Insured, 6.25%, 01/01/11 ................................................ 506,360
6,190,000 Refunding, FGIC Insured, 6.25%, 01/01/15 ................................................. 6,203,742
1,305,000 Thurston and Pierce Counties, Community Schools, Series B, AMBAC Insured, 6.65%, 12/01/09 .... 1,368,645
Washington Public Power Supply System, Nuclear Project No. 1 Revenue,
1,465,000 Refunding, Series A, MBIA Insured, 7.50%, 07/01/15 ....................................... 1,565,382
500,000 Refunding, Series A, MBIA Insured, 6.25%, 07/01/17 ....................................... 498,155
2,200,000 Refunding, Series A, MBIA Insured, Pre-Refunded, 7.50%, 07/01/15 ......................... 2,441,956
4,420,000 Refunding, Series B, FGIC Insured, 7.25%, 07/01/12 ....................................... 4,726,085
2,500,000 Refunding, Series C, FGIC Insured, 7.75%, 07/01/08 ....................................... 2,750,850
</TABLE>
The accompanying notes are an integral part of these
financial statements.
61
<PAGE>
FRANKLIN TAX-FREE TRUST
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995
(CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN INSURED TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
WASHINGTON (CONT.)
$ 5,000,000 Washington Public Power Supply System Revenue, Nuclear Project No. 2, Refunding, Series B,
FGIC Insured, Pre-Refunded, 7.375%, 07/01/12 ................................................ $ 5,599,850
100,000 Washington Public Power Supply System Revenue, Nuclear Project No. 3, Refunding, Series A,
BIG Insured, Pre-Refunded, 7.25%, 07/01/16 .................................................. 110,040
Washington State Health Care Facilities Authority Revenue,
250,000 Empire Health Services, Spokane, MBIA Insured, 5.80%, 11/01/10 ........................... 244,202
1,000,000 Franciscan Health System, BIG Insured, Pre-Refunded, 7.70%, 01/01/13 ..................... 1,081,450
235,000 Franciscan Health System, BIG Insured, Pre-Refunded, 9.25%, 07/01/15 ..................... 243,270
1,000,000 Harrison Memorial Hospital, AMBAC Insured, 5.40%, 08/15/23 ............................... 872,090
5,000,000 Mason Medical Center, MBIA Insured, 8.00%, 07/01/15 ...................................... 5,398,050
6,000,000 Refunding, Franciscan Health System, BIG Insured, Pre-Refunded, 7.60%, 01/01/08 .......... 6,473,100
3,250,000 Swedish Hospital Medical Center, AMBAC Insured, 6.30%, 11/15/22 .......................... 3,236,934
2,920,000 Washington State Housing Finance Commission, MFMR, Series A, GNMA Secured, 7.70%,
07/01/32 .................................................................................... 3,041,675
Western Washington University Revenues,
3,000,000 Housing and Dining System, MBIA Insured, 6.375%, 10/01/22 ................................ 3,026,520
1,050,000 Refunding, Housing and Dining System, MBIA Insured, 6.70%, 10/01/11 ...................... 1,086,466
3,500,000 Refunding, Housing and Dining System, MBIA Insured, 6.375%, 10/01/21 ..................... 3,523,064
6,130,000 Refunding, Housing and Dining System, MBIA Insured, 6.40%, 10/01/24 ...................... 6,204,541
2,000,000 Whatcom County School District No. 501, Bellingham, FGIC Insured, 6.125%, 12/01/13 ........... 2,013,600
350,000 Yakima-Tieton Irrigation District Revenue, Refunding, FSA Insured, 6.20%, 06/01/19 ........... 349,957
--------------
166,097,354
--------------
WEST VIRGINIA 2.3%
11,560,000 Harrison County, Community Solid Waste Disposal Revenue, Potomac Edison Co., Series C,
AMBAC Insured, 6.75%, 08/01/24 .............................................................. 11,882,871
1,000,000 Monongalia County Building Community Hospital Revenue, Refunding, Monongalia General
Hospital, Series B, MBIA Insured, 6.50%, 07/01/17 ........................................... 1,017,310
Parkersburg Waterworks Revenue,
1,370,000 Refunding, MBIA Insured, 6.30%, 09/01/14 ................................................. 1,386,713
1,880,000 Refunding, MBIA Insured, 6.375%, 09/01/19 ................................................ 1,906,695
1,000,000 Refunding, MBIA Insured, Pre-Refunded, 7.60%, 09/01/19 ................................... 1,049,610
South Charleston Hospital Revenue,
3,060,000 Refunding, Herbert J. Thomas Memorial Hospital, BIG Insured, Pre-Refunded, 8.00%,
10/01/04 ................................................................................ 3,409,757
2,400,000 Refunding, Herbert J. Thomas Memorial Hospital, BIG Insured, Pre-Refunded, 8.00%,
10/01/10 ................................................................................ 2,674,320
1,000,000 West Virginia Resource and Recovery, Solid Waste Disposal System Authority Revenue, BIG
Insured, Pre-Refunded, 8.25%, 06/01/09 ...................................................... 1,062,940
West Virginia School Building Authority Revenue,
300,000 Capital Improvement, Series B, MBIA Insured, 6.75%, 07/01/17 ............................. 309,551
100,000 Series A, MBIA Insured, Pre-Refunded, 7.25%, 07/01/15 .................................... 111,421
2,000,000 West Virginia State HDA, SFMR, MBIA Insured, 7.40%, 11/01/11 ................................. 2,089,100
West Virginia State Hospital Finance Authority Revenue,
2,000,000 Monongalia General Hospital Project, BIG Insured, Pre-Refunded, 8.60%, 07/01/17 .......... 2,163,160
1,000,000 West Virginia University Hospitals, Inc., MBIA Insured, Pre-Refunded, 7.20%, 06/01/16 .... 1,050,870
2,250,000 West Virginia State University Revenue, Refunding, AMBAC Insured, 6.00%, 04/01/12 ............ 2,235,644
West Virginia State Water Development Authority Revenue,
3,000,000 Loan Program II, Series B, CGIC Insured, Pre-Refunded, 7.50%, 11/01/29 ................... 3,348,510
2,750,000 Refunding, Loan Program, Series A, CGIC Insured, 7.00%, 11/01/25 ......................... 2,891,514
--------------
38,589,986
--------------
</TABLE>
The accompanying notes are an integral part of these
financial statements.
62
<PAGE>
FRANKLIN TAX-FREE TRUST
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995
(CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN INSURED TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
WISCONSIN 1.2%
$ 500,000 Holmen School District, Series A, AMBAC Insured, 6.25%, 10/01/10 ............................. $ 519,014
Lake County School District GO,
850,000 Refunding, AMBAC Insured, 6.35%, 04/01/11 ................................................ 864,415
900,000 Refunding, AMBAC Insured, 6.35%, 04/01/12 ................................................ 915,263
1,970,000 Sturgeon Bay, Combined Utilities Mortgage Revenue, Refunding, AMBAC Insured, 5.20%, 01/01/10 . 1,833,005
3,000,000 Superior Limited Obligation Revenue, Refunding, Midwest Energy Resources, Series E, FGIC
Insured, 6.90%, 08/01/21 .................................................................... 3,275,010
Wisconsin Health Educational Revenue,
1,965,000 Community Provider Program, Series A, CGIC Insured, 7.50%, 01/15/04 ...................... 2,125,834
2,000,000 Series A, CGIC Insured, 7.50%, 01/15/ 09 ................................................. 2,144,240
Wisconsin Health Facilities Authority Revenue,
600,000 Columbia Hospital, Inc., BIG Insured, Pre-Refunded, 9.50%, 06/01/12 ...................... 619,643
105,000 Franciscan Health Care, Inc., MBIA Insured, Pre-Refunded, 8.875%, 12/01/10 ............... 110,431
2,000,000 Meriter Hospital, Inc., FGIC Insured, Pre-Refunded, 8.375%, 12/01/09 ..................... 2,211,660
4,000,000 Milwaukee Psychiatric Hospital, MBIA Insured, 7.30%, 04/01/12 ............................ 4,190,120
100,000 Wisconsin Public Power, Inc., Power Supply System Revenue, Series A, AMBAC Insured,
Pre-Refunded, 7.40%, 07/01/20 ............................................................... 112,111
500,000 Wisconsin State Health and Educational Facilities Authority Revenue, Refunding, Series AA,
MBIA Insured, 6.25%, 06/01/20 ............................................................... 494,930
--------------
19,415,676
--------------
WYOMING .4%
500,000 Gillette Health Facilities Revenue, Lutheran Hospital and Home Society, Refunding,
MBIA Insured, 5.90%, 01/01/16 ............................................................... 484,240
835,000 Lincoln City, PCR, Refunding, Pacificorp Projects, AMBAC Insured, 5.625%, 11/01/21 ........... 746,816
2,245,000 University Facilities Revenues, MBIA Insured, 7.10%, 06/01/10 ................................ 2,396,695
1,525,000 Worland GO, Refunding, AMBAC Insured, 5.30%, 06/01/12 ........................................ 1,398,898
2,000,000 Wyoming Municipal Power Agency, Power Supply System Revenue, Refunding, Series A,
MBIA Insured, 6.125%, 01/01/16 .............................................................. 1,989,300
--------------
7,015,949
--------------
TOTAL LONG TERM INVESTMENTS (COST $1,571,939,048) ...................................... 1,654,831,416
--------------
eSHORT TERM INVESTMENTS .2%
200,000 California Health Facilities Financing, Sutter Health Facility, Series B, Daily VRDN and Put,
3.60%, 03/01/20 ............................................................................. 200,000
1,500,000 California PCFA, PCR, Southern California Edison, Series A, Daily VRDN and Put, 4.00%,
02/28/08 .................................................................................... 1,500,000
400,000 Grand Rapids, Michigan Water Supply System Revenue, Daily VRDN and Put, 3.90%, 01/01/20 ...... 400,000
Kansas City IDA, Hospital Revenue, Research Health Services System,
300,000 Daily VRDN and Put, 3.80%, 10/15/14 ...................................................... 300,000
400,000 Daily VRDN and Put, 3.80%, 10/15/15 ...................................................... 400,000
900,000 Puerto Rico Commonwealth Government Development Bank, Refunding, Weekly VRDN and Put,
3.90%, 12/01/15 ............................................................................. 900,000
--------------
TOTAL SHORT TERM INVESTMENTS (COST $3,700,000) ......................................... 3,700,000
--------------
TOTAL INVESTMENTS (COST $1,575,639,048) 98.5% ..................................... 1,658,531,416
OTHER ASSETS AND LIABILITIES, NET 1.5% ............................................ 24,702,748
--------------
NET ASSETS 100.0% ................................................................. $1,683,234,164
==============
</TABLE>
The accompanying notes are an integral part of these
financial statements.
63
<PAGE>
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- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995
(CONT.)
<TABLE>
<CAPTION>
VALUE
FRANKLIN INSURED TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
At February 28, 1995, the net unrealized appreciation based on the cost of investments
for income tax purposes of $1,575,639,048 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ............................................................ $ 90,920,373
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ............................................................ (8,028,005)
--------------
Net unrealized appreciation ............................................................... $ 82,892,368
==============
</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
ETM - Escrow to Maturity
FGIC - Financial Guaranty Insurance Co.
FHA - Federal Housing Agency
FSA - Financial Security Assistance
GNMA - Government National Mortgage Association
GO - General Obligation
HDA - Housing Development Authority
HDC - Housing Development Corp.
HFA - Housing Finance Agency/Authority
HFAR - Housing Finance Agency Revenue
HFC - Housing Finance Corp.
HMR - Housing Mortgage Revenue
IDA - Industrial Development Authority
IDAR - Industrial Development Authority Revenue
IDB - Industrial Development Bond
L.P. - Limited Partnership
MAC - Municipal Assistance Corp.
MBIA - Municipal Bond Investors Assurance Corp.
MFHR - Multi-Family Housing Revenue
MFMR - Multi-Family Mortgage Revenue
MUD - Municipal Utility District
PBA - Public Building Authority
PCA - Pollution Control Authority
PCFA - Pollution Control Financing Authority
PCR - Pollution Control Revenue
PUD - Public Utility District
RDA - Redevelopment Agency
RDAR - Redevelopment Agency Revenue
RMR - Residential Mortgage Revenue
SFMR - Single Family Mortgage Revenue
UHSD - Unified High School District
USD - Unified School District
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).
gSee Note 1c regarding uninsured securities collateralized by U.S. government
securities.
The accompanying notes are an integral part of these
financial statements.
64
<PAGE>
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- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN MASSACHUSETTS INSURED TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
$2,700,000 Ashburnham & Westminister, Regional School District, MBIA Insured, 6.00%, 12/15/13 ............ $ 2,660,850
Attleboro Municipal Purpose GO,
1,045,000 AMBAC Insured, 6.00%, 07/01/11 ............................................................ 1,041,656
1,045,000 AMBAC Insured, 6.00%, 07/01/12 ............................................................ 1,036,013
685,000 AMBAC Insured, 6.00%, 07/01/13 ............................................................ 675,205
755,000 AMBAC Insured, 6.00%, 07/01/14 ............................................................ 743,894
1,300,000 Billerica GO, Lot B, MBIA Insured, 5.50%, 07/15/13 ............................................ 1,230,918
Blackstone-Milville School District,
705,000 AMBAC Insured, 6.50%, 05/01/08 ............................................................ 742,146
750,000 AMBAC Insured, 6.50%, 05/01/09 ............................................................ 782,468
795,000 AMBAC Insured, 6.50%, 05/01/10 ............................................................ 826,562
6,000,000 Boston GO, AMBAC Insured, Pre-Refunded, 7.375%, 08/01/04 ...................................... 6,404,520
Boston Water and Sewage Commission, General Revenue,
3,000,000 Series 1988-A, BIG Insured, 7.25%, 11/01/06 ............................................... 3,254,670
1,400,000 gSeries 1989-A, Pre-Refunded, 7.10%, 11/01/19 .............................................. 1,536,640
1,095,000 Central Berkshire GO, School District, MBIA Insured, 7.25%, 06/01/08 .......................... 1,192,247
1,000,000 Chelsea School Project, 1948 Loan Act, AMBAC Insured, 6.00%, 06/15/14 ......................... 994,240
2,000,000 Fall River School Project, MBIA Insured, 7.20%, 06/01/10 ...................................... 2,174,660
Framingham Housing Authority Mortgage Revenue,
500,000 Beaver Terrace Apartments, Series A, GNMA Secured, 6.60%, 08/20/16 ........................ 504,805
1,650,000 Beaver Terrace Apartments, Series A, GNMA Secured, 6.65%, 02/20/32 ........................ 1,649,687
Greenfield GO,
500,000 MBIA Insured, 6.50%, 10/15/08 ............................................................. 525,795
500,000 MBIA Insured, 6.50%, 10/15/09 ............................................................. 523,545
750,000 Haverhill, City of, GO, AMBAC Insured, Pre-Refunded, 8.875%, 12/01/10 ......................... 789,075
1,000,000 Holyoke GO, School Project Loans, MBIA Insured, 8.05%, 06/15/04 ............................... 1,187,910
Hudson GO,
250,000 MBIA Insured, 6.00%, 05/15/13 ............................................................. 249,425
240,000 MBIA Insured, 6.00%, 05/15/14 ............................................................. 238,085
Lenox GO, Refunding,
1,000,000 AMBAC Insured, 6.60%, 10/15/11 ............................................................ 1,044,570
500,000 AMBAC Insured, 6.625%, 10/15/15 ........................................................... 521,405
450,000 Leominster GO, Series 1990, MBIA Insured, 7.50%, 04/01/09 ..................................... 498,672
Ludlow GO,
210,000 School Project, Limited Tax, MBIA Insured, 7.30%, 11/01/07 ................................ 238,951
210,000 School Project, Limited Tax, MBIA Insured, 7.30%, 11/01/08 ................................ 239,400
210,000 School Project, Limited Tax, MBIA Insured, 7.40%, 11/01/09 ................................ 241,036
Lynn Water and Sewer Commission Revenue,
200,000 Series 1985-A, FGIC Insured, Pre-Refunded, 8.40%, 06/01/99 ................................ 206,088
210,000 Series 1985-A, FGIC Insured, Pre-Refunded, 8.75%, 06/01/05 ................................ 216,575
4,000,000 Lynn Water and Sewer General Revenue, Series 1990-A, MBIA Insured, Pre-Refunded, 7.25%,
12/01/10 ..................................................................................... 4,493,000
Mansfield GO, AMBAC Insured, 6.70%, 01/15/11 .................................................. 2,097,680
Martha's Vineyard, Regional High School District No. 100,
830,000 AMBAC Insured, 6.55%, 12/15/10 ............................................................ 869,475
725,000 AMBAC Insured, 6.60%, 12/15/11 ............................................................ 759,387
880,000 AMBAC Insured, 6.65%, 12/15/12 ............................................................ 921,624
210,000 AMBAC Insured, 6.70%, 12/15/14 ............................................................ 219,908
500,000 Mashpee Water District GO, MBIA Insured, 6.40%, 10/15/12 ...................................... 517,350
Massachusetts Bay Transportation Authority,
2,500,000 COP, BIG Insured, 7.75%, 01/15/06 ......................................................... 2,939,250
3,000,000 gGeneral Transportation System, Series 1988-A, Pre-Refunded, 7.75%, 03/01/13 ............... 3,290,910
2,610,000 Massachusetts Education Loan Authority Revenue, Issue D, Series A, MBIA Insured, 7.25%,
01/01/09 ..................................................................................... 2,728,129
</TABLE>
The accompanying notes are an integral part of these
financial statements.
65
<PAGE>
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- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN MASSACHUSETTS INSURED TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
Massachusetts GO,
$1,200,000 Commonwealth, Series A, FGIC Insured, Pre-Refunded, 7.25%, 03/01/09 ....................... $ 1,333,740
800,000 Commonwealth, Series C, AMBAC Insured, 6.75%, 08/01/09 .................................... 852,096
1,000,000 Commonwealth, Series C, CGIC Insured, Pre-Refunded, 7.00%, 12/01/10 ....................... 1,095,920
4,000,000 Refunding, Series A, AMBAC Insured, 6.50%, 08/01/11 ....................................... 4,181,080
2,000,000 Refunding, Series B, MBIA Insured, 6.50%, 08/01/11 ........................................ 2,090,540
Massachusetts Health and Educational Facilities Authority Revenue,
1,750,000 Bay State Medical Center, Refunding, Series D, FGIC Insured, 6.00%, 07/01/15 .............. 1,715,613
2,000,000 Berkshire Health System, Series A, MBIA Insured, 7.50%, 10/01/08 .......................... 2,168,240
1,500,000 Berkshire Health System, Series A, MBIA Insured, 6.75%, 10/01/19 .......................... 1,532,175
1,900,000 Beverly Hospital, Lot 1, Refunding, Series D, MBIA Insured, Pre-Refunded, 7.30%, 07/01/13 . 2,013,715
4,000,000 Beverly Hospital, Lot 2, Series D, MBIA Insured, Pre-Refunded, 7.30%, 07/01/19 ............ 4,417,480
2,250,000 Boston College, Series J, FGIC Insured, 6.625%, 07/01/21 .................................. 2,318,490
500,000 Brigham & Women's Hospital, Series C, MBIA Insured, 7.00%, 06/01/18 ....................... 525,885
4,500,000 Cape Cod Health System, Series A, Connie Lee Insured, 5.625%, 11/15/23 .................... 4,027,815
2,200,000 Children's Hospital, Refunding, Series E, AMBAC Insured, 6.20%, 10/01/16 .................. 2,204,576
1,000,000 Community College Program, Series A, Connie Lee Insured, 6.50%, 10/01/09 .................. 1,031,530
3,250,000 Community College Program, Series A, Connie Lee Insured, 6.60%, 10/01/22 .................. 3,307,395
5,250,000 Fallon Healthcare System, Series A, CGIC Insured, 6.875%, 06/01/11 ........................ 5,561,850
7,550,000 Fallon Healthcare System, Series A, CGIC Insured, 6.75%, 06/01/20 ......................... 7,843,167
600,000 Fallon Healthcare System, Series A, CGIC Insured, 6.00%, 06/01/21 ......................... 586,752
3,490,000 Lahey Clinic Medical Center, Series A, MBIA Insured, Pre-Refunded, 7.625%, 07/01/18 ....... 3,836,941
7,665,000 Massachusetts General Hospital, AMBAC Insured, 6.25%, 07/01/20 ............................ 7,710,377
2,500,000 Massachusetts General Hospital, Refunding, Series F, AMBAC Insured, 6.00%, 07/01/15 ....... 2,470,825
1,280,000 McLean Hospital, Series C, FGIC Insured, 6.625%, 07/01/15 ................................. 1,326,157
3,000,000 Metro West Health, Inc., Series C, AMBAC Insured, 6.40%, 11/15/11 ......................... 3,106,920
3,500,000 Metro West Health, Inc., Series C, AMBAC Insured, 6.50%, 11/15/18 ......................... 3,593,135
550,000 Metro West Health, Inc., Refunding, Series C, AMBAC Insured, 6.30%, 11/15/12 .............. 562,331
5,400,000 Milton Hospital, Series B, MBIA Insured, 7.00%, 07/01/16 .................................. 5,741,226
6,000,000 Mt. Auburn Hospital, Series 1988-A, MBIA Insured, Pre-Refunded, 7.875%, 07/01/18 .......... 6,612,720
3,500,000 Mt. Auburn Hospital, Series B-1, MBIA Insured, 6.30%, 08/15/24 ............................ 3,502,625
1,895,000 New England Medical Center Hospitals, Series D, AMBAC Insured, 6.875%, 04/01/22 ........... 1,989,276
1,000,000 New England Medical Center Hospitals, Series D, BIG Insured, Pre-Refunded, 7.20%, 07/01/10 1,053,570
1,000,000 New England Medical Center Hospitals, Series F, FGIC Insured, 6.50%, 07/01/12 ............. 1,040,240
8,925,000 New England Medical Center Hospitals, Series F, FGIC Insured, 6.625%, 07/01/25 ............ 9,246,836
5,000,000 Newton-Wellesley Hospital, Series C, BIG Insured, 8.00%, 07/01/18 ......................... 5,471,550
4,030,000 Newton-Wellesley Hospital, Series D, MBIA Insured, 7.00%, 07/01/15 ........................ 4,322,900
1,250,000 Northeastern University, Series D, AMBAC Insured, 7.125%, 10/01/10 ........................ 1,339,775
3,900,000 Northeastern University, Series E, MBIA Insured, 6.55%, 10/01/22 .......................... 4,017,000
5,750,000 Salem Hospital, Series 1987-A, MBIA Insured, Pre-Refunded, 7.25%, 07/01/09 ................ 6,061,248
4,000,000 gSt. Elizabeth's Hospital of Boston, Series B, FHA Mortgage Insured, Pre-Refunded, 7.75%,
08/01/27 ................................................................................. 4,330,840
6,200,000 St. Luke's Hospital, New Bedford, Series B, AMBAC Insured, Pre-Refunded, 7.75%, 07/01/13 .. 6,714,042
890,000 Stonehill College, Refunding, Series E, MBIA Insured, 6.55%, 07/01/12 ..................... 927,024
3,000,000 Stonehill College, Refunding, Series E, MBIA Insured, 6.60%, 07/01/20 ..................... 3,100,740
1,025,000 Stonehill College, Series D, AMBAC Insured, Pre-Refunded, 7.65%, 07/01/10 ................. 1,163,519
515,000 Stonehill College, Series D, AMBAC Insured, Pre-Refunded, 7.70%, 07/01/20 ................. 585,787
3,250,000 Suffolk University, Series B, Connie Lee Insured, 6.35%, 07/01/22 ......................... 3,204,013
1,500,000 University Hospital, Series C, MBIA Insured, Pre-Refunded, 7.25%, 07/01/19 ................ 1,618,095
1,820,000 Wentworth Institute of Technology, Series A, AMBAC Insured, Pre-Refunded, 7.40%, 04/01/10 . 2,037,272
1,500,000 Wentworth Technology Institute, Series B, Connie Lee Insured, 5.625%, 10/01/13 ............ 1,385,385
</TABLE>
The accompanying notes are an integral part of these
financial statements.
66
<PAGE>
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- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995
(CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN MASSACHUSETTS INSURED TAX-FREE INCOME FUND (NOTE 1)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
Massachusetts Health and Educational Facilities Authority Revenue, (cont.)
$1,500,000 Wentworth Technology Institute, Series B, Connie Lee Insured, 5.50%, 10/01/23 ............. $ 1,336,395
3,000,000 Wheaton College, Series B, CGIC Insured, 7.25%, 07/01/19 .................................. 3,307,350
2,750,000 Worcester Polytech Institute, MBIA Insured, 6.625%, 09/01/17 .............................. 2,862,805
2,500,000 Massachusetts Municipal Wholesale Electric Co., Power Supply System Revenue, Series A,
AMBAC Insured, 6.00%, 07/01/18 ............................................................... 2,484,225
Massachusetts State HFA,
430,000 gMFHR, Section 8 Assisted, Series 1979-A, ETM 04/01/19, 7.00%, 04/01/21 .................... 471,198
2,930,000 MFHR, Series 1985-A, MBIA Insured, 8.875%, 07/01/18 ....................................... 3,013,534
Massachusetts State HFA, Housing Revenue,
2,700,000 MFHR, Series 1985-A, MBIA Insured, 9.25%, 12/01/14 ........................................ 2,829,114
110,000 Series 1985-A, FGIC Insured, 9.50%, 12/01/16 .............................................. 113,590
1,735,000 Series 1986-A, MBIA Insured, 7.50%, 12/01/06 .............................................. 1,814,168
1,975,000 Series 1988-8, BIG Insured, 7.70%, 06/01/17 ............................................... 2,077,878
135,000 SFHR, Series 1985-1, FGIC Insured, 9.375%, 06/01/12 ....................................... 141,203
1,355,000 SFHR, Series 1986-2, FGIC Insured, 8.25%, 06/01/14 ........................................ 1,401,124
1,500,000 SFMR, Series 18, MBIA Insured, 7.35%, 12/01/16 ............................................ 1,567,455
Massachusetts State Industrial Finance Agency Revenue,
750,000 Babson College, Series A, MBIA Insured, 6.375%, 10/01/09 .................................. 776,828
3,105,000 Babson College, Series A, MBIA Insured, 6.50%, 10/01/22 ................................... 3,180,265
7,075,000 Brandeis University, Series C, MBIA Insured, 6.80%, 10/01/19 .............................. 7,331,540
1,000,000 Milton Hospital, Series A, MBIA Insured, Pre-Refunded, 7.25%, 09/01/19 .................... 1,105,380
2,010,000 Refunding, Combined Jewish Philanthropies, AMBAC Insured, Series A, 6.375%, 02/01/15 ...... 2,046,964
Massachusetts State Port Authority Revenue,
285,000 gRefunding, Series B, Pre-Refunded, 9.375%, 07/01/15 ....................................... 295,485
5,200,000 Series A, FGIC Insured, 7.50%, 07/01/20 ................................................... 5,620,940
Melrose Municipal Purpose GO,
200,000 MBIA Insured, 6.00%, 08/15/11 ............................................................. 201,140
200,000 MBIA Insured, 6.05%, 08/15/12 ............................................................. 201,138
200,000 MBIA Insured, 6.10%, 08/15/13 ............................................................. 201,134
200,000 MBIA Insured, 6.10%, 08/15/14 ............................................................. 201,134
Millis School Project, GO,
270,000 Unlimited Tax, AMBAC Insured, 7.40%, 05/01/06 ............................................. 296,792
270,000 Unlimited Tax, AMBAC Insured, 7.40%, 05/01/07 ............................................. 296,155
270,000 Unlimited Tax, AMBAC Insured, 7.40%, 05/01/08 ............................................. 295,518
270,000 Unlimited Tax, AMBAC Insured, 7.40%, 05/01/09 ............................................. 291,983
Norfolk GO,
450,000 AMBAC Insured, 6.00%, 01/15/10 ............................................................ 450,621
425,000 AMBAC Insured, 6.00%, 01/15/11 ............................................................ 425,587
375,000 AMBAC Insured, 6.00%, 01/15/12 ............................................................ 373,785
300,000 AMBAC Insured, 6.00%, 01/15/13 ............................................................ 298,995
300,000 North Andover Municipal Purpose, Limited Tax, MBIA Insured, 7.40%, 09/15/09 ................... 329,262
North Attleborough GO,
125,000 Limited Tax, AMBAC Insured, Pre-Refunded, 7.05%, 06/01/06 ................................. 138,284
125,000 Limited Tax, AMBAC Insured, Pre-Refunded, 7.10%, 06/01/07 ................................. 138,568
125,000 Limited Tax, AMBAC Insured, Pre-Refunded, 7.15%, 06/01/08 ................................. 138,853
125,000 Limited Tax, AMBAC Insured, Pre-Refunded, 7.20%, 06/01/09 ................................. 139,136
1,500,000 Palmer GO, Refunding, MBIA Insured, 5.50%, 10/01/10 ........................................... 1,427,640
Peabody GO,
500,000 Electric Light, AMBAC Insured, 6.75%, 08/01/05 ............................................ 541,775
750,000 Electric Light, AMBAC Insured, 6.85%, 08/01/06 ............................................ 812,430
500,000 Electric Light, AMBAC Insured, 6.90%, 08/01/07 ............................................ 540,140
555,000 Electric Light, AMBAC Insured, 6.95%, 08/01/08 ............................................ 599,472
</TABLE>
The accompanying notes are an integral part of these
financial statements.
67
<PAGE>
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- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995
(CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN MASSACHUSETTS INSURED TAX-FREE INCOME FUND (NOTE 1)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
$1,000,000 Puerto Rico Commonwealth, Public Improvement, MBIA Insured, Pre-Refunded, 6.50%, 07/01/09 ..... $ 1,101,330
Puerto Rico HFC, SFMR,
2,580,000 Portfolio No. 1, Series 1988-A, GNMA Secured, 7.80%, 10/15/21 ............................. 2,704,408
880,000 Portfolio No. 1, Series 1988-B, GNMA Secured, 7.65%, 10/15/22 ............................. 931,401
Quabbin Regional School District, GO,
275,000 AMBAC Insured, 7.00%, 06/15/04 ............................................................ 299,076
275,000 AMBAC Insured, 7.00%, 06/15/05 ............................................................ 298,416
275,000 AMBAC Insured, 7.00%, 06/15/06 ............................................................ 297,756
275,000 AMBAC Insured, 7.00%, 06/15/07 ............................................................ 297,099
275,000 AMBAC Insured, 7.00%, 06/15/08 ............................................................ 297,099
250,000 AMBAC Insured, 7.00%, 06/15/09 ............................................................ 264,828
Quincy Revenue, Quincy City Hospital, FHA Mortgage Insured,
1,500,000 gSeries A, Pre-Refunded, 7.75%, 01/15/06 ................................................... 1,592,550
3,475,000 gSeries A, Pre-Refunded, 7.875%, 01/15/16 .................................................. 3,695,037
Rochester School GO,
150,000 Lot B, MBIA Insured, 7.30%, 04/01/04 ...................................................... 164,129
150,000 Lot B, MBIA Insured, 7.30%, 04/01/05 ...................................................... 163,839
150,000 Lot B, MBIA Insured, 7.30%, 04/01/06 ...................................................... 163,551
150,000 Lot B, MBIA Insured, 7.30%, 04/01/07 ...................................................... 163,263
150,000 Lot B, MBIA Insured, 7.30%, 04/01/08 ...................................................... 162,975
120,000 Lot B, MBIA Insured, 7.30%, 04/01/09 ...................................................... 128,197
Salem GO,
425,000 AMBAC Insured, 6.70%, 08/15/05 ............................................................ 457,113
500,000 AMBAC Insured, 6.80%, 08/15/07 ............................................................ 539,045
470,000 MBIA Insured, 5.20%, 07/15/11 ............................................................. 432,043
470,000 MBIA Insured, 5.20%, 07/15/12 ............................................................. 428,338
3,000,000 Somerville Housing Authority Revenue, Clarendon Hill, GNMA Secured, 7.95%, 11/20/30 ........... 3,234,750
South Essex Sewer District,
330,000 AMBAC Insured, 6.25%, 11/01/11 ............................................................ 340,321
2,800,000 Series B, MBIA Insured, 7.00%, 06/01/24 ................................................... 3,002,383
2,375,000 Southbridge GO, AMBAC Insured, 6.375%, 01/01/12 ............................................... 2,422,001
Tyngsborough GO,
600,000 School Project Loan, AMBAC Insured, 6.90%, 05/15/09 ....................................... 650,405
600,000 School Project Loan, AMBAC Insured, 6.90%, 05/15/10 ....................................... 650,405
2,000,000 Westfield School District GO, AMBAC Insured, Pre-Refunded, 7.10%, 12/15/08 .................... 2,232,860
Westford GO,
800,000 FGIC Insured, Pre-Refunded, 7.60%, 10/15/10 ............................................... 910,551
2,000,000 Refunding, AMBAC Insured, 5.45%, 10/15/10 ................................................. 1,893,280
Whately GO,
215,000 AMBAC Insured, 6.20%, 01/15/07 ............................................................ 223,593
215,000 AMBAC Insured, 6.30%, 01/15/08 ............................................................ 224,430
200,000 AMBAC Insured, 6.40%, 01/15/10 ............................................................ 207,425
Whitman GO, Various Purpose Loan,
250,000 MBIA Insured, Pre-Refunded, 7.60%, 06/15/04 ............................................... 265,520
250,000 MBIA Insured, Pre-Refunded, 7.60%, 06/15/05 ............................................... 265,520
150,000 MBIA Insured, Pre-Refunded, 7.60%, 06/15/06 ............................................... 159,311
-------------
TOTAL LONG TERM INVESTMENTS (COST $268,469,996) ......................................... 283,270,085
-------------
</TABLE>
The accompanying notes are an integral part of these
financial statements.
68
<PAGE>
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- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995
(CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN MASSACHUSETTS INSURED TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
eSHORT TERM INVESTMENTS .2%
$ 700,000 Puerto Rico Commonwealth, Governmental Development Bank, Weekly VRDN and Put,
3.90%, 12/01/15 (COST $700,000) .............................................................. $ 700,000
------------
TOTAL INVESTMENTS (COST $269,169,996) 98.5% ........................................ 283,970,085
OTHER ASSETS AND LIABILITIES, NET 1.5% .............................................. 4,360,831
------------
NET ASSETS 100.0% .................................................................. $288,330,916
============
At February 28, 1995, the net unrealized appreciation based on
the cost of investments for income tax purposes of $269,192,109
was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ............................................................. $ 15,893,790
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ............................................................. (1,115,814)
------------
Net unrealized appreciation ................................................................. $ 14,777,976
============
</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
HFA - Housing Finance Agency/Authority
HFC - Housing Finance Corp.
MBIA - Municipal Bond Investors Assurance Corp.
MFHR - Multi-Family Housing Revenue
SFHR - Single Family Housing Revenue
SFMR - Single Family Mortgage Revenue
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).
gSee Note 1c regarding uninsured securities collateralized by U.S. government
securities.
The accompanying notes are an integral part of these
financial statements.
69
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STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN MICHIGAN INSURED TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS 98.1%
$ 1,325,000 Allegan Public School District GO, School Building and Site, AMBAC Insured, 5.875%, 05/01/18 . $ 1,291,358
3,750,000 Allendale Public School District, MBIA Insured, 6.00%, 05/01/24 .............................. 3,683,775
995,000 Alpena County GO, Hospital Improvement, Refunding, Series 1985-B, AMBAC Insured,
Pre-Refunded, 8.75%, 06/01/02 .............................................................. 1,026,153
5,000,000 Anchor Bay School District GO, FGIC Insured, 5.55%, 05/01/19 ................................. 4,577,800
Battle Creek, Limited Tax GO, Refunding, AMBAC Insured, 8.25%, 04/01/97 ...................... 541,437
Bay City Electric Utility Revenue,
3,100,000 AMBAC Insured, 6.60%, 01/01/12 ........................................................... 3,253,760
2,000,000 Refunding, AMBAC Insured, Pre-Refunded, 7.30%, 01/01/05 .................................. 2,126,100
1,135,000 Bay City GO, Refunding, AMBAC Insured, 5.20%, 09/01/12 ....................................... 1,024,962
Belding Area School,
375,000 Series B, AMBAC Insured, 6.15%, 05/01/13 ................................................. 376,785
675,000 Series B, AMBAC Insured, 6.15%, 05/01/14 ................................................. 678,213
1,450,000 Breckenridge Community School District, AMBAC Insured, 5.75%, 05/01/23 ....................... 1,358,012
Breitung Township School District,
7,500,000 CGIC Insured, Pre-Refunded, 7.20%, 05/01/19 .............................................. 8,222,550
2,935,000 MBIA Insured, 6.30%, 05/01/15 ............................................................ 2,952,904
Caledonia Community Schools,
3,750,000 Refunding, AMBAC Insured, 6.625%, 05/01/14 ............................................... 3,891,413
10,000,000 Refunding, AMBAC Insured, 5.50%, 05/01/22 ................................................ 9,048,900
1,290,000 Calhoun County, Western Calhoun County Sanitary Sewer System No. 1, Township of Emmett,
Refunding, AMBAC Insured, Pre-Refunded, 7.75%, 11/01/18 .................................... 1,411,389
875,000 dCalumet School District GO, Laurium and Keweenah Public Schools, CGIC Insured, 5.875%,
05/01/20 .................................................................................... 851,953
5,000,000 Central Michigan University Revenue, MBIA Insured, Pre-Refunded, 7.90%, 10/01/15 ............. 5,458,400
Chippewa Valley School District,
500,000 BIG Insured, Pre-Refunded, 7.40%, 05/01/07 ............................................... 550,535
500,000 BIG Insured, Pre-Refunded, 7.40%, 05/01/08 ............................................... 550,535
500,000 BIG Insured, Pre-Refunded, 7.40%, 05/01/09 ............................................... 550,535
500,000 BIG Insured, Pre-Refunded, 7.40%, 05/01/10 ............................................... 550,535
Coldwater Community Schools,
1,100,000 MBIA Insured, 6.20%, 05/01/15 ............................................................ 1,114,905
1,700,000 MBIA Insured, 6.30%, 05/01/23 ............................................................ 1,722,916
3,000,000 Comstock Park Public Schools, Refunding, School Building and Site, FGIC Insured, 5.25%,
05/01/15 ................................................................................... 2,687,070
65,000 Coopersville Area Public Schools, Counties of Ottawa and Muskegon, MBIA Insured,
Pre-Refunded, 8.60%, 05/01/04 ............................................................... 69,816
3,000,000 Dearborn EDC Revenue, Oakwood Hospital, Refunding, Series A, MBIA Insured, 5.25%, 08/15/14 ... 2,664,960
13,050,000 Detroit City Water Supply System Revenue, MBIA Insured, Pre-Refunded, 7.875%, 07/01/19 ....... 14,446,089
Detroit Sewage Disposal System Revenue,
1,000,000 FGIC Insured, 6.625%, 07/01/21 ........................................................... 1,031,100
10,300,000 FGIC Insured, Pre-Refunded, 7.125%, 07/01/19 ............................................. 11,264,183
3,500,000 FGIC Insured, Pre-Refunded, 7.25%, 07/01/20 .............................................. 3,908,450
4,000,000 Refunding, BIG Insured, 7.00%, 07/01/09 .................................................. 4,172,240
500,000 Refunding, BIG Insured, Pre-Refunded, 8.00%, 07/01/08 .................................... 543,820
6,000,000 Detroit State Aid GO, AMBAC Insured, Pre-Refunded, 7.20%, 05/01/09 ........................... 6,586,380
Detroit Water Supply System Revenue,
5,000,000 FGIC Insured, 6.25%, 07/01/12 ............................................................ 5,073,400
4,960,000 FGIC Insured, Pre-Refunded, 7.125%, 07/01/10 ............................................. 5,510,262
DeWitt Public Schools Building and Site,
350,000 AMBAC Insured, Pre-Refunded, 6.60%, 05/01/15 ............................................. 381,238
350,000 AMBAC Insured, Pre-Refunded, 6.60%, 05/01/16 ............................................. 381,238
1,250,000 East Lansing Building Authority, GO, Refunding, AMBAC Insured, 7.00%, 10/01/16 ............... 1,320,350
</TABLE>
The accompanying notes are an integral part of these
financial statements.
70
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STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995
(CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN MICHIGAN INSURED TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
Eastern Michigan University Revenue,
$ 1,000,000 Refunding, AMBAC Insured, 6.375%, 06/01/14 ............................................... $ 1,016,960
2,105,000 Refunding, Residence Hall, FGIC Insured, 7.875%, 10/01/10 ................................ 2,207,324
4,500,000 gRefunding, Special Project, Student Fee, Pre-Refunded, 7.875%, 10/01/14 .................. 4,754,970
10,140,000 Farmington Hills Hospital Finance Authority Revenue, Refunding, Botsford General Hospital,
Series A, MBIA Insured, 7.10%, 02/15/14 ..................................................... 10,776,589
Ferris State College Revenue,
1,000,000 AMBAC Insured, 6.15%, 10/01/14 ........................................................... 1,004,570
1,000,000 AMBAC Insured, 6.25%, 10/01/19 ........................................................... 1,008,400
7,700,000 Flint Hospital Building Authority Revenue, Refunding, Hurley Medical Center, Series A,
BIG Insured, 7.75%, 07/01/00 ................................................................ 8,140,517
Fowlerville Community School District,
645,000 Refunding, FGIC Insured, 5.50%, 05/01/13 ................................................. 605,507
2,150,000 Refunding, FGIC Insured, 5.75%, 05/01/20 ................................................. 2,037,813
4,425,000 Gaylord Community Schools, Refunding, MBIA Insured, 5.625%, 05/01/21 ......................... 4,108,082
Gerrish and Higgins School District, Building and Site,
3,000,000 CGIC Insured, 6.40%, 05/01/12 ............................................................ 3,098,160
2,500,000 CGIC Insured, 6.50%, 05/01/17 ............................................................ 2,590,325
4,000,000 Gibraltar School District GO, CGIC Insured, Pre-Refunded, 7.00%, 05/01/15 .................... 4,296,120
6,250,000 Grand Haven Area Public Schools, Refunding, MBIA Insured, 6.05%, 05/01/14 .................... 6,228,313
10,000,000 Grand Ledge Public School District, MBIA Insured, 6.60%, 05/01/24 ............................ 10,350,000
7,500,000 Grand Rapids, Downtown, Devauth Tax Increment Revenue, MBIA Insured, 6.875%, 06/01/24 ........ 7,966,725
Grand Rapids Water Supply System Revenue,
5,375,000 FGIC Insured, Pre-Refunded, 7.25%, 01/01/20 .............................................. 5,958,994
4,500,000 MBIA Insured, Pre-Refunded, 7.875%, 01/01/18 ............................................. 4,932,495
Grand Traverse County Hospital Finance Authority Revenue,
5,500,000 gMunson Medical Center, Series A, Pre-Refunded, 7.625%, 12/01/15 .......................... 5,875,210
2,500,000 Refunding, Munson Healthcare, Series A, AMBAC Insured, 6.25%, 07/01/12 ................... 2,549,200
2,900,000 Refunding, Munson Healthcare, Series A, AMBAC Insured, 6.25%, 07/01/22 ................... 2,942,572
3,000,000 Gratiot County EDC, EDR, Masonic Home Project, AMBAC Insured, Pre-Refunded, 7.375%,
04/01/20 .................................................................................... 3,354,840
2,750,000 Gull Lake Community School District, FGIC Insured, Pre-Refunded, 6.80%, 05/01/21 ............. 3,034,240
4,715,000 Harrison Community Schools GO, AMBAC Insured, 6.25%, 05/01/13 ................................ 4,771,109
Haslett Public School District,
4,000,000 CGIC Insured, Pre-Refunded, 7.50%, 05/01/20 .............................................. 4,470,080
3,875,000 Refunding, CGIC Insured, 6.625%, 05/01/19 ................................................ 4,034,921
2,000,000 Holland School District GO, Refunding, AMBAC Insured, 6.375%, 05/01/10 ....................... 2,047,780
Holt Public Schools Building and Site,
1,000,000 MBIA Insured, 6.25%, 05/01/16 ............................................................ 1,011,690
3,060,000 MBIA Insured, 6.25%, 05/01/18 ............................................................ 3,095,771
2,525,000 MBIA Insured, 6.30%, 05/01/20 ............................................................ 2,554,467
1,425,000 MBIA Insured, 6.50%, 05/01/21 ............................................................ 1,461,352
Houghton-Portage Township School District,
2,000,000 Refunding, AMBAC Insured, 6.00%, 05/01/14 ................................................ 2,005,380
2,700,000 Refunding, CGIC Insured, Pre-Refunded, 7.00%, 05/01/17 ................................... 2,899,881
5,695,000 Howell Public Schools, Refunding, AMBAC Insured, 5.375%, 05/01/20 ............................ 5,093,209
750,000 Hudsonville Building Authority, Refunding, AMBAC Insured, 6.60%, 10/01/17 .................... 770,813
Hudsonville Public Schools GO,
2,000,000 Refunding, Series B, FGIC Insured, 6.05%, 05/01/19 ....................................... 2,003,020
2,000,000 Refunding, Series B, FGIC Insured, 6.10%, 05/01/24 ....................................... 2,003,000
9,800,000 Huron Valley School District, Refunding, FGIC Insured, 6.125%, 05/01/20 ...................... 9,832,046
6,800,000 Imlay City Community School District, Refunding, CGIC Insured, Pre-Refunded, 6.70%, 05/01/21 . 7,075,944
</TABLE>
The accompanying notes are an integral part of these
financial statements.
71
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- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995
(CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN MICHIGAN INSURED TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
Ingham County Medical Center Revenue,
$ 475,000 gRefunding, Pre-Refunded, 8.25%, 05/01/00 ................................................. $ 495,843
500,000 gRefunding, Pre-Refunded, 8.25%, 11/01/00 ................................................. 521,940
Inkster Michigan School District,
450,000 Series 1990, AMBAC Insured, Pre-Refunded, 7.00%, 05/01/14 ................................ 494,537
450,000 Series 1990, AMBAC Insured, Pre-Refunded, 7.00%, 05/01/16 ................................ 494,537
2,250,000 Iron Mountain School District, Building and Site, AMBAC Insured, 6.30%, 05/01/21 ............. 2,276,258
1,350,000 Ithaca Public Schools GO, AMBAC Insured, 5.75%, 05/01/21 ..................................... 1,283,445
Jackson County GO,
3,000,000 Refunding, AMBAC Insured, 5.50%, 04/01/13 ................................................ 2,826,300
400,000 gSeries 1985, FGIC Insured, Pre-Refunded, 8.60%, 04/01/12 ................................. 449,896
Kalamazoo Hospital Finance Authority, Hospital Facility Revenue,
3,500,000 Refunding, Borgess Medical Center, FGIC Insured, Pre-Refunded, 9.125%, 01/01/16 .......... 3,625,300
5,000,000 Refunding & Improvement, Bronson Methodist, Series A, MBIA Insured, 6.25%, 05/15/12 ...... 5,074,650
2,460,000 Refunding & Improvement, Bronson Methodist, Series A, MBIA Insured, 6.375%, 05/15/17 ..... 2,501,156
1,000,000 Kelloggsville Public School District GO, FGIC Insured, 5.75%, 05/01/13 ....................... 969,270
2,100,000 Kent County Hospital Finance Authority Revenue, Pine Rest Christian Hospital Association,
FGIC Insured, Pre-Refunded, 9.00%, 11/01/10 ................................................. 2,203,509
Lake City Area School District GO,
2,500,000 AMBAC Insured, Pre-Refunded, 6.95%, 05/01/13 ............................................. 2,669,150
2,955,000 Refunding, AMBAC Insured, 5.625%, 05/01/13 ............................................... 2,845,842
Lake Superior State University Revenue,
1,500,000 AMBAC Insured, 6.375%, 11/15/15 .......................................................... 1,541,520
2,135,000 MBIA Insured, 6.50%, 11/15/11 ............................................................ 2,218,479
1,500,000 Lakeview Community School District GO, Refunding, MBIA Insured, 6.75%, 05/01/13 .............. 1,553,940
Lansing Sewage Disposal System Revenue,
12,500,000 Refunding, Series 1988, MBIA Insured, 7.625%, 05/01/06 ................................... 13,295,500
1,500,000 Series 1985, MBIA Insured, Pre-Refunded, 9.25%, 05/01/06 ................................. 1,557,480
Livonia Public School District,
10,000,000 Refunding, FGIC Insured, 5.50%, 05/01/16 ................................................. 9,280,300
3,625,000 Refunding, FGIC Insured, 5.50%, 05/01/21 ................................................. 3,315,751
1,000,000 Marquette Area Public School Building and Site, Series B, FGIC Insured, Pre-Refunded, 6.65%,
05/01/12 .................................................................................... 1,095,530
5,000,000 Marquette City Hospital Finance Authority Revenue, Refunding, Marquette General Hospital,
Series C, AMBAC Insured, 7.50%, 04/01/07 .................................................... 5,436,050
Mattawan Consolidated School District, Counties of Van Buren and Kalamazoo, School Building
and Site, GO,
775,000 Unlimited Tax, AMBAC Insured, Pre-Refunded, 7.50%, 05/01/13 .............................. 846,393
775,000 Unlimited Tax, AMBAC Insured, Pre-Refunded, 7.55%, 05/01/16 .............................. 847,509
800,000 Unlimited Tax, AMBAC Insured, Pre-Refunded, 7.55%, 05/01/17 .............................. 874,848
800,000 Unlimited Tax, AMBAC Insured, Pre-Refunded, 7.55%, 05/01/18 .............................. 874,848
1,675,000 Menominee Area Public School District, Refunding, AMBAC Insured, 6.00%, 05/01/20 ............. 1,657,681
5,415,000 Michigan Higher Education Facilities Authority Revenue, Refunding, Limited Obligation,
Hope College, Connie Lee Insured, 6.30%, 10/01/19 ........................................... 5,414,675
Michigan Higher Education Student Loan Authority Revenue,
2,000,000 Series 8-A, MBIA Insured, 7.40%, 10/01/04 ................................................ 2,131,120
2,000,000 Series 8-A, MBIA Insured, 7.55%, 10/01/08 ................................................ 2,112,820
Michigan Municipal Bond Authority Revenue,
1,400,000 Local Government Loan Program, Group 2, BIG Insured, Pre-Refunded, 7.30%, 05/01/16 ....... 1,470,742
850,000 Local Government Loan Program, Series A, Group 15, AMBAC Insured, 7.60%, 05/01/09 ........ 932,229
3,790,000 Local Government Loan Program, Series C, MBIA Insured, 6.00%, 11/01/10 ................... 3,803,644
6,490,000 Local Government Loan Program, Series G, AMBAC Insured, 6.75%, 11/01/14 ................. 6,837,410
1,650,000 Local Government Loan Program, Series G, AMBAC Insured, 6.80%, 11/01/14 .................. 1,745,139
</TABLE>
The accompanying notes are an integral part of these
financial statements.
72
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STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995
(CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN MICHIGAN INSURED TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
Michigan Municipal Bond Authority Revenue, (cont.)
$ 825,000 Local Government Loan Program, Series G, AMBAC Insured, 6.80%, 11/01/23 .................. $ 865,541
1,000,000 Local Government Loan Program, Wayne County Project, Series A, FGIC Insured,
Pre-Refunded, 7.00%, 12/01/09 ........................................................... 1,104,000
Michigan Public Power Agency Revenue,
10,310,000 Refunding, Belle River Project, AMBAC Insured, Pre-Refunded, 7.25%, 01/01/12 ............. 10,745,494
4,300,000 Refunding, Belle River Project, AMBAC Insured, Pre-Refunded, 7.00%, 01/01/18 ............. 4,431,580
1,900,000 Refunding, Campbell Project, AMBAC Insured, 6.125%, 01/01/10 ............................. 1,913,566
Michigan State Building Authority Revenue,
10,000,000 Detroit Regional Prisons, Series I, MBIA Insured, Pre-Refunded, 7.25%, 10/01/08 .......... 10,908,000
1,000,000 Refunding, University of Michigan, Adult General Hospital, AMBAC Insured, Pre-Refunded,
7.375%, 12/01/00 ........................................................................ 1,064,100
5,625,000 Refunding, University of Michigan, Adult General Hospital, BIG Insured, Pre-Refunded,
7.875%, 12/01/04 ........................................................................ 6,031,913
4,645,000 Series II, MBIA Insured, 6.25%, 10/01/20 ................................................. 4,675,285
5,000,000 Series II, MBIA Insured, ETM 04/01/98, 7.40%, 04/01/01 ................................... 5,459,950
Michigan State Comprehensive Transportation Revenue,
1,940,000 gRefunding, Series 1986-II, Pre-Refunded, 7.625%, 08/01/05 ................................ 2,030,908
1,000,000 gRefunding, Series 1986-II, Pre-Refunded, 7.75%, 08/01/11 ................................. 1,047,950
1,750,000 Refunding, Series 1988-II, FGIC Insured, 7.625%, 05/01/11 ................................ 1,892,398
Michigan State HDA, Limited Obligation Revenue,
3,200,000 Mercy Bellbrook Project, MBIA Insured, Pre-Refunded, 8.00%, 04/01/07 ..................... 3,458,368
1,200,000 Mercy Bellbrook Project, MBIA Insured, Pre-Refunded, 8.125%, 04/01/18 .................... 1,299,804
Michigan State HDA, MFHR,
50,000 Series 1985-A, FGIC Insured, 8.625%, 07/01/03 ............................................ 51,748
2,990,000 Series 1985-A, FGIC Insured, 8.875%, 07/01/17 ............................................ 3,088,999
5,750,000 Series 1987-A, FGIC Insured, 8.375%, 07/01/19 ............................................ 6,032,210
4,415,000 Series 1988-A, FGIC Insured, 7.70%, 07/01/18 ............................................. 4,638,885
2,880,000 Series 1989-A, FGIC Insured, 7.55%, 07/01/09 ............................................. 3,037,277
2,945,000 Series 1989-A, FGIC Insured, 7.65%, 07/01/15 ............................................. 3,082,119
7,095,000 Michigan State HDA, SFHR, Series 1986-A, FGIC Insured, 8.00%, 10/01/06 ....................... 7,306,502
1,800,000 Michigan State HDA, SFMR, Series 1978, FGIC Insured, 6.30%, 04/01/11 ......................... 1,800,000
Michigan State Hospital Finance Authority Revenue,
1,750,000 Crittenton Hospital, FGIC Insured, 6.75%, 03/01/20 ....................................... 1,803,848
2,000,000 Crittenton Hospital, Series A, FGIC Insured, 7.125%, 12/01/06 ............................ 2,095,300
4,295,000 gCrittenton Hospital, Series A, Pre-Refunded, 7.25%, 12/01/13 ............................. 4,554,074
1,785,000 Daughters of Charity, Providence Hospital, FGIC Insured, 10.00%, 11/01/15 ................ 1,885,014
1,000,000 gHenry Ford Hospital, Series 1985-A, Pre-Refunded, 7.50%, 07/01/13 ........................ 1,066,490
3,500,000 MidMichigan Hospital, MBIA Insured, 6.625%, 06/01/10 ..................................... 3,642,695
8,750,000 Mt. Sinai Hospital of Detroit, FGIC Insured, 7.00%, 01/01/09 ............................. 9,079,088
9,020,000 Oakland General Hospital, AMBAC Insured, 7.00%, 07/01/15 ................................. 9,607,202
2,200,000 Oakwood Hospital, FGIC Insured, Pre-Refunded, 7.00%, 07/01/10 ............................ 2,431,374
10,000,000 Oakwood Hospital, FGIC Insured, Pre-Refunded, 7.20%, 11/01/15 ............................ 11,157,200
13,250,000 Oakwood Hospital, FGIC Insured, Pre-Refunded, 7.10%, 07/01/18 ............................ 14,704,585
7,635,000 Pontiac Osteopathic, Series B, AMBAC Insured, Pre-Refunded, 7.75%, 02/01/05 .............. 8,192,813
35,000 Refunding, Edward W. Sparrow Hospital, MBIA Insured, Pre-Refunded, 8.70%, 06/01/03 ....... 36,091
2,695,000 Refunding, Edward W. Sparrow Hospital, MBIA Insured, Pre-Refunded, 8.75%, 06/01/11 ....... 2,779,380
4,500,000 Refunding, Oakwood Hospital, Group A, FGIC Insured, 5.625%, 11/01/18 ..................... 4,201,830
2,000,000 Refunding, Sisters of Mercy Health Corp., Series H, MBIA Insured, 7.50%, 08/15/07 ........ 2,151,180
3,445,000 Refunding, St. John's Hospital, Series A, AMBAC Insured, 6.00%, 05/15/13 ................. 3,403,350
9,545,000 Refunding, St. John's Hospital, Series A, AMBAC Insured, 6.25%, 05/15/14 ................. 9,615,347
2,455,000 Sisters of Mercy Health Corp., Series G, FGIC Insured, Pre-Refunded, 7.00%, 07/01/10 ..... 2,580,303
4,900,000 Sisters of Mercy Health Corp., Series H, MBIA Insured, 7.50%, 08/15/13 ................... 5,235,356
</TABLE>
The accompanying notes are an integral part of these
financial statements.
73
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STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995
(CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN MICHIGAN INSURED TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
Michigan State Hospital Finance Authority Revenue, (cont.)
$ 1,500,000 Sparrow Obligation Group, MBIA Insured, 6.50%, 11/15/11 .................................. $ 1,539,825
4,500,000 St. Joseph's Hospital Corp., Series A, FGIC Insured, Pre-Refunded, 8.125%, 07/01/05 ...... 4,716,405
3,000,000 Michigan State South Central Power Agency, Power Supply System Revenue, Refunding,
AMBAC Insured, Pre-Refunded, 7.25%, 11/01/06 ................................................ 3,180,330
Michigan State Strategic Fund, Limited Obligation Revenue,
3,000,000 Refunding, Detroit Edison Co., AMBAC Insured, 7.00%, 05/01/21 ............................ 3,329,220
5,000,000 Refunding, Detroit Edison Co., FGIC Insured, 6.95%, 05/01/11 ............................. 5,508,300
20,000,000 Refunding, Detroit Edison Co., FGIC Insured, 6.875%, 12/01/21 ............................ 21,104,000
1,285,000 Refunding, Detroit Edison Co., Series BB, MBIA Insured, 6.05%, 10/01/23 .................. 1,276,288
5,540,000 Refunding, Detroit Edison Co., Series CC, FGIC Insured, 6.95%, 09/01/21 .................. 5,879,325
5,825,000 Refunding, Detroit Edison Co., Series CC, MBIA Insured, 6.05%, 10/01/23 .................. 5,785,507
1,800,000 St. John-Bon Secours Care Center, FGIC Insured, 7.90%, 11/15/16 .......................... 1,930,482
Michigan State Trunk Line GO,
6,000,000 Refunding, Series B-2, MBIA Insured, 5.50%, 10/01/21 ..................................... 5,499,720
10,000,000 Series A, FGIC Insured, 5.80%, 11/15/24 .................................................. 9,537,100
2,500,000 Monroe County EDC, Limited Obligation Revenue, Monroe Community Health Services,
MBIA Insured, Pre-Refunded, 7.00%, 09/01/21 ................................................. 2,795,475
Monroe County PCR,
4,000,000 Detroit Edison Co., Series 1, MBIA Insured, 6.875%, 09/01/22 ............................. 4,162,240
4,000,000 Detroit Edison Co., Series 1-B, MBIA Insured, 6.55%, 09/01/24 ............................ 4,057,440
9,420,000 Detroit Edison Co., Series A, AMBAC Insured, 9.625%, 12/01/15 ............................ 10,039,553
10,000,000 Detroit Edison Co., Series C, AMBAC Insured, 7.50%, 12/01/19 ............................. 11,019,000
1,150,000 Detroit Edison Co., Series CC, MBIA Insured, 6.55%, 06/01/24 ............................. 1,166,100
Mount Clemens Community School District,
10,000 AMBAC Insured, 9.30%, 05/01/99 ........................................................... 10,064
1,250,000 MBIA Insured, Pre-Refunded, 6.60%, 05/01/20 .............................................. 1,374,538
2,040,000 Refunding, MBIA Insured, 5.50%, 05/01/19 ................................................. 1,859,827
3,200,000 North Branch Area Schools, Lapeer County Building and Site, Refunding, CGIC Insured,
Pre-Refunded, 6.60%, 05/01/21 ............................................................... 3,518,816
Northern Michigan University Revenue,
1,715,000 AMBAC Insured, 5.60%, 12/01/13 ........................................................... 1,632,697
1,000,000 AMBAC Insured, 6.55%, 12/01/14 ........................................................... 1,036,280
1,000,000 Norway Electric Utilities System Revenue, Refunding, AMBAC Insured, 5.375%, 02/01/12 ......... 909,410
4,750,000 Novi Community School District, FGIC Insured, 6.125%, 05/01/18 ............................... 4,772,658
4,750,000 Oak Park GO, Refunding, AMBAC Insured, 5.50%, 05/01/12 ....................................... 4,468,278
3,500,000 Oakland Community College District, Washtenaw County, AMBAC Insured, Pre-Refunded, 6.65%,
05/01/11 .................................................................................... 3,658,025
6,975,000 Oakland County EDC, EDR, FHA Mortgage Insured, Series A, FGIC Insured, 8.00%, 08/01/18 ....... 7,199,944
Okemos Public School District,
5,390,000 Refunding, MBIA Insured, 5.50%, 05/01/11 ................................................. 5,070,750
3,000,000 Series I, MBIA Insured, Pre-Refunded, 6.90%, 05/01/11 .................................... 3,325,740
1,800,000 Olivet Community School District, Refunding, MBIA Insured, 5.50%, 05/01/20 ................... 1,638,234
2,270,000 Otsego Public School District, Building and Site, CGIC Insured, 6.625%, 05/01/16 ............. 2,383,046
3,755,000 Perry Public School Building and Site, Refunding, FGIC Insured 5.45%, 05/01/22 ............... 3,418,965
Petoskey Hospital Finance Authority Facilities Revenue,
4,500,000 Refunding, Northern Michigan Hospital, MBIA Insured, 7.00%, 11/15/07 ..................... 4,825,620
1,000,000 Refunding, Northern Michigan Hospital, MBIA Insured, 6.75%, 11/15/19 ..................... 1,032,380
Plymouth-Canton Community School District,
4,000,000 Refunding, AMBAC Insured, 5.50%, 05/01/13 ................................................ 3,767,680
1,875,000 Refunding, AMBAC Insured, 5.50%, 05/01/17 ................................................ 1,743,431
3,500,000 Series C, FGIC Insured, 6.50%, 05/01/16 .................................................. 3,638,950
3,000,000 Series C, MBIA Insured, 6.50%, 05/01/16 .................................................. 3,119,100
</TABLE>
The accompanying notes are an integral part of these
financial statements.
74
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- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995
(CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN MICHIGAN INSURED TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
$ 1,305,000 Pontiac General Building Authority, Series 1991, Refunding, AMBAC Insured, 6.875%, 04/01/06 .. $ 1,396,768
Port Huron School District,
5,500,000 CGIC Insured, Pre-Refunded, 7.25%, 05/01/15 .............................................. 6,127,275
4,500,000 Refunding, AMBAC Insured, 6.00%, 05/01/12 ................................................ 4,423,950
Portage Lake Water and Sewer Authority GO,
770,000 dRefunding, AMBAC Insured, 6.10%, 10/01/14 ................................................ 771,294
670,000 dRefunding, AMBAC Insured, 6.20%, 10/01/20 ................................................ 674,027
Portage Public Schools GO,
4,750,000 MBIA Insured, 5.70%, 05/01/12 ............................................................ 4,583,465
2,750,000 MBIA Insured, 5.625%, 05/01/19 ........................................................... 2,559,563
Puerto Rico Commonwealth Aqueduct and Sewer Authority Revenue,
500,000 Series 1985-A, FSA Insured, ETM 07/01/00, 8.75%, 07/01/00 ................................ 588,315
2,500,000 Series 1985-A, FSA Insured, Pre-Refunded, 9.00%, 07/01/09 ................................ 3,181,575
Puerto Rico Commonwealth Public Improvement GO,
825,000 MBIA Insured, 7.125%, 07/01/02 ........................................................... 876,785
175,000 MBIA Insured, Pre-Refunded, 7.125%, 07/01/02 ............................................. 187,738
10,875,000 MBIA Insured, Pre-Refunded, 6.60%, 07/01/13 .............................................. 12,042,866
8,500,000 Series 1987, MBIA Insured, 6.75%, 07/01/06 ............................................... 8,926,530
Puerto Rico Electric Power Authority Revenue,
3,400,000 Refunding, Series U, CGIC Insured, 6.00%, 07/01/14 ....................................... 3,376,608
7,000,000 Series P, CGIC Insured, 7.00%, 07/01/21 .................................................. 7,377,300
2,000,000 Puerto Rico HFC, SFMR, Portfolio No. 1, Series 1988-C, GNMA Secured, 6.85%, 10/15/23 ......... 2,070,680
8,700,000 Puerto Rico Port Authority Revenue, Series D, FGIC Insured, 7.00%, 07/01/14 .................. 9,197,901
Reeths-Puffer Schools,
2,985,000 Refunding, MBIA Insured, 6.625%, 05/01/12 ................................................ 3,123,146
1,000,000 Refunding, MBIA Insured, 6.625%, 05/01/12 ................................................ 1,046,280
2,000,000 Riverview Community School District, Refunding, AMBAC Insured, 5.25%, 05/01/21 ............... 1,753,120
Rockford Public Schools GO,
3,000,000 Refunding, AMBAC Insured, 5.875%, 05/01/19 ............................................... 2,867,610
9,750,000 Refunding, CGIC Insured, Pre-Refunded, 7.375%, 05/01/19 .................................. 10,841,220
1,850,000 Refunding, MBIA Insured, 5.875%, 05/01/12 ................................................ 1,800,180
Romulus Community Schools,
690,000 Refunding, FGIC Insured, 5.75%, 05/01/13 ................................................. 660,730
1,200,000 Refunding, FGIC Insured, 5.75%, 05/01/17 ................................................. 1,136,688
3,500,000 Refunding, FGIC Insured, 5.75%, 05/01/22 ................................................. 3,280,970
2,220,000 Refunding, Series II, FGIC Insured, 6.40%, 05/01/17 ...................................... 2,251,968
25,000 Saginaw City School District, Unlimited Tax, MBIA Insured, Pre-Refunded, 11.00%, 06/01/03 .... 28,692
Saginaw Hospital Finance Authority Revenue,
5,325,000 Refunding, St. Luke's Hospital Project, Series C, MBIA Insured, 6.875%, 07/01/14 ......... 5,534,166
2,000,000 Refunding, St. Luke's Hospital Project, Series C, MBIA Insured, 6.75%, 07/01/17 .......... 2,062,540
1,000,000 Refunding, St. Luke's Hospital Project, Series D, MBIA Insured, 6.50%, 07/01/11 .......... 1,034,230
2,185,000 St. Luke's Hospital Project, Series B, AMBAC Insured, Pre-Refunded, 7.625%, 07/01/06 ..... 2,383,617
3,540,000 St. Luke's Hospital Project, Series B, AMBAC Insured, Pre-Refunded, 7.75%, 07/01/13 ...... 3,875,167
3,875,000 St. Luke's Hospital Project, Series B, MBIA Insured, 6.00%, 07/01/21 ..................... 3,784,441
1,000,000 Saginaw Valley State University Revenue, MBIA Insured, 5.375%, 07/01/16 ...................... 908,530
Sandusky Community School District,
3,425,000 CGIC Insured, Pre-Refunded, 6.50%, 05/01/21 .............................................. 3,712,803
3,340,000 Refunding, AMBAC Insured, 5.40%, 05/01/14 ................................................ 3,067,089
2,000,000 Sault Ste. Marie GO, Series 1990, AMBAC Insured, Pre-Refunded, 7.50%, 09/01/10 ............... 2,230,620
Shelby Charter Township Authority,
750,000 AMBAC Insured, 5.75%, 11/01/11 ........................................................... 734,220
750,000 AMBAC Insured, 5.75%, 11/01/12 ........................................................... 733,673
</TABLE>
The accompanying notes are an integral part of these
financial statements.
75
<PAGE>
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- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995
(CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN MICHIGAN INSURED TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
South Haven Public Schools,
$ 1,640,000 Refunding, FGIC Insured, 5.50%, 05/01/13 ................................................. $ 1,522,560
1,725,000 Refunding, FGIC Insured, 5.50%, 05/01/17 ................................................. 1,578,513
7,745,000 St. Clair County EDC, PCR, Refunding, Detroit Edison Co., Series DD, AMBAC Insured, 6.05%,
08/01/24 .................................................................................... 7,629,290
1,000,000 Sturgis Public School District, MBIA Insured, 6.10%, 05/01/18 ................................ 1,001,500
375,000 Three Rivers City Revenue, GO, Refunding, Unlimited Tax, MBIA Insured, Pre-Refunded, 8.60%,
11/01/01 .................................................................................... 392,535
Tri County Area School District,
1,850,000 School Building and Site, MBIA Insured, Pre-Refunded, 6.875%, 05/01/11 ................... 2,041,679
2,325,000 School Building and Site, MBIA Insured, Pre-Refunded, 6.875%, 05/01/16 ................... 2,565,893
1,395,000 University of Michigan Construction Project, Student Fee Revenue, FGIC Insured, Pre-Refunded,
7.25%, 04/01/12 ............................................................................. 1,461,807
10,635,000 gUniversity of Michigan Hospital Revenue, Refunding, Series 1986-A, Pre-Refunded,
7.75%, 12/01/12............................................................................. 11,363,923
2,365,000 University Revenues Medical Service Plan, MBIA Insured, 6.50%, 12/01/21 ...................... 2,408,800
Vicksburg Community School District,
2,175,000 Refunding, MBIA Insured, 5.625%, 05/01/12 ................................................ 2,070,296
1,000,000 Refunding, MBIA Insured, 5.625%, 05/01/20 ................................................ 929,530
Warren Consolidated School District,
6,500,000 Refunding, CGIC Insured, Pre-Refunded, 6.70%, 05/01/16 ................................... 7,137,910
3,735,000 Refunding, MBIA Insured, 5.50%, 05/01/14 ................................................. 3,491,515
1,030,000 Refunding, MBIA Insured, 5.50%, 05/01/21 ................................................. 945,880
1,225,000 Refunding, Series II, FGIC Insured, 5.375%, 05/01/14 ..................................... 1,127,956
3,405,000 Refunding, Series II, FGIC Insured, 5.50%, 05/01/16 ...................................... 3,171,383
2,000,000 Wayland Union School District, FGIC Insured, 6.75%, 05/01/24 ................................. 2,132,200
Wayne Charter County Airport Revenue,
2,900,000 Detroit Metro Airport, MBIA Insured, Pre-Refunded, 6.75%, 12/01/19 ....................... 3,210,821
6,635,000 Detroit Metro Airport, MBIA Insured, Pre-Refunded, 7.00%, 12/01/21 ....................... 7,439,625
2,450,000 Detroit Metro Airport, Series A, MBIA Insured, Pre-Refunded, 6.50%, 12/01/11 ............. 2,678,071
300,000 Detroit Metro Airport, Series B, MBIA Insured, 6.875%, 12/01/11 .......................... 316,352
2,000,000 Detroit Metro Airport, Series B, MBIA Insured, 6.75%, 12/01/21 ........................... 2,058,120
10,585,000 Wayne County Airport Revenue, Series B, AMBAC Insured, 6.00%, 12/01/20 ....................... 10,379,862
Wayne County, Ecorse Creek Drain District, Pollution Abatement No. 1,
500,000 AMBAC Insured, 7.40%, 11/01/04 ........................................................... 541,244
500,000 AMBAC Insured, 7.50%, 11/01/05 ........................................................... 542,470
490,000 AMBAC Insured, 7.50%, 11/01/06 ........................................................... 531,621
450,000 AMBAC Insured, 7.50%, 11/01/07 ........................................................... 488,222
5,500,000 Wayne State University Revenues, Refunding, AMBAC Insured, 5.65%, 11/15/15 ................... 5,192,220
2,275,000 Wayne-Westland Community School, Refunding, FGIC Insured, 6.10%, 05/01/13 .................... 2,296,998
2,400,000 West Ottawa Public School District, Refunding, FGIC Insured, 6.00%, 05/01/20 ................. 2,360,015
Western Michigan University Revenues,
5,000,000 FGIC Insured, 6.25%, 11/15/12 ............................................................ 5,097,650
4,290,000 Special Projects, Student Fees, BIG Insured, Pre-Refunded, 7.375%, 10/01/11 .............. 4,547,656
Western Townships Utilities Authority, Sewer Disposal System,
18,710,000 Refunding, CGIC Insured, 6.75%, 01/01/15 ................................................. 19,262,318
6,115,000 Refunding, CGIC Insured, 6.50%, 01/01/19 ................................................. 6,228,616
1,800,000 Williamston County GO, Refunding, AMBAC Insured, 6.90%, 11/01/17 ............................. 1,900,421
6,210,000 Willow Run Community School, CGIC Insured, 6.375%, 05/01/18 .................................. 6,293,027
Wyandotte Electric Revenue,
16,060,000 Refunding, AMBAC Insured, Pre-Refunded, 7.875%, 10/01/17 ................................. 17,522,744
9,980,000 Refunding, MBIA Insured, 6.25%, 10/01/17 ................................................. 10,137,284
</TABLE>
The accompanying notes are an integral part of these
financial statements.
76
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- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995
(CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN MICHIGAN INSURED TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
Yale Public School District, School Building and Site,
$ 2,000,000 AMBAC Insured, 5.375%, 05/01/17 .......................................................... $ 1,811,420
1,500,000 AMBAC Insured, 5.50%, 05/01/19 ........................................................... 1,376,280
Zeeland Public Schools GO,
2,000,000 Refunding, Series B, MBIA Insured, 6.05%, 05/01/19 ....................................... 1,987,240
2,000,000 Refunding, Series B, MBIA Insured, 6.10%, 05/01/24 ....................................... 1,986,320
--------------
TOTAL LONG TERM INVESTMENTS (COST $975,571,773) ........................................ 1,017,894,038
--------------
eSHORT TERM INVESTMENTS .4%
3,800,000 Grand Rapids Water Supply System, Refunding, Daily VRDN and Put, 3.90%, 01/01/20 ............. 3,800,000
600,000 Midland County EDC Revenue, Limited Obligation, Refunding, Dow Chemical Co., Project B, Daily
VRDN and Put, 4.00%, 12/01/15 ............................................................... 600,000
--------------
TOTAL SHORT TERM INVESTMENTS (COST $4,400,000) ......................................... 4,400,000
--------------
TOTAL INVESTMENTS (COST $979,971,773) 98.5% ....................................... 1,022,294,038
OTHER ASSETS AND LIABILITIES, NET 1.5% ............................................ 15,422,893
--------------
NET ASSETS 100.0% ................................................................ $1,037,716,931
==============
At February 28, 1995, the net unrealized appreciation based on
the cost of investments for income tax purposes of $979,971,773
was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ............................................................ $ 52,103,869
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ............................................................ (9,781,604)
--------------
Net unrealized appreciation ................................................................ $ 42,322,265
==============
</TABLE>
PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
BIG - Bond Investors Guaranty Insurance Co.
CGIC - Capital Guaranty Insurance Co.
EDC - Economic Development Corp.
EDR - Economic Development Revenue
ETM - Escrow to Maturity
FGIC - Financial Guaranty Insurance Co.
FHA - Federal Housing Authority
FSA - Financial Security Assurance
GNMA - Government National Mortgage Association
GO - General Obligation
HDA - Housing Development Authority
HFC - Housing Finance Corp.
MBIA - Municipal Bond Investors Assurance Corp.
MFHR - Multi-Family Housing Revenue
PCR - Pollution Control Revenue
SFHR - Single Family Housing Revenue
SFMR - Single Family Mortgage Revenue
dSee Note 1 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).
gSee Note 1c regarding uninsured securities collateralized by U.S. government
securities.
The accompanying notes are an integral part of these
financial statements.
77
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- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN MINNESOTA INSURED TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS 98.8%
$ 2,295,000 Albany ISD No. 745, Series A, CGIC Insured, 6.00%, 02/01/16 ................................... $ 2,284,007
2,100,000 Anoka County Resource Recovery Revenue, Northern, AMBAC Insured, 7.15%, 12/01/08 .............. 2,258,508
4,870,000 Becker GO, Refunding, Tax Increment, Series D, MBIA Insured, 6.25%, 08/01/15 .................. 4,910,908
Becker Wastewater Treatment Facility,
625,000 Series A, MBIA Insured, 5.90%, 02/01/12 ................................................... 622,969
610,000 Series A, MBIA Insured, 5.95%, 02/01/15 ................................................... 607,841
Brainerd Health Care Facilities Revenue,
3,500,000 Refunding, Benedictine Health-St. Joseph, Series D, MBIA Insured, 5.875%, 02/15/13 ........ 3,433,325
5,000,000 Refunding, Benedictine Health-St. Joseph, Series E, Connie Lee Insured, 6.00%, 02/15/20 ... 4,886,000
935,000 Brainerd Hospital Facilities Revenue, Benedictine Health System, St. Joseph's Medical
Center, MBIA Insured, Pre-Refunded, 9.625%, 10/01/12 ......................................... 980,880
2,800,000 Buffalo ISD No. 877, CGIC Insured, 6.15%, 02/01/18 ............................................ 2,827,664
3,695,000 Burnsville Hospital System Revenue, Refunding, Fairview Community
Hospitals, Series 1985-A, MBIA Insured, 9.00%, 05/01/12 ...................................... 3,795,393
2,105,000 Burnsville ISD, Series A, CGIC Insured, 6.20%, 02/01/17 ....................................... 2,146,932
Byron ISD No. 531 GO,
600,000 AMBAC Insured, 6.90%, 06/01/13 ............................................................ 637,680
625,000 AMBAC Insured, 6.90%, 06/01/14 ............................................................ 664,250
Cannon Falls ISD No. 252 GO, School Building,
610,000 Series 1987-A, AMBAC Insured, 8.00%, 02/01/05 ............................................. 644,428
655,000 Series 1987-A, AMBAC Insured, 8.10%, 02/01/06 ............................................. 693,147
705,000 Series 1987-A, AMBAC Insured, 8.20%, 02/01/07 ............................................. 747,321
760,000 Series 1987-A, AMBAC Insured, 8.20%, 02/01/08 ............................................. 805,623
3,500,000 Cold Spring ISD No. 750, Series A, FGIC Insured, 6.15%, 02/01/11 .............................. 3,532,970
Crystal GO, Tax Increment,
250,000 Refunding, Series 1986-A, MBIA Insured, 7.75%, 02/01/04 ................................... 256,735
490,000 Refunding, Series 1986-A, MBIA Insured, 7.80%, 02/01/05 ................................... 503,416
475,000 Refunding, Series 1986-A, MBIA Insured, 7.80%, 02/01/06 ................................... 488,006
460,000 Refunding, Series 1986-A, MBIA Insured, 7.80%, 02/01/07 ................................... 472,595
445,000 Refunding, Series 1986-A, MBIA Insured, 7.80%, 02/01/08 ................................... 457,184
Dakota County GO,
2,020,000 Refunding, Series B, AMBAC Insured, 6.30%, 02/01/06 ....................................... 2,075,368
1,365,000 Refunding, Series B, AMBAC Insured, 6.35%, 02/01/07 ....................................... 1,402,374
1,000,000 Refunding, Series B, AMBAC Insured, 6.45%, 02/01/09 ....................................... 1,021,750
Dakota County Housing and Redevelopment Authority,
20,000 City of South St. Paul, SFMR, Burnsville and Inver Grove Heights, FGIC Insured, 9.375%,
05/01/18 ................................................................................. 21,248
1,155,000 Refunding, SFRMR, GNMA Secured, 8.10%, 03/01/16 ........................................... 1,225,871
Dakota, Washington and Stearns County SFMR,
1,140,000 Series 1990, GNMA Secured, 7.80%, 12/01/10 ................................................ 1,227,313
4,060,000 Series 1990, GNMA Secured, 7.85%, 12/01/30 ................................................ 4,351,711
Delano ISD No. 879,
810,000 Refunding, Series A, AMBAC Insured, 5.55%, 02/01/09 ....................................... 784,801
855,000 Refunding, Series A, AMBAC Insured, 5.60%, 02/01/10 ....................................... 827,281
400,000 Refunding, Series A, AMBAC Insured, 5.60%, 02/01/11 ....................................... 384,512
1,040,000 Dilworth ISD No. 147, MBIA Insured, 6.00%, 02/01/15 ........................................... 1,033,947
1,940,000 Dover and Eyota ISD No. 533 GO, AMBAC Insured, 7.25%, 02/01/20 ................................ 2,050,987
Duluth EDA Health Care Facilities Revenue,
1,145,000 Benedictine Health System, Series B, Connie Lee Insured, 6.00%, 02/15/17 .................. 1,125,764
4,000,000 The Duluth Clinic, Ltd., AMBAC Insured, 6.20%, 11/01/12 ................................... 4,078,120
7,530,000 The Duluth Clinic, Ltd., AMBAC Insured, 6.30%, 11/01/22 ................................... 7,676,308
3,000,000 Duluth EDA Hospital Facilities Revenue, St. Lukes Hospital, Series A, Connie Lee Insured, 6.40%,
05/01/12 ..................................................................................... 3,054,480
</TABLE>
The accompanying notes are an integral part of these
financial statements.
78
<PAGE>
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- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995
(CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN MINNESOTA INSURED TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
$ 3,500,000 Duluth EDA Tax Increment Revenue, Refunding, MBIA Insured, 7.25%, 08/01/08 .................... $ 3,734,815
Duluth ISD No. 709 GO,
600,000 gSchool Building, Series 1986, Pre-Refunded, 7.80%, 02/01/00 ............................... 617,496
4,350,000 Series A, FGIC Insured, 5.25%, 02/01/14 ................................................... 3,993,039
4,420,000 Eagan MFMR, Refunding, Forest Ridge Apartments, BIG Insured, 7.50%, 03/01/27 .................. 4,634,105
Eden Prairie ISD No. 272,
4,980,000 Series A, CGIC Insured, 5.75%, 02/01/15 ................................................... 4,847,383
1,000,000 Series A, FGIC Insured, 5.45%, 02/01/08 ................................................... 969,330
500,000 Eden Valley ISD No. 463, CGIC Insured, 6.60%, 02/01/16 ........................................ 526,795
Elk River ISD No. 728 GO,
950,000 CGIC Insured, 6.35%, 02/01/18 ............................................................. 987,497
4,480,000 CGIC Insured, 6.40%, 02/01/22 ............................................................. 4,669,459
4,610,000 Refunding, Series B, CGIC Insured, 5.25%, 02/01/22 ........................................ 4,072,797
650,000 Series A, CGIC Insured, 7.00%, 02/01/11 ................................................... 694,207
Farmington ISD No. 192 GO, School Building,
4,290,000 AMBAC Insured, 5.125%, 02/01/15 ........................................................... 3,866,234
425,000 FGIC Insured, 8.20%, 01/01/02 ............................................................. 434,843
500,000 FGIC Insured, 8.20%, 01/01/04 ............................................................. 511,780
340,000 FGIC Insured, 8.20%, 01/01/05 ............................................................. 347,874
Forest Lake ISD No. 831 GO, School Building,
675,000 Series A, FGIC Insured, 7.30%, 02/01/05 ................................................... 702,756
1,055,000 Series A, FGIC Insured, 7.35%, 02/01/06 ................................................... 1,099,331
Golden Valley GO, Tax Increment,
335,000 Series C, FGIC Insured, 8.00%, 02/01/04 ................................................... 344,755
535,000 Series C, FGIC Insured, 8.00%, 02/01/05 ................................................... 550,579
Lake of the Woods, ISD No. 390, School Building,
325,000 AMBAC Insured, Pre-Refunded, 7.40%, 02/01/18 .............................................. 349,921
350,000 AMBAC Insured, Pre-Refunded, 7.40%, 02/01/19 .............................................. 376,838
375,000 AMBAC Insured, Pre-Refunded, 7.40%, 02/01/20 .............................................. 403,755
Lakeview ISD No. 194,
1,000,000 FGIC Insured, 5.40%, 02/01/13 ............................................................. 941,960
500,000 Series A, FGIC Insured, 7.00%, 02/01/14 ................................................... 535,915
2,105,000 Series C, FGIC Insured, 6.70%, 02/01/12 ................................................... 2,234,058
Marshall County Utility Revenue,
750,000 CGIC Insured, 5.375%, 01/01/14 ............................................................ 695,100
825,000 CGIC Insured, 5.375%, 01/01/15 ............................................................ 762,919
1,565,000 Menahga ISD No. 821, GO, AMBAC Insured, 6.25%, 02/01/18 ....................................... 1,579,695
Minneapolis CDA, MFHR, Rental, Laurel Village,
9,000,000 Project No. 9, Mandatory Put 12/01/97, CGIC Insured, 7.50%, 12/01/31 ...................... 9,228,330
1,645,000 Project No. 10, Mandatory Put 12/01/99, CGIC Insured, 7.50%, 12/01/31 ..................... 1,686,734
900,000 Minneapolis CDA and St. Paul Housing and Redevelopment Authority, Health Care Facilities
Revenue, Carondelet Community Hospitals, Inc., Series B, BIG Insured, Pre-Refunded,
8.875%, 11/01/15 ............................................................................ 1,169,964
4,436,000 Minneapolis CDA and St. Paul Housing and Redevelopment Authority, Homeownership
Mortgage Revenue, Joint Housing Program, Phase II, FGIC Insured, 7.875%, 07/01/17 ............ 4,570,810
2,100,000 Minneapolis CDA, Tax Increment Revenue, Series 1990, MBIA Insured, 7.00%, 03/01/01 ............ 2,321,718
Minneapolis Convention Center, Sales Tax Revenue,
2,000,000 AMBAC Insured, Pre-Refunded, 7.625%, 04/01/04 ............................................. 2,103,500
10,410,000 AMBAC Insured, Pre-Refunded, 7.75%, 04/01/11 .............................................. 10,962,146
Minneapolis Hospital Facilities Revenue,
1,475,000 gLifeSpan, Inc., Series 1987-A, Pre-Refunded, 8.125%, 04/01/07 ............................. 1,597,676
4,450,000 gLifeSpan, Inc., Series 1987-A, Pre-Refunded, 8.125%, 04/01/17 ............................. 4,820,107
600,000 Refunding, Fairview Hospital and Healthcare, Series A, MBIA Insured, 6.50%, 01/01/11 ...... 623,988
7,815,000 Refunding, Fairview Hospital and Healthcare, Series B, MBIA Insured, 6.70%, 01/01/17 ...... 8,151,827
</TABLE>
The accompanying notes are an integral part of these
financial statements.
79
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- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995
(CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN MINNESOTA INSURED TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
Minneapolis Hospital Facilities Revenue, (cont.)
$ 700,000 gRefunding, LifeSpan, Inc., Series 1987-B, Pre-Refunded, 9.125%, 12/01/14 .................. $ 788,319
915,000 gRefunding, LifeSpan, Inc., Series 1988-A, Pre-Refunded, 7.875%, 12/01/14 .................. 1,002,245
1,450,000 Minneapolis Housing and Redevelopment Authority, Home Ownership Mortgage
Program, BIG Insured, 7.10%, 12/01/10 ........................................................ 1,454,698
Minneapolis-St. Paul Housing Finance Board, SFMR,
4,095,000 Phase VI, Series A, GNMA Secured, 8.30%, 08/01/21 ......................................... 4,317,973
1,065,000 Series A, GNMA Secured, 8.375%, 11/01/17 .................................................. 1,127,015
625,000 Series C, GNMA Secured, 8.875%, 11/01/18 .................................................. 659,450
Minneapolis-St. Paul Housing and Redevelopment Authority, Health Care System Revenue,
10,390,000 Series A, MBIA Insured, 7.40%, 08/15/11 ................................................... 11,287,384
3,950,000 Series A, MBIA Insured, 6.75%, 08/15/14 ................................................... 4,159,311
3,000,000 Minnesota State GO, Refunding, MBIA Insured, 5.40%, 08/01/09 .................................. 2,875,260
Minnesota State HFA, Housing Development,
185,000 FGIC Insured, 7.25%, 02/01/19 ............................................................. 189,127
845,000 MF Program, Series 1978-A, FGIC Insured, 7.125%, 02/01/20 ................................. 859,323
3,170,000 MF Program, Series 1978-B, FGIC Insured, 7.10%, 02/01/21 .................................. 3,223,415
485,000 MF Program, Series 1980-A, FGIC Insured, 7.00%, 02/01/22 .................................. 493,085
230,000 MF Program, Series 1985-B, FGIC Insured, 9.375%, 02/01/18 ................................. 239,294
2,000,000 MFMR, Series 1988-A, FGIC Insured, 7.80%, 08/01/18 ........................................ 2,053,560
1,000,000 Minnesota State HFA, MFHR, Series 1977-A, FGIC Insured, 6.375%, 02/01/20 ...................... 993,130
Minnesota State HFA, SFMR,
2,580,000 Series 1986-B, FGIC Insured, 7.25%, 07/01/06 .............................................. 2,673,964
770,000 Series 1986-B, FGIC Insured, 7.25%, 07/01/16 .............................................. 787,795
425,000 Series 1986-C, FGIC Insured, 7.00%, 07/01/16 .............................................. 432,837
710,000 Series 1987-A, FGIC Insured, 8.50%, 02/01/17 .............................................. 740,154
205,000 Series 1987-D, FGIC Insured, 8.80%, 07/01/16 .............................................. 214,104
3,135,000 Series 1989-A, FGIC Insured, 8.00%, 07/01/29 .............................................. 3,235,477
4,585,000 Series 1989-D, AMBAC Insured, 7.30%, 07/01/09 ............................................. 4,832,498
1,500,000 Series 1992-I, MBIA Insured, 6.25%, 01/01/15 .............................................. 1,505,280
1,500,000 Series 1994-F, MBIA Insured, 6.30%, 07/01/25 .............................................. 1,505,655
3,940,000 Minnesota State Higher Educational Facilities Authority Revenue, Series 3, Connie Lee Insured,
6.50%, 01/01/17 .............................................................................. 4,017,579
Minnetonka MFHR,
350,000 Cedar Hills East Project, FGIC Insured, 7.40%, 12/01/07 ................................... 369,628
1,000,000 Cedar Hills East Project, FGIC Insured, 7.50%, 12/01/27 ................................... 1,058,830
2,720,000 Refunding, Brier Creek Project, Series A, GNMA Secured, 6.45%, 06/20/24 ................... 2,698,403
Monticello ISD No. 882 GO,
750,000 Series 1991, CGIC Insured, Pre-Refunded, 6.80%, 02/01/06 .................................. 798,615
1,310,000 Series 1991, CGIC Insured, Pre-Refunded, 6.80%, 02/01/07 .................................. 1,394,914
2,000,000 North St. Paul ISD No. 622, Maplewood, Series A, MBIA Insured, 7.10%, 02/01/19 ................ 2,156,080
Northern Municipal Power Agency, Electric System Revenue,
11,900,000 Refunding, Series A, AMBAC Insured, 6.00%, 01/01/19 ....................................... 11,824,197
4,200,000 Refunding, Series A, AMBAC Insured, 6.00%, 01/01/20 ....................................... 4,172,742
3,500,000 Refunding, Series A, AMBAC Insured, Pre-Refunded, 7.25%, 01/01/17 ......................... 3,834,565
9,500,000 Refunding, Series A, AMBAC Insured, Pre-Refunded, 7.40%, 01/01/18 ......................... 10,457,125
4,000,000 Refunding, Series A, MBIA Insured, 6.00%, 01/01/20 ........................................ 3,974,040
5,290,000 Refunding, Series B, AMBAC Insured, 5.50%, 01/01/18 ....................................... 4,963,078
1,500,000 Series B, AMBAC Insured, Pre-Refunded, 7.40%, 01/01/18 .................................... 1,651,125
8,090,000 Series C, AMBAC Insured, 6.125%, 01/01/20 ................................................. 8,163,295
2,000,000 Northfield College Facility Revenue, St. Olaf College Project, BIG Insured, Pre-Refunded,
8.00%, 10/01/18 ............................................................................. 2,198,460
</TABLE>
The accompanying notes are an integral part of these
financial statements.
80
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STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995
(CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN MINNESOTA INSURED TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
$ 3,350,000 Owatonna Public Utilities Commission, Public Utilities Revenue, Refunding, Series A,
AMBAC Insured, 5.45%, 01/01/16 ............................................................... $ 3,139,855
2,835,000 Perham ISD No. 549, CGIC Insured, 5.375%, 02/01/14 ............................................ 2,642,163
Plymouth Health Facilities Revenue, Westhealth Project,
1,600,000 Series A, CGIC Insured, 6.25%, 06/01/16 ................................................... 1,628,240
1,815,000 Series A, CGIC Insured, 6.125%, 06/01/24 .................................................. 1,813,548
7,205,000 Princeton Hospital Revenue, Fairview Hospital and Healthcare, Series C, MBIA Insured,
6.25%, 01/01/21 .............................................................................. 7,311,346
Princeton ISD No. 477, Mille Lacs County,
2,550,000 Refunding, FGIC Insured, 6.30%, 02/01/17 .................................................. 2,636,394
2,540,000 Series A, CGIC Insured, 5.375%, 02/01/17 .................................................. 2,339,035
Puerto Rico Commonwealth Public Improvement GO,
3,000,000 MBIA Insured, 6.50%, 07/01/23 ............................................................. 3,124,110
10,000,000 Series 1989-A, FGIC Insured, Pre-Refunded, 7.375%, 07/01/04 ............................... 11,093,800
Puerto Rico HFC, SFMR,
1,895,000 Portfolio No. 1, Series B, GNMA Secured, 7.65%, 10/15/22 .................................. 2,005,687
1,150,000 Portfolio No. 1, Series D, GNMA Secured, 6.75%, 10/15/14 .................................. 1,190,814
520,000 Portfolio No. 1, Series D, GNMA Secured, 6.85%, 10/15/24 .................................. 538,377
1,145,000 Puerto Rico PBA, Public Education and Health Facilities, Refunding, Series M, CGIC Insured,
5.50%, 07/01/21 .............................................................................. 1,054,030
1,300,000 Puerto Rico Port Authority Revenue, Series D, FGIC Insured, 7.00%, 07/01/14 ................... 1,374,399
Robbinsdale Hospital Revenue,
1,400,000 North Memorial Medical Center Project, Series B, AMBAC Insured, 5.45%, 05/15/13 ........... 1,318,268
6,450,000 Refunding, North Memorial Medical Center Project, AMBAC Insured, Pre-Refunded, 7.375%,
01/01/19 ................................................................................. 7,094,291
2,000,000 Refunding, North Memorial Medical Center Project, Series A, AMBAC Insured, 5.45%, 05/15/13 .... 1,883,240
6,355,000 Refunding, North Memorial Medical Center Project, Series A, AMBAC Insured, 5.55%, 05/15/19..... 5,892,610
400,000 Rochester Hospital Facilities Revenue, Rochester Methodist Hospital Project, Refunding,
FGIC Insured, Pre-Refunded, 8.75%, 06/01/05 .................................................. 433,208
Roseville ISD No. 623,
1,200,000 Series A, CGIC Insured, 5.80%, 02/01/19 ................................................... 1,180,116
2,470,000 Series A, CGIC Insured, 5.85%, 02/01/24 ................................................... 2,425,911
2,200,000 dSeries A, CGIC Insured, 6.00%, 02/01/25 ................................................... 2,184,710
1,750,000 Shakopee Public Utilities Commission Revenue, AMBAC Insured, 5.60%, 08/01/18 .................. 1,639,523
2,080,000 South Washington County ISD No. 833, Refunding, Series A, FGIC Insured, 6.125%, 06/01/10 ...... 2,084,555
Southern Minnesota Municipal Power Agency, Power Supply System Revenue,
5,000,000 Refunding, Series B, AMBAC Insured, 6.00%, 01/01/16 ....................................... 5,003,150
2,500,000 Series A, AMBAC Insured, 6.00%, 01/01/13 .................................................. 2,504,800
12,500,000 Series A, MBIA Insured, 6.00%, 01/01/13 ................................................... 12,524,000
300,000 Series A, BIG Insured, Pre-Refunded, 9.50%, 01/01/17 ...................................... 317,946
5,975,000 Series A, MBIA Insured, 5.00%, 01/01/12 ................................................... 5,323,845
2,730,000 Series A, MBIA Insured, 5.75%, 01/01/18 ................................................... 2,599,943
1,370,000 Series A, MBIA Insured, Pre-Refunded, 5.75%, 01/01/18 ..................................... 1,344,819
St. Cloud Hospital Facilities Revenue,
2,000,000 Refunding, St. Cloud Hospital, Series 1990-C, AMBAC Insured, 7.00%, 07/01/07 .............. 2,169,680
1,350,000 Refunding, St. Cloud Hospital, Series 1990-C, AMBAC Insured, 6.75%, 07/01/15 .............. 1,416,285
695,000 gSt. Cloud Hospital, Series 1985-A, Pre-Refunded, 9.40%, 12/01/15 .......................... 733,809
8,000,000 St. Cloud Hospital, Series 1990-B, AMBAC Insured, Pre-Refunded, 7.00%, 07/01/20 ........... 8,927,600
St. Francis ISD No. 015,
1,500,000 Series A, CGIC Insured, 6.35%, 02/01/13 ................................................... 1,549,935
5,465,000 Series A, CGIC Insured, 6.375%, 02/01/16 .................................................. 5,635,617
</TABLE>
The accompanying notes are an integral part of these
financial statements.
81
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- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995
(CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN MINNESOTA INSURED TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
St. Louis Park Hospital Facilities Revenue,
$ 1,000,000 Refunding, Methodist Hospital Project, Series 1985-A, AMBAC Insured, 7.25%, 07/01/15 ...... $ 1,094,600
4,500,000 Refunding, Methodist Hospital Project, Series 1985-C, AMBAC Insured, Pre-Refunded, 7.25%,
07/01/18 ................................................................................. 5,025,150
440,000 Refunding, Methodist Hospital Project, Series 1990-A, AMBAC Insured, 7.20%, 07/01/03 ...... 480,621
920,000 Refunding, Methodist Hospital Project, Series 1990-A, AMBAC Insured, 7.25%, 07/01/04 ...... 1,007,032
500,000 Refunding, Methodist Hospital Project, Series 1990-A, AMBAC Insured, 7.30%, 07/01/05 ...... 559,505
4,115,000 Refunding, Methodist Hospital Project, Series 1990-A, AMBAC Insured, 7.25%, 07/01/08 ...... 4,504,279
1,350,000 Refunding, Methodist Hospital Project, Series 1990-C, AMBAC Insured, Pre-Refunded, 7.25%,
07/01/08 ................................................................................. 1,507,545
3,840,000 St. Louis Park MFHR, Rental Community Housing and Service Corp. Project, FHA Mortgage Insured,
FGIC Insured, 7.375%, 12/01/28 ............................................................... 3,959,194
1,200,000 St. Paul Housing and Redevelopment Authority Hospital Revenue, St. Paul-Ramsey
Medical Center Project, AMBAC Insured, 5.50%, 05/15/13 ....................................... 1,137,816
St. Paul Housing and Redevelopment Authority Revenue, Tax Increment,
355,000 AMBAC Insured, 7.20%, 09/01/01 ............................................................ 366,072
380,000 AMBAC Insured, 7.25%, 09/01/02 ............................................................ 392,441
405,000 AMBAC Insured, 7.30%, 09/01/03 ............................................................ 421,419
St. Paul ISD No. 625,
1,075,000 Series C, MBIA Insured, 6.10%, 02/01/14 ................................................... 1,085,202
500,000 Series C, MBIA Insured, 6.10%, 02/01/15 ................................................... 502,345
200,000 St. Paul Port Authority, IDR, Series 1985-K, FGIC Insured, 9.50%, 12/01/14 .................... 203,344
8,000,000 St. Paul Sewer Revenue, Series A, AMBAC Insured, 8.00%, 12/01/08 .............................. 8,830,560
3,645,000 Stearns County Housing and Redevelopment Authority Lease Revenue, Refunding,
Administration Building Project, AMBAC Insured, 7.00%, 02/01/11 .............................. 3,794,226
3,375,000 Stillwater ISD No. 834, FGIC Insured, 6.75%, 02/01/09 ......................................... 3,545,134
University of Minnesota GO,
2,100,000 gRefunding, Series 1986-A, Pre-Refunded, 7.625%, 02/01/05 .................................. 2,200,316
2,300,000 gRefunding, Series 1986-A, Pre-Refunded, 7.75%, 02/01/10 ................................... 2,412,377
1,400,000 Vadnais Heights Housing Development Revenue, Riverwood Housing Project,
FGIC Insured, 7.50%, 08/01/09 ................................................................ 1,405,810
375,000 Wabasha ISD, No. 811, Refunding, Series A, CGIC Insured, 5.20%, 02/01/12 ...................... 344,134
Waconia ISD No. 110, Carver County,
630,000 Refunding, Series A, CGIC Insured, 5.25%, 02/01/10 ........................................ 590,921
2,740,000 Series A, FGIC Insured, 6.35%, 02/01/11 ................................................... 2,892,727
3,150,000 Wadena ISD No. 819, Refunding, AMBAC Insured, 5.60%, 02/01/20 ................................. 2,957,062
Washington County Housing and Redevelopment Authority, Jail Facility Revenue,
3,735,000 Refunding, MBIA Insured, 5.40%, 02/01/08 .................................................. 3,574,207
3,000,000 Unlimited Tax, MBIA Insured, Pre-Refunded, 7.00%, 02/01/12 ................................ 3,318,660
225,000 Washington County SFRMR, Housing and Redevelopment Authority, City of Cottage Grove, GNMA
Secured, Series 1986, FGIC Insured, 7.60%, 12/01/11 .......................................... 225,278
Western Minnesota Municipal Power Agency, Power Supply Revenue,
1,090,000 Refunding, Series A, AMBAC Insured, 7.00%, 01/01/13 ....................................... 1,128,803
7,000,000 Refunding, Series A, MBIA Insured, 6.875%, 01/01/09 ....................................... 7,260,750
5,425,000 Refunding, Series A, MBIA Insured, 5.50%, 01/01/15 ........................................ 5,136,499
1,875,000 Refunding, Series A, MBIA Insured, Pre-Refunded, 9.10%, 01/01/15 .......................... 1,981,218
Western Minnesota Municipal Power Agency, Transmission Project Revenue,
2,000,000 Refunding, AMBAC Insured, 6.75%, 01/01/16 ................................................. 2,093,540
200,000 Series A, AMBAC Insured, Pre-Refunded, 8.00%, 01/01/06 .................................... 209,585
1,000,000 Series A, AMBAC Insured, Pre-Refunded, 8.125%, 01/01/16 ................................... 1,048,920
-------------
TOTAL LONG TERM INVESTMENTS (COST $458,012,208) ......................................... 474,381,633
-------------
</TABLE>
The accompanying notes are an integral part of these
financial statements.
82
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STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995
(CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN MINNESOTA INSURED TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
eSHORT TERM INVESTMENTS .5%
$ 500,000 Duluth Tax Increment Revenue, Lake Superior Paper, Weekly VRDN and Put, 4.05%, 09/01/10 ....... $ 500,000
500,000 Minnetonka MFHR, Cliffs at Ridgedale, Weekly VRDN and Put, 4.05%, 03/01/09 .................... 500,000
1,400,000 Puerto Rico Commonwealth, Government Development Bank, Refunding, Weekly VRDN and
Put, 3.90%, 12/01/15 ......................................................................... 1,400,000
------------
TOTAL SHORT TERM INVESTMENTS (COST $2,400,000) ......................................... 2,400,000
------------
TOTAL INVESTMENTS (COST $460,412,208) 99.3% ........................................ 476,781,633
OTHER ASSETS AND LIABILITIES, NET .7% .............................................. 3,152,597
------------
NET ASSETS 100.0% .................................................................. $479,934,230
============
At February 28, 1995, the net unrealized appreciation based on
the cost of investments for income tax purposes of $460,413,202
was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ............................................................. $ 20,294,336
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value.............................................................. (3,925,905)
------------
Net unrealized appreciation.................................................................. $ 16,368,431
============
</TABLE>
PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
BIG - Bond Investors Guaranty Insurance Co.
CDA - Community Development Agency
CGIC - Capital Guaranty Insurance Co.
EDA - Economic Development Authority
FGIC - Financial Guaranty Insurance Co.
FHA - Federal Housing Authority
GNMA - Government National Mortgage Association
GO - General Obligation
HFA - Housing Finance Agency/Authority
HFC - Housing Finance Corp.
IDR - Industrial Development Revenue
ISD - Independent School District
MBIA - Municipal Bond Investors Assurance Corp.
MF - Multi-Family
MFHR - Multi-Family Housing Revenue
MFMR - Multi-Family Mortgage Revenue
PBA - Public Building Authority
SFMR - Single Family Mortgage Revenue
SFRMR - Single Family Residential Mortgage Revenue
dSee Note 1 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).
gSee Note 1c regarding uninsured securities collateralized by U.S. government
securities.
The accompanying notes are an integral part of these
financial statements.
83
<PAGE>
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- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN OHIO INSURED TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS 98.6%
Akron Bath Copley Joint Township Hospital District Revenue,
$ 1,000,000 Akron General Medical Center Project, AMBAC Insured, 6.50%, 01/01/11 ...................... $ 1,030,720
5,000,000 Akron General Medical Center Project, AMBAC Insured, 6.50%, 01/01/19 ...................... 5,137,900
2,000,000 Children's Hospital Medical Center, AMBAC Insured, Pre-Refunded, 7.45%, 11/15/20 .......... 2,264,680
500,000 Akron GO, Limited Tax, FGIC Insured, 7.50%, 09/01/05 .......................................... 566,485
1,000,000 Akron Waterworks System First Mortgage Revenue, FGIC Insured, 6.00%, 03/01/14 ................. 994,380
1,250,000 Allen County, Refunding, AMBAC Insured, 5.30%, 12/01/15........................................ 1,135,825
1,200,000 Allen County Sewer Revenue, MBIA Insured, 5.70%, 12/01/13 ..................................... 1,166,256
250,000 Alliance Sewer System Mortgage Revenue, BIG Insured, Pre-Refunded, 9.55%, 10/01/10 ............ 262,165
600,000 Archbold Area Local School District GO, Refunding, MBIA Insured, 5.90%, 12/01/11 .............. 594,900
Bedford Sewer System Mortgage Revenue,
310,000 AMBAC Insured, Pre-Refunded, 7.75%, 07/01/02 .............................................. 331,688
335,000 AMBAC Insured, Pre-Refunded, 7.75%, 07/01/03 .............................................. 358,437
360,000 AMBAC Insured, Pre-Refunded, 7.75%, 07/01/04 .............................................. 385,186
2,000,000 Bellefontaine School District GO, Unlimited Tax, AMBAC Insured, Pre-Refunded, 7.125%, 12/01/11 2,260,700
430,000 Belmont County, AMBAC Insured, 5.20%, 12/01/13 ................................................ 390,216
Berne and Union Local School District,
640,000 Series A, AMBAC Insured, 5.40%, 12/01/11 .................................................. 601,018
370,000 Series A, AMBAC Insured, 5.50%, 12/01/14 .................................................. 347,511
1,450,000 Big Walnut Local School District, Delaware County Construction and Improvement,
AMBAC Insured, 6.625%, 12/01/15 .............................................................. 1,517,744
2,295,000 Brunswick City School District, AMBAC Insured, 6.90%, 12/01/12 ................................ 2,460,906
Butler County Hospital Facilities Revenue,
2,150,000 Refunding & Improvement, Middletown Regional Hospital, FGIC Insured, 6.75%, 11/15/10 ...... 2,281,602
1,400,000 Series 1985-A, FGIC Insured, Pre-Refunded, 9.30%, 11/01/15 ................................ 1,553,762
1,870,000 Series 1986-A, FGIC Insured, Pre-Refunded, 8.25%, 11/01/02 ................................ 1,971,485
2,650,000 Series 1986-A, FGIC Insured, Pre-Refunded, 8.375%, 11/01/15 ............................... 2,795,909
Butler County Waterworks Revenue,
790,000 AMBAC Insured, 6.35%, 12/01/08 ............................................................ 823,196
500,000 AMBAC Insured, 6.40%, 12/01/12 ............................................................ 519,230
400,000 Cardington and Lincoln Local School District, MBIA Insured, 6.60%, 12/01/14 ................... 415,256
1,200,000 Celina Wastewater System Mortgage Revenue, FGIC Insured, 6.55%, 11/01/16 ...................... 1,242,120
675,000 Chillicothe GO, Limited Tax, AMBAC Insured, 6.05%, 12/01/12 ................................... 678,557
1,000,000 Chillicothe Sanitary Sewer System First Mortgage Revenue, BIG Insured, Pre-Refunded, 7.65%,
12/01/08 ..................................................................................... 1,110,350
Clermont County Hospital Facilities Revenue, Mercy Health System,
1,475,000 Refunding, Province of Cincinnati, Series 1985-A, AMBAC Insured, Pre-Refunded, 9.75%,
09/01/13 ................................................................................. 1,542,791
2,000,000 Refunding, Province of Cincinnati, Series 1988-A, MBIA Insured, Pre-Refunded, 7.625%,
01/01/15 ................................................................................. 2,179,220
1,000,000 Refunding, Mercy Health System, Series B, AMBAC Insured, 5.875%, 09/01/15 ................. 975,010
6,000,000 Refunding, Mercy Health System, Series B, AMBAC Insured, 6.00%, 09/01/19 .................. 5,931,600
2,250,000 Series A, AMBAC Insured, Pre-Refunded, 7.50%, 09/01/19 .................................... 2,509,448
1,500,000 Clermont County Road Improvement GO, AMBAC Insured, Pre-Refunded, 7.125%, 09/01/11 ............ 1,670,265
Clermont County Sewer System Revenue,
10,000,000 Refunding, AMBAC Insured, 5.80%, 12/01/18 ................................................. 9,637,300
4,280,000 Refunding, AMBAC Insured, Pre-Refunded, 7.10%, 12/01/15 ................................... 4,721,953
5,500,000 Series 1991, AMBAC Insured, Pre-Refunded, 7.10%, 12/01/21 ................................. 6,198,005
3,000,000 Cleveland Airport Systems Revenue, Series A, FGIC Insured, 6.25%, 01/01/20 .................... 3,004,320
2,000,000 Cleveland GO, Series 1994, MBIA Insured, 6.70%, 11/15/18 ...................................... 2,109,300
Cleveland Waterworks First Mortgage Revenue,
3,000,000 Refunding, Series D, AMBAC Insured, Pre-Refunded, 7.25%, 01/01/12 ......................... 3,186,570
2,000,000 Refunding, Series F, AMBAC Insured, 6.25%, 01/01/16 ....................................... 2,029,520
</TABLE>
The accompanying notes are an integral part of these
financial statements.
84
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STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995
(CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN OHIO INSURED TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
Cleveland Waterworks First Mortgage Revenue, (cont.)
$ 5,000,000 Series F, AMBAC Insured, Pre-Refunded, 6.50%, 01/01/21 .................................... $ 5,454,150
1,000,000 Series F-92, AMBAC Insured, 6.25%, 01/01/15 ............................................... 1,014,760
1,000,000 Clinton-Massie Local School District, Refunding, Issue I, AMBAC Insured, 7.50%, 12/01/11 ...... 1,110,680
1,360,000 Columbus City School District GO, Renovation & Improvement, FGIC Insured,
Pre-Refunded, 6.65%, 12/01/12 ................................................................ 1,506,989
975,000 Columbus GO, Limited Tax, FGIC Insured, 9.50%, 04/15/03 ....................................... 1,242,638
2,500,000 gColumbus Sewer System Revenue, Series A, Pre-Refunded, 8.00%, 06/01/08 ........................ 2,648,400
1,530,000 Coshocton Sewer System GO, AMBAC Insured, 6.50%, 12/01/12 ..................................... 1,593,602
1,650,000 Crestview Local School District GO, Construction and Improvement,
AMBAC Insured, 6.65%, 12/01/14 ............................................................... 1,730,471
100,000 Cuyahoga County GO, Limited Tax, MBIA Insured, 9.375%, 10/01/04 ............................... 128,521
Cuyahoga County Hospital Revenue,
1,490,000 Deaconess Hospital of Cleveland, Series A, FGIC Insured, Pre-Refunded, 9.25%, 10/01/09 .... 1,560,030
10,000,000 Metro Health System Project, MBIA Insured, 6.00%, 02/15/19 ................................ 9,812,800
2,685,000 Mt. Sinai Medical Center, AMBAC Insured, 6.625%, 11/15/21 ................................. 2,776,827
2,000,000 Refunding, Fairview General Hospital Project, AMBAC Insured, 5.50%, 08/15/19 .............. 1,843,720
5,360,000 Refunding, University Hospital Health System, Series A, BIG Insured, 6.875%, 01/15/19 ..... 5,577,402
4,775,000 Cuyahoga County IDR, Harbour Court, Limited Partnership Project, Series A, FHA Mortgage
Insured, FGIC Insured, 7.875%, 06/01/16 ...................................................... 5,048,942
5,200,000 Dayton Airport Revenue, James M. Cox Dayton International Airport,
AMBAC Insured, 8.25%, 01/01/16 ............................................................... 5,441,904
1,395,000 Dayton Water System Mortgage Revenue, Refunding, MBIA Insured, 6.75%, 12/01/10 ................ 1,451,930
Defiance GO,
1,000,000 MBIA Insured, 6.10%, 12/01/14 ............................................................. 1,005,710
750,000 MBIA Insured, 6.20%, 12/01/20 ............................................................. 754,253
Delphos Sewer System Revenue,
450,000 CGIC Insured, 7.20%, 09/01/10 ............................................................. 482,729
1,100,000 CGIC Insured, 7.25%, 09/01/20 ............................................................. 1,176,670
2,000,000 Dover City School District, AMBAC Insured, 6.25%, 12/01/16 .................................... 2,036,080
1,100,000 Dover Waterworks Systems Revenue, AMBAC Insured, 6.00%, 12/01/13 .............................. 1,099,868
5,735,000 Dublin City School District, AMBAC Insured, 6.20%, 12/01/19 ................................... 5,784,321
800,000 Dublin Local School District GO, Franklin, Delaware and Union Counties, Unlimited Tax for
School Buildings, Construction and Improvement, Series 1988, AMBAC Insured,
Pre-Refunded, 7.30%, 12/01/05 ................................................................ 878,048
1,390,000 Fairborn GO, Limited Tax, Series 1991, MBIA Insured, 7.00%, 10/01/11 .......................... 1,506,274
5,915,000 Fairfield County Hospital Improvement Revenue, Lancaster-Fairfield Community Hospital,
Series A, MBIA Insured, Pre-Refunded, 7.10%, 06/15/21 ........................................ 6,628,822
Findlay Waterworks System Revenue,
1,000,000 Refunding, BIG Insured, 7.20%, 11/01/04 ................................................... 1,037,570
3,500,000 Refunding, BIG Insured, 7.30%, 11/01/09 ................................................... 3,620,120
2,500,000 Fostoria City School District GO, AMBAC Insured, 6.70%, 12/01/16 .............................. 2,650,000
5,000,000 Franklin County Convention Facility Authority, Tax and Lease Revenue, Anticipation Bonds,
MBIA Insured, Pre-Refunded, 7.00%, 12/01/19 .................................................. 5,554,700
Franklin County Hospital Revenue,
420,000 Refunding & Improvement, Grant Medical Center Project, Series A, MBIA Insured,
ETM 12/01/95, 8.50%, 12/01/95 ........................................................... 432,613
1,500,000 Refunding & Improvement, Grant Medical Center Project, Series A, MBIA Insured,
Pre-Refunded, 9.25%, 12/01/04 ............................................................. 1,582,155
2,000,000 Refunding & Improvement, Riverside United Hospital, MBIA Insured, 7.25%, 05/15/20 ......... 2,135,540
5,150,000 Granville Exempted Village School District, Unlimited Tax, AMBAC Insured, Pre-Refunded,
7.15%, 12/01/15.............................................................................. 5,869,146
Green Local School District GO, Summit County,
2,800,000 FGIC Insured, 5.875%, 12/01/14 ............................................................ 2,749,992
5,150,000 FGIC Insured, 5.90%, 12/01/19 ............................................................. 5,031,602
2,000,000 Hamilton County Health Care System Revenue, Refunding, Sisters of Charity,
Good Samaritan Hospital, MBIA Insured, 7.625%, 08/01/12 ...................................... 2,134,340
</TABLE>
The accompanying notes are an integral part of these
financial statements.
85
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STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995
(CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN OHIO INSURED TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
Hamilton County Hospital Facilities Revenue,
$ 2,000,000 Children's Hospital Medical Center, FGIC Insured, Pre-Refunded, 7.125%, 05/15/09 .......... $ 2,163,980
990,000 Christ Hospital, Series 1987, FGIC Insured, Pre-Refunded, 8.375%, 01/01/07 ................ 1,097,197
3,650,000 Refunding, Bethesda Hospital, Series A, AMBAC Insured, 6.25%, 01/01/12 .................... 3,711,138
4,410,000 gHamilton County Sewer System Revenue, Metropolitan Sewer District of Greater Cincinnati,
Series A, Pre-Refunded, 7.50%, 12/01/10 ...................................................... 4,652,771
Hamilton Electric System Mortgage Revenue,
12,000,000 Refunding, Series A, FGIC Insured, 6.00%, 10/15/23 ........................................ 11,758,080
2,340,000 Refunding, Series B, FGIC Insured, 6.30%, 10/15/25 ........................................ 2,364,968
9,500,000 Refunding, Series B, FGIC Insured, Pre-Refunded, 8.00%, 10/15/22 .......................... 10,611,310
4,665,000 Hamilton Waterworks Mortgage Revenue, Series A, MBIA Insured, 6.30%, 10/15/21 ................. 4,770,196
500,000 Hillard School District, Refunding, FGIC Insured, 6.55%, 12/01/05 ............................. 539,970
Hudson Local School District,
2,750,000 Refunding, FGIC Insured, 5.60%, 12/15/14 .................................................. 2,614,178
3,350,000 Series A, FGIC Insured, Pre-Refunded, 7.10%, 12/15/13 ..................................... 3,740,041
Jackson Local School District, Stark and Summit Counties School Building,
2,750,000 Construction and Improvement, MBIA Insured, 5.40%, 12/01/13 ............................... 2,527,883
4,060,000 Construction and Improvement, MBIA Insured, 5.50%, 12/01/21 ............................... 3,676,086
500,000 Jackson Waterworks Revenue, AMBAC Insured, 5.60%, 12/01/18 .................................... 469,405
225,000 Kent Sewer System Mortgage Revenue, Series 1985, AMBAC Insured, Pre-Refunded, 8.875%,
12/01/05 ..................................................................................... 238,903
1,195,000 Kent State University, University Revenues, AMBAC Insured, 6.45%, 05/01/12 .................... 1,236,574
Kettering City School District,
1,000,000 FGIC Insured, 5.30%, 12/01/14 ............................................................. 916,320
1,000,000 FGIC Insured, 5.25%, 12/01/22 ............................................................. 877,230
Lake County Hospital Improvement Revenue, Lake Hospital System, Inc.,
2,000,000 Refunding, AMBAC Insured, 5.50%, 08/15/20.................................................. 1,833,800
1,940,000 Series B and C, AMBAC Insured, 7.875%, 01/01/05............................................ 2,080,456
2,185,000 Series B and C, AMBAC Insured, 8.00%, 01/01/13............................................. 2,323,791
2,560,000 Series B and C, AMBAC Insured, Pre-Refunded, 7.875%, 01/01/05 ............................. 2,746,726
2,815,000 Series B and C, AMBAC Insured, Pre-Refunded, 8.00%, 01/01/13............................... 3,024,858
1,000,000 Lake Local School District, Stark County, AMBAC Insured, 6.25%, 12/01/09 ...................... 1,027,420
3,200,000 Lakota Local District GO, AMBAC Insured, 6.125%, 12/01/17 ..................................... 3,210,848
Liberty Benton Local School District,
2,000,000 AMBAC Insured, 6.00%, 12/01/15 ............................................................ 1,992,720
2,045,000 AMBAC Insured, 6.10%, 12/01/19 ............................................................ 2,048,149
Lucas County GO,
120,000 Limited Tax, FGIC Insured, 8.00%, 12/01/06 ................................................ 138,018
110,000 Limited Tax, FGIC Insured, 8.00%, 12/01/08 ................................................ 126,782
120,000 Limited Tax, FGIC Insured, 8.00%, 12/01/09 ................................................ 137,998
220,000 Limited Tax, FGIC Insured, 8.00%, 12/01/10 ................................................ 254,313
Lucas County Hospital Revenue,
6,660,000 St. Vincent Medical Center, Series B, MBIA Insured, 6.75%, 08/15/20 ....................... 7,145,581
3,200,000 The Toledo Hospital, MBIA Insured, Pre-Refunded, 7.50%, 11/15/14 .......................... 3,530,848
Mahoning County GO,
1,500,000 Limited Tax, Bridge Improvement, AMBAC Insured, 7.20%, 12/01/09 ........................... 1,622,805
1,500,000 Unlimited Tax, Bridge Improvement, AMBAC Insured, 7.15%, 12/01/04 ......................... 1,634,775
2,000,000 Mahoning County Hospital Facilities Revenue, YHA, Inc. Project, Series B, MBIA Insured, 7.00%,
10/15/08 ..................................................................................... 2,154,280
2,500,000 Mansfield Hospital Improvement Revenue, Mansfield General Hospital Project, AMBAC Insured,
6.70%, 12/01/09 .............................................................................. 2,662,750
1,000,000 Marietta City School District, Series B, AMBAC Insured, 5.75%, 12/01/07 ....................... 1,005,070
500,000 Marietta Sewer System Mortgage Revenue, BIG Insured, 7.50%, 11/01/07 .......................... 542,905
</TABLE>
The accompanying notes are an integral part of these
financial statements.
86
<PAGE>
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- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995
(CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN OHIO INSURED TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
Marysville Water Systems,
$ 1,000,000 Refunding, AMBAC Insured, 5.40%, 12/01/13 ................................................. $ 917,150
1,500,000 Refunding, AMBAC Insured, 5.50%, 12/01/18 ................................................. 1,370,235
1,000,000 Mason Sewer Systems Revenue, FGIC Insured, 6.00%, 12/01/19 .................................... 987,200
Massillon City School District GO,
1,500,000 Series 1, AMBAC Insured, Pre-Refunded, 7.10%, 12/01/11 .................................... 1,654,890
1,000,000 Unlimited Tax, AMBAC Insured, Pre-Refunded, 7.20%, 12/01/11 ............................... 1,120,790
3,000,000 Medina City School District, FGIC Insured, 6.20%, 12/01/18 .................................... 3,025,800
Mentor Exempted Village School District,
1,000,000 MBIA Insured, 5.375%, 12/01/11 ............................................................ 941,510
2,000,000 MBIA Insured, 6.625%, 12/01/13 ............................................................ 2,100,400
2,040,000 MBIA Insured, Pre-Refunded, 7.40%, 12/01/11 ............................................... 2,276,171
Miami County Hospital Facilities Revenue, Upper Valley Medical Center, Nursing Care, Inc.,
525,000 Series A, BIG Insured, 8.375%, 05/01/13 ................................................... 567,389
1,340,000 Series B, MBIA Insured, 6.50%, 05/01/21 ................................................... 1,373,875
2,000,000 Miami University, FGIC Insured, 5.60%, 12/01/13 ............................................... 1,927,920
Montgomery County Greater Moraine-Beaver Creek Sewer Revenue,
500,000 Series A, FGIC Insured, Pre-Refunded, 7.45%, 09/01/00 ..................................... 530,660
500,000 Series A, FGIC Insured, Pre-Refunded, 7.50%, 09/01/01 ..................................... 531,015
3,800,000 Series A, FGIC Insured, Pre-Refunded, 7.75%, 09/01/11 ..................................... 4,049,204
Montgomery County Hospital Facilities Revenue,
300,000 Miami Valley Hospital, Series 1985-A, FGIC Insured, 9.25%, 12/01/00 ....................... 316,047
250,000 Miami Valley Hospital, Series 1985-A, FGIC Insured, 9.375%, 12/01/05 ...................... 263,595
15,000,000 Refunding, Kettering Medical Center Project, MBIA Insured, 7.40%, 04/01/09 ................ 16,129,200
5,000,000 Refunding, Kettering Medical Center Project, MBIA Insured, 7.50%, 04/01/14 ................ 5,337,950
Montgomery County Revenue,
1,600,000 Refunding, Miami Valley Hospital, Series A, AMBAC Insured, 6.25%, 11/15/12 ................ 1,624,192
1,780,000 Sisters of Charity Health Care, Series A, AMBAC Insured, 6.25%, 05/15/14 .................. 1,801,182
1,565,000 Sisters of Charity Health Care, Series A, MBIA Insured, 6.625%, 05/15/21 .................. 1,612,075
3,500,000 Montgomery County Water Revenue, Refunding, Greater Moraine-Beaver Creek, FGIC Insured,
Pre-Refunded, 7.25%, 11/15/08 ................................................................ 3,638,215
Muskingum County,
1,000,000 Ohio County Office Building Improvement, AMBAC Insured, 7.20%, 12/01/10 ................... 1,085,320
1,695,000 Ohio Justice Center Improvement, AMBAC Insured, 6.375%, 12/01/17 .......................... 1,731,120
2,000,000 New Philadelphia City School District, School and Improvement, AMBAC Insured, 6.25%, 12/01/17 . 2,033,360
1,500,000 New Richmond Exempted Village School District GO, AMBAC Insured, 7.125%, 09/01/09 ............. 1,590,270
1,000,000 Newark Water System, AMBAC Insured, 6.00%, 12/01/18 ........................................... 989,900
3,800,000 North Olmsted GO, AMBAC Insured, 6.25%, 12/15/12 .............................................. 3,860,610
1,000,000 North Ridgeville, AMBAC Insured, 5.125%, 12/01/13 ............................................. 899,130
2,900,000 North Ridgeville GO, City School District, AMBAC Insured, 6.30%, 12/01/17 ..................... 2,956,666
455,000 Northeast Regional Sewer District Wastewater Revenue, AMBAC Insured, 6.50%, 11/15/16 .......... 469,865
25,000 Northeast Regional Sewer District Water Resource Revenue, Junior Lien, MBIA Insured, ETM
10/01/96, 9.80%, 10/01/96 .................................................................... 25,842
2,000,000 Northwest Local School District, Scioto County, AMBAC Insured, 7.05%, 12/01/14 ................ 2,149,600
1,000,000 Norwalk Waterworks System Revenue, Series 1990, AMBAC Insured, 7.20%, 04/01/15 ................ 1,064,720
Ohio Capital Corp. for Housing Mortgage Revenue,
4,215,000 Refunding, MBIA Insured, 6.90%, 07/01/24 .................................................. 4,296,687
3,500,000 Refunding, Series J, MBIA Insured, 6.50%, 01/01/25 ........................................ 3,542,910
1,625,000 dRefunding, Westview Apartments, Series A, MBIA Insured, 6.125%, 01/01/15 .................. 1,625,000
2,565,000 dRefunding, Westview Apartments, Series A, MBIA Insured, 6.25%, 01/01/23 ................... 2,565,000
780,000 Ohio HFA, MFHR, Northridge Apartments, FGIC Insured, 10.35%, 12/01/25 ......................... 838,523
</TABLE>
The accompanying notes are an integral part of these
financial statements.
87
<PAGE>
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- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995
(CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN OHIO INSURED TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
Ohio HFA, SFMR,
$ 3,175,000 Series 1988-C, GNMA Secured, 8.00%, 09/01/08 .............................................. $ 3,411,220
2,985,000 Series 1988-C, GNMA Secured, 8.125%, 03/01/20 ............................................. 3,157,832
4,250,000 Series 1989-A, GNMA Secured, 7.65%, 03/01/29 .............................................. 4,538,788
1,265,000 Series 1990-B, GNMA Secured, 7.40%, 09/01/15 .............................................. 1,325,910
2,845,000 Series 1990-C, GNMA Secured, 7.85%, 09/01/21 .............................................. 3,025,515
1,530,000 Series 1990-D, GNMA Secured, 7.50%, 09/01/13 .............................................. 1,616,720
4,285,000 Series 1990-I, GNMA Secured, 7.60%, 09/01/16 .............................................. 4,468,098
4,970,000 Series 1991-D, GNMA Secured, 7.05%, 09/01/16 .............................................. 5,087,541
13,000,000 Ohio Municipal Electric Generation Agency, Joint Venture, AMBAC Insured, 5.625%, 02/15/16 ..... 12,348,310
Ohio State Air Quality Development Authority Revenue,
1,000,000 PCR, Refunding, FGIC Insured, 7.45%, 03/01/16 ............................................. 1,077,440
7,000,000 PCR, Refunding, Pennsylvania Power Co., AMBAC Insured, 6.45%, 05/01/27 .................... 7,174,020
5,000,000 Refunding, Cincinnati Gas & Electric, MBIA Insured, 5.45%, 01/01/24 ....................... 4,567,300
15,245,000 Refunding, JMG Funding, L.P., AMBAC Insured, 6.375%, 04/01/29 ............................. 15,336,927
4,000,000 Series A, FGIC Insured, 6.375%, 12/01/20 .................................................. 4,079,360
13,000,000 Ohio State Building Authority, Adult Correctional Facility, Series A, MBIA Insured, 6.125%,
10/01/13 .................................................................................... 13,144,170
1,100,000 Ohio State Department of Transportation, COP, Panhandle Rail Line Project, Series A, CGIC
Insured, 6.50%, 04/15/12 ..................................................................... 1,143,538
Ohio State Higher Educational Facility Commission Revenue,
2,500,000 Dayton University Project, FGIC Insured, 7.25%, 12/01/12 .................................. 2,721,875
1,725,000 Dayton University Project, FGIC Insured, 6.75%, 12/01/15 .................................. 1,821,721
1,135,000 Northern University Project, FGIC Insured, Pre-Refunded, 7.30%, 05/15/10 .................. 1,250,180
915,000 gOberlin College Project, Pre-Refunded, 9.25%, 10/01/15 .................................... 958,005
1,000,000 Wittenberg University Project, FGIC Insured, 7.85%, 06/01/07 .............................. 1,082,850
1,500,000 Xavier University Project, MBIA Insured, Pre-Refunded, 7.625%, 11/01/08 ................... 1,634,955
2,000,000 Ohio State Water Development Authority, PCR Facilities, Refunding, PA Power Co. Project, AMBAC
Insured, 6.15%, 08/01/23 ..................................................................... 2,007,980
Ohio State Water Development Authority Revenue,
485,000 AMBAC Insured, 9.375%, 12/01/18 ........................................................... 503,265
1,915,000 AMBAC Insured, Pre-Refunded, 9.375%, 12/01/18 ............................................. 1,996,368
5,000,000 Refunding, Dayton Power, Series A, AMBAC Insured, 6.40%, 08/15/27 ......................... 5,106,150
1,000,000 Refunding & Improvement, AMBAC Insured, 5.50%, 12/01/11 ................................... 962,860
2,000,000 Series I, AMBAC Insured, ETM 06/01/05, 7.00%, 12/01/09 .................................... 2,245,920
Olentangy Local School District GO,
375,000 BIG Insured, 7.75%, 12/01/08 .............................................................. 443,528
375,000 BIG Insured, 7.75%, 12/01/09 .............................................................. 445,485
375,000 BIG Insured, 7.75%, 12/01/10 .............................................................. 446,288
1,000,000 MBIA Insured, 6.35%, 12/01/17 ............................................................. 1,028,190
1,000,000 Olmsted Falls Local School District, FGIC Insured, 7.05%, 12/15/11 ............................ 1,083,810
2,500,000 Orrville Electric System Mortgage Revenue, Refunding, Series A & B, AMBAC Insured, 7.50%,
12/01/10 ..................................................................................... 2,749,950
4,100,000 Orrville Sewer System Revenue, Improvement Mortgage, MBIA Insured, 7.875%, 12/01/12 ........... 4,494,256
1,150,000 Orrville Water Systems Improvement Revenue, MBIA Insured, 6.125%, 12/01/18 .................... 1,152,243
1,500,000 Ottawa County GO, Catawba Isle, AMBAC Insured, 7.00%, 09/01/11 ................................ 1,617,645
1,950,000 Ottawa County Sewer System Revenue, Refunding, Danbury Project, AMBAC Insured, 5.50%,
10/01/14 ..................................................................................... 1,849,244
3,225,000 Oxford Water Supply System Mortgage Revenue, AMBAC Insured, Pre-Refunded, 7.625%, 12/01/14 .... 3,574,977
Painesville Township Local School District GO,
3,240,000 Lake County, FGIC Insured, 5.625%, 12/01/09 ............................................... 3,143,448
4,490,000 Lake County, FGIC Insured, 5.65%, 12/01/15 ................................................ 4,314,755
2,000,000 Perrysburg Exempted Village School District, AMBAC Insured, 6.00%, 12/01/15 ................... 1,992,720
</TABLE>
The accompanying notes are an integral part of these
financial statements.
88
<PAGE>
FRANKLIN TAX-FREE TRUST
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995
(CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN OHIO INSURED TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
Pickerington Local School District GO,
$ 1,000,000 Construction and Improvement, FGIC Insured, 5.375%, 12/01/19 .............................. $ 904,390
1,000,000 Refunding, AMBAC Insured, 5.55%, 12/01/07 ................................................. 975,850
Puerto Rico Commonwealth Public Improvement,
1,000,000 MBIA Insured, Pre-Refunded, 6.50%, 07/01/09 ............................................... 1,101,330
3,250,000 MBIA Insured, Pre-Refunded, 6.60%, 07/01/13 ............................................... 3,599,018
11,000,000 Puerto Rico Port Authority Revenue, Series D, FGIC Insured, 6.00%, 07/01/21 ................... 10,701,240
Revere Local School District,
2,000,000 AMBAC Insured, 5.25%, 12/01/16 ............................................................ 1,789,980
1,600,000 AMBAC Insured, 6.00%, 12/01/16 ............................................................ 1,594,048
1,300,000 Reynoldsburg City School District, FGIC Insured, 6.55%, 12/01/17 .............................. 1,349,062
1,000,000 Richland County Hospital Improvement Mortgage Revenue, Refunding, Mansfield General Hospital
Project, AMBAC Insured, 9.375%, 12/01/09 ..................................................... 1,054,910
2,000,000 Ross County Hospital Revenue, Refunding, Medical Center Hospital, AMBAC Insured, 5.60%,
12/01/14 ..................................................................................... 1,881,560
1,200,000 Rural Lorain County Water Authority, Water Resource Revenue, Refunding, AMBAC Insured,
Pre-Refunded, 7.70%, 10/01/08 ................................................................ 1,328,856
600,000 Saint Mary's Electric System Mortgage Revenue, AMBAC Insured, 6.65%, 12/01/11 ................. 639,564
750,000 Saint Mary's Waterworks Revenue, AMBAC Insured, 6.65%, 12/01/11 ............................... 799,455
2,000,000 Salem GO, AMBAC Insured, 6.50%, 12/01/06 ...................................................... 2,153,060
1,000,000 South Euclid Lyndhurst City School District, FGIC Insured, 5.30%, 12/01/14 .................... 910,950
600,000 South Range Local School District, MBIA Insured, 6.15%, 12/01/18 .............................. 603,204
South-Western City School District of Ohio, Franklin and Pickway Counties,
490,000 FGIC Insured, ETM 12/01/03, 7.875%, 12/01/03 .............................................. 577,240
550,000 FGIC Insured, ETM 12/01/04, 7.875%, 12/01/04 .............................................. 654,236
600,000 FGIC Insured, ETM 12/01/06, 7.875%, 12/01/06 .............................................. 719,040
600,000 FGIC Insured, ETM 12/01/07, 7.875%, 12/01/07 .............................................. 697,914
1,125,000 Springboro Water Systems Revenue, Refunding, AMBAC Insured, 5.45%, 12/01/18 ................... 1,033,808
Springfield City School District,
1,220,000 Clark County, AMBAC Insured, 6.40%, 12/01/12 .............................................. 1,266,360
1,000,000 Clark County, AMBAC Insured, 6.60%, 12/01/12 .............................................. 1,048,510
2,500,000 Stark County GO, Refunding, AMBAC Insured, 5.70%, 11/15/17 .................................... 2,383,625
3,830,000 gStark County Hospital Facilities Revenue, Refunding, Timken Mercy Medical Center,
Series A, Pre-Refunded, 7.50%, 12/01/07 ...................................................... 4,083,393
8,500,000 Stark County Sanitary Sewer System Revenue, Series A, MBIA Insured, Pre-Refunded, 7.75%,
11/15/18 ..................................................................................... 9,449,705
1,075,000 Steubenville City School District, Series A, AMBAC Insured, 6.20%, 12/01/17 ................... 2,094,173
1,750,000 Struthers City School District, AMBAC Insured, 6.50%, 12/01/14 ................................ 1,829,345
Summit County GO,
660,000 Limited Tax, Building Improvement, AMBAC Insured, Pre-Refunded, 8.00%, 12/01/07 ........... 724,482
355,000 Limited Tax, Capital Improvement, AMBAC Insured, Pre-Refunded, 8.00%, 12/01/07 ............ 389,684
3,530,000 Limited Tax, County Jail Improvement, AMBAC Insured, Pre-Refunded, 7.85%, 12/01/08 ........ 3,939,868
795,000 Limited Tax, Justice Facilities, AMBAC Insured, Pre-Refunded, 8.00%, 12/01/07 ............. 872,672
1,000,000 Limited Tax, Refunding, Series B, AMBAC Insured, 6.95%, 08/01/08 .......................... 1,086,310
690,000 Limited Tax, Sewer System Improvement, AMBAC Insured, Pre-Refunded, 8.00%, 12/01/07 ....... 757,413
500,000 Limited Tax, Water System Improvement, AMBAC Insured, Pre-Refunded, 8.00%, 12/01/07 ....... 548,850
Toledo GO,
500,000 Limited Tax, FGIC Insured, 7.375%, 12/01/00 ............................................... 543,460
400,000 Limited Tax, FGIC Insured, 7.375%, 12/01/02 ............................................... 439,544
650,000 Limited Tax, FGIC Insured, 7.375%, 12/01/03 ............................................... 716,950
650,000 Limited Tax, FGIC Insured, 7.375%, 12/01/04 ............................................... 726,785
</TABLE>
The accompanying notes are an integral part of these
financial statements.
89
<PAGE>
FRANKLIN TAX-FREE TRUST
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995
(CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN OHIO INSURED TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
Toledo GO, (cont.)
$ 650,000 Limited Tax, FGIC Insured, 7.375%, 12/01/05 ............................................... $ 728,657
625,000 Limited Tax, FGIC Insured, 7.375%, 12/01/06 ............................................... 695,443
4,500,000 Limited Tax, MBIA Insured, 6.50%, 12/01/11 ................................................ 4,687,064
Toledo Sewerage System Mortgage Revenue,
2,320,000 Series 1988-B, MBIA Insured, 7.75%, 11/15/17 .............................................. 2,499,174
3,680,000 Series 1988-B, MBIA Insured, Pre-Refunded, 7.75%, 11/15/17 ................................ 4,091,165
Trumbull County GO,
3,000,000 Hillside Hospital Project, Series 1990, CGIC Insured, Pre-Refunded, 7.125%, 12/01/14 ...... 3,384,960
1,500,000 Refunding, AMBAC Insured, 5.30%, 12/01/14 ................................................. 1,358,444
Trumbull County Hospital Revenue,
1,000,000 Refunding & Improvement, Series A, FGIC Insured, 6.25%, 11/15/12 .......................... 1,023,420
2,000,000 Refunding, Series B, FGIC Insured, 6.90%, 11/15/12 ........................................ 2,137,000
4,000,000 Twinsburg City School District, CGIC Insured, 6.70%, 12/01/11 ................................. 4,235,040
1,600,000 University of Cincinnati, COP, MBIA Insured, 6.75%, 12/01/09 .................................. 1,714,127
University of Toledo General Receipt,
2,535,000 FGIC Insured, 5.30%, 06/01/18 ............................................................. 2,299,168
2,350,000 MBIA Insured, Pre-Refunded, 7.65%, 06/01/08 ............................................... 2,581,004
3,450,000 MBIA Insured, Pre-Refunded, 7.70%, 06/01/18 ............................................... 3,794,206
1,000,000 Urbana Wastewater Treatment Plant GO, AMBAC Insured, 7.05%, 12/01/11 .......................... 1,087,780
1,400,000 Valley Local School District, AMBAC Insured, 7.00%, 12/01/13 .................................. 1,522,611
1,250,000 Warren County, Ohio Sewer Revenue, Series A, FGIC Insured, Pre-Refunded, 7.20%, 12/01/15 ...... 1,400,987
2,000,000 Warren County Waterworks District Revenue, Refunding, FGIC Insured, 5.45%, 12/01/15 ........... 1,881,560
Warren GO,
2,415,000 MBIA Insured, 6.65%, 11/01/12 ............................................................. 2,550,602
1,015,000 Refunding, AMBAC Insured, 5.50%, 11/15/13 ................................................. 955,073
1,150,000 Washington City Water System Revenue, AMBAC Insured, 5.30%, 12/01/13 .......................... 1,056,412
500,000 Washington County Hospital Revenue, Refunding, Marietta Memorial Hospital, AMBAC Insured,
Pre-Refunded, 9.00%, 06/01/98 ................................................................ 536,230
Westerville, Minerva Park and Blendon Joint Township Hospital District Revenue,
825,000 Refunding & Improvement, St. Ann's Hospital, AMBAC Insured, Pre-Refunded, 9.50%, 09/15/12 . 862,594
5,000,000 Refunding, St. Ann's Hospital, Series B, AMBAC Insured, 7.00%, 09/15/12 ................... 5,404,900
2,000,000 Wilmington City School District, FGIC Insured, 6.30%, 12/01/14 ................................ 2,036,000
500,000 Woodmore Local School District, Refunding, AMBAC Insured, 5.65%, 12/01/08 ..................... 495,244
8,700,000 Wooster City School District, AMBAC Insured, 6.50%, 12/01/17 .................................. 9,201,293
2,350,000 Worthington City School District, Refunding, FGIC Insured, 6.375%, 12/01/12 ................... 2,414,860
2,250,000 Youngstown State University, General Receipts, AMBAC Insured, 6.00%, 12/15/16 ................. 2,236,230
410,000 Xenia Waterworks, First Mortgage Revenue, AMBAC Insured, 9.20%, 08/15/00 ...................... 427,711
------------
TOTAL LONG TERM INVESTMENTS (COST $616,367,411) ......................................... 643,420,276
------------
eSHORT TERM INVESTMENTS .1%
200,000 Ohio State Air Quality Development Authority Revenue, Refunding, Environmental-Mead Corp.,
Daily VRDN and Put, 3.75%, 10/01/01 ......................................................... 200,000
225,000 Ohio State University General Receipts, Series B, Weekly VRDN and Put, 3.60%, 12/01/12 ........ 225,000
100,000 Puerto Rico Commonwealth, Government Development Bank, Refunding, Weekly VRDN and Put,
3.90%, 12/01/15 .............................................................................. 100,000
------------
TOTAL SHORT TERM INVESTMENTS (COST $525,000) ............................................ 525,000
------------
TOTAL INVESTMENTS (COST $616,892,411) 98.7% ........................................ 643,945,276
OTHER ASSETS AND LIABILITIES, NET 1.3% ............................................. 8,599,328
------------
NET ASSETS 100.0% .................................................................. $652,544,604
============
</TABLE>
The accompanying notes are an integral part of these
financial statements.
90
<PAGE>
FRANKLIN TAX-FREE TRUST
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995
(CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN OHIO INSURED TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
At February 28, 1995, the net unrealized appreciation based on the cost of investments
for income tax purposes of $616,957,203 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ............................................................. $ 32,144,467
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ............................................................. (5,156,394)
------------
Net unrealized appreciation ................................................................ $ 26,988,073
============
</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 Authority
GNMA - Government National Mortgage Association
GO - General Obligation
HFA - Housing Finance Authority/Agency
IDR - Industrial Development Revenue
L.P. - Limited Partnership
MBIA - Municipal Bond Investors Assurance Corp.
MFHR - Multi-Family Housing Revenue
PCR - Pollution Control Revenue
SFMR - Single Family Mortgage Revenue
YHA - Young's Town Hospital
dSee Note 1 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).
gSee Note 1c regarding uninsured securities collateralized by U.S. government
securities.
The accompanying notes are an integral part of these
financial statements.
91
<PAGE>
FRANKLIN TAX-FREE TRUST
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
STATEMENTS OF ASSETS AND LIABILITIES
FEBRUARY 28, 1995
<TABLE>
<CAPTION>
FRANKLIN FRANKLIN FRANKLIN
ARIZONA INSURED FLORIDA INSURED FRANKLIN MASSACHUSETTS
TAX-FREE TAX-FREE INSURED TAX-FREE INSURED TAX-FREE
INCOME FUND INCOME FUND INCOME FUND INCOME FUND
--------------- --------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Assets:
Investments in securities:
At identified cost..................................... $21,161,645 $46,380,712 $1,575,639,048 $269,169,996
=========== =========== ============== ============
At value............................................... 21,093,084 45,841,545 1,658,531,416 283,970,085
Cash.................................................... 26,635 143,415 209,829 343,422
Receivables:
Interest............................................... 244,740 754,455 26,455,048 4,346,582
Capital shares sold.................................... 87,284 165,524 1,768,429 337,039
Investment securities sold............................. -- -- 990,686 --
----------- ----------- -------------- ------------
Total assets................................. 21,451,743 46,904,939 1,687,955,408 288,997,128
----------- ----------- -------------- ------------
Liabilities:
Payables:
Investment securities purchased:
When-issued basis (Note 1)............................ 612,174 -- -- --
Distributions payable to shareholders.................. 24,527 53,696 2,074,795 349,317
Capital shares repurchased............................. 6,010 -- 1,772,307 142,281
Management fees........................................ -- -- 652,170 128,944
Distribution fees...................................... 9,701 3,011 96,492 16,590
Shareholder servicing costs............................ -- 732 23,115 4,402
Accrued expenses and other liabilities.................. 4,872 996 102,365 24,678
----------- ----------- -------------- ------------
Total liabilities............................ 657,284 58,435 4,721,244 666,212
----------- ----------- -------------- ------------
Net assets, at value..................................... $20,794,459 $46,846,504 $1,683,234,164 $288,330,916
=========== =========== ============== ============
Net assets consist of:
Undistributed net investment income..................... $44,860 $13,973 $1,735,732 $375,946
Unrealized appreciation(depreciation) on investments.... (68,561 (539,167) 82,892,368 14,800,089
Accumulated net realized loss........................... (436,058 (1,320,015) (12,929,866) (3,683,996)
Capital shares.......................................... 21,254,218 48,691,713 1,611,535,930 276,838,877
----------- ----------- -------------- ------------
Net assets, at value..................................... $20,794,459 $46,846,504 $1,683,234,164 $288,330,916
=========== =========== ============== ============
Shares outstanding....................................... 2,122,922 4,914,966 140,649,184 25,429,785
=========== =========== ============== ============
Net asset value per share................................ $9.80 $9.53 $11.97 $11.34
=========== =========== ============== ============
Representative computation (Franklin Arizona Insured
Tax-Free Income Fund) of net asset value and offering
price per share:
Net asset value and redemption price per share
($20,794,459 / 2,122,922)............................. $9.80
===========
Maximum offering price (100/95.75 of $9.80)............ $10.23
===========
</TABLE>
The accompanying notes are an integral part of these
financial statements.
92
<PAGE>
FRANKLIN TAX-FREE TRUST
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS (CONT.)
STATEMENTS OF ASSETS AND LIABILITIES (CONT.)
FEBRUARY 28, 1995
<TABLE>
<CAPTION>
FRANKLIN FRANKLIN FRANKLIN
MICHIGAN INSURED MINNESOTA INSURED OHIO INSURED
TAX-FREE TAX-FREE TAX-FREE
INCOME FUND INCOME FUND INCOME FUND
---------------- ----------------- ------------
<S> <C> <C> <C>
Assets:
Investments in securities:
At identified cost.............................................. $ 979,971,773 $460,412,208 $616,892,411
============== ============ ============
At value........................................................ 1,022,294,038 476,781,633 643,945,276
Cash............................................................. 116,678 304,745 133,433
Receivables:
Interest........................................................ 18,658,301 5,623,355 11,867,565
Capital shares sold............................................. 1,129,441 395,356 986,576
Investment securities sold...................................... -- 15,000 1,470,000
-------------- ------------ ------------
Total assets................................................ 1,042,198,458 483,120,089 658,402,850
-------------- ------------ ------------
Liabilities:
Payables:
Investment securities purchased:
When-issued basis (Note 1)..................................... 2,271,792 2,185,260 4,203,714
Distributions payable to shareholders........................... 1,255,783 564,683 780,507
Capital shares repurchased...................................... 382,481 148,703 503,133
Management fees................................................. 410,036 200,821 265,521
Distribution fees............................................... 60,238 27,355 38,066
Shareholder servicing costs..................................... 18,183 8,376 11,436
Accrued expenses and other liabilities........................... 83,014 50,661 55,869
-------------- ------------ ------------
Total liabilities........................................... 4,481,527 3,185,859 5,858,246
-------------- ------------ ------------
Net assets, at value.............................................. $1,037,716,931 $479,934,230 $652,544,604
============== ============ ============
Net assets consist of:
Undistributed net investment income.............................. $781,185 $547,076 $481,682
Unrealized appreciation on investments........................... 42,322,265 16,369,425 27,052,865
Accumulated net realized loss.................................... (2,403,522) (600,127) (8,501,919)
Capital shares................................................... 997,017,003 463,617,856 633,511,976
-------------- ------------ ------------
Net assets, at value.............................................. $1,037,716,931 $479,934,230 $652,544,604
============== ============ ============
Shares outstanding................................................ 88,222,756 40,383,702 54,836,159
============== ============ ============
Net asset value per share......................................... $11.76 $11.88 $11.90
============== ============ ============
</TABLE>
The accompanying notes are an integral part of these
financial statements.
93
<PAGE>
FRANKLIN TAX-FREE TRUST
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS (CONT.)
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED FEBRUARY 28, 1995
<TABLE>
<CAPTION>
FRANKLIN FRANKLIN FRANKLIN
ARIZONA INSURED FLORIDA INSURED FRANKLIN MASSACHUSETTS
TAX-FREE TAX-FREE INSURED TAX-FREE INSURED TAX-FREE
INCOME FUND INCOME FUND INCOME FUND INCOME FUND
--------------- --------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Investment income:
Interest (Note 1).......................................... $ 954,650 $ 2,261,391 $112,477,597 $ 18,922,694
--------- ----------- ------------ ------------
Expenses:
Management fees, net (Note 5).............................. -- 43,007 7,903,871 1,540,886
Distribution fees (Note 5)................................. 13,483 33,326 989,559 168,597
Shareholder servicing costs (Note 5)....................... -- 7,847 302,560 58,502
Reports to shareholders.................................... -- 19,101 293,071 74,216
Custodian fees............................................. -- 3,410 172,844 28,470
Registration and filing fees............................... -- 14,077 140,812 13,321
Professional fees.......................................... -- 1,928 50,806 9,871
Trustees' fees and expenses................................ -- -- 29,096 4,909
Insurance (Note 1)......................................... -- -- 3,560 2,313
Other...................................................... 2,932 11,651 141,412 40,531
--------- ----------- ------------ ------------
Total expenses, net................................... 16,415 134,347 10,027,591 1,941,616
--------- ----------- ------------ ------------
Net investment income (Note 9)....................... 938,235 2,127,044 102,450,006 16,981,078
--------- ----------- ------------ ------------
Realized and unrealized gain (loss) on investments:
Net realized loss......................................... (394,263) (1,225,446) (8,535,568) (1,669,981)
Net unrealized appreciation (depreciation)................. 20,907 97,973 (63,668,654) (10,866,463)
--------- ----------- ------------ ------------
Net realized and unrealized loss on investments............. (373,356) (1,127,473) (72,204,222) (12,536,444)
--------- ----------- ------------ ------------
Net increase in net assets resulting from operations........ $ 564,879 $ 999,571 $ 30,245,784 $ 4,444,634
========= =========== ============ ============
</TABLE>
The accompanying notes are an integral part of these
financial statements.
94
<PAGE>
FRANKLIN TAX-FREE TRUST
- -------------------------------------------------------------------------------
FINANCIAL STATEMENTS (CONT.)
STATEMENTS OF OPERATIONS (CONT.)
FOR THE YEAR ENDED FEBRUARY 28, 1995
<TABLE>
<CAPTION>
FRANKLIN FRANKLIN FRANKLIN
MICHIGAN INSURED MINNESOTA INSURED OHIO INSURED
TAX-FREE TAX-FREE TAX-FREE
INCOME FUND INCOME FUND INCOME FUND
---------------- ----------------- ------------
<S> <C> <C> <C>
Investment income:
Interest (Note 1).......................................................... $ 66,362,803 $ 31,037,504 $ 42,230,040
------------ ------------ ------------
Expenses:
Management fees (Note 5)................................................... 4,846,714 2,401,351 3,181,729
Distribution fees (Note 5)................................................. 606,141 279,290 386,625
Shareholder servicing costs (Note 5)....................................... 242,541 109,515 151,352
Reports to shareholders.................................................... 187,707 101,192 136,219
Custodian fees............................................................. 101,488 47,604 64,742
Registration fees.......................................................... 62,891 54,004 45,340
Professional fees.......................................................... 28,514 14,614 19,029
Trustees' fees and expenses................................................ 17,404 8,157 11,128
Insurance (Note 1)......................................................... 40,028 90,778 38,876
Other...................................................................... 85,801 54,635 73,005
------------ ------------ ------------
Total expenses........................................................ 6,219,229 3,161,140 4,108,045
------------ ------------ ------------
Net investment income (Note 9)....................................... 60,143,574 27,876,364 38,121,995
------------ ------------ ------------
Realized and unrealized loss on investments:
Net realized loss......................................................... (146,409) (599,133) (2,762,910)
Net unrealized depreciation................................................ (41,854,681) (18,084,434) (25,721,132)
------------ ------------ ------------
Net realized and unrealized loss on investments............................. (42,001,090) (18,683,567) (28,484,042)
------------ ------------ ------------
Net increase in net assets resulting from operations........................ $ 18,142,484 $ 9,192,797 $ 9,637,953
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these
financial statements.
95
<PAGE>
FRANKLIN TAX-FREE TRUST
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS (CONT.)
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED FEBRUARY 28, 1995 AND 1994
<TABLE>
<CAPTION>
FRANKLIN ARIZONA INSURED FRANKLIN FLORIDA INSURED
TAX-FREE INCOME FUND TAX-FREE INCOME FUND
-------------------------- --------------------------
1995 1994* 1995 1994*
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income........................................... $ 938,235 $ 315,879 $ 2,127,044 $ 694,879
Net realized loss from security transactions..................... (394,263) (41,795) (1,225,446) (94,569)
Net unrealized appreciation (depreciation) on investments........ 20,907 (89,468) 97,973 (637,140)
----------- ----------- ----------- -----------
Net increase (decrease) in net assets resulting
from operations............................................. 564,879 184,616 999,571 (36,830)
Distributions to shareholders from undistributed
net investment income (Note 9)................................... (915,004) (294,250) (2,149,615) (658,335)
Increase in net assets from capital share transactions (Note 2)... 8,249,140 13,005,078 15,846,220 32,845,493
----------- ----------- ----------- -----------
Net increase in net assets................................... 7,899,015 12,895,444 14,696,176 32,150,328
----------- ----------- ----------- -----------
Net assets:
Beginning of year................................................. 12,895,444 -- 32,150,328 --
----------- ----------- ----------- -----------
End of year....................................................... $20,794,459 $12,895,444 $46,846,504 $32,150,328
=========== =========== =========== ===========
Undistributed net investment income included in net assets:
Beginning of year................................................. $ 21,629 $ -- $ 36,544 $ --
=========== =========== =========== ===========
End of year....................................................... $ 44,860 $ 21,629 $ 13,973 $ 36,544
=========== =========== =========== ===========
</TABLE>
*For the period April 30, 1993 (effective date of registration) to February 28,
1994.
The accompanying notes are an integral part of these
financial statements.
96
<PAGE>
FRANKLIN TAX-FREE TRUST
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS (CONT.)
STATEMENTS OF CHANGES IN NET ASSETS (CONT.)
FOR THE YEARS ENDED FEBRUARY 28, 1995 AND 1994
<TABLE>
<CAPTION>
FRANKLIN INSURED FRANKLIN MASSACHUSETTS INSURED
TAX-FREE INCOME FUND TAX-FREE INCOME FUND
------------------------------- -------------------------------
1995 1994 1995 1994
-------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income..................................... $ 102,450,006 $ 98,210,809 $ 16,981,078 $ 16,866,280
Net realized gain (loss) from security transactions....... (8,535,568) (182,322) (1,669,981) 171,880
Net unrealized appreciation (depreciation) on investments. (63,668,654) 2,238,586 (10,866,463) 1,772,216
-------------- -------------- ------------ ------------
Net increase in net assets resulting from operations.. 30,245,784 100,267,073 4,444,634 18,810,376
Distributions to shareholders from undistributed
net investment income (Note 9)............................ (102,152,086) (98,675,451) (16,987,060) (17,044,673)
Increase (decrease) in net assets from
capital share transactions (Note 2)....................... (47,407,145) 261,770,193 (6,139,716) 26,737,308
-------------- -------------- ------------ ------------
Net increase (decrease) in net assets................. (119,313,447) 263,361,815 (18,682,142) 28,503,011
Net assets:
Beginning of year.......................................... 1,802,547,611 1,539,185,796 307,013,058 278,510,047
-------------- -------------- ------------ ------------
End of year................................................ $1,683,234,164 $1,802,547,611 $288,330,916 $307,013,058
============== ============== ============ ============
Undistributed net investment income included in net assets:
Beginning of year.......................................... $ 1,437,812 $ 1,902,454 $ 381,928 $ 560,321
============== ============== ============ ============
End of year................................................ $ 1,735,732 $ 1,437,812 $ 375,946 $ 381,928
============== ============== ============ ============
</TABLE>
The accompanying notes are an integral part of these
financial statements.
97
<PAGE>
FRANKLIN TAX-FREE TRUST
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS (CONT.)
STATEMENTS OF CHANGES IN NET ASSETS (CONT.)
FOR THE YEARS ENDED FEBRUARY 28, 1995 AND 1994
<TABLE>
<CAPTION>
FRANKLIN MICHIGAN INSURED FRANKLIN MINNESOTA INSURED FRANKLIN OHIO INSURED
TAX-FREE INCOME FUND TAX-FREE INCOME FUND TAX-FREE INCOME FUND
------------------------------- --------------------------- --------------------------
1995 1994 1995 1994 1995 1994
-------------- -------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income............. $ 60,143,574 $ 55,977,817 $ 27,876,364 $ 27,193,942 $ 38,121,995 $ 35,583,251
Net realized gain (loss) from
security transactions............ (146,409) 459,461 (599,133) 2,976,878 (2,762,910) 637,987
Net unrealized appreciation
(depreciation) on investments ... (41,854,681) 3,729,678 (18,084,434) (4,088,719) (25,721,132) 1,766,334
-------------- -------------- ------------ ------------ ------------ ------------
Net increase in net assets
resulting from operations.... 18,142,484 60,166,956 9,192,797 26,082,101 9,637,953 37,987,572
Distributions to shareholders:
From undistributed net
investment income (Note 9)....... (60,164,972) (56,524,804) (27,874,417) (27,179,498) (38,353,594) (35,851,022)
From net realized gain............ -- -- (146,496) -- -- --
Increase (decrease) in net assets
from capital share transactions
(Note 2).......................... 24,287,690 169,448,399 (856,282) 54,949,390 (5,138,221) 119,504,297
-------------- -------------- ------------ ------------ ------------ ------------
Net increase (decrease)
in net assets................ (17,734,798) 173,090,551 (19,684,398) 53,851,993 (33,853,862) 121,640,847
Net assets:
Beginning of year.................. 1,055,451,729 882,361,178 499,618,628 445,766,635 686,398,466 564,757,619
-------------- -------------- ------------ ------------ ------------ ------------
End of year........................ $1,037,716,931 $1,055,451,729 $479,934,230 $499,618,628 $652,544,604 $686,398,466
============== ============== ============ ============ ============ ============
Undistributed net investment income
included in net assets:
Beginning of year................. $ 802,583 $ 1,349,570 $ 545,129 $ 530,685 $ 713,281 $ 981,052
============== ============== ============ ============ ============ ============
End of year....................... $ 781,185 $ 802,583 $ 547,076 $ 545,129 $ 481,682 $ 713,281
============== ============== ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these
financial statements.
98
<PAGE>
FRANKLIN TAX-FREE TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
Franklin Tax-Free Trust (the Trust) is an open-end, diversified 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 seven 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 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 ask 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.
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 will be deemed to mature on
the last day on which the put may be exercisable.
C. INSURANCE:
Each long-term municipal security in the Trust is insured as to the scheduled
payments of interest and principal by either a mutual fund portfolio insurance
policy, a secondary market insurance policy, a new issue insurance policy or
collateral guaranteed by an agency of the U.S. government. The providers of
secondary market and new issue insurance are rated "AAA" by Standard & Poor's.
Premiums for a mutual fund portfolio insurance policy or a secondary market
insurance policy are paid from the Trust's assets. Premiums for a mutual fund
portfolio insurance policy (effective only so long as the Trust is in
existence, Financial Guaranty (the insurer) remains in business and the
municipal security insured under the policy continues to be held by the Trust)
will reduce the current income of the portfolio by the amount thereof. Premiums
paid by the Trust for a secondary market insurance policy (effective so long as
the security so insured is outstanding and the insurer remains in business) are
added to the cost basis of the municipal security insured and are not
considered an expense of the Trust. Premiums for a new issue insurance policy
(effective so long as the security so insured is outstanding and the insurer
remains in business) are paid in advance by the insured security issuer or by
another third party prior to acquisition of the security by the Trust and are
not considered an expense of the Trust.
D. 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.
E. 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.
F. 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
of 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 gains and losses differ for financial statement and tax
purposes primarily due to differing treatment of wash sale transactions.
99
<PAGE>
FRANKLIN TAX-FREE TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONT.)
1. SIGNIFICANT ACCOUNTING POLICIES (CONT.)
G. SECURITIES PURCHASED ON A WHEN-ISSUED BASIS 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.
H. 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 February 28, 1995, there were an unlimited number of no par value shares of
beneficial interest authorized. Transactions in each of the Fund's shares for
the years ended February 28, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
FRANKLIN ARIZONA INSURED FRANKLIN FLORIDA INSURED FRANKLIN INSURED
TAX-FREE INCOME FUND TAX-FREE INCOME FUND TAX-FREE INCOME FUND
------------------------ --------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
--------- ----------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
1995
Shares sold........................ 720,312 $ 6,864,816 1,400,121 $13,019,430 10,709,574 $ 127,758,145
Shares issued in reinvestment of
distributions.................... 46,351 439,728 74,928 689,499 3,460,173 40,968,219
Shares redeemed.................... (171,115) (1,597,343) (561,546) (5,079,480) (16,808,196) (198,025,835)
Changes from exercise of
exchange privilege:
Shares sold.................... 404,530 3,767,372 1,024,661 9,214,606 14,126,885 166,515,862
Shares redeemed................ (132,005) (1,225,433) (217,134) (1,997,835) (15,627,091) (184,623,536)
--------- ----------- --------- ----------- ----------- -------------
Net increase/(decrease)............ 868,073 $ 8,249,140 1,721,030 $15,846,220 (4,138,655) $ (47,407,145)
========= =========== ========= =========== =========== =============
1994
Shares sold........................ 1,139,006 $11,785,848 2,919,579 $30,013,775 28,471,368 $ 356,483,380
Shares issued in connection with
merger (Note 7).................. -- -- -- -- 2,593,362 32,598,558
Shares issued in reinvestment of
distributions.................... 15,291 160,077 20,884 215,324 2,862,815 35,839,828
Shares redeemed.................... (9,013) (94,657) (114,447) (1,181,506) (11,849,686) (148,759,222)
Changes from exercise of
exchange privilege:
Shares sold...................... 159,431 1,679,398 428,998 4,430,908 7,066,865 88,477,586
Shares redeemed.................. (49,866) (525,588) (61,078) (633,008) (8,219,372) (102,869,937)
--------- ----------- --------- ----------- ----------- -------------
Net increase....................... 1,254,849* $13,005,078* 3,193,936* $32,845,493* 20,925,352 $ 261,770,193
========= =========== ========= =========== =========== =============
</TABLE>
*For the period April 30, 1993 (effective date of registration) to February 28,
1994.
100
<PAGE>
FRANKLIN TAX-FREE TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONT.)
2. TRUST SHARES (CONT.)
<TABLE>
<CAPTION>
FRANKLIN MASSACHUSETTS FRANKLIN MICHIGAN INSURED
INSURED TAX-FREE INCOME FUND TAX-FREE INCOME FUND
---------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------ ---------- -------------
<S> <C> <C> <C> <C>
1995
Shares sold........................................................ 2,136,833 $ 24,013,694 8,411,532 $ 98,364,535
Shares issued in reinvestment of distributions..................... 611,950 6,849,369 2,368,629 27,539,473
Shares redeemed.................................................... (3,436,289) (38,407,049) (8,097,706) (93,942,160)
Changes from exercise of exchange privilege:
Shares sold....................................................... 1,622,193 18,251,780 1,232,418 14,413,187
Shares redeemed................................................... (1,500,057) (16,847,510) (1,905,019) (22,087,345)
---------- ------------ ---------- ------------
Net increase/(decrease)............................................ (565,370) $ (6,139,716) 2,009,854 $ 24,287,690
========== ============ ========== ============
1994
Shares sold........................................................ 4,437,891 $ 52,598,781 17,033,485 $209,411,748
Shares issued in reinvestment of distributions..................... 535,785 6,356,171 1,868,012 23,008,684
Shares redeemed.................................................... (2,234,748) (26,498,193) (4,842,074) (59,718,468)
Changes from exercise of exchange privilege:
Shares sold....................................................... 1,784,355 21,209,070 1,445,394 17,825,337
Shares redeemed................................................... (2,271,987) (26,928,521) (1,706,763) (21,078,902)
---------- ------------ ---------- ------------
Net increase....................................................... 2,251,296 $ 26,737,308 13,798,054 $169,448,399
========== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
FRANKLIN MINNESOTA FRANKLIN OHIO INSURED
INSURED TAX-FREE INCOME FUND TAX-FREE INCOME FUND
---------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------ ---------- -------------
<S> <C> <C> <C> <C>
1995
Shares sold........................................................ 3,174,540 $ 37,475,651 4,851,598 $ 57,392,071
Shares issued in reinvestment of distributions..................... 1,183,229 13,910,099 1,494,660 17,553,487
Shares redeemed.................................................... (4,116,746) (48,145,194) (6,250,075) (73,187,665)
Changes from exercise of exchange privilege:
Shares sold....................................................... 989,975 11,620,432 880,783 10,306,806
Shares redeemed................................................... (1,353,664) (15,717,270) (1,475,603) (17,202,920)
---------- ------------ ---------- ------------
Net decrease....................................................... (122,666) $ (856,282) (498,637) $ (5,138,221)
========== ============ ========== ============
1994
Shares sold........................................................ 6,113,477 $ 76,019,793 11,782,700 $147,064,536
Shares issued in reinvestment of distributions..................... 1,012,321 12,603,066 1,185,589 14,817,672
Shares redeemed.................................................... (2,800,600) (34,891,098) (3,406,820) (42,637,712)
Changes from exercise of exchange privilege:
Shares sold....................................................... 664,074 8,275,048 702,104 8,763,342
Shares redeemed................................................... (566,546) (7,057,419) (681,770) (8,503,541)
---------- ------------ ---------- ------------
Net increase....................................................... 4,422,726 $ 54,949,390 9,581,803 $119,504,297
========== ============ ========== ============
</TABLE>
101
<PAGE>
FRANKLIN TAX-FREE TRUST NOTES TO FINANCIAL STATEMENTS (CONT.)
3. DISTRIBUTION AND CAPITAL LOSS CARRYOVERS
At February 28, 1995, for tax purposes, the Funds had accumulated net capital
loss carryovers as follows:
<TABLE>
<CAPTION>
FRANKLIN FRANKLIN FRANKLIN FRANKLIN FRANKLIN FRANKLIN
ARIZONA FLORIDA FRANKLIN MASSACHUSETTS MICHIGAN MINNESOTA OHIO
INSURED INSURED INSURED INSURED INSURED INSURED INSURED
TAX-FREE TAX-FREE TAX-FREE TAX-FREE TAX-FREE TAX-FREE TAX-FREE
INCOME INCOME INCOME INCOME INCOME INCOME INCOME
FUND FUND FUND FUND FUND FUND FUND
--------- --------- ----------- ------------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Capital loss carryovers
Expiring in:
1996............. $ -- $ -- $ -- $ 162,016 $ -- $ -- $1,606,253
1997............. -- -- 1,780,770 1,463,422 2,257,113 -- 3,975,739
1998............. -- -- 280,975 359,586 -- -- --
2000............. -- -- -- -- -- -- 2,000
2001............. -- -- 2,150,831 6,640 -- -- 90,225
2002............. 41,544 94,569 133,317 -- -- -- --
2003............. 394,514 1,225,446 8,584,573 1,670,219 146,409 599,133 2,762,910
-------- ---------- ----------- ---------- ---------- -------- ----------
$436,058 $1,320,015 $12,930,466 $3,661,883 $2,403,522 $599,133 $8,437,127
======== ========== =========== ========== ========== ======== ==========
</TABLE>
For tax purposes, the aggregate cost of securities is higher (and unrealized
appreciation is lower) than for financial reporting purposes at February 28,
1995 by $22,113 in the Franklin Massachusetts Insured Tax-Free Income Fund,
$994 in the Franklin Minnesota Insured Tax-Free Income Fund, and $64,792 in the
Franklin Ohio Insured Tax-Free Income Fund.
4. PURCHASES AND SALES OF SECURITIES
Aggregate purchases and sales of securities (excluding purchases and sales of
short-term securities) for the year ended February 28, 1995 were as follows:
<TABLE>
<CAPTION>
FRANKLIN FRANKLIN FRANKLIN FRANKLIN FRANKLIN FRANKLIN
ARIZONA FLORIDA FRANKLIN MASSACHUSETTS MICHIGAN MINNESOTA OHIO
INSURED INSURED INSURED INSURED INSURED INSURED INSURED
TAX-FREE TAX-FREE TAX-FREE TAX-FREE TAX-FREE TAX-FREE TAX-FREE
INCOME INCOME INCOME INCOME INCOME INCOME INCOME
FUND FUND FUND FUND FUND FUND FUND
----------- ----------- ----------- ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Purchases.......... $15,706,127 $31,255,705 $242,123,240 $47,672,366 $108,964,213 $85,523,131 $75,592,947
=========== =========== ============ =========== ============ =========== ===========
Sales.............. $ 7,002,278 $16,129,180 $288,787,835 $52,315,398 $ 91,910,926 $82,842,321 $77,127,377
=========== =========== ============ =========== ============ =========== ===========
</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 based 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 year ended
February 28, 1995, Franklin Advisers, Inc. agreed in advance to waive $102,744
and $196,901 of the management fees for the Franklin Arizona Insured Tax-Free
Income Fund and the Franklin Florida Insured Tax-Free Income Fund,
respectively, and made payments for certain operating expenses of $35,489 for
the Franklin Arizona Insured Tax-Free Income Fund which are not reflected in
the Statement of Operations.
In its capacity as underwriter for the shares of the Funds, Franklin/Templeton
Distributors, Inc. receives commissions on sales of the Funds' shares.
Commissions received by Franklin/Templeton Distributors, Inc. and the amounts
which were subsequently paid to other dealers for the year ended February 28,
1995 were as follows:
<TABLE>
<CAPTION>
FRANKLIN FRANKLIN FRANKLIN FRANKLIN FRANKLIN FRANKLIN
ARIZONA FLORIDA FRANKLIN MASSACHUSETTS MICHIGAN MINNESOTA OHIO
INSURED INSURED INSURED INSURED INSURED INSURED INSURED
TAX-FREE TAX-FREE TAX-FREE TAX-FREE TAX-FREE TAX-FREE TAX-FREE
INCOME INCOME INCOME INCOME INCOME INCOME INCOME
FUND FUND FUND FUND FUND FUND FUND
----------- ----------- ----------- ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Total commissions
received......... $249,896 $508,390 $4,263,865 $876,196 $3,669,978 $1,317,567 $2,206,639
======== ======== ========== ======== ========== ========== ==========
Paid to other
dealers.......... $227,255 $461,083 $4,022,355 $825,321 $3,469,185 $1,235,404 $2,082,379
======== ======== ========== ======== ========== ========== ==========
</TABLE>
102
<PAGE>
FRANKLIN TAX-FREE TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONT.)
5. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES (CONT.)
Commissions are deducted from the gross proceeds received from the sales of the
Funds' shares, and as such are not expenses of the Funds.
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 year ended
February 28, 1995 aggregated $875,271, of which $768,475 was paid to
Franklin/Templeton Investor Services, Inc. and $2,954 was borne by Franklin
Advisers, Inc.
Under the terms of a Distribution Plan pursuant to Rule 12b-1 of the Investment
Company Act of 1940, which was effective for the Franklin Arizona Insured
Tax-Free Income Fund and the Franklin Florida Insured Tax-Free Income Fund
prior to March 1, 1994, and which became effective for the other five Funds on
May 1, 1994, the Funds reimburse Franklin/Templeton Distributors, Inc. in an
amount up to a maximum of 0.10% per annum of each Fund's average daily net
assets for costs incurred in the promotion offering and marketing the Funds'
shares. Fees incurred by the Funds under the agreement aggregated $2,477,021
for the year ended February 28, 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 has a diversified investment portfolio, all of their
investments are in the securities of issuers within their respective states and
Puerto Rico, except for the Franklin Insured Tax-Free Income Fund. Such
concentration may subject the Funds more significantly to economic changes
occurring within those states and Puerto Rico.
Each of the insurance policies covering securities held by the Funds is issued
by an insurer rated "AAA" by Standard & Poor's. Only eight insurers provide
coverage to the Funds. As a result, the Funds may face the risk of loss if
changes in the solvency of an insurer occur.
7. ACQUISITION OF TEMPLETON INSURED TAX FREE FUND
On August 27, 1993, the Franklin Insured Tax-Free Income Fund acquired all of
the net assets of the Templeton Insured Tax Free Fund (Templeton Insured)
pursuant to a plan of reorganization approved by the shareholders of Templeton
Insured on August 27, 1993.
The acquisition was accomplished by a tax-free exchange of Franklin Insured
Tax-Free Income Fund shares for all the net assets of the Templeton Insured
Tax-Free Fund, which was accounted for as a pooling-of-interest without
restatement for financial reporting purposes.
The selected financial information and shares outstanding immediately before
and after the acquisition for the funds were as follows:
<TABLE>
<CAPTION>
NET UNDISTRIBUTED ACCUMULATED UNREALIZED
ASSET VALUE SHARES NET INVESTMENT NET REALIZED APPRECIATION
NET ASSETS PER SHARE OUTSTANDING EXCHANGE RATIO INCOME GAIN (LOSS) ON INVESTMENTS
------------ ----------- ----------- -------------- -------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Templeton Insured
Tax Free Fund............ $ 32,598,558 $11.76 2,772,792 0.93528889 -- $ 600 $ 3,194,669
Franklin Insured
Tax-Free Income Fund..... 1,696,663,673 12.57 134,925,173 $450,384 (4,302,663) 163,032,062
Combined.................. 1,729,262,231 12.57 137,518,535 450,384 (4,302,063) 166,226,731
</TABLE>
8. SUBSEQUENT EVENT
All of the Funds within this report (except for the Franklin Arizona Insured
Tax-Free Income Fund and the Franklin Florida Insured Tax-Free Income Fund)
will be offering an additional class of shares effective May 1, 1995.
103
<PAGE>
FRANKLIN TAX-FREE TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONT.)
9. FINANCIAL HIGHLIGHTS
Selected data for each share of beneficial interest outstanding throughout the
year by Fund are as follows:
<TABLE>
<CAPTION>
PER SHARE OPERATING PERFORMANCE
- --------------------------------------------------------------------------------------------------------------------------------
NET
NET ASSET REALIZED & DISTRIBUTIONS NET ASSET
YEAR VALUE AT NET UNREALIZED TOTAL FROM FROM NET DISTRIBUTIONS VALUE
ENDED BEGINNING INVESTMENT GAIN (LOSS) INVESTMENT INVESTMENT FROM CAPITAL TOTAL AT END TOTAL
FEBRUARY 28 OF YEAR INCOME ON SECURITIES OPERATIONS INCOME GAINS DISTRIBUTIONS OF YEAR RETURN**
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FRANKLIN ARIZONA INSURED TAX-FREE INCOME FUND:
1994(1) $10.00 $.34 $ .265 $ .605 $(.325) $-- $(.325) $10.28 6.041
1995 10.28 .55 (.485) .065 (.545) -- (.545) 9.80 .94
FRANKLIN FLORIDA INSURED TAX-FREE INCOME FUND:
1994(1) 10.00 .34 .060 .400 (.330) -- (.330) 10.07 3.97
1995 10.07 .52 (.531) (.011) (.529) -- (.529) 9.53 .21
FRANKLIN INSURED TAX-FREE INCOME FUND:
1991 11.26 .78 .156 .936 (.786) -- (.786) 11.41 8.38
1992 11.41 .74 .298 1.038 (.768) -- (.768) 11.68 9.29
1993 11.68 .74 .751 1.491 (.741) -- (.741) 12.43 12.93
1994 12.43 .73 .020 .750 (.730) -- (.730) 12.45 5.93
1995 12.45 .71 (.481) .229 (.709) -- (.709) 11.97 2.03
FRANKLIN MASSACHUSETTS INSURED TAX-FREE INCOME FUND:
1991 10.72 .72 .040 .760 (.720) -- (.720) 10.76 7.10
1992 10.76 .68 .307 .987 (.717) -- (.717) 11.03 9.34
1993 11.03 .69 .685 1.375 (.675) -- (.675) 11.73 12.61
1994 11.73 .67 .092 .762 (.682) -- (.682) 11.81 6.39
1995 11.81 .66 (.468) .192 (.662) -- (.662) 11.34 1.83
FRANKLIN MICHIGAN INSURED TAX-FREE INCOME FUND:
1991 11.06 .75 .124 .874 (.744) -- (.744) 11.19 7.93
1992 11.19 .71 .254 .964 (.744) -- (.744) 11.41 8.78
1993 11.41 .71 .766 1.476 (.706) -- (.706) 12.18 13.23
1994 12.18 .70 .066 .766 (.706) -- (.706) 12.24 6.18
1995 12.24 .69 (.484) .206 (.686) -- (.686) 11.76 1.87
FRANKLIN MINNESOTA INSURED TAX-FREE INCOME FUND:
1991 11.40 .76 .072 .832 (.792) -- (.792) 11.44 7.29
1992 11.44 .73 .275 1.005 (.765) -- (.765) 11.68 8.95
1993 11.68 .73 .667 1.397 (.727) -- (.727) 12.35 12.23
1994 12.35 .70 (.014) .686 (.706) -- (.706) 12.33 5.42
1995 12.33 .69 (.451) .239 (.685) (.004) (.689) 11.88 2.12
FRANKLIN OHIO INSURED TAX-FREE INCOME FUND:
1991 11.17 .75 .172 .922 (.762) -- (.762) 11.33 8.28
1992 11.33 .71 .275 .985 (.765) -- (.765) 11.55 8.86
1993 11.55 .72 .776 1.496 (.706) -- (.706) 12.34 13.26
1994 12.34 .70 .066 .766 (.706) -- (.706) 12.40 6.08
1995 12.40 .69 (.499) .191 (.691) -- (.691) 11.90 1.74
</TABLE>
<TABLE>
<CAPTION>
RATIO/SUPPLEMENTAL DATE
- -------------------------------------------------------------------------
RATIO OF NET
RATIO OF INVESTMENT
YEAR NET ASSETS AT EXPENSES INCOME PORTFOLIO
ENDED END OF YEAR TO AVERAGE TO AVERAGE TURNOVER
FEBRUARY 28 (IN 000'S) NET ASSETS+ NET ASSETS RATE
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FRANKLIN ARIZONA INSURED TAX-FREE INCOME FUND:
1994(1) $ 12,895 .03%* 4.85%* 62.88%
1995 20,794 .10 5.80 44.61
FRANKLIN FLORIDA INSURED TAX-FREE INCOME FUND:
1994(1) 32,150 --* 4.97* 28.72
1995 46,847 .35 5.61 43.71
FRANKLIN INSURED TAX-FREE INCOME FUND:
1991 850,089 .53 6.95 9.76
1992 1,130,592 .53 6.55 6.35
1993 1,539,186 .53 6.22 7.95
1994 1,802,548 .52 5.79 6.85
1995 1,683,234 .59 6.00 14.42
FRANKLIN MASSACHUSETTS INSURED TAX-FREE INCOME FUND:
1991 152,622 .70 6.72 11.47
1992 218,336 .67 6.40 7.49
1993 278,510 .64 6.09 9.65
1994 307,013 .60 5.69 13.82
1995 288,331 .67 5.89 16.90
FRANKLIN MICHIGAN INSURED TAX-FREE INCOME FUND:
1991 515,313 .61 6.72 4.17
1992 665,914 .59 6.45 10.80
1993 882,361 .58 6.09 2.04
1994 1,055,452 .54 5.66 3.21
1995 1,037,717 .61 5.87 9.12
FRANKLIN MINNESOTA INSURED TAX-FREE INCOME FUND:
1991 284,779 .67 6.62 9.12
1992 357,279 .65 6.43 3.14
1993 445,767 .63 6.12 5.58
1994 499,619 .60 5.67 13.42
1995 479,934 .66 5.81 17.59
FRANKLIN OHIO INSURED TAX-FREE INCOME FUND:
1991 273,119 .65 6.67 4.44
1992 409,044 .62 6.36 1.16
1993 564,758 .59 6.05 2.87
1994 686,398 .56 5.59 7.29
1995 652,545 .63 5.83 11.76
</TABLE>
(1) For the period April 30, 1993 (effective date of registration) to
February 28, 1994.
*Annualized
**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, and assumes reinvestment of dividends and capital gains, if any, at
net asset value for the Franklin Arizona Insured Tax-Free Income Fund and the
Franklin Florida Insured Tax-Free Income Fund, and assumes reinvestment of
dividends at the maximum offering price and of capital gains, if any, at
net asset value for all other funds. Effective May 1, 1994, with the
implementation of the Rule 12b-1 distribution plan, as discussed in Note 5,
the Fund's existing sales charge on reinvested dividends were eliminated.
+During the periods indicated below, Franklin Advisers, Inc., the investment
manager, agreed in advance to waive a portion of its management fees and made
payments of other expenses of the Franklin Arizona Insured Tax-Free Income
Fund and the Franklin Florida Insured Tax-Free Income Fund. Had such action
not been taken, the ratios of expenses to average net assets would have been
as follows:
<TABLE>
<CAPTION>
RATIO OF EXPENSES RATIO OF EXPENSES
TO AVERAGE NET ASSETS* TO AVERAGE NET ASSETS*
---------------------- ----------------------
S> <C> <C> <C>
FRANKLIN ARIZONA INSURED TAX-FREE FRANKLIN FLORIDA INSURED TAX-FREE
INCOME FUND: INCOME FUND:
1994(1)................................... 0.83% 1994(1)................................ 0.83%
1995...................................... 0.96 1995................................... 0.88
</TABLE>
- --------------------------------------------------------------------------------
During this fiscal year, each Fund paid distributions from undistributed net
investment income in the amounts shown in the Statement of Changes in Net
Assets. Each Fund hereby designates the total amount of these distributions as
exempt-interest dividends under Section 852(b)(5) of the Internal Revenue Code.
- --------------------------------------------------------------------------------
104
<PAGE>
FRANKLIN TAX-FREE TRUST
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT AUDITORS
To the Shareholders and Board of Trustees
of the Franklin Tax-Free Trust:
We have audited the accompanying statements of assets and liabilities of the
funds comprising the Franklin Tax-Free Trust, including each Fund's statement
of investments in securities and net assets, as of February 28, 1995, and the
related statements of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the periods indicated thereon. These
financial statements and financial highlights are the responsibility of the
Trusts' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
February 28, 1995 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
funds comprising the Franklin Tax-Free Trust as of February 28, 1995, the
results of their operations for the year then ended, the changes in their net
assets for each of the two years in the period then ended, and the financial
highlights for each of the periods indicated thereon in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
San Francisco, California
April 4, 1995
105
<PAGE>
Franklin Tax-Free Trust I
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 breakdown by sector
as a percentage of the fund's total net assets.
Portfolio Breakdown on 12/31/94
Industrial 1.8%
Housing 4.5%
Sales Tax 5.1%
Hospitals 5.7%
General Obligations 12.5%
Transportation 2.9%
Utilities 24.6%
Education 42.4%
Other Revenue 0.5%
GRAPHIC MATERIAL (2)
This bar chart shows the comparison between the fund's distribution rate of
5.40% and the taxable equivalent rate of 9.61%.
GRAPHIC MATERIAL (3)
The following line graph hypothetically compares the performance of the Franklin
Arizona Insured Tax-Free Income Fund to that of the Lehman Brothers Municipal
Bond Index and the Consumer Price Index (CPI), based on a $10,000 investment
from 5/1/93 - 2/28/95.
Period Ending Arizona Insured TF LB Muni. Index CPI
5/1/93 9,579 10,000 10,000
5/31/93 9,646 0.56% 10,056 0.14% 10,014
6/30/93 9,837 1.67% 10,224 0.14% 10,028
7/31/93 9,837 0.13% 10,237 0.00% 10,028
8/31/93 10,053 2.08% 10,450 0.28% 10,056
9/30/93 10,183 1.14% 10,569 0.21% 10,077
10/31/93 10,187 0.19% 10,589 0.41% 10,119
11/30/93 10,046 -0.88% 10,496 0.07% 10,126
12/31/93 10,334 2.11% 10,718 0.00% 10,126
1/31/94 10,477 1.14% 10,840 0.27% 10,153
2/28/94 10,147 -2.59% 10,559 0.34% 10,187
3/31/94 9,518 -4.07% 10,129 0.34% 10,222
4/30/94 9,613 0.85% 10,215 0.14% 10,236
5/31/94 9,707 0.87% 10,304 0.07% 10,244
6/30/94 9,612 -0.61% 10,241 0.34% 10,278
7/31/94 9,848 1.83% 10,429 0.27% 10,306
8/31/94 9,864 0.35% 10,465 0.40% 10,347
9/30/94 9,666 -1.47% 10,312 0.27% 10,375
10/31/94 9,425 -1.78% 10,128 0.07% 10,383
11/30/94 9,185 -1.81% 9,945 0.13% 10,396
12/31/94 9,480 2.20% 10,163 0.00% 10,396
1/31/95 9,870 2.86% 10,454 0.40% 10,438
2/28/95 10,240 2.91% 10,758 0.40% 10,479
GRAPHIC MATERIAL (4)
This chart shows in pie format the fund's securities breakdown by sector as a
percentage of the fund's total net assets.
Portfolio Breakdown on 12/31/94
Utilities 50.7%
Education 2.5%
Transportation 5.0%
Certificates of Participation 13.2%
Hospitals 16.3%
Miscellaneous 1.3%
Sales Tax 1.5%
Other Revenue 9.5%
GRAPHIC MATERIAL (5)
This bar chart shows the comparison between the fund's distribution rate of
5.31% and the taxable equivalent distribution rate of 8.79%.
GRAPHIC MATERIAL (6)
The following line graph hypothetically compares the performance of the Franklin
Florida Insured Tax-Free Income Fund to that of the Lehman Brothers Municipal
Bond Index and the Consumer Price Index (CPI), based on a $10,000 investment
from 4/30/93 to 2/28/95.
Period Ending FL Insured TF LB Muni. Index CPI
5/1/93 9,579 10,000 10,000
5/31/93 9,646 0.56% 10,056 0.14% 10,014
6/30/93 9,837 1.67% 10,224 0.14% 10,028
7/31/93 9,837 0.13% 10,237 0.00% 10,028
8/31/93 10,053 2.08% 10,450 0.28% 10,056
9/30/93 10,183 1.14% 10,569 0.21% 10,077
10/31/93 10,187 0.19% 10,589 0.41% 10,119
11/30/93 10,046 -0.88% 10,496 0.07% 10,126
12/31/93 10,334 2.11% 10,718 0.00% 10,126
1/31/94 10,477 1.14% 10,840 0.27% 10,153
2/28/94 10,147 -2.59% 10,559 0.34% 10,187
3/31/94 9,518 -4.07% 10,129 0.34% 10,222
4/30/94 9,613 0.85% 10,215 0.14% 10,236
5/31/94 9,707 0.87% 10,304 0.07% 10,244
6/30/94 9,612 -0.61% 10,241 0.34% 10,278
7/31/94 9,848 1.83% 10,429 0.27% 10,306
8/31/94 9,864 0.35% 10,465 0.40% 10,347
9/30/94 9,666 -1.47% 10,312 0.27% 10,375
10/31/94 9,425 -1.78% 10,128 0.07% 10,383
11/30/94 9,185 -1.81% 9,945 0.13% 10,396
12/31/94 9,480 2.20% 10,163 0.00% 10,396
1/31/95 9,870 2.86% 10,454 0.40% 10,438
2/28/95 10,240 2.91% 10,758 0.40% 10,479
GRAPHIC MATERIAL (7)
This chart shows in pie format the fund's securities breakdown by sector as a
percentage of the fund's total net assets.
Portfolio Breakdown on 2/28/95
Utilities 23.8%
Education 8.7%
Certificates of Participation 3.8%
Miscellaneous 2.9%
Housing 5.8%
Hospitals 15.9%
Pre-Refunded 25.6%
General Obligations 4.0%
Industrial 1.5%
Transportation 4.6%
Other Revenue 3.4%
GRAPHIC MATERIAL (8)
This bar chart shows the comparison between the fund's distribution rate of
5.66% and the taxable equivalent distribution rate of 9.37%.
GRAPHIC MATERIAL (9)
The following line graph hypothetically compares the performance of the Franklin
Insured Tax-Free Income Fund to that of the Lehman Brothers Municipal Bond Index
and the Consumer Price Index (CPI), based on a $10,000 investment from 4/3/85 to
2/28/95.
Period Ending Insured Tax-Free LB Muni Index CPI
4/3/85 9,579 10,000 10,000
4/30/85 9,588 3.66% 10,366 0.47% 10,047
5/31/85 9,885 3.47% 10,726 0.37% 10,084
6/30/85 9,971 1.05% 10,838 0.28% 10,112
7/31/85 9,933 0.20% 10,860 0.19% 10,132
8/31/85 9,895 -0.70% 10,784 0.19% 10,151
9/30/85 9,645 -1.00% 10,676 0.28% 10,179
10/31/85 10,031 3.43% 11,042 0.37% 10,217
11/30/85 10,294 3.59% 11,439 0.28% 10,246
12/31/85 10,618 0.88% 11,539 0.28% 10,274
1/31/86 11,151 5.89% 12,219 0.27% 10,302
2/28/86 11,569 3.97% 12,704 -0.27% 10,274
3/31/86 11,750 0.03% 12,708 -0.46% 10,227
4/30/86 11,650 0.08% 12,718 -0.18% 10,209
5/31/86 11,447 -1.63% 12,511 0.28% 10,237
6/30/86 11,551 0.95% 12,630 0.55% 10,293
7/31/86 11,624 0.61% 12,707 0.00% 10,293
8/31/86 12,195 4.48% 13,276 0.18% 10,312
9/30/86 12,145 0.25% 13,309 0.46% 10,359
10/31/86 12,471 1.73% 13,539 0.09% 10,369
11/30/86 12,641 1.98% 13,808 0.09% 10,378
12/31/86 12,664 -0.28% 13,769 0.09% 10,387
1/31/87 12,921 3.01% 14,183 0.63% 10,453
2/28/87 12,976 0.49% 14,253 0.36% 10,490
3/31/87 12,804 -1.06% 14,102 0.45% 10,538
4/30/87 11,948 -5.02% 13,394 0.54% 10,595
5/31/87 11,666 -0.50% 13,327 0.35% 10,632
6/30/87 12,040 2.94% 13,719 0.35% 10,669
7/31/87 12,107 1.02% 13,859 0.26% 10,697
8/31/87 12,153 0.22% 13,889 0.53% 10,753
9/30/87 11,502 -3.69% 13,377 0.52% 10,809
10/31/87 11,596 0.35% 13,423 0.26% 10,837
11/30/87 12,065 2.61% 13,774 0.09% 10,847
12/31/87 12,274 1.45% 13,973 0.00% 10,847
1/31/88 12,854 3.56% 14,471 0.26% 10,875
2/29/88 12,995 1.06% 14,624 0.26% 10,904
3/31/88 12,645 -1.16% 14,455 0.43% 10,950
4/30/88 12,694 0.76% 14,565 0.52% 11,007
5/31/88 12,743 -0.29% 14,522 0.34% 11,045
6/30/88 13,007 1.46% 14,734 0.43% 11,092
7/31/88 13,104 0.65% 14,830 0.42% 11,139
8/31/88 13,166 0.09% 14,843 0.42% 11,186
9/30/88 13,447 1.81% 15,112 0.67% 11,261
10/31/88 13,829 1.76% 15,378 0.33% 11,298
11/30/88 13,682 -0.92% 15,237 0.08% 11,307
12/31/88 13,845 1.02% 15,392 0.17% 11,326
1/31/89 14,121 2.07% 15,711 0.50% 11,383
2/28/89 13,997 -1.14% 15,532 0.41% 11,429
3/31/89 13,993 -0.24% 15,494 0.58% 11,496
4/30/89 14,308 2.37% 15,861 0.65% 11,570
5/31/89 14,599 2.08% 16,191 0.57% 11,636
6/30/89 14,788 1.36% 16,412 0.24% 11,664
7/31/89 14,914 1.36% 16,635 0.24% 11,692
8/31/89 14,845 -0.98% 16,472 0.16% 11,711
9/30/89 14,762 -0.30% 16,422 0.32% 11,748
10/31/89 14,903 1.22% 16,623 0.48% 11,805
11/30/89 15,098 1.75% 16,914 0.24% 11,833
12/31/89 15,227 0.82% 17,052 0.16% 11,852
1/31/90 15,102 -0.47% 16,972 1.03% 11,974
2/28/90 15,274 0.89% 17,123 0.47% 12,030
3/31/90 15,270 0.03% 17,128 0.55% 12,097
4/30/90 15,128 -0.72% 17,005 0.16% 12,116
5/31/90 15,482 2.18% 17,376 0.23% 12,144
6/30/90 15,616 0.88% 17,529 0.54% 12,209
7/31/90 15,877 1.48% 17,788 0.38% 12,256
8/31/90 15,495 -1.45% 17,530 0.92% 12,368
9/30/90 15,613 0.06% 17,541 0.84% 12,472
10/31/90 15,845 1.81% 17,858 0.60% 12,547
11/30/90 16,179 2.01% 18,217 0.22% 12,575
12/31/90 16,227 0.44% 18,297 0.00% 12,575
1/31/91 16,493 1.34% 18,542 0.60% 12,650
2/28/91 16,599 0.87% 18,704 0.15% 12,669
3/31/91 16,664 0.04% 18,711 0.15% 12,688
4/30/91 16,904 1.34% 18,962 0.15% 12,707
5/31/91 17,013 0.89% 19,131 0.30% 12,745
6/30/91 17,005 -0.10% 19,112 0.29% 12,782
7/31/91 17,234 1.22% 19,345 0.15% 12,802
8/31/91 17,375 1.32% 19,600 0.29% 12,839
9/30/91 17,607 1.30% 19,855 0.44% 12,895
10/31/91 17,719 0.90% 20,034 0.15% 12,914
11/30/91 17,710 0.28% 20,090 0.29% 12,952
12/31/91 18,069 2.15% 20,522 0.07% 12,961
1/31/92 18,136 0.23% 20,569 0.15% 12,980
2/29/92 18,158 0.03% 20,575 0.36% 13,027
3/31/92 18,211 0.04% 20,583 0.51% 13,094
4/30/92 18,357 0.89% 20,766 0.14% 13,112
5/31/92 18,631 1.18% 21,011 0.14% 13,130
6/30/92 18,875 1.68% 21,364 0.36% 13,178
7/31/92 19,562 3.00% 22,005 0.21% 13,205
8/31/92 19,293 -0.98% 21,790 0.28% 13,242
9/30/92 19,329 0.65% 21,931 0.28% 13,279
10/31/92 19,008 -0.98% 21,716 0.35% 13,326
11/30/92 19,466 1.79% 22,105 0.14% 13,344
12/31/92 19,730 1.02% 22,331 -0.07% 13,335
1/31/93 19,996 1.16% 22,590 0.49% 13,400
2/28/93 20,577 3.62% 23,407 0.35% 13,447
3/31/93 20,447 -1.06% 23,159 0.35% 13,494
4/30/93 20,583 1.01% 23,393 0.28% 13,532
5/31/93 20,670 0.56% 23,524 0.14% 13,551
6/30/93 21,023 1.67% 23,917 0.14% 13,570
7/31/93 21,057 0.13% 23,948 0.00% 13,570
8/31/93 21,482 2.08% 24,446 0.28% 13,608
9/30/93 21,721 1.14% 24,725 0.21% 13,637
10/31/93 21,754 0.19% 24,772 0.41% 13,693
11/30/93 21,685 -0.88% 24,554 0.07% 13,702
12/31/93 22,066 2.11% 25,072 0.00% 13,702
1/31/94 22,275 1.14% 25,358 0.27% 13,739
2/28/94 21,838 -2.59% 24,701 0.34% 13,786
3/31/94 21,134 -4.07% 23,696 0.34% 13,833
4/30/94 21,223 0.85% 23,897 0.14% 13,852
5/31/94 21,364 0.87% 24,105 0.07% 13,862
6/30/94 21,292 -0.61% 23,958 0.34% 13,909
7/31/94 21,632 1.83% 24,396 0.27% 13,946
8/31/94 21,687 0.35% 24,482 0.40% 14,002
9/30/94 21,484 -1.47% 24,122 0.27% 14,040
10/31/94 21,206 -1.78% 23,693 0.07% 14,050
11/30/94 20,857 -1.81% 23,264 0.13% 14,068
12/31/94 21,276 2.20% 23,776 0.00% 14,068
1/31/95 21,770 2.86% 24,456 0.40% 14,124
2/28/95 22,286 2.91% 25,167 0.40% 14,181
GRAPHIC MATERIAL (10)
This chart shows in pie format the fund's securities breakdown by sector as a
percentage of the fund's total net assets.
Portfolio Breakdown on 2/28/95
Hospitals 27.0%
Housing 7.8%
Utilities 3.1%
Healthcare 5.5%
Transportation 2.0%
General Obligations 13.9%
Certificates of Participation 1.4%
Education 17.5%
Pre-Refunded 20.8%
GRAPHIC MATERIAL (11)
This bar chart shows the comparison between the fund's distribution rate of
5.57% and the taxable equivalent distribution rate of 10.47%.
GRAPHIC MATERIAL (12)
The following line graph hypothetically compares the performance of the Franklin
Massachusetts Insured Tax-Free Income Fund to that of the Lehman Brothers
Municipal Bond Index and the Consumer Price Index (CPI), based on a $10,000
investment from 4/3/85 to 2/28/95.
Period Ending Mass. Insured TF LB Muni Index CPI
4/3/85 9,579 $10,000 $10,000
4/30/85 9,598 3.66% 10,366 0.47% 10,047
5/31/85 9,703 3.47% 10,726 0.37% 10,084
6/30/85 9,799 1.05% 10,838 0.28% 10,112
7/31/85 9,780 0.20% 10,860 0.19% 10,132
8/31/85 9,741 -0.70% 10,784 0.19% 10,151
9/30/85 9,537 -1.00% 10,676 0.28% 10,179
10/31/85 9,834 3.43% 11,042 0.37% 10,217
11/30/85 10,083 3.59% 11,439 0.28% 10,246
12/31/85 10,385 0.88% 11,539 0.28% 10,274
1/31/86 10,826 5.89% 12,219 0.27% 10,302
2/28/86 11,201 3.97% 12,704 -0.27% 10,274
3/31/86 11,408 0.03% 12,708 -0.46% 10,227
4/30/86 11,175 0.08% 12,718 -0.18% 10,209
5/31/86 10,982 -1.63% 12,511 0.28% 10,237
6/30/86 11,061 0.95% 12,630 0.55% 10,293
7/31/86 11,100 0.61% 12,707 0.00% 10,293
8/31/86 11,572 4.48% 13,276 0.18% 10,312
9/30/86 11,580 0.25% 13,309 0.46% 10,359
10/31/86 11,787 1.73% 13,539 0.09% 10,369
11/30/86 11,889 1.98% 13,808 0.09% 10,378
12/31/86 11,908 -0.28% 13,769 0.09% 10,387
1/31/87 12,118 3.01% 14,183 0.63% 10,453
2/28/87 12,212 0.49% 14,253 0.36% 10,490
3/31/87 12,142 -1.06% 14,102 0.45% 10,538
4/30/87 11,415 -5.02% 13,394 0.54% 10,595
5/31/87 11,064 -0.50% 13,327 0.35% 10,632
6/30/87 11,319 2.94% 13,719 0.35% 10,669
7/31/87 11,489 1.02% 13,859 0.26% 10,697
8/31/87 11,572 0.22% 13,889 0.53% 10,753
9/30/87 10,876 -3.69% 13,377 0.52% 10,809
10/31/87 10,895 0.35% 13,423 0.26% 10,837
11/30/87 11,284 2.61% 13,774 0.09% 10,847
12/31/87 11,540 1.45% 13,973 0.00% 10,847
1/31/88 12,084 3.56% 14,471 0.26% 10,875
2/29/88 12,257 1.06% 14,624 0.26% 10,904
3/31/88 11,991 -1.16% 14,455 0.43% 10,950
4/30/88 12,026 0.76% 14,565 0.52% 11,007
5/31/88 12,061 -0.29% 14,522 0.34% 11,045
6/30/88 12,273 1.46% 14,734 0.43% 11,092
7/31/88 12,309 0.65% 14,830 0.42% 11,139
8/31/88 12,391 0.09% 14,843 0.42% 11,186
9/30/88 12,629 1.81% 15,112 0.67% 11,261
10/31/88 12,930 1.76% 15,378 0.33% 11,298
11/30/88 12,819 -0.92% 15,237 0.08% 11,307
12/31/88 12,965 1.02% 15,392 0.17% 11,326
1/31/89 13,196 2.07% 15,711 0.50% 11,383
2/28/89 13,096 -1.14% 15,532 0.41% 11,429
3/31/89 13,071 -0.24% 15,494 0.58% 11,496
4/30/89 13,319 2.37% 15,861 0.65% 11,570
5/31/89 13,605 2.08% 16,191 0.57% 11,636
6/30/89 13,780 1.36% 16,412 0.24% 11,664
7/31/89 13,918 1.36% 16,635 0.24% 11,692
8/31/89 13,803 -0.98% 16,472 0.16% 11,711
9/30/89 13,750 -0.30% 16,422 0.32% 11,748
10/31/89 13,864 1.22% 16,623 0.48% 11,805
11/30/89 14,044 1.75% 16,914 0.24% 11,833
12/31/89 14,147 0.82% 17,052 0.16% 11,852
1/31/90 14,015 -0.47% 16,972 1.03% 11,974
2/28/90 14,158 0.89% 17,123 0.47% 12,030
3/31/90 14,158 0.03% 17,128 0.55% 12,097
4/30/90 14,011 -0.72% 17,005 0.16% 12,116
5/31/90 14,305 2.18% 17,376 0.23% 12,144
6/30/90 14,426 0.88% 17,529 0.54% 12,209
7/31/90 14,657 1.48% 17,788 0.38% 12,256
8/31/90 14,384 -1.45% 17,530 0.92% 12,368
9/30/90 14,357 0.06% 17,541 0.84% 12,472
10/31/90 14,536 1.81% 17,858 0.60% 12,547
11/30/90 14,827 2.01% 18,217 0.22% 12,575
12/31/90 14,868 0.44% 18,297 0.00% 12,575
1/31/91 15,135 1.34% 18,542 0.60% 12,650
2/28/91 15,205 0.87% 18,704 0.15% 12,669
3/31/91 15,275 0.04% 18,711 0.15% 12,688
4/30/91 15,489 1.34% 18,962 0.15% 12,707
5/31/91 15,589 0.89% 19,131 0.30% 12,745
6/30/91 15,604 -0.10% 19,112 0.29% 12,782
7/31/91 15,821 1.22% 19,345 0.15% 12,802
8/31/91 15,952 1.32% 19,600 0.29% 12,839
9/30/91 16,142 1.30% 19,855 0.44% 12,895
10/31/91 16,260 0.90% 20,034 0.15% 12,914
11/30/91 16,260 0.28% 20,090 0.29% 12,952
12/31/91 16,572 2.15% 20,522 0.07% 12,961
1/31/92 16,646 0.23% 20,569 0.15% 12,980
2/29/92 16,642 0.03% 20,575 0.36% 13,027
3/31/92 16,683 0.04% 20,583 0.51% 13,094
4/30/92 16,830 0.89% 20,766 0.14% 13,112
5/31/92 17,054 1.18% 21,011 0.14% 13,130
6/30/92 17,310 1.68% 21,364 0.36% 13,178
7/31/92 17,876 3.00% 22,005 0.21% 13,205
8/31/92 17,639 -0.98% 21,790 0.28% 13,242
9/30/92 17,665 0.65% 21,931 0.28% 13,279
10/31/92 17,332 -0.98% 21,716 0.35% 13,326
11/30/92 17,767 1.79% 22,105 0.14% 13,344
12/31/92 18,031 1.02% 22,331 -0.07% 13,335
1/31/93 18,280 1.16% 22,590 0.49% 13,400
2/28/93 18,803 3.62% 23,407 0.35% 13,447
3/31/93 18,797 -1.06% 23,159 0.35% 13,494
4/30/93 18,937 1.01% 23,393 0.28% 13,532
5/31/93 18,997 0.56% 23,524 0.14% 13,551
6/30/93 19,302 1.67% 23,917 0.14% 13,570
7/31/93 19,346 0.13% 23,948 0.00% 13,570
8/31/93 19,702 2.08% 24,446 0.28% 13,608
9/30/93 19,894 1.14% 24,725 0.21% 13,637
10/31/93 19,936 0.19% 24,772 0.41% 13,693
11/30/93 19,863 -0.88% 24,554 0.07% 13,702
12/31/93 20,158 2.11% 25,072 0.00% 13,702
1/31/94 20,370 1.14% 25,358 0.27% 13,739
2/28/94 20,042 -2.59% 24,701 0.34% 13,786
3/31/94 19,371 -4.07% 23,696 0.34% 13,833
4/30/94 19,414 0.85% 23,897 0.14% 13,852
5/31/94 19,525 0.87% 24,105 0.07% 13,862
6/30/94 19,481 -0.61% 23,958 0.34% 13,909
7/31/94 19,767 1.83% 24,396 0.27% 13,946
8/31/94 19,811 0.35% 24,482 0.40% 14,002
9/30/94 19,610 -1.47% 24,122 0.27% 14,040
10/31/94 19,389 -1.78% 23,693 0.07% 14,050
11/30/94 19,082 -1.81% 23,264 0.13% 14,068
12/31/94 19,428 2.20% 23,776 0.00% 14,068
1/31/95 19,918 2.86% 24,456 0.40% 14,124
2/28/95 20,412 2.91% 25,167 0.40% 14,181
GRAPHIC MATERIAL (13)
This chart shows in pie format the fund's securities breakdown by sector as a
percentage of the fund's total net assets.
Portfolio Breakdown on 2/28/95
Education 24.1%
Utilities 14.8%
Housing 3.1%
Hospitals 11.4%
Transportation 3.7%
General Obligations 5.1%
Pre-Refunded 33.2%
Miscellaneous 1.0%
Other Revenue 3.6%
GRAPHIC MATERIAL (14)
This bar chart shows the comparison between the fund's distribution rate of
5.57% and the taxable equivalent distribution rate of 9.65%.
GRAPHIC MATERIAL (15)
The following line graph hypothetically compares the performance of the Franklin
Michigan Insured Tax-Free Income Fund to that of the Lehman Brothers Municipal
Bond Index and the Consumer Price Index (CPI), based on a $10,000 investment
from 4/3/85 to 2/28/95.
Period Ending MICH Ins. TF LB Muni. Index CPI
4/3/85 9,579 10,000 10,000
4/30/85 9,588 3.66% 10,366 0.47% 10,047
5/31/85 9,703 3.47% 10,726 0.37% 10,084
6/30/85 9,761 1.05% 10,838 0.28% 10,112
7/31/85 9,703 0.20% 10,860 0.19% 10,132
8/31/85 9,617 -0.70% 10,784 0.19% 10,151
9/30/85 9,462 -1.00% 10,676 0.28% 10,179
10/31/85 9,759 3.43% 11,042 0.37% 10,217
11/30/85 10,117 3.59% 11,439 0.28% 10,246
12/31/85 10,419 0.88% 11,539 0.28% 10,274
1/31/86 10,832 5.89% 12,219 0.27% 10,302
2/28/86 11,208 3.97% 12,704 -0.27% 10,274
3/31/86 11,457 0.03% 12,708 -0.46% 10,227
4/30/86 11,285 0.08% 12,718 -0.18% 10,209
5/31/86 11,072 -1.63% 12,511 0.28% 10,237
6/30/86 11,163 0.95% 12,630 0.55% 10,293
7/31/86 11,223 0.61% 12,707 0.00% 10,293
8/31/86 11,748 4.48% 13,276 0.18% 10,312
9/30/86 11,726 0.25% 13,309 0.46% 10,359
10/31/86 12,059 1.73% 13,539 0.09% 10,369
11/30/86 12,204 1.98% 13,808 0.09% 10,378
12/31/86 12,224 -0.28% 13,769 0.09% 10,387
1/31/87 12,425 3.01% 14,183 0.63% 10,453
2/28/87 12,509 0.49% 14,253 0.36% 10,490
3/31/87 12,379 -1.06% 14,102 0.45% 10,538
4/30/87 11,609 -5.02% 13,394 0.54% 10,595
5/31/87 11,291 -0.50% 13,327 0.35% 10,632
6/30/87 11,614 2.94% 13,719 0.35% 10,669
7/31/87 11,774 1.02% 13,859 0.26% 10,697
8/31/87 11,880 0.22% 13,889 0.53% 10,753
9/30/87 11,184 -3.69% 13,377 0.52% 10,809
10/31/87 11,238 0.35% 13,423 0.26% 10,837
11/30/87 11,606 2.61% 13,774 0.09% 10,847
12/31/87 11,852 1.45% 13,973 0.00% 10,847
1/31/88 12,420 3.56% 14,471 0.26% 10,875
2/29/88 12,588 1.06% 14,624 0.26% 10,904
3/31/88 12,341 -1.16% 14,455 0.43% 10,950
4/30/88 12,383 0.76% 14,565 0.52% 11,007
5/31/88 12,426 -0.29% 14,522 0.34% 11,045
6/30/88 12,657 1.46% 14,734 0.43% 11,092
7/31/88 12,688 0.65% 14,830 0.42% 11,139
8/31/88 12,767 0.09% 14,843 0.42% 11,186
9/30/88 13,003 1.81% 15,112 0.67% 11,261
10/31/88 13,337 1.76% 15,378 0.33% 11,298
11/30/88 13,216 -0.92% 15,237 0.08% 11,307
12/31/88 13,377 1.02% 15,392 0.17% 11,326
1/31/89 13,612 2.07% 15,711 0.50% 11,383
2/28/89 13,527 -1.14% 15,532 0.41% 11,429
3/31/89 13,491 -0.24% 15,494 0.58% 11,496
4/30/89 13,755 2.37% 15,861 0.65% 11,570
5/31/89 14,083 2.08% 16,191 0.57% 11,636
6/30/89 14,274 1.36% 16,412 0.24% 11,664
7/31/89 14,377 1.36% 16,635 0.24% 11,692
8/31/89 14,289 -0.98% 16,472 0.16% 11,711
9/30/89 14,213 -0.30% 16,422 0.32% 11,748
10/31/89 14,331 1.22% 16,623 0.48% 11,805
11/30/89 14,540 1.75% 16,914 0.24% 11,833
12/31/89 14,646 0.82% 17,052 0.16% 11,852
1/31/90 14,529 -0.47% 16,972 1.03% 11,974
2/28/90 14,675 0.89% 17,123 0.47% 12,030
3/31/90 14,678 0.03% 17,128 0.55% 12,097
4/30/90 14,546 -0.72% 17,005 0.16% 12,116
5/31/90 14,885 2.18% 17,376 0.23% 12,144
6/30/90 15,064 0.88% 17,529 0.54% 12,209
7/31/90 15,284 1.48% 17,788 0.38% 12,256
8/31/90 14,972 -1.45% 17,530 0.92% 12,368
9/30/90 14,989 0.06% 17,541 0.84% 12,472
10/31/90 15,185 1.81% 17,858 0.60% 12,547
11/30/90 15,508 2.01% 18,217 0.22% 12,575
12/31/90 15,539 0.44% 18,297 0.00% 12,575
1/31/91 15,781 1.34% 18,542 0.60% 12,650
2/28/91 15,882 0.87% 18,704 0.15% 12,669
3/31/91 15,942 0.04% 18,711 0.15% 12,688
4/30/91 16,159 1.34% 18,962 0.15% 12,707
5/31/91 16,262 0.89% 19,131 0.30% 12,745
6/30/91 16,252 -0.10% 19,112 0.29% 12,782
7/31/91 16,458 1.22% 19,345 0.15% 12,802
8/31/91 16,578 1.32% 19,600 0.29% 12,839
9/30/91 16,787 1.30% 19,855 0.44% 12,895
10/31/91 16,908 0.90% 20,034 0.15% 12,914
11/30/91 16,896 0.28% 20,090 0.29% 12,952
12/31/91 17,242 2.15% 20,522 0.07% 12,961
1/31/92 17,305 0.23% 20,569 0.15% 12,980
2/29/92 17,293 0.03% 20,575 0.36% 13,027
3/31/92 17,342 0.04% 20,583 0.51% 13,094
4/30/92 17,512 0.89% 20,766 0.14% 13,112
5/31/92 17,791 1.18% 21,011 0.14% 13,130
6/30/92 18,052 1.68% 21,364 0.36% 13,178
7/31/92 18,701 3.00% 22,005 0.21% 13,205
8/31/92 18,450 -0.98% 21,790 0.28% 13,242
9/30/92 18,496 0.65% 21,931 0.28% 13,279
10/31/92 18,179 -0.98% 21,716 0.35% 13,326
11/30/92 18,604 1.79% 22,105 0.14% 13,344
12/31/92 18,841 1.02% 22,331 -0.07% 13,335
1/31/93 19,079 1.16% 22,590 0.49% 13,400
2/28/93 19,623 3.62% 23,407 0.35% 13,447
3/31/93 19,573 -1.06% 23,159 0.35% 13,494
4/30/93 19,701 1.01% 23,393 0.28% 13,532
5/31/93 19,813 0.56% 23,524 0.14% 13,551
6/30/93 20,139 1.67% 23,917 0.14% 13,570
7/31/93 20,137 0.13% 23,948 0.00% 13,570
8/31/93 20,532 2.08% 24,446 0.28% 13,608
9/30/93 20,777 1.14% 24,725 0.21% 13,637
10/31/93 20,873 0.19% 24,772 0.41% 13,693
11/30/93 20,770 -0.88% 24,554 0.07% 13,702
12/31/93 21,120 2.11% 25,072 0.00% 13,702
1/31/94 21,303 1.14% 25,358 0.27% 13,739
2/28/94 20,874 -2.59% 24,701 0.34% 13,786
3/31/94 20,204 -4.07% 23,696 0.34% 13,833
4/30/94 20,336 0.85% 23,897 0.14% 13,852
5/31/94 20,434 0.87% 24,105 0.07% 13,862
6/30/94 20,359 -0.61% 23,958 0.34% 13,909
7/31/94 20,667 1.83% 24,396 0.27% 13,946
8/31/94 20,715 0.35% 24,482 0.40% 14,002
9/30/94 20,481 -1.47% 24,122 0.27% 14,040
10/31/94 20,209 -1.78% 23,693 0.07% 14,050
11/30/94 19,886 -1.81% 23,264 0.13% 14,068
12/31/94 20,291 2.20% 23,776 0.00% 14,068
1/31/95 20,752 2.86% 24,456 0.40% 14,124
2/28/95 21,269 2.91% 25,167 0.40% 14,181
GRAPHIC MATERIAL (16)
This chart shows in pie format the fund's securities breakdown by sector as a
percentage of the fund's total net assets.
Portfolio Breakdown on 2/28/95
Utilities 19.7%
Housing 16.0%
General Obligations 6.5%
Tax Allocation 1.8%
Education 15.6%
Hospitals 17.1%
Pre-Refunded 20.4%
Miscellaneous 1.3%
Other Revenue 1.6%
GRAPHIC MATERIAL (17)
This bar chart shows the comparison between the fund's distribution rate of
5.41% and the taxable equivalent distribution rate of 9.78%.
GRAPHIC MATERIAL (18)
The following line graph hypothetically compares the performance of Franklin
Minnesota Insured Tax-Free Income Fund to that of the Lehman Brothers Municipal
Bond Index and the Consumer Price Index (CPI), based on a $10,000 investment
from 4/3/85 to 2/28/95.
Period Ending Minn. Insured TF LB Muni.Index CPI
4/3/85 9,579 10,000 10,000
4/30/85 9,693 3.66% 10,366 0.47% 10,047
5/31/85 10,000 3.47% 10,726 0.37% 10,084
6/30/85 10,105 1.05% 10,838 0.28% 10,112
7/31/85 10,057 0.20% 10,860 0.19% 10,132
8/31/85 10,019 -0.70% 10,784 0.19% 10,151
9/30/85 9,770 -1.00% 10,676 0.28% 10,179
10/31/85 10,098 3.43% 11,042 0.37% 10,217
11/30/85 10,380 3.59% 11,439 0.28% 10,246
12/31/85 10,694 0.88% 11,539 0.28% 10,274
1/31/86 11,218 5.89% 12,219 0.27% 10,302
2/28/86 11,596 3.97% 12,704 -0.27% 10,274
3/31/86 11,777 0.03% 12,708 -0.46% 10,227
4/30/86 11,647 0.08% 12,718 -0.18% 10,209
5/31/86 11,436 -1.63% 12,511 0.28% 10,237
6/30/86 11,488 0.95% 12,630 0.55% 10,293
7/31/86 11,561 0.61% 12,707 0.00% 10,293
8/31/86 12,108 4.48% 13,276 0.18% 10,312
9/30/86 12,098 0.25% 13,309 0.46% 10,359
10/31/86 12,412 1.73% 13,539 0.09% 10,369
11/30/86 12,549 1.98% 13,808 0.09% 10,378
12/31/86 12,572 -0.28% 13,769 0.09% 10,387
1/31/87 12,774 3.01% 14,183 0.63% 10,453
2/28/87 12,877 0.49% 14,253 0.36% 10,490
3/31/87 12,754 -1.06% 14,102 0.45% 10,538
4/30/87 11,964 -5.02% 13,394 0.54% 10,595
5/31/87 11,646 -0.50% 13,327 0.35% 10,632
6/30/87 11,957 2.94% 13,719 0.35% 10,669
7/31/87 12,139 1.02% 13,859 0.26% 10,697
8/31/87 12,234 0.22% 13,889 0.53% 10,753
9/30/87 11,551 -3.69% 13,377 0.52% 10,809
10/31/87 11,583 0.35% 13,423 0.26% 10,837
11/30/87 11,893 2.61% 13,774 0.09% 10,847
12/31/87 12,161 1.45% 13,973 0.00% 10,847
1/31/88 12,774 3.56% 14,471 0.26% 10,875
2/29/88 12,976 1.06% 14,624 0.26% 10,904
3/31/88 12,729 -1.16% 14,455 0.43% 10,950
4/30/88 12,783 0.76% 14,565 0.52% 11,007
5/31/88 12,802 -0.29% 14,522 0.34% 11,045
6/30/88 13,021 1.46% 14,734 0.43% 11,092
7/31/88 13,063 0.65% 14,830 0.42% 11,139
8/31/88 13,142 0.09% 14,843 0.42% 11,186
9/30/88 13,400 1.81% 15,112 0.67% 11,261
10/31/88 13,733 1.76% 15,378 0.33% 11,298
11/30/88 13,619 -0.92% 15,237 0.08% 11,307
12/31/88 13,773 1.02% 15,392 0.17% 11,326
1/31/89 13,989 2.07% 15,711 0.50% 11,383
2/28/89 13,910 -1.14% 15,532 0.41% 11,429
3/31/89 13,893 -0.24% 15,494 0.58% 11,496
4/30/89 14,187 2.37% 15,861 0.65% 11,570
5/31/89 14,483 2.08% 16,191 0.57% 11,636
6/30/89 14,680 1.36% 16,412 0.24% 11,664
7/31/89 14,789 1.36% 16,635 0.24% 11,692
8/31/89 14,707 -0.98% 16,472 0.16% 11,711
9/30/89 14,638 -0.30% 16,422 0.32% 11,748
10/31/89 14,762 1.22% 16,623 0.48% 11,805
11/30/89 14,964 1.75% 16,914 0.24% 11,833
12/31/89 15,077 0.82% 17,052 0.16% 11,852
1/31/90 14,966 -0.47% 16,972 1.03% 11,974
2/28/90 15,119 0.89% 17,123 0.47% 12,030
3/31/90 15,127 0.03% 17,128 0.55% 12,097
4/30/90 15,054 -0.72% 17,005 0.16% 12,116
5/31/90 15,371 2.18% 17,376 0.23% 12,144
6/30/90 15,528 0.88% 17,529 0.54% 12,209
7/31/90 15,741 1.48% 17,788 0.38% 12,256
8/31/90 15,462 -1.45% 17,530 0.92% 12,368
9/30/90 15,428 0.06% 17,541 0.84% 12,472
10/31/90 15,645 1.81% 17,858 0.60% 12,547
11/30/90 15,945 2.01% 18,217 0.22% 12,575
12/31/90 15,953 0.44% 18,297 0.00% 12,575
1/31/91 16,188 1.34% 18,542 0.60% 12,650
2/28/91 16,266 0.87% 18,704 0.15% 12,669
3/31/91 16,332 0.04% 18,711 0.15% 12,688
4/30/91 16,569 1.34% 18,962 0.15% 12,707
5/31/91 16,693 0.89% 19,131 0.30% 12,745
6/30/91 16,684 -0.10% 19,112 0.29% 12,782
7/31/91 16,907 1.22% 19,345 0.15% 12,802
8/31/91 17,014 1.32% 19,600 0.29% 12,839
9/30/91 17,239 1.30% 19,855 0.44% 12,895
10/31/91 17,362 0.90% 20,034 0.15% 12,914
11/30/91 17,351 0.28% 20,090 0.29% 12,952
12/31/91 17,685 2.15% 20,522 0.07% 12,961
1/31/92 17,749 0.23% 20,569 0.15% 12,980
2/29/92 17,739 0.03% 20,575 0.36% 13,027
3/31/92 17,820 0.04% 20,583 0.51% 13,094
4/30/92 17,962 0.89% 20,766 0.14% 13,112
5/31/92 18,227 1.18% 21,011 0.14% 13,130
6/30/92 18,460 1.68% 21,364 0.36% 13,178
7/31/92 19,083 3.00% 22,005 0.21% 13,205
8/31/92 18,804 -0.98% 21,790 0.28% 13,242
9/30/92 18,805 0.65% 21,931 0.28% 13,279
10/31/92 18,475 -0.98% 21,716 0.35% 13,326
11/30/92 18,920 1.79% 22,105 0.14% 13,344
12/31/92 19,177 1.02% 22,331 -0.07% 13,335
1/31/93 19,418 1.16% 22,590 0.49% 13,400
2/28/93 19,951 3.62% 23,407 0.35% 13,447
3/31/93 19,904 -1.06% 23,159 0.35% 13,494
4/30/93 20,051 1.01% 23,393 0.28% 13,532
5/31/93 20,146 0.56% 23,524 0.14% 13,551
6/30/93 20,455 1.67% 23,917 0.14% 13,570
7/31/93 20,468 0.13% 23,948 0.00% 13,570
8/31/93 20,812 2.08% 24,446 0.28% 13,608
9/30/93 21,025 1.14% 24,725 0.21% 13,637
10/31/93 21,087 0.19% 24,772 0.41% 13,693
11/30/93 20,984 -0.88% 24,554 0.07% 13,702
12/31/93 21,284 2.11% 25,072 0.00% 13,702
1/31/94 21,467 1.14% 25,358 0.27% 13,739
2/28/94 21,072 -2.59% 24,701 0.34% 13,786
3/31/94 20,468 -4.07% 23,696 0.34% 13,833
4/30/94 20,534 0.85% 23,897 0.14% 13,852
5/31/94 20,686 0.87% 24,105 0.07% 13,862
6/30/94 20,619 -0.61% 23,958 0.34% 13,909
7/31/94 20,912 1.83% 24,396 0.27% 13,946
8/31/94 20,979 0.35% 24,482 0.40% 14,002
9/30/94 20,760 -1.47% 24,122 0.27% 14,040
10/31/94 20,469 -1.78% 23,693 0.07% 14,050
11/30/94 20,125 -1.81% 23,264 0.13% 14,068
12/31/94 20,529 2.20% 23,776 0.00% 14,068
1/31/95 21,025 2.86% 24,456 0.40% 14,124
2/28/95 21,523 2.91% 25,167 0.40% 14,181
GRAPHIC MATERIAL (19)
This chart shows in pie format the fund's securities breakdown by sector as a
percentage of the fund's total net assets.
Portfolio Breakdown on 2/28/95
Utilities 17.2%
Certificates of Participation 2.5%
Industrial 4.1%
General Obligations 10.1%
Hospitals 16.1%
Education 16.1%
Pre-Refunded 25.7%
Housing 5.6%
Miscellaneous 2.6%
GRAPHIC MATERIAL (20)
This bar chart shows the comparison between the fund's distribution rate of
5.50% and the taxable equivalent distribution rate of 9.84%.
GRAPHIC MATERIAL (21)
The following line graph hypothetically compares the performance of Franklin
Ohio Insured Tax-Free Income Fund to that of the Lehman Brothers 10-Year
Municipal Bond Index and the Consumer Price Index (CPI), based on a $10,000
investment from 4/3/93 to 2/28/95.
Period Ending OH Ins. TF Inc. LB Muni. Index CPI
4/3/85 9,579 10,000 10,000
4/30/85 9,579 3.66% 10,366 0.47% 10,047
5/31/85 9,789 3.47% 10,726 0.37% 10,084
6/30/85 9,837 1.05% 10,838 0.28% 10,112
7/31/85 9,780 0.20% 10,860 0.19% 10,132
8/31/85 9,732 -0.70% 10,784 0.19% 10,151
9/30/85 9,538 -1.00% 10,676 0.28% 10,179
10/31/85 9,864 3.43% 11,042 0.37% 10,217
11/30/85 10,134 3.59% 11,439 0.28% 10,246
12/31/85 10,427 0.88% 11,539 0.28% 10,274
1/31/86 10,850 5.89% 12,219 0.27% 10,302
2/28/86 11,267 3.97% 12,704 -0.27% 10,274
3/31/86 11,488 0.03% 12,708 -0.46% 10,227
4/30/86 11,328 0.08% 12,718 -0.18% 10,209
5/31/86 11,117 -1.63% 12,511 0.28% 10,237
6/30/86 11,210 0.95% 12,630 0.55% 10,293
7/31/86 11,252 0.61% 12,707 0.00% 10,293
8/31/86 11,727 4.48% 13,276 0.18% 10,312
9/30/86 11,739 0.25% 13,309 0.46% 10,359
10/31/86 12,053 1.73% 13,539 0.09% 10,369
11/30/86 12,191 1.98% 13,808 0.09% 10,378
12/31/86 12,234 -0.28% 13,769 0.09% 10,387
1/31/87 12,426 3.01% 14,183 0.63% 10,453
2/28/87 12,545 0.49% 14,253 0.36% 10,490
3/31/87 12,384 -1.06% 14,102 0.45% 10,538
4/30/87 11,588 -5.02% 13,394 0.54% 10,595
5/31/87 11,297 -0.50% 13,327 0.35% 10,632
6/30/87 11,625 2.94% 13,719 0.35% 10,669
7/31/87 11,779 1.02% 13,859 0.26% 10,697
8/31/87 11,869 0.22% 13,889 0.53% 10,753
9/30/87 11,147 -3.69% 13,377 0.52% 10,809
10/31/87 11,206 0.35% 13,423 0.26% 10,837
11/30/87 11,571 2.61% 13,774 0.09% 10,847
12/31/87 11,799 1.45% 13,973 0.00% 10,847
1/31/88 12,394 3.56% 14,471 0.26% 10,875
2/29/88 12,578 1.06% 14,624 0.26% 10,904
3/31/88 12,338 -1.16% 14,455 0.43% 10,950
4/30/88 12,374 0.76% 14,565 0.52% 11,007
5/31/88 12,422 -0.29% 14,522 0.34% 11,045
6/30/88 12,670 1.46% 14,734 0.43% 11,092
7/31/88 12,707 0.65% 14,830 0.42% 11,139
8/31/88 12,779 0.09% 14,843 0.42% 11,186
9/30/88 13,019 1.81% 15,112 0.67% 11,261
10/31/88 13,368 1.76% 15,378 0.33% 11,298
11/30/88 13,249 -0.92% 15,237 0.08% 11,307
12/31/88 13,420 1.02% 15,392 0.17% 11,326
1/31/89 13,641 2.07% 15,711 0.50% 11,383
2/28/89 13,568 -1.14% 15,532 0.41% 11,429
3/31/89 13,533 -0.24% 15,494 0.58% 11,496
4/30/89 13,795 2.37% 15,861 0.65% 11,570
5/31/89 14,108 2.08% 16,191 0.57% 11,636
6/30/89 14,298 1.36% 16,412 0.24% 11,664
7/31/89 14,402 1.36% 16,635 0.24% 11,692
8/31/89 14,315 -0.98% 16,472 0.16% 11,711
9/30/89 14,254 -0.30% 16,422 0.32% 11,748
10/31/89 14,359 1.22% 16,623 0.48% 11,805
11/30/89 14,555 1.75% 16,914 0.24% 11,833
12/31/89 14,661 0.82% 17,052 0.16% 11,852
1/31/90 14,533 -0.47% 16,972 1.03% 11,974
2/28/90 14,693 0.89% 17,123 0.47% 12,030
3/31/90 14,696 0.03% 17,128 0.55% 12,097
4/30/90 14,592 -0.72% 17,005 0.16% 12,116
5/31/90 14,928 2.18% 17,376 0.23% 12,144
6/30/90 15,094 0.88% 17,529 0.54% 12,209
7/31/90 15,342 1.48% 17,788 0.38% 12,256
8/31/90 15,076 -1.45% 17,530 0.92% 12,368
9/30/90 15,109 0.06% 17,541 0.84% 12,472
10/31/90 15,307 1.81% 17,858 0.60% 12,547
11/30/90 15,574 2.01% 18,217 0.22% 12,575
12/31/90 15,635 0.44% 18,297 0.00% 12,575
1/31/91 15,892 1.34% 18,542 0.60% 12,650
2/28/91 15,953 0.87% 18,704 0.15% 12,669
3/31/91 16,001 0.04% 18,711 0.15% 12,688
4/30/91 16,234 1.34% 18,962 0.15% 12,707
5/31/91 16,339 0.89% 19,131 0.30% 12,745
6/30/91 16,331 -0.10% 19,112 0.29% 12,782
7/31/91 16,554 1.22% 19,345 0.15% 12,802
8/31/91 16,675 1.32% 19,600 0.29% 12,839
9/30/91 16,900 1.30% 19,855 0.44% 12,895
10/31/91 17,023 0.90% 20,034 0.15% 12,914
11/30/91 17,014 0.28% 20,090 0.29% 12,952
12/31/91 17,347 2.15% 20,522 0.07% 12,961
1/31/92 17,412 0.23% 20,569 0.15% 12,980
2/29/92 17,384 0.03% 20,575 0.36% 13,027
3/31/92 17,430 0.04% 20,583 0.51% 13,094
4/30/92 17,598 0.89% 20,766 0.14% 13,112
5/31/92 17,843 1.18% 21,011 0.14% 13,130
6/30/92 18,074 1.68% 21,364 0.36% 13,178
7/31/92 18,704 3.00% 22,005 0.21% 13,205
8/31/92 18,454 -0.98% 21,790 0.28% 13,242
9/30/92 18,469 0.65% 21,931 0.28% 13,279
10/31/92 18,154 -0.98% 21,716 0.35% 13,326
11/30/92 18,608 1.79% 22,105 0.14% 13,344
12/31/92 18,874 1.02% 22,331 -0.07% 13,335
1/31/93 19,142 1.16% 22,590 0.49% 13,400
2/28/93 19,730 3.62% 23,407 0.35% 13,447
3/31/93 19,728 -1.06% 23,159 0.35% 13,494
4/30/93 19,839 1.01% 23,393 0.28% 13,532
5/31/93 19,934 0.56% 23,524 0.14% 13,551
6/30/93 20,290 1.67% 23,917 0.14% 13,570
7/31/93 20,304 0.13% 23,948 0.00% 13,570
8/31/93 20,679 2.08% 24,446 0.28% 13,608
9/30/93 20,906 1.14% 24,725 0.21% 13,637
10/31/93 20,952 0.19% 24,772 0.41% 13,693
11/30/93 20,866 -0.88% 24,554 0.07% 13,702
12/31/93 21,230 2.11% 25,072 0.00% 13,702
1/31/94 21,445 1.14% 25,358 0.27% 13,739
2/28/94 20,969 -2.59% 24,701 0.34% 13,786
3/31/94 20,219 -4.07% 23,696 0.34% 13,833
4/30/94 20,318 0.85% 23,897 0.14% 13,852
5/31/94 20,469 0.87% 24,105 0.07% 13,862
6/30/94 20,395 -0.61% 23,958 0.34% 13,909
7/31/94 20,720 1.83% 24,396 0.27% 13,946
8/31/94 20,769 0.35% 24,482 0.40% 14,002
9/30/94 20,502 -1.47% 24,122 0.27% 14,040
10/31/94 20,180 -1.78% 23,693 0.07% 14,050
11/30/94 19,860 -1.81% 23,264 0.13% 14,068
12/31/94 20,279 2.20% 23,776 0.00% 14,068
1/31/95 20,807 2.86% 24,456 0.40% 14,124
2/28/95 21,338 2.91% 25,167 0.40% 14,181
<TABLE>
<CAPTION>
TABLE OF CONTENTS PAGE
<S> <C>
LETTER FROM THE CHAIRMAN .......................... 1
MANAGER'S DISCUSSION .............................. 4
FUND REPORTS
Franklin Alabama
Tax-Free Income Fund .............................. 6
Franklin Florida
Tax-Free Income Fund .............................. 10
Franklin Georgia
Tax-Free Income Fund .............................. 14
Franklin Kentucky
Tax-Free Income Fund .............................. 18
Franklin Louisiana
Tax-Free Income Fund .............................. 22
Franklin Maryland
Tax-Free Income Fund .............................. 26
Franklin Missouri
Tax-Free Income Fund .............................. 30
Franklin North Carolina
Tax-Free Income Fund .............................. 34
Franklin Texas
Tax-Free Income Fund .............................. 38
Franklin Virginia
Tax-Free Income Fund .............................. 42
SPECIAL FEATURE: PORTFOLIO TALK
FRANKLIN'S MUNICIPAL BOND DEPARTMENT .............. 46
STATEMENT OF INVESTMENTS .......................... 49
FINANCIAL STATEMENTS .............................. 97
NOTES TO FINANCIAL STATEMENTS ..................... 105
REPORT OF INDEPENDENT AUDITORS .................... 111
</TABLE>
<PAGE>
MESSAGE FROM THE CHAIRMAN
================================================================================
April 14, 1995
Dear Shareholder:
This is the tenth annual report of the Franklin Tax-Free Trust for the fiscal
year ended February 28, 1995.
Calendar year 1994 was the worst for bonds since the Trust's inception in 1985.
In fact, the 20-year U.S. Treasury bond recorded its poorest performance since
1967.(1) Concerns about rising inflation, brought on by continued strong
economic growth, prompted the Federal Reserve Board to raise interest rates six
times during the Trust's fiscal year. Bond prices declined across all
maturities, as did the share values of the funds in the Franklin Tax-Free Trust.
By the end of February 1995, however, the Federal Reserve Board's dedication to
slowing economic growth by raising interest rates appeared to be having the
intended effect -- economic growth had stabilized at a sustainable level, while
inflation remained subdued.
Although the Fed's actions caused significant short-term volatility, its
commitment to fighting inflation should benefit the Trust and its shareholders
over the long run.
Following the stellar performance of bonds in the early 1990s, 1994 came as a
reminder that bond prices can fall as well as rise. Although rising interest
rates generally cause bond prices to fall, they also bring higher bond yields.
This could ultimately lead to higher distributions of tax-free income for the
Trust's shareholders.
Periods of volatility also provide us with a glimpse of how mutual funds can
lower the risks of investing. 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.
These advantages of mutual fund investing --
diversification and professional management --
became even more apparent recently, in light of the
(1.) Source: Ibbotson Associates. Based on one-year total returns of long-term
government bonds from January 1926 to December 1994.
<PAGE>
================================================================================
municipal bankruptcy filing of Orange County, California.(2) This situation
might have devastated individual bondholders, but the direct impact on
Franklin's tax-free income funds has been minimal to date, because most of our
funds are widely diversified.(3)
For a more compelling reason to look at the potential benefits of mutual funds,
consider this: Investors in individual municipal bonds suffered declines of 15%
or more during 1994, while those invested in diversified, long-term municipal
debt funds fared a little better, averaging declines of approximately 7%.(4) As
you'll see in the fund reports that follow, for the year ended February 28,
1995, the majority of the funds in the Trust outperformed the average
performance of other municipal bond funds in their respective categories,
according to Lipper Analytical Services, Inc.
As we've said in past reports, Franklin's tax-free funds practice a conservative
investment strategy, focusing on providing our shareholders with a high level of
current income exempt from federal and, in most cases, state and local income
taxes.(5) The funds' managers maintain a long-term investment approach, and we
encourage shareholders to do the same.
Looking forward, the prospects of a slowing economy and a presidential election
in 1996 should stabilize or even lower interest rates, which bodes well for
tax-free investors in 1995.
On the pages that follow, you'll find specific information about each fund, as
well as additional information from our portfolio managers about the current
state of and outlook for the municipal bond market. In addition, an in-depth
conversation with portfolio managers from our Municipal Bond Department can be
found on page 46 of this report.
As always, we welcome your questions, appreciate your trust and support, and
look forward to serving you in the years to come.
Sincerely,
Charles B. Johnson
Chairman
(2.) The Orange County and related bankruptcy proceedings are ongoing, and the
funds' managers continue to monitor proceedings.
(3.) Most of Franklin's tax-free funds are diversified; however, a few are
classified as non-diversified under the Investment Company Act of 1940. The
risks of investing in a non-diversified fund, such as increased susceptibility
to adverse economic or regulatory developments, are described in the fund's
prospectus.
(4.) Source: Average individual municipal bond figures calculated by Delphi
Hanover Corp.; average municipal bond mutual fund figures according to Lipper
Analytical Services, Inc., a nationally recognized mutual fund research company,
are based on cumulative total returns from 12/31/93 to 12/31/94.
(5.) For investors subject to federal or state alternative minimum tax, all or a
portion of these dividends may be subject to such tax, depending on the fund.
Distributions of capital gains and of ordinary income from accrued market
discount, if any, are generally taxable.
2
<PAGE>
TAX-FREE INVESTING
================================================================================
A penny saved is a penny earned, or so the saying goes. But with regular federal
income tax taking up to 39.6% of your investment income, it can be hard to save
those pennies in the first place.
Fortunately, there is a solution to today's high tax bite: Franklin's tax-free
income funds. As a tax-free income fund shareholder, you earn monthly income
dividends free from regular federal income tax and, in many cases, state and
local taxes as well.*
LOOK AT IT IN DOLLARS AND SENSE
Tax-free income can make quite an impact on the dollar amount you take home.
Of course, the yields used in the example below are for illustrative purposes
only and do not represent the yield or the past or future performance of any
Franklin or Templeton fund. What they do represent is the advantage of tax-free
investing. Investors in the maximum regular federal income tax bracket of 39.6%
would need to earn 9.11% in a taxable investment to keep the same amount of
income earned with a 5.5% tax-free yield.
<TABLE>
<CAPTION>
A TAXING SITUATION FRANKLIN'S SOLUTION
- ------------------------------------------------------- -------------------------------
<S> <C>
With a $100,000 fully taxable investment yielding 7.5%, With a $100,000 tax-free
you might earn $7,500 annually, but you could*... investment yielding 5.5%, that
income could be free from
regular federal income tax.*
</TABLE>
<TABLE>
<S> <C> <C> <C>
KEEP ONLY: $5.175 KEEP ONLY: $4,800 KEEP ONLY: $4,530 EARN AND KEEP:
31% Federal Tax Rate 36% Federal Tax Rate 39.6% Federal Tax Rate $5,500
</TABLE>
*For investors subject to federal or state alternative minimum tax, all or a
portion of these dividends may be subject to such tax, depending on the fund.
Distributions of capital gains and of ordinary income from accrued market
discount, if any, are generally taxable. The example assumes a fixed rate of
return, no fluctuation in principal, and the stated federal income tax rates.
State and local tax rates are not reflected. Franklin fund dividends and share
price will vary with market conditions. The example assumes two different yields
(tax-free 5.5% and taxable 7.5%) because a taxable investment's higher yield
compensates for taxes incurred on the earned income.
3
<PAGE>
MANAGER'S DISCUSSION
================================================================================
Dear Shareholder:
Nineteen ninety-four reminded all of us that volatility is a fundamental market
condition. Not only did we see an unprecedented six interest rate increases
during the year, we also witnessed the largest municipal bankruptcy filing in
history by Orange County, California. The municipal bond market experienced
unusual volatility in 1994, despite a significant decrease in the municipal bond
supply, which was expected to drive prices higher.
The first two months of 1995, however, have brought welcome news. After raising
interest rates 75 basis points (three-quarters of a percentage point) in
November 1994, the Federal Reserve Board raised rates once more at their
February meeting. Investors perceived that the latest increase might be the
last. In addition, the economic news following this latest hike has been fairly
positive -- economic growth has slowed, inflation has remained subdued, and the
securities markets have reacted favorably, with the Dow Jones Industrial
Average(R) breaking the 4,000 mark for the first time in history. Of more
interest to us is the municipal bond market which, in recent weeks, appears to
be recovering. In the first two months of 1995, for example, municipal bond
prices have increased 6.7%.(1)
In managing Franklin's tax-free funds, we seek to provide our shareholders with
a high level of current income exempt from federal income taxes and, in many
cases, state and local taxes as well.(2) To achieve this goal, we generally
purchase current coupon bonds at a slight discount. We also practice a "buy and
hold" strategy, choosing to hang onto higher coupon bonds (even when they trade
at a premium) for the higher income they provide to shareholders. This helps us
to maintain a low port-
(1.) Source: Bond Buyer 40 Index
(2.) For investors subject to federal or state alternative minimum tax, all or a
portion of these dividends may be subject to such tax, depending on the fund.
Distributions of capital gains and of ordinary income from accrued market
discount, if any, are generally taxable.
4
<PAGE>
================================================================================
folio turnover, potentially shielding the fund from capital gains, which are
taxable to shareholders. In contrast, many municipal bond funds that seek
capital appreciation trade their securities more actively to capture capital
gains -- and pass on the tax implications to their shareholders.
We believe that our strategy also helps to protect the funds from extreme price
volatility. Since bonds that trade at a premium are generally slower to react to
market fluctuations, the large percentage of such bonds in our portfolios helped
to dampen the effects of the uncertain bond market in 1994. In short, we believe
that our investment approach provides portfolios that pay a high level of
tax-free income while enjoying relatively stable share prices.
Looking forward, we believe 1995 will be a promising year for fixed income
markets, as it appears that interest rates may stabilize. We also expect the
supply of newly issued municipal bonds to be roughly $140 to $150 billion in
1995 -- slightly less than last year, and significantly lower than in 1993.
Additionally, tax-free yields remain attractive relative to the taxable yields
available from Treasuries and other fixed-income securities. For example, the
current yield-to-maturity available from the Bond Buyer 40 (an index of 40
municipal bonds) was 6.42% on February 28, 1995. For investors in the maximum
federal income tax bracket of 39.6%, this tax-free yield equals a yield of
10.63% from a taxable investment -- considerably higher than the yields
available on taxable bonds of comparable quality. For example, the 10-year
Treasury note and 30-year Treasury bond yielded 7.22% and 7.42%, respectively,
on February 28, 1995.(3) Because of the relatively high yields and reduced
supply available, we expect municipal bonds to perform well in 1995.
Sincerely,
Thomas J. Kenny
Senior Vice President - Director,
Municipal Bond Department
(3.) Source: Micropal
5
<PAGE>
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.*
The fund's fiscal year was difficult for municipal bonds and other fixed-income
investments. Rising interest rates caused prices of most bonds to decline, and
the derivative-induced bankruptcy of Orange County, California added to the
volatility in the municipal bond market.
On a positive note, higher interest rates enabled us to sell some of the fund's
lower coupon securities and purchase higher yielding, current coupon bonds. As a
result, the fund's average coupon rose slightly from 6.82% on February 28, 1994,
to 6.93% on February 28, 1995. This action should be significant in helping the
fund increase its income-generating power.
While our investment strategy focuses on income rather than total return, the
fund reported a total return of +1.57% for the one year period -- better than
the average total return of other Alabama municipal bond funds. According to
Lipper Analytical Services, Inc., the average total return of Alabama municipal
bond funds was +1.20% for the year ended February 28, 1995.**
- --------------------------------------------------------------------------------
(See Appendix for description of Graphic Material 1)
- --------------------------------------------------------------------------------
We remain conservative in our management of the fund. The chart above
illustrates that at the end of the fiscal year, over 60% of the fund's
securities were rated AAA -- the highest rating possible -- by Standard & Poor's
or other national ratings agencies, or were judged to be of equivalent quality
by the fund's managers. We evaluate each issue on an individual basis, favoring
highly rated "essential service" bonds. These securities tend to have a more
reliable income stream as they are backed by dependable revenue generated from
projects such as utilities, schools and water, power and sewer 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
*For investors subject to 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.
**The fund was ranked #2 out of 6 Alabama municipal bond funds for the one-year
period, #2 out of 2 funds for the five-year period ended February 28, 1995, as
measured by Lipper Analytical Services, Inc., a nationally recognized mutual
fund rating organization. Lipper rankings do not include sales charges, and past
expense limitations increased the fund's total returns. Rankings may have been
different if these factors had been considered. Past performance cannot
guarantee future results.
6
<PAGE>
================================================================================
municipal cost-cutting environment. Like all mutual funds, however, the
principal value of the fund's holdings as well as the price of its shares will
fluctuate with market conditions.
We also seek to reduce the fund's risk through diversification. On February 28,
1995, the fund's assets spanned a broad range of cities and counties throughout
Alabama. Additionally, we purchase securities from a variety of municipal
sectors, as the table to the right illustrates.
Our outlook for the fund is positive. Recent economic reports indicate that U.S.
economic growth has stabilized at a healthy and sustainable level, while
inflation has remained subdued. More signs of a slowing economy should
eventually result in a gradual decline in interest rates, which could positively
affect bond prices and thus, the fund's price per share.
Alabama's economy has begun to show improvement, outperforming the national and
regional economies over the past three years. This recuperation was largely due
to a surge in government and service employment, with state and local
governments adding 15,000 higher education sector jobs.+ However, the state is
still experiencing employment difficulties. Statewide unemployment hovered at
7.0% through most of 1994, and recent cuts in military-related areas resulted in
the loss of 9,000 jobs during the year. Additionally, Alabama has lost portions
of its textile, apparel, and transportation equipment industries to Mexico and
Canada.
FRANKLIN ALABAMA TAX-FREE INCOME FUND
Portfolio Breakdown on February 28, 1995
As a percentage of total net assets
<TABLE>
<CAPTION>
% OF TOTAL
SECTOR NET ASSETS
- --------------------------------------------------------------------------------
<S> <C>
Utilities 21.1%
- --------------------------------------------------------------------------------
Industrial 19.0%
- --------------------------------------------------------------------------------
Hospitals 18.8%
- --------------------------------------------------------------------------------
Pre-Refunded 13.2%
- --------------------------------------------------------------------------------
General Obligations 9.9%
- --------------------------------------------------------------------------------
Housing 8.2%
- --------------------------------------------------------------------------------
Education 4.0%
- --------------------------------------------------------------------------------
Other Revenue 3.6%
- --------------------------------------------------------------------------------
Transportation 1.9%
- --------------------------------------------------------------------------------
Certificates of Participation 0.3%
- --------------------------------------------------------------------------------
</TABLE>
FOR A COMPLETE LIST OF PORTFOLIO HOLDINGS, PLEASE SEE PAGE 49 OF THIS REPORT.
To augment job losses, Alabama has implemented a program to lure new and
expanding industries to the state. While this has resulted in the state
investing over $1 billion annually, Alabama should fiscally benefit from this
investment. For example, Mercedes Benz's decision to locate its sport utility
vehicle assembly plant in the state continues to play a major role in Alabama's
economy. An incentive package offered to Mercedes by the state, the City and
County of Tuscaloosa, and the City of Birmingham, is reported to be valued
between $130 and $300 million. Included in this package are local infrastructure
improvements, worker training, state corporate income tax credits, and state
income tax offsets. The state continues to provide industry with a profitable
environment for business through these programs.
+Source: Standard & Poor's Creditweek Municipal, 6/14/93.
7
<PAGE>
================================================================================
PERFORMANCE SUMMARY
The Franklin Alabama Tax-Free Income Fund's share price, as measured by net
asset value, declined from $11.80 on February 28, 1994, to $11.31 on February
28, 1995.
The fund continued to meet its investment objective of providing high current
income to its shareholders. For the one-year period ended February 28, 1995,
your fund paid monthly income distributions totaling 64.8 cents ($0.648) per
share.++ 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 5.49%,
based on an annualization of the current monthly dividend of 5.4 cents ($0.054)
per share and the maximum offering price of $11.81 on February 28, 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 9.56% from a taxable investment to match your fund's tax-free
distribution rate.
- --------------------------------------------------------------------------------
(See Appendix for description of Graphic Material 2)
- --------------------------------------------------------------------------------
The Franklin Alabama Tax-Free Income Fund provided a total return of +1.57% for
the one-year period ended February 28, 1995. Total return measures the change in
value of an investment during the period indicated, assuming reinvestment of
dividends and capital gains, if any. This calculation does not include the
initial sales charge. Past performance is not predictive of future results.
Since 1988, the Franklin Alabama Tax-Free Income Fund's performance, as measured
by total return, has exceeded the Consumer Price Index (CPI), keeping your
purchasing power well ahead of inflation -- a primary goal of any investment.
The fund, however, slightly underperformed the unmanaged Lehman Brothers
Municipal Bond Index as illustrated by the chart on the following page. The
Lehman
++Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distribution may 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.
8
<PAGE>
================================================================================
Index has some inherent performance differentials over any fund, as the index
holds no cash in its portfolio and involves no sales charges or management
expenses. In addition, the index includes municipal securities from across the
country while your fund is composed primarily of Alabama municipal bonds. Of
course, an investor cannot invest directly in an index.
Your fund's managers maintain a long-term investment perspective and we
encourage our shareholders to do the same. While the fund may experience some
volatility from time to time, we believe that its performance will be rewarding
over the long-term. For example, as the table to the right demonstrates, the
fund has provided an average annual total return of +7.48% since its inception
in 1987.
FRANKLIN ALABAMA TAX-FREE INCOME FUND
Periods ended February 28, 1995
<TABLE>
<CAPTION>
SINCE
INCEPTION
1-YEAR 5-YEAR (9/1/87)
- -----------------------------------------------------------------------
<S> <C> <C> <C>
Cumulative Total Return(1) 1.57% 44.51% 79.47%
Average Annual
Total Return(2) -2.72% 6.70% 7.48%
</TABLE>
<TABLE>
<S> <C>
Distribution Rate(3) 5.49%
Taxable Equivalent Distribution Rate(4) 9.56%
30-Day Standardized Yield(5) 5.38%
Taxable Equivalent Yield(4) 9.38%
- -----------------------------------------------------------------------
</TABLE>
(1.) Cumulative total returns measure the change in value of an investment over
the periods indicated and do 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 have been
restated to reflect the maximum 4.25% initial sales charge. See note below.
(3.) Based on an annualization of the fund's current 5.4 cent per share monthly
dividend and the maximum offering price of $11.81 on February 28, 1995.
(4.) Taxable equivalent distribution rate and yield assume the 1995 maximum
combined federal and Alabama state income tax rate 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 the
fund's portfolio for the 30 days ended 2/28/95.
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 implemented
a plan of distribution under Rule 12b-1 and eliminated the sales charge on
reinvested dividends, which will affect future performance.
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 is not predictive of future results.
Past expense reductions by the fund's manager increased the fund's total return.
- --------------------------------------------------------------------------------
(See Appendix for description of Graphic Material 3)
*This performance graph assumes an intial $10,000 investment and includes the
maximum 4.25% sales charge, all fund expenses and account fees. It also assumes
that your dividends and capital gains were reinvested at net asset value. The
Lehman Brothers Municipal Bond Index includes price appreciation or depreciation
and distributions as a percentage of the original investment. Past performance
cannot guarantee future results.
- --------------------------------------------------------------------------------
9
<PAGE>
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.
The fund's fiscal year was difficult for municipal bonds and other fixed-income
investments. Rising interest rates caused prices of most bonds to decline, and
the derivative-induced bankruptcy of Orange County, California added to the
volatility in the municipal bond market.
On a positive note, higher interest rates enabled us to sell some of the fund's
lower coupon securities and purchase higher yielding, current coupon bonds. As a
result, the fund's average coupon rose slightly from 7.08% on February 28, 1994,
to 7.16% on February 28, 1995. This higher income enabled us to increase the
fund's monthly dividend from 5.6 cents to 5.7 cents per share, effective with
the December 1994 distribution.
While our investment strategy focuses on income rather than total return, the
fund reported a respectable total return of +2.39% for the fiscal year -- more
than five times the average total re-turn of other Florida municipal bond funds.
According to Lipper Analytical Services, Inc., the average total return of
Florida municipal bond funds was
- --------------------------------------------------------------------------------
(See Appendix for description of Graphic Material 4)
- --------------------------------------------------------------------------------
+0.44% for the year ended February 28, 1995.** The fund's yield placed it eighth
among 53 Florida municipal bond funds, as measured by Lipper.
We remain conservative in our management of the fund. As the chart above
illustrates, at the end of the fiscal year, over 50% of the fund's securities
were rated AAA or equivalent -- the highest rating possible -- by Standard &
Poor's or other national ratings agencies, or were judged to be of comparable
quality by the fund's managers. We evaluate each issue on an individual basis,
favoring highly
*For investors subject to 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.
**The fund was ranked #8 out of 53 Florida municipal bond funds for the one-year
period, and #3 out of 4 funds for the five-year period ended February 28, 1995,
as measured by Lipper Analytical Services, Inc., a nationally recognized mutual
fund rating organization. Lipper rankings do not include sales charges and past
expense limitations increased the fund's total returns. Rankings may have been
different if these factors had been considered. Past performance cannot
guarantee future results.
10
<PAGE>
================================================================================
rated "essential service" bonds. These securities tend to have a more reliable
income stream as they are backed by dependable revenue generated from projects
such as utilities, transportation, and water, power and sewer 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. Like all mutual funds, however, the principal value of
the fund's holdings as well as the price of the fund's shares will fluctuate
with market conditions.
We also seek to reduce the fund's risk through diversification. On February 28,
1995, the fund's assets were invested among a broad range of cities and counties
throughout Florida. Additionally, we purchase securities from a variety of
municipal sectors, as the table to the right illustrates.
Our outlook for the fund is positive. Recent economic reports indicate that U.S.
economic growth has stabilized at a healthy and sustainable level, while
inflation has remained subdued. More signs of a slowing economy should
eventually result in a gradual decline in interest rates, which could positively
affect bond prices and thus, the fund's price per share.
Florida's municipal bond issuance dropped significantly in 1994 to only $7.7
billion, from $17.0 billion in 1993. This helped to support the prices of
Florida bonds. Florida has outperformed the region and the nation in employment
and personal income growth since the 1990-1991 recession. The economic recovery
in Florida continues, fueled by post-hurricane clean-up and rebuilding efforts.
Unemployment rates through the end of 1994 were estimated at 6.5%, down from the
recessionary peak of 8.2% in 1992, with growth in the service, construction and
trade sectors contributing to a rise in state employment.+
FRANKLIN FLORIDA TAX-FREE INCOME FUND
Portfolio Breakdown on February 28, 1995
As a percentage of total net assets
<TABLE>
<CAPTION>
% OF TOTAL
SECTOR NET ASSETS
- --------------------------------------------------------------------------------
<S> <C>
Utilities 22.9%
- --------------------------------------------------------------------------------
Pre-Refunded 20.2%
- --------------------------------------------------------------------------------
Hospitals 12.2%
- --------------------------------------------------------------------------------
Transportation 11.0%
- --------------------------------------------------------------------------------
Housing 9.6%
- --------------------------------------------------------------------------------
Special Assessment 7.8%
- --------------------------------------------------------------------------------
Other Revenue 5.7%
- --------------------------------------------------------------------------------
Miscellaneous 3.8%
- --------------------------------------------------------------------------------
Certificates of Participation 3.1%
- --------------------------------------------------------------------------------
General Obligations 1.2%
- --------------------------------------------------------------------------------
Healthcare 0.7%
- --------------------------------------------------------------------------------
Sales Tax 0.7%
- --------------------------------------------------------------------------------
Industrial 0.6%
- --------------------------------------------------------------------------------
Education 0.5%
- --------------------------------------------------------------------------------
</TABLE>
FOR A COMPLETE LIST OF PORTFOLIO HOLDINGS, PLEASE SEE PAGE 53 OF THIS REPORT.
+Source: Standard & Poor's Creditweek Municipal, 4/25/94.
11
<PAGE>
================================================================================
PERFORMANCE SUMMARY
The Franklin Florida Tax-Free Income Fund's share price, as measured by net
asset value, declined from $11.77 on February 28, 1994, to $11.35 on February
28, 1995.
The fund continued to meet its investment objective of providing high current
income to its shareholders. For the one-year period ended February 28, 1995,
your fund paid monthly income distributions totaling 67.2 cents ($0.672) per
share.++ We are pleased to inform you that your fund's dividend rate was
increased to 5.7 cents ($0.057) per share from 5.6 cents ($0.056), effective
with the December 1994 distribution. 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 5.77%,
based on an annualization of the current monthly dividend of 5.7 ($0.057) cents
per share and the maximum offering price of $11.85 on February 28, 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
- --------------------------------------------------------------------------------
(See Appendix for description of Graphic Material 5)
- --------------------------------------------------------------------------------
would have to earn 9.55% from a taxable investment to match your fund's tax-free
distribution rate.
The Franklin Florida Tax-Free Income Fund provided a total return of +2.39% for
the one-year period ended February 28, 1995. Total return measures the change in
value of an investment during the period indicated, assuming reinvestment of
dividends and capital gains, if any. This calculation does not include the
initial sales charge and past performance is not predictive of future results.
Since 1988, the Franklin Florida Tax-Free Income Fund's performance has exceeded
the Consumer Price Index (CPI), keeping your purchasing power well ahead of
inflation -- a primary goal of any investment. The fund, however, has slightly
underperformed the unmanaged Lehman Brothers Municipal Bond Index as illustrated
by the chart on the following page. The Lehman Index has some inher-
++Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distribution may 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.
12
<PAGE>
================================================================================
ent performance differentials over any fund, as it has no cash in its portfolio
and involves no sales charges or management expenses. In addition, the index
includes municipal securities from across the country while your fund is
composed primarily of Florida municipal bonds. Of course, an investor cannot
invest directly in an index.
Your fund's managers maintain a long-term investment perspective and we
encourage our shareholders to do the same. While the fund may experience
volatility from time to time, we believe that its performance will be rewarding
over the long term. For example, as the table to the right demonstrates, the
fund has provided an average annual total return of +7.94% since its inception
in 1987.
FRANKLIN FLORIDA TAX-FREE INCOME FUND
Periods ended February 28, 1995
<TABLE>
<CAPTION>
SINCE
INCEPTION
1-YEAR 5-YEAR (09/1/87)
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Cumulative Total Return(1) 2.39% 46.86% 85.27%
Average Annual
Total Return(2) -1.94% 7.05% 7.94%
</TABLE>
<TABLE>
<S> <C>
Distribution Rate(3) 5.77%
Taxable Equivalent Distribution Rate(4) 9.55%
30-Day Standardized Yield(5) 5.56%
Taxable Equivalent Yield(4) 9.21%
- ------------------------------------------------------------------------
</TABLE>
(1.) Cumulative total returns measure the change in value of an investment over
the periods indicated and do not include the maximum 4.25% initial sales charge
stated in the prospectus. See note below.
(2.) Average annual total return represents the average annual change in value
of an investment over the specified periods. The figures have been restated to
reflect the maximum 4.25% initial sales charge. See note below.
(3.) Based on an annualization of the fund's current 5.7 cent per share monthly
dividend and the maximum offering price of $11.85 on February 28, 1995.
(4.) Taxable equivalent distribution rate and yield assume the 1995 maximum
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 2/28/95.
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 implemented
a plan of distribution under Rule 12b-1 and eliminated the sales charge on
reinvested dividends, which will affect future performance. 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 is not
predictive of future results.
- --------------------------------------------------------------------------------
(See Appendix for description of Graphic Material 6)
*This performance graph assumes an intial $10,000 investment and includes the
maximum 4.25% sales charge, all fund expenses and account fees. It also assumes
that your dividends and capital gains were reinvested at net asset value. The
Lehman Brothers Municipal Bond Index includes price appreciation or depreciation
and distributions as a percentage of the original investment. Past performance
cannot guarantee future results.
- --------------------------------------------------------------------------------
13
<PAGE>
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.*
The fund's fiscal year was difficult for municipal bonds and other fixed-income
investments. Rising interest rates caused prices of most bonds to decline, and
the derivative-induced bankruptcy of Orange County, California added to the
volatility in the municipal bond market.
On a positive note, higher rates enabled us to sell some of the fund's lower
coupon pre-refunded securities and purchase higher yielding current coupon
bonds. As a result, the fund's average coupon rose slightly from 6.75% on
February 28, 1994, to 6.91% on February 28, 1995. This action should be
significant in helping the fund increase its income-generating power.
While our investment strategy focuses on income rather than total return, the
fund reported a total return of +1.90% for the fiscal year -- more than four
times the average total return of other Georgia municipal bond funds. According
to Lipper Analytical Services, Inc., the average total return of Georgia
municipal bond funds was +0.41% for the year ended February 28, 1995.**
- --------------------------------------------------------------------------------
(See Appendix for description of Graphic Material 7)
- --------------------------------------------------------------------------------
We remain conservative in our management of the fund. The chart above
illustrates that at the end of the fiscal year, over 65% of the fund's
securities were rated AAA -- the highest rating possible -- by Standard &
Poor's, or were judged to be of comparable credit quality by the fund's
managers.
Credit quality is an essential component of bond selection. We evaluate each
issue on an individual basis, favoring highly rated "essential service" bonds.
These securities tend to have a more reliable income stream as they are backed
by dependable revenue generated from projects such as utilities, transportation
and water, power and sewer
*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.
**The fund was ranked #2 out of 22 Georgia municipal bond funds for the one-year
period, and #1 out of 6 funds for the five-year period ended February 28, 1995,
as measured by Lipper Analytical Services, Inc., a nationally recognized mutual
fund rating organization. Lipper rankings do not include sales charges, and past
expense limitations increased the fund's total returns. Rankings may have been
different if these factors had been considered. Past performance cannot
guarantee future results.
14
<PAGE>
================================================================================
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. Like all mutual funds, however, the
principal value of the fund's holdings as well as the price of its shares will
fluctuate with market conditions.
We also seek to reduce the fund's risk through diversification. On February 28,
1995, the fund's assets spanned a broad range of cities and counties throughout
Georgia. Furthermore, we purchase securities from a variety of municipal
sectors, as the table to the right illustrates.
Our outlook for the fund is positive. Recent economic reports indicate that U.S.
economic growth has stabilized at a healthy and sustainable level, while
inflation has remained subdued. More signs of a slowing economy should
eventually result in a gradual decline in interest rates, which could positively
affect bond prices and thus, the fund's price per share.
Municipal bond issuance in Georgia fell to $4.7 billion in 1994, down from $7.4
billion in 1993. Furthermore, the state's sound fiscal management helped it to
maintain its aaa/AA+ credit rating. This short supply and Georgia's outstanding
credit reputation helped support the prices of Georgia municipal bonds.
In 1992, Georgia began to show signs of recovery, with employment increasing by
1.5%.+ By 1994,
FRANKLIN GEORGIA TAX-FREE INCOME FUND
Portfolio Breakdown on February 28, 1995
As a percentage of total net assets
<TABLE>
<CAPTION>
% OF TOTAL
SECTOR NET ASSETS
- --------------------------------------------------------------------------------
<S> <C>
Utilities 23.2%
- --------------------------------------------------------------------------------
Pre-Refunded 19.0%
- --------------------------------------------------------------------------------
Housing 11.2%
- --------------------------------------------------------------------------------
Transportation 10.1%
- --------------------------------------------------------------------------------
Hospitals 9.7%
- --------------------------------------------------------------------------------
Industria l7.4%
- --------------------------------------------------------------------------------
Sales Tax 5.6%
- --------------------------------------------------------------------------------
Certificates of Participation 4.1%
- --------------------------------------------------------------------------------
Education 4.0%
- --------------------------------------------------------------------------------
Other Revenue 3.9%
- --------------------------------------------------------------------------------
Health Care 0.9%
- --------------------------------------------------------------------------------
General Obligations 0.9%
- --------------------------------------------------------------------------------
</TABLE>
FOR A COMPLETE LIST OF PORTFOLIO HOLDINGS, PLEASE SEE PAGE 62 OF THIS REPORT.
Georgia had the seventh-fastest employment growth rate in the nation. Employment
increases in transportation, services and trade and government contributed
heavily to this accelerated growth rate. Looking forward, the '96 Atlanta
Olympics should buoy economic activity for at least the next two years, and
spotlight the area for investment of business capital.
+Source: Standard & Poor's Creditweek Municipal, 5/16/94.
15
<PAGE>
================================================================================
PERFORMANCE SUMMARY
The Franklin Georgia Tax-Free Income Fund's share price, as measured by net
asset value, declined from $12.00 on February 28, 1994, to $11.54 on February
28, 1995.
The fund continued to meet its investment objective of providing high current
income to its shareholders. For the one-year period ended February 28, 1995,
your fund paid monthly income distributions totaling 66 cents ($0.66) per
share.++ 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 5.48%,
based on an annualization of the current monthly dividend of 5.5 cents ($0.055)
per share and the maximum offering price of $12.05 on February 28, 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 9.65% from a taxable investment to match your fund's tax-free
distribution rate.
- --------------------------------------------------------------------------------
(See Appendix for description of Graphic Material 8)
- --------------------------------------------------------------------------------
The Franklin Georgia Tax-Free Income Fund provided a total return of +1.90% for
the one-year period ended February 28, 1995. Total return measures the change in
value of an investment during the period indicated, assuming reinvestment of
dividends and capital gains, if any. This calculation does not include the
initial sales charge. Past performance is not predictive of future results.
Since 1988, the Franklin Georgia Tax-Free Income Fund's performance has exceeded
the Consumer Price Index (CPI), keeping your purchasing power well ahead of
inflation -- a primary goal of any investment. The fund, however, has slightly
underperformed the unmanaged Lehman Brothers Municipal Bond Index as illustrated
by the chart on the following page. The Lehman Index has some inher-
++Assumes 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.
16
<PAGE>
================================================================================
ent performance differentials over any fund, as it holds no cash in its
portfolio and involves no sales charges or management expenses. In addition, the
index includes municipal securities from across the country while your fund is
composed primarily of Georgia municipal bonds. An investor cannot invest
directly in an index.
Your fund's managers maintain a long-term investment perspective and we
encourage our shareholders to do the same. While the fund may experience
volatility from time to time, we believe that its performance will be rewarding
over the long term. For example, as the table to the right demonstrates, the
fund has provided an average annual total return of +7.64% since its inception
in 1987.
FRANKLIN GEORGIA TAX-FREE INCOME FUND
Periods ended February 28, 1995
<TABLE>
<CAPTION>
SINCE
INCEPTION
1-YEAR 5-YEAR (9/1/87)
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Cumulative Total Return(1) 1.90% 44.64% 81.50%
Average Annual
Total Return(2) -2.41% 6.74% 7.64%
</TABLE>
<TABLE>
<S> <C>
Distribution Rate(3) 5.48%
Taxable Equivalent Distribution Rate(4) 9.65%
30-Day Standardized Yield(5) 5.20%
Taxable Equivalent Yield(4) 9.16%
- ------------------------------------------------------------------------
</TABLE>
(1.) Cumulative total returns measure the change in value of an investment over
the periods indicated and do 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 have been restated to
reflect the maximum 4.25% initial sales charge. See note below.
(3.) Based on an annualization of the fund's current 5.5 cent per share monthly
dividend and the maximum offering price of $12.05 on February 28, 1995.
(4.) Taxable equivalent distribution rate and yield assume the 1995 maximum
43.2% combined federal and Georgia state income tax bracket, 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 2/28/95.
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 implemented
a plan of distribution under Rule 12b-1 and eliminated the sales charge on
reinvested dividends, which will affect future performance. 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 is not
predictive of future results.
Past expense reductions by the fund's manager increased the fund's total
returns.
- --------------------------------------------------------------------------------
(See Appendix for description of Graphic Material 9)
*This performance graph assumes an intial $10,000 investment and includes the
maximum 4.25% sales charge, all fund expenses and account fees. It also assumes
that your dividends and capital gains were reinvested at net asset value. The
Lehman Brothers Municipal Bond Index includes price appreciation or depreciation
and distributions as a percentage of the original investment. Past performance
cannot guarantee future results.
- --------------------------------------------------------------------------------
17
<PAGE>
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.*
The fund's fiscal year was difficult for municipal bonds and other fixed-income
investments. Rising interest rates caused prices of most bonds to decline, and
the derivative-induced bankruptcy of Orange County, California added to the
volatility in the municipal bond market.
On a positive note, higher interest rates enabled us to sell some of the fund's
lower coupon securities and purchase higher yielding current coupon bonds. As
a result, the fund's average coupon rose from 6.03% on February 28, 1994, to
6.23% on February 28, 1995. This action should be significant in helping the
fund increase its income-generating power.
Higher interest rates also helped increase the fund's 30-day yield, which at
5.73% on February 28, 1995, was significantly higher than the yield of the
average Kentucky municipal bond fund. The fund's yield placed it first among
seven Kentucky municipal bond funds, as measured by Lipper Analytical Services,
Inc.** According to Lipper, the average Kentucky municipal bond fund offered a
30-day yield of 5.08% on February 28, 1995.
- --------------------------------------------------------------------------------
(See Appendix for description of Graphic Material 10)
- --------------------------------------------------------------------------------
We remain conservative in our management of the fund. The chart above
illustrates that at the end of the fiscal year, nearly 50% of the fund's
securities were rated AAA -- the highest rating possible -by Standard & Poor's,
or were judged to be of comparable credit quality by the fund's managers.
Credit quality is an essential component of bond selection. We evaluate each
issue on an individual basis, favoring highly rated "essential service" bonds.
These securities tend to have a more reliable income stream as they are backed
by dependable revenue generated from projects such as
*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.
**The fund was ranked #1 out of 7 Kentucky municipal bond funds for yield for
the one-year period ended February 28, 1995, and #5 out of 7 funds for total
return for the one-year period ended February 28, 1995, as measured by Lipper
Analytical Services, Inc., a nationally recognized mutual fund rating
organization. Lipper rankings do not include sales charges; past and present
expense limitations increased the fund's total returns. Rankings may have been
different if these factors had been considered. Past performance cannot
guarantee future results.
18
<PAGE>
================================================================================
schools, 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. Like all
mutual funds, however, the principal value of the fund's holdings as well as the
price of its shares will fluctuate with market conditions.
We also seek to reduce the fund's risk through diversification. On February 28,
1995, the fund's assets spanned a broad range of cities and counties throughout
Kentucky. Furthermore, we purchase securities from a variety of municipal
sectors, as the table to the right illustrates.
Our outlook for the fund is positive. Recent economic reports indicate that U.S.
economic growth has stabilized at a healthy and sustainable level, while
inflation has remained subdued. More signs of a slowing economy should
eventually result in a gradual decline in interest rates, which could positively
affect bond prices and thus, the fund's price per share.
Municipal bond issuance in Kentucky was down 63.8% in 1994, to $1.4 billion.
Supply in 1995 is again expected to be low, which should continue to support
prices of Kentucky municipal bonds. During the November 1994 election, an
amendment to the Kentucky constitution was passed that allows local governments
- -- not the state -- to issue unlimited general obligation debt up to a certain
amount without voter approval. This could potentially save local governments a
significant amount of money by
FRANKLIN KENTUCKY TAX-FREE INCOME FUND
Portfolio Breakdown on February 28, 1995
As a percentage of total net assets
<TABLE>
<CAPTION>
% OF TOTAL
SECTOR NET ASSETS
- --------------------------------------------------------------------------------
<S> <C>
Utilities 27.6%
- --------------------------------------------------------------------------------
Other Revenue 14.4%
- --------------------------------------------------------------------------------
Hospitals 12.0%
- --------------------------------------------------------------------------------
Housing 9.6%
- --------------------------------------------------------------------------------
Transportation 9.3%
- --------------------------------------------------------------------------------
Industria l9.2%
- --------------------------------------------------------------------------------
Education 9.0%
- --------------------------------------------------------------------------------
Certificates of Participation 7.0%
- --------------------------------------------------------------------------------
Pre-Refunded 1.9%
- --------------------------------------------------------------------------------
</TABLE>
FOR A COMPLETE LIST OF PORTFOLIO HOLDINGS, PLEASE SEE PAGE 66 OF THIS REPORT.
creating more secure financing with higher ratings, and, therefore, lower
issuance costs than other types of bonds.
Kentucky's economy has exhibited moderate growth over the last several years
despite generally weak national activity. The state has shifted away from
outdated heavy manufacturing, tobacco, coal and horse industries, focusing
instead on modern manufacturing and services. The low costs of living and doing
business, combined with aggressive recruitment and business incentive programs,
have enabled the state to add a number of high-profile corporate expansions and
relocations.
19
<PAGE>
================================================================================
PERFORMANCE SUMMARY
The Franklin Kentucky Tax-Free Income Fund's share price, as measured by net
asset value, declined from $11.18 on February 28, 1994, to $10.54 on February
28, 1995.
The fund continued to meet its investment objective of providing high current
income to its shareholders. For the one-year period ended February 28, 1995,
your fund paid monthly income distributions totaling 62.4 cents ($0.624) per
share.+ Due to almost five years of declining interest rates, it was necessary
to adjust the fund's monthly dividend from 5.5 cents ($0.055) per share to 5.1
cents ($0.051) per share, effective with the June 1994 distribution. 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 5.56%,
based on an annualization of the current monthly dividend of 5.1 cents ($0.051)
per share and the maximum offering price of $11.01 on February 28, 1995. This
double tax-free rate is generally higher than the after-tax return on a
comparable taxable investment. For example, if you
- --------------------------------------------------------------------------------
(See Appendix for description of Graphic Material 11)
- --------------------------------------------------------------------------------
are in the maximum combined federal and Kentucky 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.
The Franklin Kentucky Tax-Free Income Fund provided a total return of +0.14% for
the one-year period ended February 28, 1995. Total return measures the change in
value of an investment during the period indicated, assuming reinvestment of
dividends and capital gains, if any. This calculation does not include the
initial sales charge. Past performance is not predictive of future results.
Since 1992, the Franklin Kentucky Tax-Free Income Fund's performance has
exceeded the Consumer Price Index (CPI), keeping your purchasing power well
ahead of inflation -- a primary goal of any investment. The fund, however,
underperformed the
+Assumes 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.
20
<PAGE>
================================================================================
unmanaged Lehman Brothers Municipal Bond Index as illustrated by the chart
below. The Lehman Index has some inherent performance differentials over any
fund, as it holds no cash in its portfolio and involves no sales charges or
management expenses. In addition, the index includes municipal securities from
across the country while your fund is composed primarily of Kentucky municipal
bonds. An investor cannot invest directly in an index.
Your fund's managers maintain a long-term investment perspective and we
encourage our shareholders to do the same. While the fund may experience
volatility from time to time, we believe that its performance will be rewarding
over the long term. For example, as the table to the right demonstrates, the
fund has provided an average annual total return of +5.82% since its inception
in 1991.
FRANKLIN KENTUCKY TAX-FREE INCOME FUND
Periods ended February 28, 1995
<TABLE>
<CAPTION>
SINCE
INCEPTION
1-YEAR 5-YEAR (10/12/91)
- -----------------------------------------------------------------------
<S> <C> <C> <C>
Cumulative Total Return(1) 0.14% 22.77% 26.45%
Average Annual
Total Return(2) -4.14% 5.53% 5.82%
</TABLE>
<TABLE>
<S> <C>
Distribution Rate(3) 5.56%
Taxable Equivalent Distribution Rate(4) 9.79%
30-Day Standardized Yield(5) 5.73%
Taxable Equivalent Yield(4) 10.09%
- -----------------------------------------------------------------------
</TABLE>
(1.) Cumulative total returns measure the change in value of an investment over
the periods indicated and do 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 have been restated to
reflect the maximum 4.25% initial sales charge. See note below.
(3.) Based on an annualization of the fund's current 5.1 cent per share monthly
dividend and the maximum offering price of $11.01 on February 28, 1995.
(4.) Taxable equivalent distribution rate and yield assume the 1995 maximum,
combined federal and Kentucky 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 2/28/95.
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 implemented
a plan of distribution under Rule 12b-1 and eliminated the sales charge on
reinvested dividends, which will affect future performance. 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 is not
predictive of future results.
The manager of the fund has agreed to waive a portion of its 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 and total return would have been lower, and yield for
the period would have been 5.21%. The fee waiver may be discontinued at any
time.
- --------------------------------------------------------------------------------
(See Appendix for description of Graphic Material 12)
*This performance graph assumes an intial $10,000 investment and includes the
maximum 4.25% sales charge, all fund expenses and account fees. It also assumes
that your dividends and capital gains were reinvested at net asset value. The
Lehman Brothers Municipal Bond Index includes price appreciation or depreciation
and distributions as a percentage of the original investment. Past performance
cannot guarantee future results.
- --------------------------------------------------------------------------------
21
<PAGE>
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.*
The fund's fiscal year was difficult for municipal bonds and other fixed-income
investments. Rising interest rates caused prices of most bonds to decline, and
the derivative-induced bankruptcy of Orange County, California added to the
volatility in the municipal bond market.
Due to the volatile environment of the municipal bond market over the past year,
the fund has maintained a defensive stance in focusing on higher grade essential
service bonds. The higher level of pre-refunded bonds has provided more
liquidity, and has helped mitigate the downside risk of the market. The fund's
higher earnings and its dividend increase from 5.3 cents to 5.4 cents per share
in December 1994 were a result of our research and investment into higher coupon
issues. The fund's average coupon rose slightly from 6.94% on February 28, 1994,
to 7.24% on February 28, 1995.
While our investment strategy focuses on income rather than total return, the
fund reported a total return of +1.17% for the fiscal year -- more than double
the average total return of other Louisiana municipal bond funds. According to
Lipper Analytical Services, Inc., the average total return of
- --------------------------------------------------------------------------------
(See Appendix for description of Graphic Material 13)
- --------------------------------------------------------------------------------
Louisiana municipal bond funds was +0.55% for the year ended February 28,
1995.**
The higher yield of the fund was not associated with a decrease in security
quality, as we remain conservative in our management of the fund. At the end of
the fiscal year, over 40% of the fund's securities were rated AAA -- the highest
rating possible -- by Standard & Poor's, or were judged by the fund's managers
to be of comparable credit quality. We evaluate each issue on an individual
basis, favoring highly rated "essential service" bonds. These securities tend to
have a more reliable income stream as
*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.
**The fund was ranked #4 out of 13 Louisiana municipal bond funds for the
one-year period, and #3 out of 5 funds for the five-year period ended February
28, 1995, as measured by Lipper Analytical Services, Inc., a nationally
recognized mutual fund rating organization. Lipper rankings do not include sales
charges, and past expense limitations increased the fund's total returns.
Rankings may have been different if these factors had been considered. Past
performance cannot guarantee future results.
22
<PAGE>
================================================================================
they are backed by dependable revenue generated from projects such as
courthouses, utilities, and water, power and sewer 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.
Like all mutual funds, however, the principal value of the fund's holdings as
well as the price of its shares will fluctuate with market conditions.
We also seek to reduce the fund's risk through diversification. On February 28,
1995, the fund's assets spanned a broad range of cities and counties throughout
Louisiana. Furthermore, we purchase securities from a variety of municipal
sectors, as the table to the right illustrates.
Our outlook for the fund is positive. Recent economic reports indicate that U.S.
economic growth has stabilized at a healthy and sustainable level, while
inflation has remained subdued. More signs of a slowing economy should
eventually result in a gradual decline in interest rates, which should
positively affect bond prices and thus, the fund's price per share.
Louisiana's economy continues to diversify, but with its energy-oriented economy
the effort has been slow. The state depends on the production of oil, natural
gas, and petrochemicals; thus, the effects of recent reductions in domestic oil
production have been felt in Louisiana. With the energy sector of the
FRANKLIN LOUISIANA TAX-FREE INCOME FUND
Portfolio Breakdown on February 28, 1995
As a percentage of total net assets
<TABLE>
<CAPTION>
% OF TOTAL
SECTOR NET ASSETS
- --------------------------------------------------------------------------------
<S> <C>
Utilities 27.3%
- --------------------------------------------------------------------------------
Housing 15.7%
- --------------------------------------------------------------------------------
Pre-Refunded 14.0%
- --------------------------------------------------------------------------------
Hospitals 12.8%
- --------------------------------------------------------------------------------
Other Revenue 11.4%
- --------------------------------------------------------------------------------
Industria l7.1%
- --------------------------------------------------------------------------------
Certificate of Participation 4.1%
- --------------------------------------------------------------------------------
General Obligations 3.6%
- --------------------------------------------------------------------------------
Transportation 1.8%
- --------------------------------------------------------------------------------
Sales Tax Bonds 1.7%
- --------------------------------------------------------------------------------
Education 0.5%
- --------------------------------------------------------------------------------
</TABLE>
FOR A COMPLETE LIST OF PORTFOLIO HOLDINGS, PLEASE SEE PAGE 69 OF THIS REPORT.
economy shrinking, the services sector has become the state's largest economic
sector, accounting for 25% of the 1.7 million employment base.+
Legal gambling in the state has contributed greatly to the construction and
services sectors of the economy. Tourism may rebound with the construction of
riverboat and land-based casinos in the New Orleans region.
+Source: Standard & Poor's Creditweek Municipal, 1/9/95.
23
<PAGE>
================================================================================
PERFORMANCE SUMMARY
The Franklin Louisiana Tax-Free Income Fund's share price, as measured by net
asset value, declined from $11.56 on February 28, 1994, to $11.03 on February
28, 1995.
The fund continued to meet its investment objective of providing high current
income to its shareholders. For the one-year period ended February 28, 1995,
your fund paid monthly income distributions totaling 63.9 cents ($0.639)per
share.++ We are pleased to inform you that your fund's monthly dividend was
increased from 5.3 cents ($0.053) per share to 5.4 cents ($0.054) per share,
effective with the December 1994 distribution. 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 5.63%,
based on an annualization of the current monthly dividend of 5.4 cents ($0.054)
per share and the maximum offering price of $11.52 on February 28, 1995. This
double tax-free rate is generally higher than the after-tax return on a
comparable taxable investment. For example, if you are
- --------------------------------------------------------------------------------
(See Appendix for description of Graphic Material 14)
- --------------------------------------------------------------------------------
in the maximum combined federal and Louisiana state personal income tax bracket
of 43.2%, you would have to earn 9.91% from a taxable investment to match your
fund's tax-free distribution rate.
The Franklin Louisiana Tax-Free Income Fund provided a total return of +1.17%
for the one-year period ended February 28, 1995. Total return measures the
change in value of an investment during the period indicated, assuming
reinvestment of dividends and capital gains, if any. This calculation does not
include the initial sales charge. Past performance is not predictive of future
results.
Since 1988, the Franklin Louisiana Tax-Free Income Fund's performance has
exceeded the Consumer Price Index (CPI), keeping your purchasing power well
ahead of inflation -- a primary goal of any investment. The fund, however, has
slightly underperformed the unmanaged Lehman Brothers
++Assumes 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.
24
<PAGE>
================================================================================
Municipal Bond Index as illustrated by the chart below. The Lehman Index has
some inherent performance differentials over any fund, as it holds no cash in
its portfolio and involves no sales charges or management expenses. In addition,
the index includes municipal securities from across the country while your fund
is composed primarily of Louisiana municipal bonds. An investor cannot invest
directly in an index.
Your fund's managers maintain a long-term investment perspective and we
encourage our shareholders to do the same. While the fund may experience
volatility from time to time, we believe that its performance will be rewarding
over the long term. For example, as the table to the right demonstrates, the
fund has provided an average annual total return of +7.46% since its inception
in 1987.
FRANKLIN LOUISIANA TAX-FREE INCOME FUND
Periods ended February 28, 1995
<TABLE>
<CAPTION>
SINCE
INCEPTION
1-YEAR 5-YEAR (9/1/87)
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Cumulative Total Return(1) 1.17% 44.33% 79.24%
Average Annual
Total Return(2) -3.10% 6.68% 7.46%
</TABLE>
<TABLE>
<S> <C>
Distribution Rate(3) 5.63%
Taxable Equivalent Distribution Rate(4) 9.91%
30-Day Standardized Yield(5) 5.50%
Taxable Equivalent Yield(4) 9.68%
- -----------------------------------------------------------------------
</TABLE>
(1.) Cumulative total returns measure the change in value of an investment over
the periods indicated and do 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 have been restated to
reflect the maximum 4.25% initial sales charge. See note below.
(3.) Based on an annualization of the fund's current 5.4 cent per share monthly
dividend and the maximum offering price of $11.52 on February 28, 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 2/28/95.
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 implemented
a plan of distribution under Rule 12b-1 and eliminated the sales charge on
reinvested dividends, which will affect future performance. 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 is not
predictive of future results.
Past expense reductions by the fund's manager increased the fund's total
returns.
- --------------------------------------------------------------------------------
(See Appendix for description of Graphic Material 15)
*This performance graph assumes an intial $10,000 investment and includes the
maximum 4.25% sales charge, all fund expenses and account fees. It also assumes
that your dividends and capital gains were reinvested at net asset value. The
Lehman Brothers Municipal Bond Index includes price appreciation or depreciation
and distributions as a percentage of the original investment. Past performance
cannot guarantee future results.
- --------------------------------------------------------------------------------
25
<PAGE>
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.*
The fund's fiscal year was difficult for municipal bonds and other fixed-income
investments. Rising interest rates caused prices of most bonds to decline, and
the derivative-induced bankruptcy of Orange County, California added to the
volatility in the municipal bond market.
On a positive note, higher rates enabled us to sell some of the fund's lower
coupon securities and purchase higher yielding, current coupon bonds. As a
result, the fund's average coupon rose slightly from 6.77% on February 28, 1994,
to 6.78% on February 28, 1995, allowing the fund to experience higher earnings.
These higher earnings resulted in a dividend increase from 5.1 cents per share
to 5.2 cents per share in December 1994.
While our investment strategy focuses on income rather than total return, the
fund reported a total return of +1.81% for the fiscal year -- more than six
times the average total return of other Maryland municipal bond funds. According
to Lipper Analytical Services, Inc., the average total return of Maryland
municipal bond funds was +0.29% for the year ended February 28, 1995.** The
fund's return placed it second among 23 Maryland municipal bond funds.
- --------------------------------------------------------------------------------
(See Appendix for description of Graphic Material 16)
- --------------------------------------------------------------------------------
We remain conservative in our management of the fund. At the end of the fiscal
year, over 30% of the fund's securities were rated AAA -- the highest rating
possible -- by Standard & Poor's, or were judged to be of comparable credit
quality by the fund's managers. We evaluate each issue on an individual basis,
favoring highly rated "essential service" bonds. These securities tend to have a
more reliable income stream as they are backed by dependable revenue generated
from projects such as utilities, transportation and water, power and
*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.
The risks of investing in a non-diversified fund, such as increased
susceptibility to adverse economic or regulatory developments, are described in
the prospectus.
**The fund was ranked #2 out of 23 Maryland municipal bond funds for the
one-year period, and #3 out of 8 funds for the five-year period ended February
28, 1995, as measured by Lipper Analytical Services, Inc., a nationally
recognized mutual fund rating organization. Lipper rankings do not include sales
charges, and past expense limitations increased the fund's total returns.
Rankings may have been different if these factors had been considered. Past
performance cannot guarantee future results.
26
<PAGE>
================================================================================
sewer 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. Like all mutual funds, however, the
principal value of the fund's holdings as well as the price of its shares will
fluctuate with market conditions.
We also seek to reduce the fund's risk by spreading its assets among a broad
range of cities and counties throughout Maryland. Additionally, we purchase
securities from a variety of municipal sectors, as the table to the right
illustrates.
Our outlook for the fund is positive. Recent economic reports indicate that U.S.
economic growth has stabilized at a healthy and sustainable level, while
inflation has remained subdued. More signs of a slowing economy should
eventually result in a gradual decline in interest rates, which could positively
affect bond prices and thus, the fund's price per share.
Municipal bond issuance in Maryland dropped from $6.5 billion in 1993 to $3.4
billion in 1994. This short supply and the state's strong credit reputation
helped support prices of Maryland's municipal bonds.
While the nation's recovery began in early 1991, Maryland did not begin to
register job gains until a year and a half later. Since September 1992, the
state has experienced a moderate recovery; however, large-scale downsizing by
key state employers has countered increases in employment.
FRANKLIN MARYLAND TAX-FREE INCOME FUND
Portfolio Breakdown on February 28, 1995
As a percentage of total net assets
<TABLE>
<CAPTION>
% OF TOTAL
SECTOR NET ASSETS
- --------------------------------------------------------------------------------
<S> <C>
Housing 24.9%
- --------------------------------------------------------------------------------
Utilities 20.0%
- --------------------------------------------------------------------------------
Hospitals 13.8%
- --------------------------------------------------------------------------------
Pre-Refunded 12.0%
- --------------------------------------------------------------------------------
Other Revenue 8.6%
- --------------------------------------------------------------------------------
General Obligations 5.9%
- --------------------------------------------------------------------------------
Transportation 5.7%
- --------------------------------------------------------------------------------
Certificates of Participation 5.3%
- --------------------------------------------------------------------------------
Health Care 2.3%
- --------------------------------------------------------------------------------
Education 1.5%
- --------------------------------------------------------------------------------
</TABLE>
FOR A COMPLETE LIST OF PORTFOLIO HOLDINGS, PLEASE SEE PAGE 73 OF THIS REPORT.
The state gained 21,300 jobs during the 1994 fiscal year -- the best record
since 1990.+ Future employment trends in the state indicate that Maryland should
grow at a moderate pace, with weakness in some sectors (communications,
government, banking, insurance industry, and health care) being offset by gains
in others (business services, health services, personal services, high-tech
services, computers, engineering and research services). Additionally,
Maryland's personal income is projected to increase by 5.9% and 5.7% in 1995 and
1996, respectively.
+Source: Standard & Poor's Creditweek Municipal, 11/28/94.
27
<PAGE>
================================================================================
PERFORMANCE SUMMARY
The Franklin Maryland Tax-Free Income Fund's share price, as measured by net
asset value, declined from $11.36 on February 28, 1994, to $10.92 on February
28, 1995.
The fund continued to meet its investment objective of providing high current
income to shareholders. For the one-year period ended February 28, 1995, your
fund paid monthly income distributions totaling 61.5 cents ($0.615) per share.+
We are pleased to inform you that your fund's monthly dividend was increased
from 5.1 cents ($0.051) per share to 5.2 cents ($0.052) per share, effective
with the December 1994 distribution. 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 5.47%,
based on an annualization of the current monthly dividend of 5.2 cents ($0.052)
per share and the maximum offering price of $11.40 on February 28, 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 combined federal and
Maryland state
- --------------------------------------------------------------------------------
(See Appendix for description of Graphic Material 17)
- --------------------------------------------------------------------------------
personal income tax bracket of 45.4%, you would have to earn 10.02% from a
taxable investment to match your fund's tax-free distribution rate.
The Franklin Maryland Tax-Free Income Fund provided a total return of +1.81% for
the one-year period ended February 28, 1995. Total return measures the change in
value of an investment during the period indicated, assuming reinvestment of
dividends and capital gains, if any. This calculation does not include the
initial sales charge. Past performance is not predictive of future results.
Since 1989, the Franklin Maryland Tax-Free Income Fund's performance has
exceeded the Consumer Price Index (CPI), keeping your purchasing power well
ahead of inflation -- a primary goal of any investment. The fund, however,
underperformed the
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distribution may 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.
28
<PAGE>
================================================================================
unmanaged Lehman Brothers Municipal Bond Index as illustrated by the chart
below. The Lehman Index has some inherent performance differentials over any
fund, as it holds no cash in its portfolio and involves no sales charges or
management expenses. In addition, the index includes municipal securities from
across the country while your fund is composed primarily of Maryland municipal
bonds. An investor cannot invest directly in an index.
Your fund's managers maintain a long-term investment perspective and we
encourage our shareholders to do the same. While the fund may experience
volatility from time to time, we believe that its performance will be rewarding
over the long term. For example, as the table to the right demonstrates, the
fund has provided an average annual total return of +6.90% since its inception
in 1988.
FRANKLIN MARYLAND TAX-FREE INCOME FUND
Periods ended February 28, 1995
<TABLE>
<CAPTION>
SINCE
INCEPTION
1-YEAR 5-YEAR (10/3/88)
- -----------------------------------------------------------------------
<S> <C> <C> <C>
Cumulative Total Return(1) 1.81% 44.65% 60.09%
Average Annual
Total Return(2) -2.48% 6.73% 6.90%
</TABLE>
<TABLE>
<S> <C>
Distribution Rate(3) 5.47%
Taxable Equivalent Distribution Rate(4) 10.02%
30-Day Standardized Yield(5) 5.43%
Taxable Equivalent Yield(4) 9.95%
</TABLE>
(1.) Cumulative total returns measure the change in value of an investment over
the periods indicated and do 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 have been restated to
reflect the maximum 4.25% initial sales charge. See note below.
(3.) Based on an annualization of the fund's current 5.2 cent per share monthly
dividend and the maximum offering price of $11.40 on February 28, 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 2/28/95.
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 implemented
a plan of distribution under Rule 12b-1 and eliminated the sales charge on
reinvested dividends, which will affect future performance. 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 is not
predictive of future results.
Past expense reductions by the fund's manager increased the fund's total
returns.
- --------------------------------------------------------------------------------
(See Appendix for description of Graphic Material 18)
*This performance graph assumes an intial $10,000 investment and includes the
maximum 4.25% sales charge, all fund expenses and account fees. It also assumes
that your dividends and capital gains were reinvested at net asset value. The
Lehman Brothers Municipal Bond Index includes price appreciation or depreciation
and distributions as a percentage of the original investment. Past performance
cannot guarantee future results.
- --------------------------------------------------------------------------------
29
<PAGE>
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.*
The fund's fiscal year was difficult for municipal bonds and other fixed-income
investments. Rising interest rates caused prices of most bonds to decline, and
the derivative-induced bankruptcy of Orange County, California added to the
volatility in the municipal bond market.
On a positive note, higher rates enabled us to sell some of the fund's lower
coupon securities and purchase higher yielding current coupon bonds. As a
result, the fund's average coupon rose slightly from 6.73% on February 28, 1994,
to 6.77% on February 28, 1995. This action should be significant in helping the
fund increase its income-generating power.
While our investment strategy focuses on income rather than total return, the
fund reported a total return of +1.47% for the fiscal year -- more than four
times the average total return of other Missouri municipal bond funds. According
to Lipper Analytical Services, Inc., the average total return of Missouri
municipal bond funds was +0.32% for the year ended February 28, 1995.** The
fund's return placed it fourth among 16 Missouri municipal bond funds, as
measured by Lipper.
- --------------------------------------------------------------------------------
(See Appendix for description of Graphic Material 19)
- --------------------------------------------------------------------------------
We remain conservative in our management of the fund. At the end of the fiscal
year, 58% of the fund's securities were rated AAA -- the highest rating possible
- -- by Standard & Poor's, or were judged to be of comparable credit quality by
the fund's managers. We evaluate each issue on an individual basis, favoring
highly rated "essential service" bonds. These securities tend to have a more
reliable income stream as they are backed by dependable revenue generated from
projects such as courthouses, jails, and water, power and sewer projects, to
name a few. As a result, these bonds tend to be less affected by budgetary and
political changes,
*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.
**The fund was ranked #4 out of 16 Missouri municipal bond funds for the
one-year period, and #2 out of 5 funds for the five-year period ended February
28, 1995, as measured by Lipper Analytical Services, Inc., a nationally
recognized mutual fund rating organization. Lipper rankings do not include sales
charges, and past expense limitations increased the fund's total returns.
Rankings may have been different if these factors had been considered. Past
performance cannot guarantee future results.
30
<PAGE>
================================================================================
and are believed to be very attractive in a municipal cost-cutting environment.
Like all mutual funds, however, the principal value of the fund's holdings as
well as the price of its shares will fluctuate with market conditions.
We also seek to reduce the fund's risk through diversification. On February 28,
1995, the fund's assets spanned cities and counties throughout Missouri.
Additionally, we purchase securities from a variety of municipal sectors, as the
table to the right illustrates.
Our outlook for the fund is positive. Recent economic reports indicate that U.S.
economic growth has stabilized at a healthy and sustainable level, while
inflation has remained subdued. More signs of a slowing economy should
eventually result in a gradual decline in interest rates, which could positively
affect bond prices and thus, the fund's price per share.
Municipal bond issuance in Missouri declined 52.1% in 1994 to $1.8 billion.*
Supply is expected to be low again in 1995, which should continue to help
support prices of Missouri bonds. The state maintained its AAA credit rating,
which also helped support its bond prices.
Missouri's economy closely reflects that of the nation. It is extremely diverse,
with manufacturing, finance, and agriculture remaining the dominant sectors.
Both of the state's key manufacturing industries -- motor vehicles and
defense-related
FRANKLIN MISSOURI TAX-FREE INCOME FUND
Portfolio Breakdown on February 28, 1995
As a percentage of total net assets
<TABLE>
<CAPTION>
% OF TOTAL
SECTOR NET ASSETS
- --------------------------------------------------------------------------------
<S> <C>
Certificates of Participation 22.8%
- --------------------------------------------------------------------------------
Pre-Refunded 21.9%
- --------------------------------------------------------------------------------
Utilities 18.6%
- --------------------------------------------------------------------------------
Hospitals 12.1%
- --------------------------------------------------------------------------------
Housing 6.5%
- --------------------------------------------------------------------------------
Other Revenue 5.3%
- --------------------------------------------------------------------------------
Transportation 3.7%
- --------------------------------------------------------------------------------
Health Care 2.6%
- --------------------------------------------------------------------------------
Education 2.5%
- --------------------------------------------------------------------------------
Industrial 2.0%
- --------------------------------------------------------------------------------
Tax Allocation Bonds 1.6%
- --------------------------------------------------------------------------------
General Obligations 0.4%
- --------------------------------------------------------------------------------
</TABLE>
FOR A COMPLETE LIST OF PORTFOLIO HOLDINGS, PLEASE SEE PAGE 77 OF THIS REPORT.
goods -- experienced widespread layoffs in the early 1990s; however, strong
sales of minivans as well as a bottoming-out of defense downsizing should help
to stabilize these sectors. Based on personal income trends, we believe that
Missouri should experience modest economic growth in 1995.
*Source: Standard & Poor's Creditweek Municipal, 3/21/94.
31
<PAGE>
================================================================================
PERFORMANCE SUMMARY
The Franklin Missouri Tax-Free Income Fund's share price, as measured by net
asset value, declined from $11.94 on February 28, 1994, to $11.44 on February
28, 1995.
The fund continued to meet its investment objective of providing high current
income to shareholders. For the one-year period ended February 28, 1995, your
fund paid monthly income distributions totaling 64.8 cents ($0.648) per share.+
Five years of falling interest rates forced us to adjust the monthly dividend
from 5.5 cents ($0.055) per share to 5.3 cents ($0.053) per share, effective
with the September 1994 distribution. 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 5.32%,
based on an annualization of the current monthly dividend of 5.3 cents ($0.053)
per share and the maximum offering price of $11.95 on February 28, 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
- --------------------------------------------------------------------------------
(See Appendix for description of Graphic Material 20)
- --------------------------------------------------------------------------------
state personal income tax bracket of 43.2%, you would have to earn 9.37% from a
taxable investment to match your fund's tax-free distribution rate.
The Franklin Missouri Tax-Free Income Fund provided a total return of +1.47% for
the one-year period ended February 28, 1995. Total return measures the change in
value of an investment during the period indicated, assuming reinvestment of
dividends and capital gains, if any. This calculation does not include the
initial sales charge. Past performance is not predictive of future results.
Since 1988, the Franklin Missouri Tax-Free Income Fund's performance has
exceeded the Consumer Price Index (CPI), keeping your purchasing power well
ahead of inflation -- a primary goal of any investment. The fund, however, has
slightly under-
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distribution may 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.
32
<PAGE>
================================================================================
performed the unmanaged Lehman Brothers Municipal Bond Index as illustrated by
the chart below. The Lehman Index has some inherent performance differentials
over any fund, as it holds no cash in its portfolio and involves no sales
charges or management expenses. In addition, the index includes municipal
securities from across the country while your fund is composed primarily of
Missouri municipal bonds. An investor cannot invest directly in an index.
Your fund's managers maintain a long-term investment perspective and we
encourage our shareholders to do the same. While the fund may experience
volatility from time to time, we believe that its performance will be rewarding
over the long term. For example, as the table to the right demonstrates, the
fund has provided an average annual total return of +7.55% since its inception
in 1987
FRANKLIN MISSOURI TAX-FREE INCOME FUND
Periods ended February 28, 1995
<TABLE>
<CAPTION>
SINCE
INCEPTION
1-YEAR 5-YEAR (9/1/87)
- -----------------------------------------------------------------------
<S> <C> <C> <C>
Cumulative Total Return(1) 1.47% 46.70% 80.38%
Average Annual
Total Return(2) -2.84% 7.04% 7.55%
</TABLE>
<TABLE>
<S> <C>
Distribution Rate(3) 5.32%
Taxable Equivalent Distribution Rate(4) 9.37%
30-Day Standardized Yield(5) 5.24%
Taxable Equivalent Yield(4) 9.23%
- -----------------------------------------------------------------------
</TABLE>
(1.) Cumulative total returns measure the change in value of an investment over
the periods indicated and do 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 have been restated
to reflect the maximum 4.25% initial sales charge. See note below.
(3.) Based on an annualization of the fund's current 5.3 cent per share monthly
dividend and the maximum offering price of $11.95 on February 28, 1995.
(4.) Taxable equivalent distribution rate and yield assume the 1995 maximum
43.2% combined federal and Missouri state income tax bracket, 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 2/28/95.
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 implemented
a plan of distribution under Rule 12b-1 and eliminated the sales charge on
reinvested dividends, which will affect future performance. 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 is not
predictive of future results.
Past expense reductions by the fund's manager increased the fund's total
returns.
- --------------------------------------------------------------------------------
(See Appendix for description of Graphic Material 21)
*This performance graph assumes an intial $10,000 investment and includes the
maximum 4.25% sales charge, all fund expenses and account fees. It also assumes
that your dividends and capital gains were reinvested at net asset value. The
Lehman Brothers Municipal Bond Index includes price appreciation or depreciation
and distributions as a percentage of the original investment. Past performance
cannot guarantee future results.
- --------------------------------------------------------------------------------
33
<PAGE>
FRANKLIN NORTHCAROLINA 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.*
The fund's fiscal year was difficult for municipal bonds and other fixed-income
investments. Rising interest rates caused prices of most bonds to decline, and
the derivative-induced bankruptcy of Orange County, California added to the
volatility in the municipal bond market.
On a positive note, higher rates enabled us to sell some of the fund's lower
coupon securities and purchase higher yielding, current coupon bonds. As a
result, the fund's average coupon rose slightly from 6.57% on February 28, 1994,
to 6.67% on February 28, 1995. This action should be significant in helping the
fund increase its income-generating power.
While our investment strategy focuses on income rather than total return, the
fund reported a total return of +1.06% for the fiscal year -- more than triple
the average total return of other North Carolina municipal bond funds. According
to Lipper Analytical Services, Inc., the average total return of North Carolina
municipal bond funds was +0.29% for the year ended February 28, 1995.**
- --------------------------------------------------------------------------------
(See Appendix for description of Graphic Material 22)
- --------------------------------------------------------------------------------
We remain conservative in our management of the fund. At the end of the fiscal
year, over 37% of the fund's securities were rated AAA -- the highest rating
possible -- by Standard & Poor's, or were judged to be of comparable credit
quality by the fund's managers. We evaluate each issue on an individual basis,
favoring highly rated "essential service" bonds. These securities tend to have a
more reliable income stream as they are backed by dependable revenue generated
from courthouses, jails, and water, power and sewer projects, to name a few. As
a result, these bonds tend to be less affected by budgetary and political
changes, and are
*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.
**The fund was ranked #7 out of 26 North Carolina municipal bond funds for the
one-year period, and #1 out of 5 funds for the five-year period ended February
28, 1995, as measured by Lipper Analytical Services, Inc., a nationally
recognized mutual fund rating organization. Lipper rankings do not include sales
charges, and past expense limitations increased the fund's total returns.
Rankings may have been different if these factors had been considered. Past
performance cannot guarantee future results.
34
<PAGE>
================================================================================
believed to be very attractive in a municipal cost-cutting environment. Like all
mutual funds, however, the principal value of the fund's holdings as well as the
price of its shares will fluctuate with market conditions.
We also seek to reduce the fund's risk through diversification. On February 28,
1995, the fund's assets spanned a broad range of cities and counties throughout
North Carolina. Additionally, we purchase securities from a variety of municipal
sectors, as the table to the right illustrates.
Our outlook for the fund is positive. Recent economic reports indicate that U.S.
economic growth has stabilized at a healthy and sustainable level, while
inflation has remained subdued. More signs of a slowing economy should
eventually result in a gradual decline in interest rates, which could positively
affect bond prices and thus, the fund's price per share.
Last year marked the third straight year of significant economic growth in North
Carolina, with all major economic sectors in the state experiencing expansion.
However, the state still faces considerable challenges in the tobacco industry.
Coming under a great deal of scrutiny in 1994, the tobacco industry experienced
a decline in the production and manufacturing of tobacco products. The industry
faces further uncertainty as talks of additional cigarette taxes and a "buyout"
of the tobacco price support system continues on a national level.
FRANKLIN NORTH CAROLINA TAX-FREE INCOME FUND
Portfolio Breakdown on February 28, 1995
As a percentage of total net assets
<TABLE>
<CAPTION>
% OF TOTAL
SECTOR NET ASSETS
- --------------------------------------------------------------------------------
<S> <C>
Utilities 27.8%
- --------------------------------------------------------------------------------
Pre-Refunded 16.7%
- --------------------------------------------------------------------------------
Hospitals 14.9%
- --------------------------------------------------------------------------------
Certificates of Participation 13.9%
- --------------------------------------------------------------------------------
Housing 12.0%
- --------------------------------------------------------------------------------
Industria l6.3%
- --------------------------------------------------------------------------------
General Obligations 4.4%
- --------------------------------------------------------------------------------
Other Revenue 2.1%
- --------------------------------------------------------------------------------
Transportation 1.5%
- --------------------------------------------------------------------------------
Education 0.4%
- --------------------------------------------------------------------------------
</TABLE>
FOR A COMPLETE LIST OF PORTFOLIO HOLDINGS, PLEASE SEE PAGE 82 OF THIS REPORT.
American Airlines' recent reduction in flight operations at the Raleigh-Durham
airport has left some companies in the Research Triangle area in a difficult
position. Many companies had relocated to the area because of its pro-business
environment and the existence of a strong national carrier at RDU. The airport
is struggling to fill the void left by American, but airport officials remain
optimistic about RDU's ability to increase competition by replacing the vacancy
with a number of smaller carriers.
35
<PAGE>
================================================================================
PERFORMANCE SUMMARY
The Franklin North Carolina Tax-Free Income Fund's share price, as measured by
net asset value, declined from $11.92 on February 28, 1994, to $11.37 on
February 28, 1995.
The fund continued to meet its investment objective of providing high current
income to its shareholders. For the one-year period ended February 28, 1995,
your fund paid monthly income distributions totaling 64.8 cents ($0.648) per
share.+ 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 5.46%,
based on an annualization of the curremt monthly dividend of 5.4 cents ($0.054)
per share and the maximum offering price of $11.87 on February 28, 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 9.80% from a taxable investment to match your fund's tax-free
distribution rate.
- --------------------------------------------------------------------------------
(See Appendix for description of Graphic Material 23)
- --------------------------------------------------------------------------------
The Franklin North Carolina Tax-Free Income Fund provided a total return of
+1.06% for the one-year period ended February 28, 1995. Total return measures
the change in value of an investment during the period indicated, assuming
reinvestment of dividends and capital gains, if any. This calculation does not
include the initial sales charge. Past performance is not predictive of future
results.
Since 1988, the Franklin North Carolina Tax-Free Income Fund's performance has
exceeded the Consumer Price Index (CPI), keeping your purchasing power well
ahead of inflation -- a primary goal of any investment. The fund, however, has
slightly underperformed the unmanaged Lehman Brothers Municipal Bond Index as
illustrated by the chart on the following page. The Lehman Index has some
+Assumes 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.
36
<PAGE>
================================================================================
inherent performance differentials over any fund, as it holds no cash in its
portfolio and involves no sales charges or management expenses. In addition, the
index includes municipal securities from across the country while your fund is
composed primarily of North Carolina municipal bonds. An investor cannot invest
directly in an index.
Your fund's managers maintain a long-term investment perspective and we
encourage our shareholders to do the same. While the fund may experience
volatility from time to time, we believe that its performance will be rewarding
over the long term. For example, as the table to the right demonstrates, the
fund has provided an average annual total return of +7.56% since its inception
in 1987.
FRANKLIN NORTH CAROLINA TAX-FREE INCOME FUND
Periods ended February 28, 1995
<TABLE>
<CAPTION>
SINCE
INCEPTION
1-YEAR 5-YEAR (9/1/87)
- -----------------------------------------------------------------------
<S> <C> <C> <C>
Cumulative Total Return(1) 1.06% 43.39% 80.34%
Average Annual
Total Return(2) -3.25% 6.54% 7.56%
</TABLE>
<TABLE>
<S> <C>
Distribution Rate(3) 5.46%
Taxable Equivalent Distribution Rate(4) 9.80%
30-Day Standardized Yield(5) 5.30%
Taxable Equivalent Yield(4) 9.52%
- -----------------------------------------------------------------------
</TABLE>
(1.) Cumulative total returns measure the change in value of an investment over
the periods indicated and do 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 have been restated to
reflect the maximum 4.25% initial sales charge. See note below.
(3.) Based on an annualization of the fund's current 5.4 cent per share monthly
dividend and the maximum offering price of $11.87 on February 28, 1995.
(4.) Taxable equivalent distribution rate and yield assume the 1995 maximum
44.3% combined federal and North Carolina state income tax bracket, 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 2/28/95.
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 implemented
a plan of distribution under Rule 12b-1 and eliminated the sales charge on
reinvested dividends, which will affect future performance. 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 is not
predictive of future results.
Past expense reductions by the fund's manager increased the fund's total
returns.
- --------------------------------------------------------------------------------
(See Appendix for description of Graphic Material 24)
*This performance graph assumes an intial $10,000 investment and includes the
maximum 4.25% sales charge, all fund expenses and account fees. It also assumes
that your dividends and capital gains were reinvested at net asset value. The
Lehman Brothers Municipal Bond Index includes price appreciation or depreciation
and distributions as a percentage of the original investment. Past performance
cannot guarantee future results.
- --------------------------------------------------------------------------------
37
<PAGE>
FRANKLIN TEXAS TAX-FREE INCOME FUND
================================================================================
FUND OBJECTIVE:
Seeks to provide high current income exempt from regular federal income taxes
through a portfolio consisting primarily of Texas municipal bonds.*
The fund's fiscal year was difficult for municipal bonds and other fixed-income
investments. Rising interest rates caused prices of most bonds to decline, and
the derivative-induced bankruptcy of Orange County, California added to the
volatility in the municipal bond market.
Due to the volatile environment of the municipal bond market over the past year,
the fund has maintained a defensive stance in focusing on higher grade essential
service bonds. The higher level of pre-refunded bonds has provided for more
liquidity and has helped mitigate the downside risk of the market. To decrease
volatility, the average maturity of the fund was shortened from 18 years on
February 28, 1994, to 15.6 years on February 28, 1995. The fund's average coupon
rose slightly from 7.15% on February 28, 1994, to 7.26% on February 28, 1995. We
are pleased to announce that this enabled us to raise the fund's dividend from
5.5 cents to 5.6 cents per share, effective with the March 1995 distribution.
While our investment strategy focuses on income rather than total return, the
fund reported a total return of +1.83% for the fiscal year -- more than ten
- --------------------------------------------------------------------------------
(See Appendix for description of Graphic Material 25)
- --------------------------------------------------------------------------------
times the average total return of other Texas municipal bond funds. According to
Lipper Analytical Services, Inc., the average total return of Texas municipal
bond funds was +0.18% for the year ended February 28, 1995.**
We remain conservative in our management of the fund. At the end of the fiscal
year, over 58% of the fund's securities were rated AAA -- the highest rating
possible -- by Standard & Poor's, or were judged to be of comparable credit
quality by the
*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.
**The fund was ranked #5 out of 20 Texas municipal bond funds for the one-year
period, and #3 out of 3 funds for the five-year period ended February 28, 1995,
as measured by Lipper Analytical Services, Inc., a nationally recognized mutual
fund rating organization. Lipper rankings do not include sales charges, and past
expense limitations increased the fund's total returns. Rankings may have been
different if these factors had been considered. Past performance cannot
guarantee future results.
38
<PAGE>
================================================================================
fund's managers. We evaluate each issue on an individual basis, favoring highly
rated "essential service" bonds. These securities tend to have a more reliable
income stream as they are backed by dependable revenue generated from projects
such as courthouses, utilities and water, power and sewer 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. Like all mutual funds, however, the principal value of
the fund's holdings as well as the price of its shares will fluctuate with
market conditions.
We also seek to reduce the fund's risk through diversification. On February 28,
1995, the fund's assets spanned a broad range of cities and counties throughout
Texas. Furthermore, we purchase securities from a variety of municipal sectors,
as the table to the right illustrates.
Our outlook for the fund is positive. Recent economic reports indicate that U.S.
economic growth has stabilized at a healthy and sustainable level, while
inflation has remained subdued. More signs of a slowing economy should
eventually result in a gradual decline in interest rates, which could positively
affect bond prices and thus, the fund's price per share.
The diversification of the Texas economy continues. Strong employment prospects
make the state a popular destination. Labor force growth rates are
FRANKLIN TEXAS TAX-FREE INCOME FUND
Portfolio Breakdown on February 28, 1995
As a percentage of total net assets
<TABLE>
<CAPTION>
% OF TOTAL
SECTOR NET ASSETS
- --------------------------------------------------------------------------------
<S> <C>
Pre-Refunded 28.3%
- --------------------------------------------------------------------------------
Utilities 16.0%
- --------------------------------------------------------------------------------
Other Revenue 13.6%
- --------------------------------------------------------------------------------
Hospitals 11.9%
- --------------------------------------------------------------------------------
Education 8.2%
- --------------------------------------------------------------------------------
Transportation 7.4%
- --------------------------------------------------------------------------------
Housing 6.6%
- --------------------------------------------------------------------------------
Industrial 5.6%
- --------------------------------------------------------------------------------
Certificates of Participation 1.3%
- --------------------------------------------------------------------------------
Health Care 1.1%
- --------------------------------------------------------------------------------
</TABLE>
FOR A COMPLETE LIST OF PORTFOLIO HOLDINGS, PLEASE SEE PAGE 87 OF THIS REPORT.
projected to increase by 1.8% annually -- the eighth fastest in the U.S.
Population is expected to increase by 1.4% annually between 1995 and 2000, the
sixth fastest nationwide.+ Since the oil price crash in the mid-1980s, the Texas
economy has been less dependent on energy-related industries. As a result, the
state's economy has diversified and now more closely resembles that of the
nation.
+Source: Standard & Poor's Creditweek Municipal,7/4/94.
39
<PAGE>
================================================================================
PERFORMANCE SUMMARY
The Franklin Texas Tax-Free Income Fund's share price, as measured by net asset
value, declined from $11.72 on February 28, 1994, to $11.25 on February 28,
1995.
The fund continued to meet its investment objective of providing high current
income to its shareholders. For the one-year period ended February 28, 1995,
your fund paid monthly income distributions totaling 66.2 cents ($0.662) per
share.+ Due to almost five years of declining interest rates, reduced income
made it necessary to adjust the monthly dividend from 5.7 cents ($0.057) per
share to 5.5 cents ($0.055) per share, effective with the April 1994 dividend.
However, in response to the recent interest rate increases, the fund's dividend
was raised to 5.6 cents ($0.056) per share effective with the March 1995
distribution. 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 5.72%,
based on an annualization of the new monthly dividend of 5.6 cents ($0.056) per
share and the maximum offering price of $11.75 on February 28, 1995.
- --------------------------------------------------------------------------------
(See Appendix for description of Graphic Material 26)
- --------------------------------------------------------------------------------
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 9.47% from a taxable
investment to match your fund's tax-free distribution rate.
The Franklin Texas Tax-Free Income Fund provided a total return of +1.83% for
the one-year period ended February 28, 1995. Total return measures the change in
value of an investment during the period indicated, assuming reinvestment of
dividends and capital gains, if any. This calculation does not include the
initial sales charge. Past performance is not predictive of future results.
Since 1988, the Franklin Texas Tax-Free Income Fund's performance has exceeded
the Consumer Price Index (CPI), keeping your purchasing power well ahead of
inflation -- a primary goal of any investment. The fund, however, has slightly
under-
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distribution may 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.
40
<PAGE>
================================================================================
performed the unmanaged Lehman Brothers Municipal Bond Index as illustrated by
the chart below. The Lehman Index has some inherent performance differentials
over any fund, as it holds no cash in its portfolio and involves no sales
charges or management expenses. In addition, the index includes municipal
securities from across the country while your fund is composed primarily of
Texas municipal bonds. An investor cannot invest directly in an index.
Your fund's managers maintain a long-term investment perspective and we
encourage our shareholders to do the same. While the fund may experience
volatility from time to time, we believe that its performance will be rewarding
over the long term. For example, as the table to the right demonstrates, the
fund has provided an average annual total return of +7.74% since its inception
in 1987.
FRANKLIN TEXAS TAX-FREE INCOME FUND
Periods ended February 28, 1995
<TABLE>
<CAPTION>
SINCE
INCEPTION
1-YEAR 5-YEAR (09/1/87)
- -----------------------------------------------------------------------
<S> <C> <C> <C>
Cumulative Total Return(1) 1.83% 45.18% 82.71%
Average Annual
Total Return(2) -2.50% 6.80% 7.74%
</TABLE>
<TABLE>
<S> <C>
Distribution Rate(3) 5.72%
Taxable Equivalent Distribution Rate(4) 9.47%
30-Day Standardized Yield(5) 5.33%
Taxable Equivalent Yield4 8.82%
- -----------------------------------------------------------------------
</TABLE>
(1.) Cumulative total returns measure the change in value of an investment over
the periods indicated and do 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 have been restated to
reflect the maximum 4.25% initial sales charge. See note below.
(3.) Based on an annualization of the fund's current 5.6 cent per share monthly
dividend and the maximum offering price of $11.75 on February 28, 1995.
(4.) Taxable equivalent distribution rate and yield assume the 1995 maximum
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 2/28/95.
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 implemented
a plan of distribution under Rule 12b-1 and eliminated the sales charge on
reinvested dividends, which will affect future performance. 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 is not
predictive of future results.
Past expense reductions by the fund's managers increased the fund's total
return.
- --------------------------------------------------------------------------------
(See Appendix for description of Graphic Material 27)
*This performance graph assumes an intial $10,000 investment and includes the
maximum 4.25% sales charge, all fund expenses and account fees. It also assumes
that your dividends and capital gains were reinvested at net asset value. The
Lehman Brothers Municipal Bond Index includes price appreciation or depreciation
and distributions as a percentage of the original investment. Past performance
cannot guarantee future results.
- --------------------------------------------------------------------------------
41
<PAGE>
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 portfolio consisting primarily of Virginia
municipal bonds.*
The fund's fiscal year was difficult for municipal bonds and other fixed-income
investments. Rising interest rates caused prices of most bonds to decline, and
the derivative-induced bankruptcy of Orange County, California added to the
volatility in the municipal bond market.
The fund's positive performance is a result of following a consistent investment
strategy of purchasing current coupon bonds at a slight discount, and buying the
most attractive bonds that the market offers. Throughout 1994, we applied a
simple strategy of increasing the income of the portfolio. The outlook for the
fund's dividends is positive, and we anticipate an increase in the first half of
the year.
The low interest rate environment of 1993 caused many of the bonds in the
portfolio to be pre-refunded. During the unpredictable interest rate environment
of 1994, the pre-refunded bonds were very valuable since they offered high
liquidity and helped the fund maintain its share value. The fund's average
coupon rose slightly from 6.83% on February 28, 1994, to 6.92% on February 28,
1995.
- --------------------------------------------------------------------------------
(See Appendix for description of Graphic Material 28)
- --------------------------------------------------------------------------------
While our investment strategy focuses on income rather than total return, the
fund reported a total return of +1.60% for the fiscal year -- five times the
average total return of other Virginia municipal bond funds. According to Lipper
Analytical Services, Inc., the average total return of Virginia municipal bond
funds was +0.32% for the year ended February 28, 1995.** The fund's return
placed it fourth out of 25 Virginia municipal bond funds.
*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.
**The fund was ranked #4 out of 25 Virginia municipal bond funds for the
one-year period, and #2 out of 5 funds for the five-year period ended February
28, 1995, as measured by Lipper Analytical Services, Inc., a nationally
recognized mutual fund rating organization. Lipper rankings do not include sales
charges, and past expense limitations increased the fund's total returns.
Rankings may have been different if these factors had been considered. Past
performance cannot guarantee future results.
42
<PAGE>
================================================================================
We remain conservative in our management of the fund. At the end of the fiscal
year, over 35% of the fund's securities were rated AAA -- the highest rating
possible -- by Standard & Poor's, or were judged to be of comparable credit
quality by the fund's managers. We evaluate each issue on an individual basis,
favoring highly rated "essential service" bonds. These securities tend to have a
more reliable income stream as they are backed by dependable revenue generated
from projects such as schools, 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. Like all mutual funds, however, the principal value of
the fund's holdings as well as the price of its shares will fluctuate with
market conditions.
We also seek to reduce the fund's risk through diversification. On February 28,
1995, the fund's assets spanned a broad range of cities and counties throughout
Virginia. Furthermore, we purchase securities from a variety of municipal
sectors, as the table to the right illustrates.
Our outlook for the fund is positive. Recent economic reports indicate that
U.S. economic growth has stabilized at a healthy and sustainable level, while
inflation has remained subdued. More signs of a slowing economy should
eventually result in a gradual decline in interest rates, which could
positively affect bond prices and thus, the fund's price per share.
FRANKLIN VIRGINIA TAX-FREE INCOME FUND
Portfolio Breakdown on February 28, 1995
As a percentage of total net assets
<TABLE>
<CAPTION>
% OF TOTAL
SECTOR NET ASSETS
- --------------------------------------------------------------------------------
<S> <C>
Pre-Refunded 22.9%
- --------------------------------------------------------------------------------
Housing 17.3%
- --------------------------------------------------------------------------------
Hospitals 16.0%
- --------------------------------------------------------------------------------
Utilities 12.6%
- --------------------------------------------------------------------------------
Transportation 12.3%
- --------------------------------------------------------------------------------
Industria l6.6%
- --------------------------------------------------------------------------------
Education 5.1%
- --------------------------------------------------------------------------------
Certificates of Participation 3.3%
- --------------------------------------------------------------------------------
General Obligations 2.2%
- --------------------------------------------------------------------------------
Other Revenue 1.1%
- --------------------------------------------------------------------------------
Miscellaneous 0.5%
- --------------------------------------------------------------------------------
Health Care 0.1%
- --------------------------------------------------------------------------------
</TABLE>
FOR A COMPLETE LIST OF PORTFOLIO HOLDINGS, PLEASE SEE PAGE 92 OF THIS REPORT.
Congress' consolidation of the country's various military operations currently
has a very small impact on the fund. The portfolio has little exposure to the
types of securities which are highly dependent on military revenue.
43
<PAGE>
================================================================================
PERFORMANCE SUMMARY
The Franklin Virginia Tax-Free Income Fund's share price, as measured by net
asset value, declined from $11.82 on February 28, 1994, to $11.33 on February
28, 1995.
The fund continued to meet its investment objective of providing high current
income to shareholders. For the one-year period ended February 28, 1995, your
fund paid monthly income distributions totaling 65.0 cents ($0.650) per share.+
Due to five years of declining interst rates, it was necessary to adjust the
fund's monthly dividend from 5.6 cents ($0.056) per share to 5.4 cents ($0.054)
per share, effective with the April 1994 distribution. 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 5.48%,
based on an annualization of the current monthly dividend of 5.4 cents ($0.054)
per share and the maximum offering price of $11.83 on February 28, 1995. This
double tax-free rate is generally higher than the after-tax return on a
comparable taxable investment. For example, if you are
- --------------------------------------------------------------------------------
(See Appendix for description of Graphic Material 29)
- --------------------------------------------------------------------------------
in the maximum combined federal and Virginia state personal income tax bracket
of 43.1%, you would have to earn 9.63% from a taxable investment to match your
fund's tax-free distribution rate.
The Franklin Virginia Tax-Free Income Fund provided a total return of +1.60% for
the one-year period ended February 28, 1995. Total return measures the change in
value of an investment during the period indicated, assuming reinvestment of
dividends and capital gains, if any. This calculation does not include the
initial sales charge. Past performance is not predictive of future results.
Since 1988, the Franklin Virginia Tax-Free Income Fund's performance has
exceeded the Consumer Price Index (CPI), keeping your purchasing power well
ahead of inflation -- a primary goal of any investment. The fund, however, has
slightly underperformed the unmanaged Lehman Brothers Municipal
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distribution may 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.
44
<PAGE>
================================================================================
Bond Index as illustrated by the chart below. The Lehman Index has some inherent
performance differentials over any fund, as it holds no cash in its portfolio
and involves no sales charges or management expenses. In addition, the index
includes municipal securities from across the country while your fund is
composed primarily of Virginia municipal bonds. An investor cannot invest
directly in an index.
Your fund's managers maintain a long-term investment perspective and we
encourage our shareholders to do the same. While the fund may experience
volatility from time to time, we believe that its performance will be rewarding
over the long term. For example, as the table to the right demonstrates, the
fund has provided an average annual total return of +7.67% since its inception
in 1987.
- --------------------------------------------------------------------------------
(See Appendix for description of Graphic Material 30)
*This performance graph assumes an intial $10,000 investment and includes the
maximum 4.25% sales charge, all fund expenses and account fees. It also assumes
that your dividends and capital gains were reinvested at net asset value. The
Lehman Brothers Municipal Bond Index includes price appreciation or depreciation
and distributions as a percentage of the original investment. Past performance
cannot guarantee future results.
- --------------------------------------------------------------------------------
FRANKLIN VIRGINIA TAX-FREE INCOME FUND
Periods ended February 28, 1995
<TABLE>
<CAPTION>
SINCE
INCEPTION
1-YEAR 5-YEAR (9/1/87)
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Cumulative Total Return(1) 1.60% 45.94% 81.86%
Average Annual
Total Return(2) -2.69% 6.93% 7.67%
</TABLE>
<TABLE>
<S> <C>
Distribution Rate(3) 5.48%
Taxable Equivalent Distribution Rate(4) 9.63%
30-Day Standardized Yield(5) 5.29%
Taxable Equivalent Yield(4) 9.30%
- ------------------------------------------------------------------------
</TABLE>
(1.) Cumulative total returns measure the change in value of an investment over
the periods indicated and do 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 have been restated to
reflect the maximum 4.25% initial sales charge. See note below.
(3.) Based on an annualization of the fund's current 5.4 cent per share monthly
dividend and the maximum offering price of $11.83 on February 28, 1995.
(4.) Taxable equivalent distribution rate and yield assume the 1995 maximum
43.1% combined federal and Virginia state income tax bracket, 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 2/28/95.
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 implemented
a plan of distribution under Rule 12b-1 and eliminated the sales charge on
reinvested dividends, which will affect future performance. 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 is not
predictive of future results.
Past expense reductions by the fund's manager increased the fund's total return.
45
<PAGE>
PORTFOLIO TALK
================================================================================
LAST YEAR, RISING INTEREST RATES AFFECTED THE PERFORMANCE OF FIXED-INCOME
INVESTMENTS ACROSS THE BOARD. MUNICIPAL SECURITIES WERE NO EXCEPTION, AND MANY
TAX-CONSCIOUS INVESTORS MAY BE CONCERNED ABOUT THE CURRENT OUTLOOK FOR THE
MUNICIPAL MARKET. IN THE FOLLOWING INTERVIEW, TOM KENNY, SENIOR VICE PRESIDENT
OF FRANKLIN'S MUNICIPAL BOND DEPARTMENT, AND PORTFOLIO MANAGERS SHEILA AMOROSO,
ANDREW JENNINGS, SR., AND BERNIE SCHROER DISCUSS RISING INTEREST RATES AND THE
CURRENT MUNICIPAL MARKET ENVIRONMENT. THEY ALSO TALK ABOUT THE "PLAIN VANILLA"
INVESTMENT APPROACH THAT HAS MADE FRANKLIN A WELL-RESPECTED NAME IN THE TAX-FREE
MUTUAL FUND ARENA.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SOME OF THE SENIOR MEMBERS OF FRANKLIN'S MUNICIPAL BOND TEAM - FRONT ROW (L-R)
TOM KENNY, MARK ORSI, SHEILA AMOROSO, STELLA WONG. BACK ROW (L-R) JEFF WILSON,
TOM WALSH, RAFAEL COSTAS, ANDREW JENNINGS, SR., BERNIE SCHROER, DON DUERSON.
46
<PAGE>
WHAT IS YOUR GENERAL OVERVIEW OF THE MUNICIPAL BOND MARKET?
Tom Kenny: In 1992 and 1993, the municipal bond market saw a record supply of
new issues and refinancings, and investor demand was very strong. That changed
in 1994, when both the supply and demand for municipal securities were
significantly lower due to rising interest rates.
Looking ahead, I think investors will start to aggressively buy municipal
securities again. But, relative to 1992 or 1993, the supply of new municipal
issues will continue to be much lower. It goes back to basic economics; if
there are more buyers than supply, then prices will move up. That could result
in a stronger municipal market in the upcoming year.
WHAT ABOUT THE PERFORMANCE OF THE MUNICIPAL MARKET IN 1994?
Andrew Jennings: Because of the rapid rise in interest rates, last year was
difficult for bond funds. In fact, in terms of total return, it was the worst
year for the 20-year Treasury bond since 1967.(1) In light of these difficult
market conditions, we believe that the performance of Franklin's tax-free
income funds held up relatively well.
DID THE PERFORMANCE OF FRANKLIN'S TAX-FREE INCOME FUNDS MEET YOUR EXPECTATIONS?
Tom: Yes, relative to the overall market. Past performance cannot guarantee
future results; however, our tax-free income fund shareholders continued to
enjoy attractive yields.
In addition, we believe our conservative management philosophy resulted in
stronger performance than that of many other tax-free income funds. For
example, most of Franklin's tax-free income funds outperformed their peers
during the year ended February 28, 1995, according to Lipper Analytical
Services, Inc., a nationally recognized mutual fund research organization. Of
course, each Franklin tax-free income fund's performance is unique, and some
funds' returns may not have exceeded their category averages. I encourage
investors to contact Franklin Templeton Fund Information at 1-800/DIAL BEN
(1-800/342-5236) for specific performance figures related to Franklin's
tax-free income funds.
WHAT MAKES FRANKLIN'S TAX-FREE INCOME FUNDS STAND OUT FROM OTHER TAX-ADVANTAGED
INVESTMENTS AVAILABLE TODAY?
Tom: I think Franklin's conservative investment philosophy differentiates our
funds from many of today's investment alternatives. We believe our tax-free
income fund shareholders have come to rely on the fact that, with Franklin,
what you see is what you get.
WHAT IS FRANKLIN'S TAX-FREE INVESTMENT PHILOSOPHY?
Andrew: Two goals guide Franklin's tax-free income fund management approach.
We have always managed our tax-free income funds with an emphasis on
maximizing tax-free income and maintaining greater price stability than other
tax-free income funds with similar objectives.(2) Of course, it's impossible
to eliminate price volatility completely because municipal securities are
always reacting to a variety of factors, such as interest rate movements.
Sheila Amoroso: That's why Franklin takes a very "plain vanilla" investment
approach when it comes to managing our tax-free income funds.
WHAT DO YOU MEAN BY "PLAIN VANILLA"?
Andrew: Municipal securities are generally considered to be among the safest
investments available in terms of credit risk, but they are still extremely
complicated. Investors need only look at the recent publicity surrounding
derivative securities, and other elaborate hedging techniques that have
increased volatility, for evidence of the complex nature of some municipal
investments out there.
Sheila: Franklin avoids these riskier securities and investment techniques,
because we don't want to expose our shareholders' investments to an undue
amount of risk. Many exotic securities, such as derivatives, are extremely
sensitive to interest rate movements and can significantly increase a fund's
price volatility. As a result, Franklin chooses not to use derivatives in its
tax-free portfolios.(3)
(1.) Source: Ibbotson Associates. Based on one-year total returns of long-term
government bonds from January 1926 to December 1994.
(2.) For investors subject to federal or state alternative minimum tax, all or a
portion of these dividends may be subject to such tax, depending on the fund.
Distributions of capital gains and of ordinary income from accrued market
discount, if any, are generally taxable. Most of Franklin's tax-free income
funds have the objective of seeking as high a level of current income as is
consistent with prudent management, while seeking preservation of shareholders'
capital. Of course, all bond funds, including Franklin's, involve investment
risks, and there is no assurance that any fund's investment objectives will be
met.
(3.) Franklin's tax-free income funds may use the following investments which
Franklin does not classify as derivative securities because they are highly
liquid and do not involve borrowing or leveraging a fund's portfolio: variable
rate demand notes; purchases of fixed income securities on a when-issued basis;
zero coupon bonds; certificates of participation on municipal leases; and/or
other transactions, which in the fund manager's opinion, are highly liquid and
do not involve leverage. Please read the funds' prospectuses for details of
these permissible investments.
47
<PAGE>
================================================================================
HAS FRANKLIN'S INVESTMENT STRATEGY CHANGED NOW THAT INTEREST RATES HAVE BEEN
RISING?
Andrew: No. We focus on the same objectives no matter what interest rates are
doing.
Bernie Schroer: That's right. And in light of today's market, shareholders may
want to consider dollar cost averaging when purchasing shares of a fund. Over
the long-term, they can take advantage of short-term price movements by
purchasing more shares of a fund when prices are lower.(4)
Tom: Franklin's commitment to research is really the backbone of its success
in the tax-free mutual fund market. This commitment doesn't change just
because interest rates are changing. Shareholders in our tax-free income funds
have one of the industry's largest municipal research teams dedicated to
searching for the most attractive securities on the market.(5)
Most of Franklin's tax-free income funds purchase only municipal
securities within the top four credit ratings of such national rating
agencies as Standard & Poor's, Moody's, or Fitch.(6) Our funds can also
invest in non-rated securities, which are deemed to be of comparable credit
quality by the funds' portfolio managers.(7)
Franklin, however, treats every municipal security as a non-rated issue. We
thoroughly examine each prospective issue and assign every security an
internal Franklin rating. Often, we'll go to the prospective project's site
and examine its creditworthiness firsthand.
And our research doesn't end when we purchase a bond; we constantly monitor
our portfolio holdings. National rating services only review individual bonds
periodically. Generally, by the time a municipal security receives a new
national rating, it will already be reflected in the issue's price. Franklin
tries to stay ahead of the industry by closely monitoring each municipal
security that we own in our tax-free income portfolios.
DO YOU THINK TAX-FREE MUTUAL FUNDS STILL MAKE SENSE FOR INVESTORS?
Andrew: Yes. Franklin's tax-free income fund shareholders have one of the most
respected municipal research departments working for them -- an important
consideration in today's market. They also enjoy the standard benefits of
investing in a mutual fund: monthly dividends, easy access to their money, and
diversification.(8)
Bernie: Franklin is the largest open-end municipal bond fund manager in the
nation, with more than $38 billion in municipal securities under
management.(9) Our tax-free income funds' diversification is a major advantage
for shareholders.8 For example, Orange County's recent bankruptcy might have
devastated individual bondholders, but the direct impact on Franklin's
tax-free income funds has been minimal to date, because most of our funds are
widely diversified.(10) Investing in a Franklin tax-free income fund spreads
our shareholders' risk over a variety of securities, reducing the impact any
one issue or municipality can have on the overall portfolio.(11)
Tom: Investors may be concerned about the bond market's volatility over the
past year, but they should maintain a long-term perspective. There will always
be short-term price movements in a bond fund. That's why Franklin's tax-free
income funds are managed for income first, while seeking preservation of
shareholders' capital. Over the long run, Franklin's tax-free income funds can
offer investors a strong investment choice. I think our shareholders have
found that tax-free mutual funds are one of the most effective and convenient
ways to participate in the municipal securities market.
To learn more about Franklin's Tax-Free Income Funds, ask your investment
representative or call Franklin Templeton Fund Information at 1-800/DIAL BEN
(1-800/342-5236).
(4.) Dollar cost averaging involves continuous investment in securities,
regardless of fluctuating price levels. Investors should consider their
financial ability to continue purchases through periods of low price levels or
changing economic conditions. Such a plan does not assure a profit and does not
protect against loss in a declining market.
(5.) Source: Research & Ratings Review, Volume II, issue 8, Febru- ary 28, 1994.
Franklin's municipal research team ranks 2nd out of 1,000 investment advisory
firms in terms of the number of municipal bond analysts, in a survey by TMS
Holdings, Inc. As of December 31, 1994, this ranking was unchanged.
(6.) Bond credit ratings reflect the rating agency's assessment of the credit
quality of the bonds, and are subject to change. Ratings do not reflect the
yield or market price of the bonds, nor approval by the rating agency.
(7.) All but two Franklin tax-free income funds follow this investment policy.
Franklin High Yield Tax-Free Income Fund and Franklin California High Yield
Municipal Fund invest primarily in higher-yielding, lower-rated securities. The
risks of investing in lower-rated securities are described in these funds'
prospectuses.
(8.) Most of Franklin's tax-free income funds are diversified; however, a few
are classified as non-diversified under the Investment Company Act of 1940.
The risks of investing in a non-diversified fund, such as increased
susceptibility to adverse economic or regulatory developments, are described in
each fund's individual prospectus.
(9.) Strategic Insight: December 31, 1994.
(10.) The Orange County and related bankruptcy proceedings are ongoing, and the
funds' managers continue to monitor the proceedings.
(11.) Because many Franklin tax-free income funds concentrate their investments
in a single state, these funds may be subject to greater risk of adverse
economic changes in their respective states than funds with greater
geographical diversification.
48
<PAGE>
FRANKLIN TAX-FREE TRUST
================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN ALABAMA TAX-FREE INCOME FUND (NOTE 1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS 97.6%
$1,500,000 Alabama Building Renovation Financing Authority Revenue, 7.45%, 09/01/11 ............................. $1,638,960
685,000 Alabama HFA, MF Residential Development, Bragg, Series B, 7.75%, 07/15/31 ............................ 716,688
Alabama HFA, SFMR, GNMA Secured,
490,000 Series A, 7.50%, 10/01/10 ......................................................................... 516,499
130,000 Series A, 8.00%, 10/01/20 ......................................................................... 136,263
3,510,000 Series A-1, 6.50%, 04/01/17 ....................................................................... 3,519,547
150,000 Series A-2, 8.00%, 10/01/20 ....................................................................... 158,139
1,250,000 Series A-2, 6.80%, 04/01/25 ....................................................................... 1,264,437
290,000 Series C, 7.45%, 10/01/21 ......................................................................... 299,364
1,180,000 Series C-2, 7.75%, 04/01/22 ....................................................................... 1,249,655
1,395,000 Alabama Judicial Building Authority Revenue, Judicial Facilities Project, AMBAC Insured, 7.25%.
01/01/14 .......................................................................................... 1,496,221
700,000 Alabama Mental Health Finance Authority, Special Tax, FGIC Insured, 7.375%, 05/01/03 ................. 771,288
250,000 Alabama State University Dormitory Revenue, Pre-Refunded, 8.00%, 01/01/14 ............................ 280,737
3,395,000 Alabama Water PCFA, Revolving Fund Loan, Series B, 7.75%, 08/15/12 ................................... 3,578,262
2,215,000 Alabaster Water and Gas Board Revenue, AMBAC Insured, 6.35%, 09/01/14 ................................ 2,260,208
750,000 Albertville Warrants, MBIA Insured, 7.00%, 04/01/11 .................................................. 802,597
115,000 Alexander City GO Warrants, Refunding, Series 1988, Pre-Refunded, 7.90%, 05/01/08 .................... 124,021
2,000,000 Alexander City Utility Revenue Warrants, FSA Insured, 6.20%, 08/15/10 ................................ 2,021,320
250,000 Anniston Regional Medical Center Board, Hospital Revenue, Refunding, Northeast Alabama
Regional Medical Center Project, Series A, 7.70%, 07/01/08 .......................................... 257,508
1,500,000 Athens Water and Sewer Revenue Warrants, AMBAC Insured, 6.10%, 08/01/18 .............................. 1,496,175
1,600,000 Auburn Governmental Utility Services Corp., Waste Water Revenue, Merscot-Auburn L.P.,
FGIC Insured, 7.30%, 01/01/12 ....................................................................... 1,680,928
2,000,000 Auburn University General Fee Revenue, Refunding, 7.00%, 06/01/11 .................................... 2,138,780
1,000,000 Bessemer Medical Clinic Board Revenue, Refunding, Bessemer Carraway Center, Series A,
MBIA Insured, 7.25%, 04/01/15 ....................................................................... 1,064,610
Birmingham Airport Authority Revenue,
500,000 Series 1990-A, AMBAC Insured, 7.375%, 07/01/10 .................................................... 538,245
1,000,000 Series 1990-B, AMBAC Insured, Pre-Refunded, 7.125%, 07/01/20 ...................................... 1,101,110
1,870,000 Birmingham BMC, Special Care Facilities Financing Authority Revenue, Series A, MBIA Insured,
7.00%, 01/01/21 ..................................................................................... 1,974,365
Birmingham GO,
900,000 Improvement Bonds, Series 1990, Pre-Refunded, 7.40%, 04/01/18 ..................................... 988,038
145,000 Refunding, 8.00%, 10/01/15 ........................................................................ 158,086
1,000,000 Refunding, Series B, 6.25%, 04/01/12 .............................................................. 1,016,530
1,000,000 Refunding, Series B, 6.25%, 04/01/16 .............................................................. 1,013,050
500,000 Birmingham Historical Preservation Authority Revenue, Kelly Ingram/Civil Rights Project,
Pre-Refunded, 7.20%, 07/01/11 ....................................................................... 555,395
Birmingham-Jefferson Civic Center Authority, Special Tax,
285,000 Capital Outlay, 7.40%, 01/01/08 ................................................................... 308,940
640,000 Capital Outlay, 7.25%, 01/01/12 ................................................................... 672,179
1,200,000 Birmingham Special Care Facilities Financing Authority Revenue, Health Care Medical Center
East, MBIA Insured, 7.00%, 07/01/12 ................................................................. 1,282,380
2,000,000 Birmingham Special Care Facilities Financing Authority Revenue, Refunding, Medical Center East,
MBIA Insured, 7.25%, 07/01/15 ....................................................................... 2,070,000
Birmingham Waterworks and Sewer Board, Water and Sewer Revenue,
1,500,000 Series 1990, Pre-Refunded, 7.10%, 01/01/16 ........................................................ 1,643,325
1,200,000 Series 1990, Pre-Refunded, 7.20%, 01/01/20 ........................................................ 1,319,712
3,250,000 Camden IDB, PCR, Facilities Revenue, Refunding, MacMillian Bloedel Project, Series A, 7.75%,
05/01/09 ............................................................................................ 3,476,460
500,000 Citronelle IDB, PCR, Stauffer Chemical Project, Guaranteed by Imperial Chemical, Plc., Series 1982,
8.00%, 12/01/12 ..................................................................................... 562,560
</TABLE>
The accompanying notes are an integral part of these financial statements.
49
<PAGE>
FRANKLIN TAX-FREE TRUST
================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN ALABAMA TAX-FREE INCOME FUND (NOTE 1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
$ 1,750,000 Colbert County Health Care Authority, Helen Keller Hospital, 8.75%, 06/01/09 ......................... $ 1,910,510
Columbia IDB, PCR, Refunding,
5,000,000 Alabama Power Co. Project, AMBAC Insured, 6.50%, 09/01/23 ......................................... 5,119,100
105,000 Alabama Power Co. Project, Farley Keller Hospital, Series G, 7.40%, 11/01/16 ...................... 108,254
505,000 Courtland IDB, Solid Waste Disposal Revenue, Champion International Corp. Project, 7.75%, 01/01/20.... 533,846
4,000,000 Courtland IDBR, Refunding, Champion International Corp. Project, Series A, 7.20%, 12/01/13 ........... 4,224,120
2,000,000 Cullman Water Revenue Warrants, Series A, AMBAC Insured, 6.20%, 10/01/12 ............................. 2,016,680
2,000,000 Daphne Utilities Board, Water, Gas and Sewer Revenue, Refunding, Series A, FGIC Insured,
Pre-Refunded, 7.35%, 06/01/20 ....................................................................... 2,234,920
200,000 Decatur GO Warrants, Series A, Pre-Refunded, 7.60%, 05/01/09 ......................................... 214,478
1,400,000 Demopolis HDC, MFHR, Refunding, Series 1990-A, CGIC Insured, 7.625%, 08/01/19 ........................ 1,461,068
75,000 Dothan GO Warrants, Refunding, 8.00%, 09/01/13 ....................................................... 78,442
2,600,000 East Alabama Health Care Authority Facilities Revenue, East Alabama Medical Center,
MBIA Insured, Pre-Refunded, 7.00%, 09/01/21 ......................................................... 2,883,296
3,500,000 Fairfield IDB, Environmental Improvement Revenue, Refunding, USX Corp. Project, Series A,
6.70%, 12/01/24 ..................................................................................... 3,416,280
3,000,000 Fairfield Warrants, AMBAC Insured, 6.30%, 06/01/22 ................................................... 3,073,410
1,565,000 Gadsden HDC, MFR, Refunding, Series A, 7.00%, 01/01/22 ............................................... 1,609,039
1,000,000 Guam Airport Authority Revenue, Refunding, Series A, 6.50%, 10/01/23 ................................. 990,960
530,000 Homewood Special Care Facilities Financing Authority Revenue, Refunding, Lakeshore Hospital
Project, Series B, Pre-Refunded, 8.25%, 02/01/04 .................................................... 596,436
1,000,000 Hoover GO Warrants, Series A, AMBAC Insured, Pre-Refunded, 7.30%, 03/01/14 ........................... 1,111,280
Houston County Health Care Authority Revenue, Southeast Alabama Medical Center,
1,250,000 BIG Insured, Pre-Refunded, 7.25%, 10/01/19 ........................................................ 1,380,750
2,070,000 MBIA Insured, 6.125%, 10/01/12 .................................................................... 2,048,120
Huntsville Health Care Authority Facilities Revenue,
100,000 Refunding, Series A, MBIA Insured, Pre-Refunded, 7.70%, 06/01/12 .................................. 109,413
2,175,000 Series B, MBIA Insured, 6.50%, 06/01/13 ........................................................... 2,235,813
230,000 Huntsville Solid Waste Disposal Authority and Resource Recovery Revenue, FGIC Insured, 7.00%,
10/01/14 ........................................................................................... 243,096
200,000 Jefferson County GO Warrants, Pre-Refunded, 7.50%, 04/01/07 .......................................... 217,182
200,000 Jefferson County Sewer Revenue Warrants, ETM 09/01/11, 7.50%, 09/01/13 ............................... 214,186
440,000 Lauderdale County and City of Florence Public Hospital Board Revenue, Eliza Coffee Memorial
Hospital, 7.00%, 07/01/19 ........................................................................... 449,082
1,255,000 LCM Housing Assistance Corp. Project, MFR, Refunding, Series A, 7.875%, 01/01/22 ..................... 1,313,232
1,050,000 Limestone County Water Authority Revenue, FGIC Insured, Pre-Refunded, 7.70%, 12/01/19 ................ 1,147,493
500,000 Madison County PBA Revenue Warrants, 6.90%, 11/01/11 ................................................. 528,170
Madison GO Warrants,
975,000 Series 1990, 7.25%, 01/01/15 ...................................................................... 1,037,351
1,560,000 Series B, MBIA Insured, 6.25%, 02/01/15 ........................................................... 1,587,004
2,290,000 Madison School Warrants, MBIA Insured, 6.25%, 02/01/14 ............................................... 2,329,640
Marshall County Health Care Authority Hospital Revenue,
2,530,000 Crossover Refunding, Guntersville-Arab Medical Center, 7.60%, 10/01/07 ............................ 2,682,686
10,810,000 Refunding, Boaz-Albertville Medical Center, 6.50%, 01/01/18 ....................................... 9,529,123
600,000 Marshall County Hospital Board Revenue, Refunding, Boaz-Albertville Medical Center,
Pre-Refunded, 8.875%, 01/01/05 ...................................................................... 652,110
2,500,000 Marshall County Warrants, AMBAC Insured, Pre-Refunded, 7.00%, 02/01/12 ............................... 2,769,625
1,000,000 Mobile Airport Authority Revenue, Mae Project, 7.375%, 11/01/12 ...................................... 1,025,050
1,500,000 Mobile Commissioner Water and Sewer Revenue, Refunding, 6.50%, 01/01/09 .............................. 1,564,155
Mobile GO Warrants,
45,000 Capital Improvement, Pre-Refunded, 7.90%, 08/15/11 ................................................ 48,865
900,000 Convention Center Project, AMBAC Insured, Pre-Refunded, 7.125%, 08/15/10 .......................... 999,261
1,000,000 Convention Center Project, AMBAC Insured, Pre-Refunded, 7.125%, 08/15/20 .......................... 1,110,290
</TABLE>
The accompanying notes are an integral part of these financial statements.
50
<PAGE>
FRANKLIN TAX-FREE TRUST
================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN ALABAMA TAX-FREE INCOME FUND (NOTE 1)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
$ 1,340,000 Mobile Housing Assistance Corp., MFHR, Refunding,
Series 1990-A, CGIC Insured, 7.625%, 02/01/21..................................................... $ 1,402,176
155,000 Montgomery Downtown RDAR, Mortgage, State of Alabama Project, BIG Insured, Pre-Refunded,
7.75%, 10/01/13 ................................................................................. 171,627
5,000,000 Morgan County Decatur Health Care Revenue, Refunding, Decatur General Hospital, Connie Lee
Insured, 6.375%, 03/01/24 ....................................................................... 4,977,000
1,500,000 Moulton Waterworks Board, Water Revenue, Series A, 6.30%, 01/01/18 .............................. 1,382,775
1,500,000 Muscle Shoals Utilities Board, Water and Sewer Revenue, AMBAC Insured, Pre-Refunded, 7.25%,
04/01/17 ....................................................................................... 1,644,360
Northeast Alabama Water, Sewer and Fire Protection District Revenue,
2,000,000 AMBAC Insured, 6.375%, 05/01/22 ............................................................... 2,029,520
30,000 AMBAC Insured, Pre-Refunded, 7.90%, 05/01/15 .................................................. 33,063
200,000 Northport GO Warrants, FGIC Insured, 7.70%, 12/01/13 ............................................. 219,832
5,000,000 Oneonta Utilities Board Revenue, CGIC Insured, 6.90%, 11/01/24 ................................... 5,223,400
3,640,000 Orange Beach Water, Sewer and Fire Protection Authority Revenue, 7.50%, 05/01/22 ................. 3,844,714
Pelham Alabama Warrants,
1,000,000 AMBAC Insured, 6.25%, 11/01/12 ................................................................ 1,023,160
2,000,000 AMBAC Insured, 6.25%, 11/01/22 ................................................................ 2,031,640
780,000 Piedmont IDB, IDR, Springs Industrial Project, 8.25%, 09/01/10 ................................... 842,221
Puerto Rico Commonwealth Aqueduct and Sewer Authority Revenue,
500,000 Series A, 7.90%, 07/01/07 ..................................................................... 548,695
175,000 Series A, 7.875%, 07/01/17 .................................................................... 190,514
3,200,000 Series A, 7.00%, 07/01/19 ..................................................................... 3,309,664
Puerto Rico Commonwealth Electric Power Authority Revenue, Water Resources,
350,000 Refunding, Series L, Pre-Refunded, 8.00%, 07/01/08 ............................................ 390,134
15,000 Refunding, Series L, Pre-Refunded, 8.40%, 07/01/15 ............................................ 16,497
1,000,000 Refunding, Series N, 7.00%, 07/01/07 .......................................................... 1,051,760
1,870,000 Series P, 7.00%, 07/01/21 ..................................................................... 1,990,821
Puerto Rico Commonwealth Highway Authority Revenue,
155,000 Series P, Pre-Refunded, 8.125%, 07/01/13 ...................................................... 173,361
600,000 Series R, 7.15%, 07/01/00 ..................................................................... 649,914
175,000 Puerto Rico Commonwealth Infrastructure Financing Authority, Special Tax Revenue, Series A,
7.90%, 07/01/07 ................................................................................. 189,922
85,000 Puerto Rico Commonwealth Public Improvement GO, 7.90%, 07/01/11 .................................. 91,279
300,000 Puerto Rico Commonwealth Urban Renewal and Housing Corp., Refunding, 7.875%, 10/01/04 ............ 332,964
200,000 Puerto Rico Industrial, Medical and Environmental Facilities, PCFA Revenue, Upjohn Co. Project,
7.50%, 12/01/23 ................................................................................. 215,104
40,000 Puerto Rico PBA, Guaranteed Public Education and Health Facilities, Series H, Pre-Refunded,
7.875%, 07/01/16 ................................................................................ 43,564
Russell County PBA Revenue,
1,900,000 Phenix City Jail Project Warrants, 7.125%, 01/01/14 ........................................... 1,871,120
200,000 Russell County Jail Project, Pre-Refunded, 8.50%, 01/01/14 .................................... 226,366
240,000 Shelby County Board of Education, Capital Outlay School Warrants, 7.20%, 02/01/16 ................ 255,538
1,000,000 Tuscaloosa County Limited Obligation, Capital Outlay Warrants, AMBAC Insured, Pre-Refunded,
7.00%, 02/01/10 ................................................................................. 1,097,020
4,925,000 Tuscaloosa Warrants, AMBAC Insured, 6.75%, 07/01/20 .............................................. 5,146,526
1,500,000 University of Alabama, Student Housing Revenue, Series A, MBIA Insured, Pre-Refunded,
7.10%, 06/01/15 ................................................................................. 1,675,950
100,000 University of Puerto Rico Revenue, Refunding, Series J, 7.75%, 06/01/07 .......................... 105,478
5,000,000 West Jefferson IDB, PCR, Refunding, Alabama Power Co., Miller Plant, Series C, MBIA Insured,
6.05%, 05/01/23 ................................................................................. 4,939,550
3,500,000 Wilsonville IDB, PCR, Refunding, Southern Electric Generating System, Series C, MBIA Insured,
6.75%, 02/01/15 ................................................................................. 3,665,200
------------
Total Long Term Investments (Cost $159,843,530) ............................................ 165,958,827
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
51
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================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN ALABAMA TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
(e)SHORT TERM INVESTMENTS .6%
$ 500,000 North Alabama, Environmental Improvement Authority, PCR, Refunding, Reynold Metals Project,
Daily VRDN and Put, 3.75%, 12/01/00 .......................................................... $ 500,000
300,000 Phenix City IDBR, Environmental Improvement, Mead Coated Board Project, Series A, Daily VRDN
and Put, 3.90%, 06/01/28 ..................................................................... 300,000
200,000 Puerto Rico Commonwealth, Government Development Bank, Refunding, Weekly VRDN and Put,
3.90%, 12/01/15 .............................................................................. 200,000
------------
TOTAL SHORT TERM INVESTMENTS (COST $1,000,000) ......................................... 1,000,000
------------
TOTAL INVESTMENTS (COST $160,843,530) 98.2% ....................................... 166,958,827
OTHER ASSETS AND LIABILITIES, NET 1.8% ............................................ 3,092,042
------------
NET ASSETS 100.0% ................................................................. $170,050,869
============
At February 28, 1995, the net unrealized appreciation based on
the cost of investments for income tax purposes of $160,844,280
was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ................................................................ $ 7,671,308
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ............................................................... (1,556,761)
------------
Net unrealized appreciation ................................................................. $ 6,114,547
============
</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
(e)Variable rate demand notes (VRDNs) are tax-exempt obligations which contain a
floating or variable interest rate adjustment formula and an unconditional
right of demand to receive payment of the principal balance plus accrued
interest 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.
52
<PAGE>
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STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN FLORIDA TAX-FREE INCOME FUND (NOTE 1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS 98.2%
BONDS 94.8%
$ 6,705,000 Alachua County Health Facilities Authority Revenue, Refunding, Santa Fe Health Care Facilities
Project, 7.60%, 11/15/13 ........................................................................... $ 7,021,074
11,205,000 Bay County Hospital System Revenue, Refunding, Bay Medical Center Project, 8.00%, 10/01/12 .......... 11,809,622
Bay County Resource Recovery Revenue,
3,710,000 Refunding, Series A, MBIA Insured, 6.60%, 07/01/11 ................................................ 3,915,423
18,150,000 Refunding, Series B, MBIA Insured, 6.60%, 07/01/12 ................................................ 19,088,355
2,265,000 Series 1984, Pre-Refunded, 8.00%, 07/01/12 ........................................................ 2,448,691
Bay County Water System Revenue, Refunding,
525,000 AMBAC Insured, 6.50%, 09/01/07 .................................................................... 557,009
675,000 AMBAC Insured, 6.60%, 09/01/11 .................................................................... 712,948
4,000,000 Boynton Beach Public Service Tax Revenue, MBIA Insured, Pre-Refunded, 7.50%, 11/01/10 ............... 4,501,040
5,000,000 Brevard County Health Facilities Authority Revenue, Refunding, Wuesthoff Memorial Hospital,
Series B, 7.20%, 04/01/13 .......................................................................... 5,150,350
2,210,000 Brevard County HFA, SFMR, Refunding, Series B, FSA Insured, 7.00%, 03/01/13 ......................... 2,320,787
2,250,000 Broward County Educational Facilities Authority Revenue, Refunding, Nova Southeastern University
Project, Connie Lee Insured, 6.125%, 04/01/17 ...................................................... 2,235,060
Broward County Health Facility Authority Revenue, Refunding,
2,080,000 Nursing Home, 7.40%, 08/15/10 ..................................................................... 2,191,717
1,475,000 Nursing Home, 7.50%, 08/15/20 ..................................................................... 1,575,477
Broward County HFAR,
4,550,000 Series B, GNMA Secured, 7.55%, 03/01/15 ........................................................... 4,828,642
1,365,000 Series C, GNMA Secured, 8.00%, 03/01/21 ........................................................... 1,439,706
465,000 Series D, GNMA Secured, 6.90%, 06/01/09 ........................................................... 480,308
1,115,000 Series D, GNMA Secured, 7.375%, 06/01/21 .......................................................... 1,171,497
Broward County Resource Recovery Revenue,
6,305,000 Broward Waste Energy Co., Limited Partnership, North Project, 7.95%, 12/01/08 ..................... 6,886,888
11,965,000 SES Waste Energy Co., Limited Partnership, South Project, 7.95%, 12/01/08 ......................... 13,069,250
1,925,000 Broward County School District, GO, Series 1989, Pre-Refunded, 7.125%, 02/15/08 ..................... 2,104,833
200,000 Broward County Tourist Development, Special Tax Revenue, Convention Center Project, FGIC
Insured, Pre-Refunded, 7.75%, 10/01/13 ............................................................. 221,800
585,000 Broward County Water and Sewer Utility Revenue, Series B, AMBAC Insured, Pre-Refunded, 7.50%,
10/01/18............................................................................................ 633,046
1,500,000 Cape Canaveral Hospital District Revenue, Certificates, AMBAC Insured, 6.875%, 01/01/21 ............. 1,571,235
Cape Coral Health Facilities Authority, Hospital Revenue,
19,000,000 Cape Coral Medical Center, Inc. Project, 7.80%, 11/15/18 .......................................... 19,173,280
2,000,000 Cape Coral Medical Center, Inc. Project, 7.50%, 11/15/21 .......................................... 2,026,040
Celebration Community Development District, Special Assessment,
5,500,000 MBIA Insured, 6.00%, 05/01/10 ..................................................................... 5,587,175
4,000,000 MBIA Insured, 6.10%, 05/01/16 ..................................................................... 4,032,720
Citrus County PCR, Refunding, Florida Power and Light Co.,
11,100,000 Crystal River, Series A, 6.625%, 01/01/27 ......................................................... 11,438,217
20,400,000 Crystal River, Series B, 6.35%, 02/01/22 .......................................................... 20,730,072
Clay County HFAR, SFM,
2,075,000 Series A, GNMA Secured, 8.20%, 06/01/21 ........................................................... 2,182,651
4,675,000 Series A, GNMA Secured, 7.80%, 06/01/22 ........................................................... 4,980,418
1,310,000 Series A, GNMA Secured, 7.45%, 09/01/23 ........................................................... 1,372,435
2,955,000 Clearwater MFR, Refunding, Rent Housing, Drew Gardens Projects, Series A, FHA Insured, 6.50%,
10/01/25 ........................................................................................... 2,961,058
1,000,000 Clewiston Water and Sewer Revenue, Refunding, AMBAC Insured, Pre-Refunded, 7.65%, 10/01/10 .......... 1,122,910
1,325,000 Collier County Special Assessment, Pine/Naples Municipal Service, 5.60%, 11/01/13 ................... 1,193,096
370,000 Collier County Water and Sewer District Revenue, Sewer Assessment, East and South Naples
Project, MBIA Insured, 7.15%, 10/01/11 ............................................................. 378,114
</TABLE>
The accompanying notes are an integral part of these financial statements.
53
<PAGE>
FRANKLIN TAX-FREE TRUST
================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN FLORIDA TAX-FREE INCOME FUND (NOTE 1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
$ 3,890,000 Coral Springs ID, Special Water and Sewer, 6.75%, 11/01/02 ..................................... $ 3,890,739
1,250,000 Dade County Aviation Revenue, Series B, MBIA Insured, 6.55%, 10/01/13 .......................... 1,292,063
Dade County Health Facilities Authority Revenue,
400,000 Baptist Hospital of Miami Project, Pre-Refunded, 7.375%, 05/01/13 ............................ 428,416
75,000 Mt. Sinai Medical Center Project, CGIC Insured, Pre-Refunded, 8.40%, 12/01/17 ................ 83,086
7,475,000 Refunding, Catholic Health and Rehabilitation, Inc. Project, 7.625%, 08/15/20 ................ 8,045,716
1,930,000 Dade County HFA, MFMR, GNMA Secured, Hialeah Center, Series 5, 7.875%, 12/01/32 ................ 2,060,410
Dade County HFA, SFMR,
45,000 Refunding, Series A, 8.125%, 07/01/07 ........................................................ 45,934
1,500,000 Refunding, Series D, FSA Insured, 6.95%, 12/15/12 ............................................ 1,561,665
300,000 Refunding, Series E, FNMA Insured, 7.00%, 03/01/24 ........................................... 309,222
3,100,000 Series A, GNMA Secured, 7.50%, 09/01/13 ...................................................... 3,178,182
1,555,000 Series A, GNMA Secured, 7.10%, 03/01/17 ...................................................... 1,620,217
260,000 Series B, GNMA Secured, 7.25%, 09/01/23 ...................................................... 269,537
125,000 Dade County IDA, IDR, Epworth Village West, FHA Insured, 8.25%, 02/01/28 ....................... 132,319
5,695,000 Dade County IDA, Solid Waste Disposal Revenue, Florida Power and Light Co. Project, 7.15%,
02/01/23 ...................................................................................... 5,974,795
Dade County GO, Unlimited Tax,
1,000,000 Series DD, MBIA Insured, 7.70%, 10/01/13 ..................................................... 1,055,230
380,000 Series DD, MBIA Insured, 7.75%, 10/01/18 ..................................................... 401,272
Dade County Public Facilities Revenue, Jackson Memorial Hospital,
140,000 Series A, MBIA Insured, 7.30%, 06/01/12 ...................................................... 145,226
1,110,000 Series A, MBIA Insured, Pre-Refunded, 7.30%, 06/01/12 ........................................ 1,168,475
5,960,000 Dade County School District GO, Pre-Refunded, 7.375%, 07/01/08 ................................. 6,599,150
Dovera Community Development District Revenue,
1,690,000 Special Assessment, 7.625%, 05/01/03 ......................................................... 1,726,166
2,315,000 Special Assessment, 7.875%, 05/01/12 ......................................................... 2,360,652
2,375,000 Dunedin Hospital Revenue, Mease Health Care, MBIA Insured, Pre-Refunded, 6.75%, 11/15/21 ....... 2,628,412
670,000 Dunes Community Development District Revenue, Water and Sewer Project, Pre-Refunded, 8.25%,
10/01/18 ...................................................................................... 750,822
Duval County HFA, SFMR,
80,000 Series 1988, GNMA Secured, 8.625%, 12/01/19 .................................................. 84,396
100,000 Series A, GNMA Secured, 8.50%, 09/01/19 ...................................................... 105,319
2,625,000 Series A, GNMA Secured, 7.85%, 12/01/22 ...................................................... 2,787,199
890,000 Series B, GNMA Secured, 7.70%, 11/01/11 ...................................................... 930,228
1,460,000 Series C, GNMA Secured, FGIC Insured, 7.70%, 09/01/24 ........................................ 1,561,076
Escambia County HFA, SFMR,
15,000 Refunding, 8.75%, 10/01/15 ................................................................... 15,487
4,235,000 Series A, GNMA Secured, 7.40%, 10/01/23 ...................................................... 4,403,765
4,350,000 Escambia County HFAR, Refunding, Baptist Hospital and Manor, 6.75%, 10/01/14 ................... 4,303,194
1,190,000 Escambia County PCR, Refunding, Gulf Power Co. Project, 8.25%, 06/01/17 ........................ 1,276,465
4,000,000 Escambia County Revenue, Series B, Sub-Series 1, MBIA Insured, 7.20%, 01/01/15 ................. 4,237,560
700,000 Escambia County Sales Tax Revenue, Refunding, Series A, Pre-Refunded, 7.70%, 01/01/02 .......... 731,486
3,255,000 Escambia County School Board, COP, FSA Insured, 6.375%, 02/01/12 ............................... 3,315,543
90,000 Escambia County Tourist Development Revenue, Pre-Refunded, 8.40%, 12/01/12 ..................... 99,459
2,500,000 Escambia County Utilities Authority, Sanitary System Revenue, FSA Insured, 6.00%, 01/01/23 ..... 2,459,875
2,000,000 Escambia County Utilities Authority System Revenue, Refunding, FGIC Insured, 7.75%, 01/01/15 ... 2,225,560
Florida HFA,
3,700,000 General Mortgage, Refunding, Series A, 6.40%, 06/01/24 ....................................... 3,749,395
930,000 Homeownership Revenue, Series G-1, GNMA Secured, 7.80%, 09/01/10 ............................. 992,775
410,000 Homeownership Revenue, Series G-1, GNMA Secured, 8.30%, 06/01/20 ............................. 433,210
8,640,000 Homeownership Revenue, Series G-1, GNMA Secured, 7.90%, 03/01/22 ............................. 9,200,822
</TABLE>
The accompanying notes are an integral part of these financial statements.
54
<PAGE>
FRANKLIN TAX-FREE TRUST
================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN FLORIDA TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
Florida HFA, (cont.)
$ 4,000,000 MF Housing, Citrus Meadows Apartments Project, Series Q, GNMA Secured, 7.65%, 06/20/31 ....... $ 4,173,440
3,445,000 MF Housing, Driftwood Terrace Project, Series I, 7.65%, 12/20/31 ............................. 3,598,061
4,000,000 MF Mortgage, Lake Carlton Arms, Guaranteed, Refunding, Series F, Mandatory Put 12/01/99,
7.375%, 12/01/07. ........................................................................... 4,137,360
2,900,000 MFHR, Refunding, Series A, 6.95%, 10/01/21 ................................................... 3,012,520
470,000 SFMR, Series A, 8.60%, 07/01/16 .............................................................. 482,892
14,185,000 Florida Local Government Finance Authority Revenue, Series C, Mandatory Put 03/01/00, 7.75%,
09/01/16 ...................................................................................... 14,278,195
Florida State Board of Education, Capital Outlay, Refunding, Public Education,
8,775,000 Series A, 7.25%, 06/01/23 .................................................................... 9,550,096
9,225,000 Series A, Pre-Refunded, 7.25%, 06/01/23 ...................................................... 10,289,196
650,000 Florida State Board of Education, Capital Outlay, Series B-1, Pre-Refunded, 7.875%, 06/01/19 ... 718,217
2,550,000 Florida State Community Services Corp., Walton County Water and Sewer Revenue, South Walton
County Regional Utilities, 7.00%, 03/01/18 .................................................... 2,701,521
6,000,000 Florida State Correctional Privatization Commission, COP, Correctional Facility Bay Project,
MBIA Insured, 6.00%, 08/01/15 ................................................................. 6,019,200
2,960,000 Florida State Department of Corrections, COP, Okeechobee Correctional, AMBAC Insured, 6.25%,
03/01/15 ...................................................................................... 3,032,727
Florida State Department of General Services, Division Board of Finance,
3,000,000 Department of Natural Resources Revenues, AMBAC Insured, 6.75%, 07/01/13 ..................... 3,165,360
100,000 Seminole County Road, Pre-Refunded, 7.75%, 11/01/18 .......................................... 106,631
145,000 Florida State Department of General Services, Division Facilities Management Revenue, Florida
Facilities Pool, Pre-Refunded, 8.125%, 09/01/17 ............................................... 162,107
Florida State Department of Transportation, Turnpike Revenue,
8,780,000 Series A, AMBAC Insured, Pre-Refunded, 7.125%, 07/01/18 ...................................... 9,856,691
2,375,000 Series A, Pre-Refunded, 7.75%, 07/01/09 ...................................................... 2,663,895
14,950,000 Series A, Pre-Refunded, 7.50%, 07/01/19 ...................................................... 16,624,998
3,715,000 Florida State GO, Pre-Refunded, 7.375%, 07/01/19 ............................................... 4,113,397
Florida State Mid Bay Bridge Authority Revenue,
13,505,000 Crossover Refunding, Series A, 6.00%, 10/01/13 ............................................... 12,255,652
7,000,000 Crossover Refunding, Series A, 6.10%, 10/01/22 ............................................... 6,203,680
11,100,000 Refunding, Series D, 6.125%, 10/01/22 ........................................................ 9,870,786
2,600,000 Series A, 8.00%, 10/01/06 .................................................................... 2,805,920
14,250,000 Series A, 7.50%, 10/01/17 .................................................................... 15,006,960
6,000,000 Series A, ETM 10/01/18, 6.875%, 10/01/22 ..................................................... 6,659,580
15,720,000 Florida State Municipal Power Agency Revenue, Refunding, St. Lucie Project, Series 1986,
Pre-Refunded, 7.375%, 10/01/16 ................................................................ 16,664,143
Fort Myers Revenue,
8,560,000 ID No. 15, Series A, 8.125%, 05/01/01 ........................................................ 8,650,822
3,640,000 ID No. 17, Series B, 8.125%, 05/01/01 ........................................................ 3,678,620
60,000 Fort Pierce Utilities Authority Revenue, Refunding, Series A, Pre-Refunded, 9.30%, 10/01/08 .... 62,837
Gainesville Utility System Revenue,
1,520,000 Series A, Pre-Refunded, 6.50%, 10/01/22 ...................................................... 1,577,988
1,600,000 Sub-Series A, AMBAC Insured, Pre-Refunded, 7.25%, 10/01/13 ................................... 1,748,512
8,675,000 Gateway Services District Revenue, Transportation Road Way Service Charges, 8.75%, 05/01/14 .... 9,038,743
2,000,000 Gulf Breeze Local Government Loan Program Revenue, FGIC Insured, 7.75%, 12/01/15 ............... 2,240,000
3,685,000 Halifax Hospital Medical Center Revenue, Refunding, Series A, MBIA Insured, 6.75%, 10/01/11 .... 3,913,396
Hillsborough County Aviation Authority Revenue, Refunding,
14,945,000 Special Purpose, Delta Airlines, Inc., 7.75%, 01/01/24 ....................................... 15,357,034
8,500,000 Tampa International Airport, Series A, FGIC Insured, 6.90%, 10/01/11 ......................... 9,018,415
</TABLE>
The accompanying notes are an integral part of these financial statements.
55
<PAGE>
FRANKLIN TAX-FREE TRUST
================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN FLORIDA TAX-FREE INCOME FUND (NOTE 1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
Hillsborough County Capital Improvement Revenue, Center Project,
$ 8,300,000 Second Series, 6.625%, 07/01/12 .................................................................... $ 8,695,329
1,250,000 Second Series, 6.75%, 07/01/22 ..................................................................... 1,305,138
5,300,000 Hillsborough County IDA, IDR, Colonial Penn Insured Project, 7.35%, 08/01/13 ......................... 5,692,889
3,000,000 Hillsborough County Port District Revenue, Tampa Port Authority, 8.25%, 06/01/09 ..................... 3,273,960
Hillsborough County School Board, COP,
9,500,000 MBIA Insured, 6.00%, 07/01/12 ...................................................................... 9,545,505
5,500,000 MBIA Insured, 6.00%, 07/01/14 ...................................................................... 5,474,535
Hillsborough County Utilities Revenue,
10,400,000 Refunding, Series A, 6.625%, 08/01/11 .............................................................. 10,644,192
5,515,000 Refunding, Series A, 7.00%, 08/01/14 ............................................................... 5,752,366
3,000,000 Refunding, Series A, 6.50%, 08/01/16 ............................................................... 3,028,680
1,135,000 Refunding, Series A, Pre-Refunded, 7.00%, 08/01/14 ................................................. 1,261,280
1,000,000 Refunding, Series B, 6.50%, 08/01/16 ............................................................... 1,009,560
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 ........................................... 17,781,223
5,000,000 Holly Hill Water and Sewer Revenue, Refunding & Improvement, MBIA Insured, Pre-Refunded,
7.25%, 10/01/19 ..................................................................................... 5,464,100
1,535,000 Indian River County Recycling Revenue, AMBAC Insured, Pre-Refunded, 6.875%, 09/01/11 ................. 1,673,902
Jacksonville Electric Authority Revenue,
990,000 Bulk Power Supply, Scherer Project, Series 4-1-A, Pre-Refunded, 6.75%, 10/01/16 .................... 1,081,991
6,000,000 Refunding, St. John's River Power Park System, Series 3, Pre-Refunded, 7.375%, 10/01/13 ............ 6,191,460
3,250,000 St. John's River Power Park System, Series 2, 7.25%, 10/01/19 ...................................... 3,328,195
1,750,000 Series 3-A, Pre-Refunded, 7.70%, 10/01/28 .......................................................... 1,855,455
45,000 Jacksonville Excise Tax and Revenue, Series A, Pre-Refunded, 8.375%, 10/01/11 ........................ 48,283
Jacksonville Health Facilities Authority, Hospital Revenue,
1,500,000 Health South, Inc. Project, MBIA Insured, 6.00%, 05/01/22 .......................................... 1,482,030
5,000,000 Memorial Medical Center Project, Series A, MBIA Insured, 6.75%, 05/01/11 ........................... 5,271,350
2,500,000 Refunding, Baptist Medical Center Project, Series A, MBIA Insured, 7.30%, 06/01/19 ................. 2,668,175
8,480,000 Refunding, Riverside Hospital Project, 7.625%, 10/01/13 ............................................ 8,768,066
1,750,000 Jacksonville Hospital Revenue, University Medical Center, Inc. Project, Connie Lee Insured, 6.60%,
02/01/21 ............................................................................................ 1,795,990
930,000 Jacksonville PCR, Anheuser Busch Cos., Inc. Project, 7.375%, 12/01/15 ................................ 974,240
550,000 Jacksonville Port Authority Facilities Revenue, BIG Insured, 7.875%, 11/01/18 ........................ 587,092
Jupiter Sales Tax Revenue,
100,000 Series 1988, Pre-Refunded, 7.875%, 09/01/13 ........................................................ 106,587
2,000,000 Series 1990, Pre-Refunded, 7.40%, 09/01/20 ......................................................... 2,242,840
5,000,000 Kissimmee Water and Sewer Revenue, Refunding, AMBAC Insured, 6.00%, 10/01/15 ......................... 5,003,300
4,500,000 Lakeland Utility Tax Revenue, Refunding & Improvement, Series A, FGIC Insured, 6.00%, 10/01/17........ 4,510,890
1,000,000 Lee County Capital Bonds, Refunding, Series A, MBIA Insured, 7.30%, 10/01/07 ......................... 1,097,160
Lee County IDA, Sewer IDR, Bonita Springs Project,
5,000,000 Insured by Asset Guaranty, 7.20%, 11/01/11 ......................................................... 5,277,900
2,000,000 Insured by Asset Guaranty, 7.25%, 11/01/20 ......................................................... 2,097,400
Lee County Solid Waste System Revenue,
1,945,000 Series A, MBIA Insured, 7.00%, 10/01/04 ............................................................ 2,117,619
1,175,000 Series A, MBIA Insured, 7.00%, 10/01/05 ............................................................ 1,272,537
1,305,000 Series A, MBIA Insured, 7.00%, 10/01/06 ............................................................ 1,413,328
6,500,000 Series A, MBIA Insured, 7.00%, 10/01/11 ............................................................ 6,952,530
Leesburg Hospital Revenue, Capital Improvement, Leesburg Regional Medical Center Project,
1,250,000 Series 1991-A, Pre-Refunded, 7.375%, 07/01/11 ...................................................... 1,426,625
2,115,000 Series 1991-A, Pre-Refunded, 7.50%, 07/01/21 ....................................................... 2,429,754
</TABLE>
The accompanying notes are an integral part of these financial statements.
56
<PAGE>
FRANKLIN TAX-FREE TRUST
================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN FLORIDA TAX-FREE INCOME FUND (NOTE 1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
Leesburg Hospital Revenue, Refunding, Leesburg Regional Medical Center Project,
$ 7,000,000 Series A, 6.125%, 07/01/18 ......................................................................... $ 6,329,680
750,000 Series B, 5.625%, 07/01/13 ......................................................................... 648,533
1,210,000 Series B, 5.70%, 07/01/18 .......................................................................... 1,031,549
500,000 Leesburg Utilities Revenue, Refunding, FGIC Insured, 7.60%, 10/01/09 ................................. 548,105
1,150,000 Leon HFA, SFMR, Series A, GNMA Secured, 7.30%, 04/01/21 .............................................. 1,198,185
Manatee County HFA, SFMR,
1,605,000 Series A, GNMA Secured, 8.10%, 11/01/20 ............................................................ 1,680,371
4,320,000 Series A, GNMA Secured, 6.85%, 11/01/23 ............................................................ 4,387,824
Manatee County IDR,
1,700,000 Manatee Hospital and Health System, Inc., 8.25%, 03/01/01 .......................................... 1,770,873
6,700,000 Manatee Hospital and Health System, Inc., 9.25%, 03/01/21 .......................................... 7,292,347
4,000,000 Martin County Consolidated Utilities System Revenue, Refunding & Improvement, FGIC Insured,
6.00%, 10/01/24 ..................................................................................... 3,988,800
14,500,000 Martin County PCR, Refunding, Florida Power and Light Co. Project, MBIA Insured, 7.30%, 07/01/20...... 15,591,560
3,335,000 Mary Esther Water and Sewer Revenue, 6.875%, 01/01/18 ................................................ 3,435,817
Miami Beach RDA, Tax Increment Revenue, City Center Historic Convention Village,
965,000 Series 1994, 5.625%, 12/01/09 ...................................................................... 876,249
2,650,000 Series 1994, 5.875%, 12/01/22 ...................................................................... 2,363,668
2,000,000 Miami Beach Special Obligation, Subordinated, FGIC Insured, 7.375%, 12/01/08 ......................... 2,209,800
Miami Health Facilities Authority Revenue, Refunding,
250,000 Mercy Hospital Project, 8.125%, 08/01/11 ........................................................... 271,393
7,500,000 Mercy Hospital Project, Series A, Pre-Refunded, 7.35%, 08/01/15 .................................... 8,308,575
6,500,000 Miramar Waste Water Improvement Assessment Revenue, FGIC Insured, 6.75%, 10/01/25 .................... 6,887,465
5,990,000 Nassau County PCR, Refunding, ITT Rayonier, Inc. Project, 6.25%, 06/01/10 ............................ 5,845,761
350,000 North Broward Hospital District Revenue, Pre-Refunded, 8.00%, 01/01/14 ............................... 370,153
1,500,000 North Port Utilities Revenue, FGIC Insured, 6.25%, 10/01/22 .......................................... 1,524,720
3,020,000 North Springs ID Revenue, Special Assessment, 6.75%, 05/01/03 ........................................ 2,978,837
Northern Palm Beach County Water Control District, Unit Development No. 31,
725,000 Project 2, 6.75%, 11/01/07 ......................................................................... 720,657
1,470,000 Project 2, 6.625%, 11/01/13 ........................................................................ 1,432,265
1,000,000 Ocala Gas Tax Revenue, MBIA Insured, Pre-Refunded, 7.40%, 12/01/09 ................................... 1,083,320
Orange County Capital Improvement Revenue,
170,000 Series A, MBIA Insured, 7.70%, 10/01/18 ............................................................ 187,490
30,000 Series A, MBIA Insured, Pre-Refunded, 7.70%, 10/01/18 .............................................. 33,221
180,000 Series B, MBIA Insured, Pre-Refunded, 7.70%, 10/01/18 .............................................. 199,328
Orange County Health Facilities Authority Revenue,
1,000,000 Adventist/Sunbelt, Series A, AMBAC Insured, 6.875%, 11/15/15 ....................................... 1,059,850
3,000,000 Adventist/Sunbelt, Series A, CGIC Insured, 7.00%, 11/15/14 ......................................... 3,157,860
1,000,000 Crossover Refunding, Orlando Regional Health Care, Series A, MBIA Insured, 6.00%, 11/01/24 ......... 990,330
9,850,000 Refunding, Pooled Hospital Loan, Series A, FGIC Insured, 7.875%, 12/01/25 .......................... 10,467,891
10,760,000 Refunding, Pooled Hospital Loan, Series B, BIG Insured, 7.875%, 12/01/25 ........................... 11,434,975
Orange County HFAR,
4,730,000 Refunding, Series A, GNMA Secured, FGIC Insured, 7.60%, 01/01/24 ................................... 5,040,808
2,320,000 Series A, GNMA Secured, 7.75%, 11/01/12 ............................................................ 2,443,378
410,000 Series A, GNMA Secured, 7.375%, 09/01/24 ........................................................... 431,837
915,000 Series D, GNMA Secured, 7.80%, 10/01/22 ............................................................ 953,549
5,050,000 Orange County Public Service, Tax Revenue, FGIC Insured, 6.00%, 10/01/24 ............................. 5,015,155
4,250,000 Orange County Research and Development Authority Revenue, Capital Improvement, 7.375%,
10/01/04 ............................................................................................ 4,333,428
</TABLE>
The accompanying notes are an integral part of these financial statements.
57
<PAGE>
FRANKLIN TAX-FREE TRUST
================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN FLORIDA TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
Orange County Tourist Development Tax Revenue,
$ 3,000,000 AMBAC Insured, Pre-Refunded, 7.25%, 10/01/10 .................................................. $ 3,362,100
25,000,000 Series B, MBIA Insured, 6.00%, 10/01/24 ....................................................... 24,930,000
Orlando and Orange County Expressway Authority Revenue,
2,000,000 Junior Lien, Pre-Refunded, 7.375%, 07/01/06 ................................................... 2,111,560
265,000 Senior Lien, AMBAC Insured, ETM 07/01/11, 7.625%, 07/01/18 .................................... 282,098
20,000,000 Senior Lien, Pre-Refunded, 7.25%, 07/01/14 .................................................... 21,084,000
5,000,000 Senior Lien, Pre-Refunded, 7.50%, 07/01/16 .................................................... 5,286,800
Orlando Community RDA, Tax Increment Revenue,
2,155,000 Series A, 6.50%, 10/01/11 ..................................................................... 2,232,063
2,585,000 Series A, 6.75%, 10/01/16 ..................................................................... 2,709,700
3,500,000 Osceola County Gas Tax Revenue, Refunding & Improvement, FGIC Insured, 6.00%, 04/01/13 .......... 3,520,825
Osceola County IDAR, Community Provider Pooled Loan Program,
4,634,000 Series A, CGIC Insured, 7.75%, 07/01/10 ....................................................... 4,821,584
795,000 Series C, CGIC Insured, 7.60%, 07/01/10 ....................................................... 831,069
200,000 Osceola County Transportation Revenue, Series A, FGIC Insured, Pre-Refunded, 7.70%, 04/01/13 .... 219,204
Pace Property Finance Authority, Utilities System Revenue,
1,000,000 Refunding & Improvement, 6.125%, 09/01/07 ..................................................... 996,100
2,545,000 Refunding & Improvement, 6.25%, 09/01/13 ...................................................... 2,458,521
1,810,000 Refunding & Improvement, 6.125%, 09/01/17 ..................................................... 1,693,907
Palm Beach County Criminal Justice Facilities Revenue,
5,000,000 FGIC Insured, 6.00%, 06/01/15 ................................................................. 5,011,600
6,950,000 FGIC Insured, Pre-Refunded, 7.25%, 06/01/11 ................................................... 7,751,752
Palm Beach County HFA, SFM Purchase Revenue,
7,485,000 Series A, GNMA Secured, 7.70%, 03/01/22 ....................................................... 7,805,807
5,270,000 Series B, GNMA Secured, 7.60%, 03/01/23 ....................................................... 5,552,156
Palm Beach County Solid Waste Authority Revenue,
65,000 GO, 8.75%, 07/01/10 ........................................................................... 72,062
535,000 Refunding, BIG Insured, 7.40%, 12/01/05 ....................................................... 583,434
1,965,000 Refunding, BIG Insured, Pre-Refunded, 7.40%, 12/01/05 ......................................... 2,163,327
Palm Beach County Solid Waste, IDR, Okeelanta Power and Light Co. Project,
3,600,000 Series A, 6.50%, 02/15/09 ..................................................................... 3,368,340
11,700,000 Series A, 6.70%, 02/15/15 ..................................................................... 10,921,365
24,500,000 Series A, 6.85%, 02/15/21 ..................................................................... 22,980,510
1,035,000 Pensacola-Westwood Homes Development Corp. Revenue, Refunding, Mortgage Loan, FHA
Insured,6.40%, 07/15/23 ........................................................................ 1,021,555
Pinellas County HFA, SFMR,
1,545,000 Multi County Program, Series B, GNMA Secured, 6.875%, 08/01/10 ................................ 1,598,519
6,055,000 Multi County Program, Series B, GNMA Secured, 7.375%, 02/01/24 ................................ 6,354,904
2,080,000 Series A, GNMA Secured, 7.30%, 08/01/22 ....................................................... 2,152,821
1,600,000 Series A, GNMA Secured, 7.75%, 08/01/23 ....................................................... 1,689,552
12,200,000 Pinellas County PCR, Refunding, Florida Power and Light Co., 7.20%, 12/01/14 .................... 13,092,796
Plantation Health Facilities Authority Revenue,
1,500,000 Covenant Retirement Community, Inc., 7.625%, 12/01/12 ......................................... 1,471,350
3,000,000 Covenant Retirement Community, Inc., 7.75%, 12/01/22 .......................................... 2,954,730
2,035,000 Polk County HFA, Refunding, Series A, GNMA Secured, 7.15%, 09/01/23 ............................. 2,113,775
Port Everglades Authority, Port Improvement Revenue,
18,050,000 Refunding, Series A, 7.50%, 09/01/12 .......................................................... 19,021,451
575,000 Series 1986, ETM 11/01/02, 7.50%, 11/01/06 .................................................... 662,699
65,000 Royal Palm Beach, Utility System Revenue, Series A, AMBAC Insured, Pre-Refunded, 8.875%,
10/15/13 ....................................................................................... 72,508
100,000 St. Augustine Water and Sewer Utility Revenue, Refunding, 8.125%, 10/01/12 ...................... 105,472
</TABLE>
The accompanying notes are an integral part of these financial statements.
58
<PAGE>
FRANKLIN TAX-FREE TRUST
================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN FLORIDA TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
$ 2,995,000 St. Johns County Water and Sewer Revenue, Series B-1, FGIC Insured, 7.00%, 06/01/11 ............ $ 3,156,910
7,500,000 St. Lucie County Solid Waste Disposal Revenue, Florida Power and Light Co. Project, 7.15%,
02/01/23....................................................................................... 7,858,050
St. Petersburg Health Facilities Authority Revenue,
8,630,000 Allegany Health System, St. Mary, Series B, Pre-Refunded, 7.75%, 12/01/15 .................... 9,754,920
10,500,000 Allegany Health System, Series A, MBIA Insured, 7.00%, 12/01/15 .............................. 11,268,705
2,500,000 Bon Secours-Maria Manor Project, Series B, Pre-Refunded, 7.875%, 08/15/18 .................... 2,766,575
2,940,000 Refunding, Allegany Health System, St. Anthony, Series C, 7.75%, 01/01/14 .................... 3,178,169
340,000 Refunding, Allegany Health System, St. Anthony, Series C, Pre-Refunded, 7.75%, 01/01/14 ...... 371,572
Santa Rosa County Health Facilities Authority Revenue, Refunding,
40,000 Gulf Breeze Hospital, Inc., 8.60%, 10/01/02 .................................................. 42,992
520,000 Gulf Breeze Hospital, Inc., Pre-Refunded, 8.70%, 10/01/14 .................................... 589,368
14,000,000 Gulf Breeze Hospital, Inc., Series A, 6.20%, 10/01/14 ........................................ 12,815,460
4,290,000 Santa Rosa County IDR, Refunding, Holley Navarre Water System Project, 6.75%, 05/01/24 ......... 4,213,338
2,000,000 Sarasota County Utility System Revenue, Capital Appreciation, AMBAC Insured, Pre-Refunded,
7.50%, 06/01/10 ............................................................................... 2,151,040
150,000 Sarasota Water and Sewer Utility Revenue, Refunding, MBIA Insured, Pre-Refunded, 7.625%,
10/01/08 ...................................................................................... 159,568
Seminole County School Board, COP,
1,150,000 Series A, MBIA Insured, 6.125%, 07/01/14 ..................................................... 1,167,227
5,000,000 Series B, MBIA Insured, 6.50%, 07/01/21 ...................................................... 5,186,000
7,500,000 Seminole County Solid Waste Disposal System Revenue, MBIA Insured, Pre-Refunded, 7.25%,
10/01/20 ...................................................................................... 8,405,250
3,000,000 South Indian River Water Control District, Refunding, Series C, Pre-Refunded, 7.50%, 10/01/06... 3,292,380
Sunrise Special Tax District No. 1,
3,485,000 Refunding, 6.375%, 11/01/08 .................................................................. 3,607,464
12,390,000 Refunding, 6.375%, 11/01/21 .................................................................. 12,408,957
Tallahassee Consolidated Utility System Revenue,
3,400,000 Series 1994, 6.20%, 10/01/19 ................................................................. 3,465,790
7,190,000 Series B, 6.90%, 10/01/14 .................................................................... 7,622,550
Tampa Allegany Health System Revenue, St. Joseph,
8,000,000 FGIC Insured, Pre-Refunded, 7.375%, 12/01/23 ................................................. 8,917,760
1,180,000 MBIA Insured, 6.75%, 12/01/17 . .............................................................. 1,243,425
7,000,000 MBIA Insured, 6.50%, 12/01/23 ................................................................ 7,267,050
1,780,000 Pre-Refunded, 7.125%, 12/01/05 ............................................................... 1,965,672
Tampa Capital Improvement Program Revenue,
6,300,000 Series A, 8.25%, 10/01/18 .................................................................... 6,633,270
31,670,000 Series B, 8.375%, 10/01/18 ................................................................... 33,469,173
2,000,000 Tampa Guaranteed Entitlement Revenue, Refunding, AMBAC Insured, 7.15%, 10/01/18 ................ 2,167,360
Tampa Water and Sewer Revenue,
340,000 Sub-Lien, Series A, AMBAC Insured, 7.75%, 10/01/14 ........................................... 373,422
3,000,000 Sub-Lien, Series A, AMBAC Insured, 7.25%, 10/01/16 ........................................... 3,182,100
1,655,000 Temple Terrace Water and Sewer Revenue, FGIC Insured, 6.30%, 10/01/17 .......................... 1,690,798
6,000,000 Titusville Water and Sewer Revenue, MBIA Insured, 6.20%, 10/01/14 .............................. 6,154,080
University Community Hospital, Inc., Florida Hospital Revenue, Refunding,
5,000,000 FSA Insured, Pre-Refunded, 7.375%, 09/01/07 .................................................. 5,626,750
5,000,000 FSA Insured, Pre-Refunded, 7.50%, 09/01/11 ................................................... 5,656,350
1,425,000 Venice Capital Improvement Revenue, MBIA Insured, Pre-Refunded, 7.80%, 11/01/13 ................ 1,522,969
Viera East Community Development District,
11,295,000 Refunding, Special Assessment, Series A, 6.00%, 05/01/14 ..................................... 10,907,807
2,505,000 Special Assessment, 7.50%, 05/01/03 .......................................................... 2,586,137
4,360,000 Special Assessment, 8.50%, 05/01/04 .......................................................... 4,760,335
</TABLE>
The accompanying notes are an integral part of these financial statements.
59
<PAGE>
FRANKLIN TAX-FREE TRUST
================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN FLORIDA TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
Viera East Community Development District, (cont.)
$ 5,225,000 Special Assessment, 7.50%, 05/01/12 ......................................................... $ 5,373,756
10,640,000 Special Assessment, 8.625%, 05/01/14 ........................................................ 11,698,467
7,490,000 Special Assessment, Series B, 6.75%, 05/01/14 ............................................... 7,239,609
4,340,000 Viera East Community Development District, Water and Sewer Revenue, 7.875%, 05/01/03 .......... 4,445,202
500,000 Volusia County Educational Facility Authority Revenue, Embry-Riddle Aeronautical University,
Connie Lee Insured, 6.625%, 10/15/22 ......................................................... 515,530
1,305,000 West Palm Beach Community RDAR, Series A, Pre-Refunded, 6.50%, 03/01/08 ....................... 1,408,408
Westgate/Belvedere Homes Community RDAR,
410,000 Series 1992, 6.50%, 11/01/09 ................................................................ 411,177
1,410,000 Series 1992, 6.60%, 11/01/17 ................................................................ 1,414,865
--------------
TOTAL BONDS (COST $1,145,744,855) ....................................................... 1,199,497,892
--------------
(c)ZERO COUPON BONDS 3.4%
3,670,000 Broward County Water and Sewer Utility Revenue, Refunding, Series A, AMBAC Insured, (original
accretion rate 7.50%), 10/01/08 .............................................................. 1,658,730
17,020,000 Dade County Guaranteed Entitlement Revenue, Capital Appreciation, AMBAC Insured, (original
accretion rate 7.70%), 08/01/18 .............................................................. 3,460,506
1,625,000 Hillsborough County Utilities Revenue, Refunding, Series A, (original accretion rate 6.97%),
08/01/98 ..................................................................................... 1,353,934
5,770,000 Lakeland Electric and Water Revenue, Capital Appreciation, (original accretion rate 7.00%),
10/01/14 ..................................................................................... 1,763,716
Port Everglades Authority, Port Improvement Revenue, Refunding,
10,575,000 Series A, (original accretion rate 7.40%), 09/01/02 ......................................... 6,824,047
9,075,000 Series A, (original accretion rate 7.40%), 09/01/03 ......................................... 5,477,851
3,550,000 Series A, (original accretion rate 7.40%), 09/01/04 ......................................... 2,000,532
50,000,000 Series A, (original accretion rate 7.45%), 09/01/10 ......................................... 18,158,000
Sarasota Special Obligation Revenue, Refunding,
1,365,000 AMBAC Insured, (original accretion rate 6.69%), 11/01/09 .................................... 584,834
1,780,000 AMBAC Insured, (original accretion rate 6.74%), 11/01/12 .................................... 622,697
2,180,000 AMBAC Insured, (original accretion rate 6.74%), 11/01/15 .................................... 625,289
TOTAL ZERO COUPON BONDS (COST $39,396,845) .............................................. 42,530,136
--------------
TOTAL LONG TERM INVESTMENTS (COST $1,185,141,700) ....................................... 1,242,028,028
--------------
(E)SHORT TERM INVESTMENTS .1%
Sarasota County Health Facilities Authority Revenue,
300,000 Venice Hospital Project, Daily VRDN and Put, 3.90%, 12/01/15 ................................ 300,000
800,000 Venice Hospital Project, Daily VRDN and Put, 3.90%, 12/01/22 .................................. 800,000
--------------
TOTAL SHORT TERM INVESTMENTS (COST $1,100,000) .......................................... 1,100,000
--------------
TOTAL INVESTMENTS (COST $1,186,241,700) 98.3% ...................................... 1,243,128,028
OTHER ASSETS AND LIABILITIES, NET 1.7% ............................................. 21,890,407
--------------
NET ASSETS 100.0% .................................................................. $1,265,018,435
==============
At February 28, 1995, the net unrealized appreciation based on
the cost of investments for income tax purposes of
$1,186,241,700 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ............................................................. $ 65,277,989
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ............................................................. (8,391,661)
--------------
Net unrealized appreciation ................................................................ $ 56,886,328
==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
60
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================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
FRANKLIN FLORIDA TAX-FREE INCOME FUND
- --------------------------------------------------------------------------------
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
(c)Zero coupon bonds. The current effective yield may vary. The original
accretion rate will remain constant.
(e)Variable rate demand notes (VRDNs) are tax-exempt obligations which contain a
floating or variable interest rate adjustment formula and an unconditional
right of demand to receive payment of the principal balance plus accrued
interest 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.
61
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================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN GEORGIA TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS 100.0%
$ 500,000 Albany-Dougherty County Hospital Authority Revenue, Anticipation Certificates, Series B,
AMBAC Insured, Pre-Refunded, 7.50%, 09/01/10 ..................................................... $ 565,635
50,000 Albany-Dougherty Inner City Authority, Improvement Revenue, Municipal Auditorium Project,
Series 1988-B, 7.875%, 01/01/09 .................................................................. 54,007
50,000 Athens Housing Authority, MFHR, Oakwood Forest Apartments Project, 8.125%, 12/01/05 ............... 51,088
4,000,000 Atlanta Airport Facilities Revenue, Series B, AMBAC Insured, 6.00%, 01/01/21 ...................... 3,847,480
1,400,000 Atlanta Board of Education, COP, FGIC Insured, Pre-Refunded, 7.125%, 06/01/12 ..................... 1,553,552
Atlanta COP, Pretrial Detention Center,
1,000,000 MBIA Insured, 6.25%, 12/01/11 .................................................................. 1,018,110
3,800,000 MBIA Insured, 6.25%, 12/01/17 .................................................................. 3,827,056
420,000 Atlanta Downtown Development Authority, IDR, Underground Atlanta Project, Pre-Refunded, 7.75%,
10/01/16 ......................................................................................... 447,577
2,000,000 Atlanta Downtown Development Authority Revenue, Refunding, Underground Atlanta Project, 6.25%,
10/01/16 ......................................................................................... 2,022,820
3,500,000 Atlanta Special Purpose Facilities Revenue, Delta Air Lines, Inc. Project, Series 1989-B, 7.90%,
12/01/18 ......................................................................................... 3,600,170
85,000 Atlanta Urban Residential Finance Authority, SFMR, GNMA Secured, 8.25%, 10/01/21 .................. 89,236
1,000,000 Barnesville Water and Sewer Revenue, Refunding, 6.85%, 09/01/17 ................................... 1,019,300
100,000 Bartow County Water and Sewage Revenue, Refunding, AMBAC Insured, Pre-Refunded, 8.00%,
09/01/15 ......................................................................................... 111,403
Burke County Development Authority, PCR,
160,000 Georgia Power Co., Plant Vogtle Project, 8.00%, 10/01/16 ....................................... 169,850
10,000,000 Refunding, Georgia Power Co., Plant Vogtle, First Series, MBIA Insured, 6.60%, 07/01/24 ........ 10,231,400
1,700,000 Chatham County Hospital Authority Revenue, Memorial Medical Center, Inc., Series A, MBIA Insured,
7.00%, 01/01/21 .................................................................................. 1,800,283
90,000 Cherokee County Hospital Authority Revenue, Certificates, MBIA Insured, 8.00%, 12/01/13 ........... 97,550
1,595,000 Cherokee County Water and Sewage Authority Revenue, Refunding, MBIA Insured, 6.90%, 08/01/18 ...... 1,757,211
200,000 Clark County Hospital Authority Revenue, Certificates, Series A, MBIA Insured, 7.10%, 01/01/08 210,844
1,400,000 Clayton County Development Authority, Special Facility Revenue, Refunding, Delta Air Lines, Inc.
Project, 7.625%, 01/01/20 ........................................................................ 1,420,874
2,400,000 Clayton County Hospital Authority Revenue, Anticipation Certificates, Southern Regional Medical
Center, MBIA Insured, 7.00%, 08/01/13 ............................................................ 2,578,584
100,000 Cobb County Kennestone Hospital Authority Revenue, Series A, MBIA Insured, ETM 02/01/01, 7.75%,
02/01/07 ......................................................................................... 116,116
1,000,000 Cobb County Residential Care Facilities Authority Revenue, Refunding, 7.50%, 08/01/15 ............. 1,075,220
1,000,000 Colquitt County Hospital Authority Revenue, Certificates, Colquitt Regional Medical Center,
MBIA Insured, 6.70%, 03/01/12 .................................................................... 1,059,440
1,300,000 Columbia County Water and Sewer Revenue, Series A, AMBAC Insured, 6.90%, 06/01/11 ................. 1,388,894
45,000 Columbus Hospital Authority Revenue, Anticipation Certificates, St. Francis Hospital Project,
Series 1987, BIG Insured, Pre-Refunded, 8.25%, 01/01/07 .......................................... 48,548
100,000 Columbus Water and Sewer Revenue, Series 1986, Pre-Refunded, 7.00%, 05/01/06 ...................... 103,617
100,000 Commerce, City of, Combined Public Utility Revenue, Refunding & Improvement, AMBAC Insured,
Pre-Refunded, 7.50%, 12/01/20 .................................................................... 111,993
1,000,000 Conyers Water and Sewer Revenue, Series A, AMBAC Insured, 6.60%, 07/01/15 ......................... 1,044,480
750,000 Coweta Association, County Commissioners of Georgia Leasing Program, MBIA Insured,
Pre-Refunded, 7.00%, 12/01/10 .................................................................... 816,442
300,000 Dade County Water and Sewer Authority Revenue, Refunding, FGIC Insured, Pre-Refunded, 7.60%,
07/01/15 ......................................................................................... 334,764
2,000,000 Dalton Building Authority Revenue, Northwest Trade and Convention, Pre-Refunded, 7.10%,
07/01/11 ......................................................................................... 2,231,080
100,000 Dekalb County Hospital Authority Revenue, Anticipation Certificates, Dekalb Medical Center,
Pre-Refunded, 7.00%, 08/01/09 .................................................................... 109,000
440,000 Dekalb County Housing Authority, SFMR, GNMA Secured, 7.70%, 02/01/24 .............................. 456,245
</TABLE>
The accompanying notes are an integral part of these financial statements.
62
<PAGE>
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================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN GEORGIA TAX-FREE INCOME FUND (NOTE 1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
$ 600,000 Dekalb County Water and Sewer Revenue, Series 1990, Pre-Refunded, 7.00%, 10/01/10 ...................... $ 665,220
1,315,000 Dekalb Private Hospital Authority Revenue, Anticipation Certificates, Emory University Project, 7.00%,
04/01/21 .............................................................................................. 1,388,587
500,000 Douglas County School System GO, Pre-Refunded, 7.15%, 01/01/10 ......................................... 538,625
Downtown Savannah Authority Revenue,
500,000 Board of Public Education Project, MBIA Insured, Pre-Refunded, 7.20%, 08/01/10 ...................... 544,060
1,000,000 Chatham County Detention, Series A, Pre-Refunded, 6.80%, 01/01/11 ................................... 1,080,120
400,000 Downtown Smyrna Development Authority Revenue, Pre-Refunded, 7.125%, 02/01/16 .......................... 435,608
1,215,000 East Point Building Authority Revenue, Public Facilities and Equipment Project, AMBAC Insured,
6.70%, 02/01/11 ....................................................................................... 1,275,580
95,000 Ellijay-Gilmer County Water and Sewer Authority Revenue, Pre-Refunded, 7.875%, 01/01/14 ................ 103,867
980,000 Fitzgerald Housing Authority Mortgage Revenue, Refunding, Bridge Creek, Series A, MBIA Insured,
6.50%, 07/01/24 ....................................................................................... 988,634
Fulco Hospital Authority Revenue, Anticipation Certificates,
100,000 Baptist Medical Center Project, Pre-Refunded, 7.75%, 10/01/08 ....................................... 107,876
100,000 Shepherd Spinal Center Project, Series 1988-A, 7.75%, 09/01/08 ...................................... 104,594
Fulton County Building Authority Revenue,
400,000 County Government and Health Facilities Project, Pre-Refunded, 7.50%, 01/01/08 ...................... 417,688
750,000 Human Resources and Government Facilities Program, 7.10%, 01/01/15 .................................. 805,912
65,000 Judicial Center Facilities Project, Pre-Refunded, 8.20%, 01/01/15 ................................... 70,069
1,000,000 Refunding, Judicial Center Facilities Project, 6.50%, 01/01/15 ...................................... 1,029,460
60,000 Fulton County School District, Unlimited Tax, GO, Pre-Refunded, 7.625%, 05/01/17 ....................... 65,108
115,000 Fulton County Water and Sewer Revenue, Pre-Refunded, 8.25%, 01/01/14 ................................... 127,078
Fulton Dekalb Hospital Authority Revenue,
1,000,000 Certificates, Grady Memorial Hospital Project, AMBAC Insured, Pre-Refunded, 6.90%,
01/01/15 ........................................................................................... 1,104,440
1,000,000 Grady Memorial Hospital Project, AMBAC Insured, Pre-Refunded, 6.90%, 01/01/20 ....................... 1,104,440
1,480,000 Grady Memorial Hospital Project, Series A, AMBAC Insured, Pre-Refunded, 7.25%, 01/01/20 ............. 1,640,802
925,000 Gainesville Hospital Authority Revenue, Anticipation Certificates, Refunding, Northeast Georgia Health
Care Project, Series B, MBIA Insured, 7.20%, 10/01/20 ................................................. 972,045
Georgia Municipal Electric Authority, Special Obligation, Refunding,
140,000 Second Crossover Series, 8.125%, 01/01/17 ........................................................... 151,701
1,000,000 Third Crossover Series, 6.60%, 01/01/18 ............................................................. 1,048,380
Georgia Municipal Electric Power Authority Revenue,
800,000 Refunding, Series R, Pre-Refunded, 7.40%, 01/01/25 .................................................. 880,600
635,000 Series A, Pre-Refunded, 7.875%, 01/01/18 ............................................................ 664,439
400,000 Series A, Pre-Refunded, 7.40%, 01/01/25 ............................................................. 440,300
7,500,000 Series E, AMBAC Insured, 6.65%, 01/01/21 ............................................................ 7,619,850
100,000 Series S, Pre-Refunded, 7.25%, 01/01/09 ............................................................. 109,193
Georgia State HFAR, Homeownership Opportunity Program,
2,895,000 Series A-1, 6.75%, 06/01/17 ......................................................................... 2,968,475
950,000 Series C, 6.60%, 12/01/23 ........................................................................... 960,051
1,000,000 Georgia State HFAR, MFMR, Club Candlewood Project, FSA Insured, 7.15%, 01/01/25 ........................ 1,034,540
2,000,000 Georgia State HFAR, SFMR, Refunding, Series A, 6.60%, 12/01/23 ......................................... 2,018,680
Georgia State Residential Finance Authority, Homeownership Mortgage,
1,295,000 Series B, FHA/VA, 7.00%, 12/01/12 ................................................................... 1,346,658
265,000 Series B, Sub-Series B-1, Convertible Loans, 7.50%, 06/01/17 ........................................ 281,684
395,000 Series E, Sub-Series E-1, FHA, 7.50%, 06/01/17 ...................................................... 420,138
Georgia State Residential Finance Authority, SF Mortgage,
100,000 Series A, FHA Insured or VA/GML, 8.375%, 12/01/19 ................................................... 105,614
75,000 Series A-2, FHA Insured or VA/GML, 8.40%, 12/01/18 .................................................. 78,521
1,000,000 Georgia State Tollway Authority Revenue, Guaranteed, Georgia 400 Project, 6.80%, 07/01/10 .............. 1,063,100
</TABLE>
The accompanying notes are an integral part of these financial statements.
63
<PAGE>
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================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN GEORGIA TAX-FREE INCOME FUND (NOTE 1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
$ 900,000 Gwinette County Hospital Authority Revenue, Anticipation Certificates, AMBAC Insured,
Pre-Refunded, 7.125%, 09/01/19 ........................................................................ $ 990,378
2,000,000 Houston County School District, Intergovernmental Contract Trust, MBIA Insured, 6.00%, 03/01/14
1,973,240
1,000,000 La Grange Water and Sewerage Revenue, Pre-Refunded, 7.375%, 01/01/12 ................................... 1,109,390
850,000 Liberty County IDR, Refunding, Leconte Property, Inc. Project, 7.875%, 12/01/14 ........................ 926,067
1,000,000 Macon-Bibb County Urban Development Authority Revenue, MFHR, Collateralized, Series A,
FGIC Insured, 7.50%, 01/01/24 ......................................................................... 1,055,880
Metropolitan Atlanta Rapid Transit Authority Sales Tax Revenue,
6,230,000 Series A, MBIA Insured, 6.90%, 07/01/20 ............................................................. 6,554,209
295,000 Series I, Pre-Refunded, 7.00%, 07/01/16 ............................................................. 303,579
630,000 Series K, 7.25%, 07/01/10 ........................................................................... 669,514
250,000 Series L, Pre-Refunded, 7.20%, 07/01/10 ............................................................. 274,108
1,000,000 Series O, 6.55%, 07/01/20 ........................................................................... 1,017,810
Monroe County Development Authority, PCR,
250,000 Georgia Power Co. Plant, Scherer Project, 8.375%, 07/01/17 .......................................... 268,423
1,500,000 Refunding, Oglethorpe Power Co. Plant, Scherer Project, Series A, 6.80%, 01/01/12 ................... 1,570,545
100,000 Polk County Water Authority, Water and Sewerage Revenue, Refunding, MBIA Insured, 7.00%,
12/01/15 .............................................................................................. 106,590
Private Colleges and Universities Facilities Authority Revenue,
1,000,000 Emory University Project, 6.875%, 05/01/15 .......................................................... 1,013,750
50,000 Spelman College Project, MBIA Insured, 7.75%, 06/01/13 .............................................. 54,858
250,000 Puerto Rico Commonwealth Aqueduct and Sewer Authority Revenue, Series 1988-A, 7.875%,
07/01/17 .............................................................................................. 272,163
Puerto Rico Commonwealth Highway Authority Revenue,
230,000 Refunding, Series R, 7.15%, 07/01/00 ................................................................ 249,134
100,000 Series P, Pre-Refunded, 8.125%, 07/01/13 ............................................................ 111,846
Puerto Rico Commonwealth Infrastructure Financing Authority,
175,000 Special Tax Revenue, Series 1988-A, 7.90%, 07/01/07 ................................................. 189,922
50,000 Special Tax Revenue, Series 1988-A, 7.50%, 07/01/09 ................................................. 53,525
80,000 Puerto Rico Commonwealth Public Improvement GO, Series A, Pre-Refunded, 7.75%, 07/01/13 ................ 88,646
150,000 Puerto Rico Electric Power Authority Revenue, Refunding, Series M, Pre-Refunded, 8.00%, 07/01/08........ 167,201
Puerto Rico Electric Power Authority Revenue, Water Resources,
50,000 Refunding, Series N, 7.125%, 07/01/14 ............................................................... 52,491
130,000 Refunding, Series N, Pre-Refunded, 7.125%, 07/01/14 ................................................. 142,967
165,000 Series O, 7.125%, 07/01/14 .......................................................................... 173,222
235,000 Series O, Pre-Refunded, 7.125%, 07/01/14 ............................................................ 258,441
200,000 Puerto Rico Industrial, Medical and Environmental Facilities, PCFA Revenue, Baxter Travenol Labs.,
Series A, 8.00%, 09/01/12 ............................................................................. 221,292
110,000 Puerto Rico Municipal Finance Agency, Series 1988-A, 8.25%, 07/01/08 ................................... 120,846
Puerto Rico PBA, Guaranteed, Public Education and Health Facilities,
80,000 Series H, Pre-Refunded, 7.875%, 07/01/16 ............................................................ 87,127
100,000 Series J, Pre-Refunded, 7.00%, 07/01/19 ............................................................. 108,103
1,500,000 Putnam County Development Authority PCR, Georgia Power Co. Plant, FGIC Insured, 7.25%, 07/01/21......... 1,544,115
200,000 Royston Downtown Development Authority Revenue, Cobb Memorial Hospital Project, Pre-Refunded,
8.20%, 07/01/08 ....................................................................................... 220,188
1,000,000 Savannah EDA, IDR, Refunding, Hershey Foods Corp. Project, 6.60%, 06/01/12 ............................. 1,034,060
3,000,000 Savannah Hospital Authority Revenue, Refunding, St. Joseph's Hospital Project, 6.20%, 07/01/23.......... 2,832,120
4,600,000 Savannah Port Authority PCR, Refunding, Union Carbide Plastic Co., Inc. 7.55%, 08/01/04 ................ 4,706,214
St. Mary's Housing Authority MFMR,
700,000 Pine Apartments, Series C, FGIC Insured, 7.375%, 04/01/22 ........................................... 723,912
500,000 Refunding, Cumberland Oaks Apartments, Series A, FGIC Insured, 7.375%, 09/01/22 ..................... 527,085
200,000 Sugar Hill Combined Public Utility Revenue, MBIA Insured, Pre-Refunded, 7.35%, 01/01/14 ................ 212,782
250,000 University of Puerto Rico Revenue, Refunding, Series J, 7.75%, 06/01/07 ................................ 263,695
</TABLE>
The accompanying notes are an integral part of these financial statements.
64
<PAGE>
FRANKLIN TAX-FREE TRUST
================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN GEORGIA TAX-FREE INCOME FUND (NOTE 1)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.).....................................................................
$ 1,500,000 Walker Dade and Catoosa County Hospital Authority Revenue, Anticipation Certificates, Series A,
FGIC Insured, 7.00%, 10/01/10 ................................................................... $ 1,615,950
1,780,000 White County IDAR, Refunding, Clark Schwebel Fiber Glass, 6.85%, 06/01/10 ........................ 1,810,153
------------
TOTAL LONG TERM INVESTMENTS (COST $111,825,108) ............................................ 116,807,147
------------
(e)SHORT TERM INVESTMENTS .9%
700,000 Georgia Municipal Associates Pool Bond, COP, Tax-Exempt Grantor Trust, MBIA Insured, Weekly
VRDN and Put, 4.00%, 12/15/20 ................................................................... 700,000
200,000 Puerto Rico Commonwealth, Government Development Bank, Refunding, Weekly VRDN and Put,
3.90%, 12/01/15 ................................................................................. 200,000
100,000 Savannah Port Authority Revenue, Powell DUF, Daily VRDN and Put, 3.80%, 12/01/08 ................. 100,000
------------
TOTAL SHORT TERM INVESTMENTS (COST $1,000,000) ............................................. 1,000,000
------------
TOTAL INVESTMENTS (COST $112,825,108) 100.9% .......................................... 117,807,147
LIABILITIES IN EXCESS OF OTHER ASSETS, NET (.9)% ...................................... (1,035,811)
------------
NET ASSETS 100.0% ..................................................................... $116,771,336
============
At February 28, 1995, the net unrealized appreciation based on the cost of investments
for income tax purposes of $112,825,108 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ................................................................. $ 5,172,272
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ................................................................. (190,233)
------------
Net unrealized appreciation .................................................................... $ 4,982,039
------------
</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
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
(e)Variable rate demand notes (VRDNs) are tax-exempt obligations which contain
a floating or variable interest rate adjustment formula and an unconditional
right of demand to receive payment of the principal balance plus accrued
interest 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.
65
<PAGE>
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================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN KENTUCKY TAX-FREE INCOME FUND (NOTE 1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS 98.4%
$ 700,000 Ashland PCR, Refunding, Ashland Oil, Inc. Project, 6.65%, 08/01/09 .................................... $ 707,728
1,000,000 Ashland Solid Waste Revenue, Ashland Oil, Inc. Project, 7.20%, 10/01/20 ............................... 1,038,710
Boone County PCR, Refunding, Collateralized,
1,500,000 Cincinnati Gas and Electric Co., Series A, MBIA Insured, 5.50%, 01/01/24 ........................... 1,352,235
710,000 Dayton Power and Light Co., Series A, 6.50%, 11/15/22 .............................................. 716,000
200,000 Campbell County Water Revenue, District No. 1, 6.60%, 12/01/11 ........................................ 207,040
325,000 Carroll County PCR, Collateralized, Kentucky Utilities Co. Project, Series B, 6.25%, 02/01/18 ......... 326,956
750,000 Carroll County Solid Waste Disposal Facilities Revenue, Collateralized, Kentucky Utility Co. Project,
Series A, 5.75%, 12/01/23 ............................................................................ 685,290
Danville Multi-City Lease Revenue,
1,500,000 Campbellsville, Series B, MBIA Insured, 6.15%, 07/01/12 ............................................ 1,518,120
125,000 Housing Authority, Jefferson County, 6.50%, 02/01/12 ............................................... 126,786
100,000 Sewer and Drain System, Series G, MBIA Insured, Pre-Refunded, 6.75%, 03/01/11 ...................... 110,376
100,000 Shelbyville, Series H, MBIA Insured, 6.70%, 07/01/11 ............................................... 105,880
Daviess County Hospital Revenue,
100,000 Odch, Inc. Project, Series A, MBIA Insured, 6.25%, 08/01/12 ........................................ 101,053
210,000 Odch, Inc. Project, Series A, MBIA Insured, 6.25%, 08/01/22 ........................................ 210,722
545,000 Daviess County Public Improvement Corp. Revenue, Refunding, First Mortgage, Court Facilities
Project, Series A, 5.70%, 10/01/14 ................................................................... 514,916
100,000 Eastern University Revenues, Consolidated Educational Building, Series Q, AMBAC Insured, 6.40%,
05/01/08 ............................................................................................. 105,196
200,000 Edgewood Public Properties Corp. Revenue, First Mortgage, Public Facilities Project, 6.70%,
12/01/21 ............................................................................................. 206,640
500,000 (d)Fulton County Industrial Building Revenue, H.I.S., Inc. Project, 7.50%, 02/01/10 ................... 496,405
400,000 Guam Airport Authority Revenue, Refunding, Series A, 6.50%, 10/01/23 .................................. 396,384
Guam Power Authority Revenue,
440,000 Series A, 6.30%, 10/01/12 .......................................................................... 433,096
225,000 Series A, 6.30%, 10/01/22 .......................................................................... 217,852
125,000 Hopkins County Hospital Revenue, Trover Clinic Foundation, Inc., MBIA Insured, 6.625%, 11/15/11 130,646
720,000 Jefferson County Health Facilities Revenue, Jewish Hospital Health Care Services, Inc.,
AMBAC Insured, 6.55%, 05/01/22 ....................................................................... 735,300
100,000 Jefferson County Hospital Revenue, Alliant Health System Project, Series C, MBIA Insured, 6.20%,
10/01/04 ............................................................................................. 105,911
Jefferson County PCR,
450,000 DuPont, Series A, 6.30%, 07/01/12 .................................................................. 462,361
1,000,000 Louisville Gas and Electric Co. Project, Series B, 5.625%, 0815/19 ................................. 940,010
1,550,000 Louisville Gas and Electric Co. Project, Series C, 5.45%, 10/15/20 ................................. 1,405,323
100,000 Refunding, Louisville Gas and Electric Co. Project, Series A, 7.45%, 06/15/15 ...................... 108,442
250,000 Jefferson County School District Finance Corp., School Building Revenue, Refunding, Series B,
MBIA Insured, 6.20%, 01/01/07 ........................................................................ 261,447
Kenton County Airport Board Revenue,
125,000 Cincinnati/Northern Kentucky International Airport, Series A, FSA Insured, 6.30%, 03/01/15 ......... 124,997
445,000 Delta Airlines Project, Special Facilities, Series A, 7.50%, 02/01/20 .............................. 448,102
150,000 Delta Airlines Project, Special Facilities, Series A, 7.125%, 02/01/21 ............................. 147,807
445,000 Delta Airlines Project, Special Facilities, Series B, 7.25%, 02/01/22 .............................. 445,240
650,000 Refunding, Cincinnati/Northern Kentucky International Airport, Series B, FSA Insured, 5.75%,
03/01/15 ........................................................................................... 606,183
155,000 Kenton County Water District No. 001, Waterworks Revenue, Refunding, FGIC Insured, 6.375%,
02/01/17 ............................................................................................. 159,731
625,000 Kentucky EDA, Hospital Facilities Revenue, St. Elizabeth Medical Center Project, Series A,
FGIC Insured, 6.00%, 12/01/22 ........................................................................ 608,475
</TABLE>
The accompanying notes are an integral part of these financial statements.
66
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STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN KENTUCKY TAX-FREE INCOME FUND (NOTE 1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
$ 500,000 Kentucky EDA Revenue, Refunding & Improvement, Ashland Hospital Corp. Medical Center, Series A,
CGIC Insured, 6.125%, 02/01/12 ........................................................................ $ 500,880
2,500,000 Kentucky HFC, Housing Revenue, Series C, FHA Insured, 6.40%, 01/01/17 .................................. 2,485,175
Kentucky HFC, Housing Revenue, SFMR,
40,000 Series A, 6.60%, 07/01/11 ........................................................................... 41,086
300,000 Series A, 5.80%, 01/01/19 ........................................................................... 284,778
150,000 Series B, 6.60%, 07/01/11 ........................................................................... 154,074
155,000 Series D, FHA/VA, 7.45%, 01/01/23 ................................................................... 163,206
Kentucky Infrastructure Authority Revenue,
200,000 Refunding, Government Agencies Program, Series F, 5.375%, 02/01/13 .................................. 182,294
100,000 Revolving Fund Program, Series E, 6.50%, 06/01/11 ................................................... 102,222
100,000 Revolving Fund Program, Series G, 6.30%, 06/01/12 ................................................... 100,683
500,000 Revolving Fund Program, Series J, 6.375%, 06/01/14 .................................................. 505,225
1,400,000 Kentucky Local Correctional Facilities Construction Authority Revenue, Refunding, FSA Insured,
5.50%, 11/01/14 ....................................................................................... 1,283,478
Kentucky State Development Finance Authority Revenue,
100,000 Refunding, Sisters of Charity of Nazareth Health Corp., 6.75%, 11/01/12 ............................. 102,086
110,000 St. Claire Medical Center Project, Pre-Refunded, 7.125%, 09/01/21 ................................... 121,820
Kentucky State Property and Buildings Commission Revenue,
45,000 Project No. 50, Pre-Refunded, 6.00%, 02/01/10 ....................................................... 46,806
700,000 Project No. 56, 6.00%, 09/01/14 ..................................................................... 687,379
Kentucky State Turnpike Authority, EDR,
200,000 Refunding, Revitalization Road Project, AMBAC Insured, 5.50%, 07/01/07 .............................. 198,218
15,000 Revitalization Road Project, Pre-Refunded, 7.25%, 05/15/10 .......................................... 16,626
85,000 Revitalization Road Project, Pre-Refunded, 7.25%, 05/15/10........................................... 94,212
Lexington-Fayette Urban County Government Revenue, University of Kentucky Library Project,
Inc. Project,
500,000 MBIA Insured, 6.625%, 11/01/13 ...................................................................... 519,495
750,000 MBIA Insured, 6.75%, 11/01/24 ....................................................................... 786,960
Louisville and Jefferson County Metropolitan Sewer District Revenue, Refunding,
700,000 Series A, MBIA Insured, 5.50%, 05/15/21 ............................................................. 636,867
400,000 Series B, MBIA Insured, 5.50%, 05/15/23 ............................................................. 362,876
500,000 Louisville and Jefferson County Metropolitan Sewer District, Sewer and Drain System Revenue,
Refunding, Series A, AMBAC Insured, 6.75%, 05/15/25 ................................................... 526,820
450,000 Louisville and Jefferson County Regional Airport Authority System Revenue, Series A, MBIA Insured,
Series A, MBIA Insured, 5.60%, 07/01/13 ............................................................... 425,340
500,000 Mc Cracken County Hospital Revenue, Refunding, Mercy Health System, Series A, MBIA Insured,
6.40%, 11/01/07 ....................................................................................... 526,400
625,000 Mount Sterling Lease Revenue, Kentucky League Cities Funding, Series A, 6.10%, 03/01/08 ................ 607,013
75,000 Owensboro IDR, Refunding, Kmart Corp. Project, 6.80%, 12/01/07 ......................................... 73,553
1,050,000 Pendleton Multi-County Association Trust, Lease Revenue, Series A, 6.50%, 03/01/19 ..................... 1,061,498
100,000 Powderly IDR, Refunding, First Mortgage, Kmart Corp. Project, 6.90%, 03/01/07 .......................... 98,956
350,000 Puerto Rico Commonwealth Aqueduct and Sewer Authority Revenue, Series 1988-A, 7.00%,
07/01/19 .............................................................................................. 361,995
100,000 Puerto Rico Commonwealth Electric Power Authority Revenue, Water Resources, Series P, 7.00%,
07/01/21 .............................................................................................. 106,461
100,000 Puerto Rico Commonwealth Highway and Transportation Authority Revenue, Refunding, Series V,
6.625%, 07/01/12 ...................................................................................... 103,033
140,000 Puerto Rico Commonwealth Highway Authority Revenue, Refunding, Series R, 6.75%, 07/01/05 ............... 147,994
165,000 Puerto Rico Commonwealth Public Improvement GO, Pre-Refunded, 6.80%, 07/01/21 .......................... 184,721
500,000 Puerto Rico Industrial, Educational, Medical & Environmental Facilities, Financing Authority Revenue,
Auxilio Mutuo Hospital Group, Series A, MBIA Insured, 6.25%, 07/01/24 ................................. 507,035
</TABLE>
The accompanying notes are an integral part of these financial statements.
67
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STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN KENTUCKY TAX-FREE INCOME FUND (NOTE 1)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
$ 110,000 Puerto Rico Industrial, Medical and Environmental Facilities, PCFA Revenue, Series A, 6.75%,
01/01/14 ........................................................................................... $ 117,008
50,000 Puerto Rico PBA, Guaranteed Public Education and Health Facilities, Series L, Pre-Refunded,
6.875%, 07/01/21 ................................................................................... 56,204
350,000 Russell Health System Facilities Revenue, Franciscan Health Center, Series B, 8.10%, 07/01/15 ....... 385,812
100,000 Somerset Water Project Revenue, MBIA Insured, 6.40%, 12/01/06 ....................................... 103,295
University of Kentucky Revenues, Community College Educational Buildings,
350,000 Refunding, Series J, 5.10%, 05/01/10 ............................................................. 316,323
100,000 Series I, 6.40%, 05/01/08 ........................................................................ 104,856
145,000 University of Kentucky Revenues, Consolidated Educational Buildings, Series M, 6.40%, 05/01/10 ...... 150,339
750,000 University of Louisville Revenues, Refunding, Consolidated Educational Buildings, Series I, 5.40%,
05/01/16 ........................................................................................... 683,873
-----------
TOTAL INVESTMENTS (COST $32,483,797) 98.4% ............................................... 32,292,335
OTHER ASSETS AND LIABILITIES, NET 1.6% ................................................... 538,969
-----------
NET ASSETS 100.0% ........................................................................ $32,831,304
===========
At February 28, 1995, the net unrealized depreciation based on the cost of investments
for income tax purposes of $32,483,797 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost .................................................................... $ 600,558
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value .................................................................... (792,020)
-----------
Net unrealized depreciation ....................................................................... $ (191,462)
===========
</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.
PBA - Public Building Authority
PCFA - Pollution Control Financing Authority
PCR - Pollution Control Revenue
SFMR - Single Family Mortgage Revenue
VA - Veterans Administration
(d)See Note 1 regarding securities purchased on a when-issued basis.
The accompanying notes are an integral part of these financial statements.
68
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STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN LOUISIANA TAX-FREE INCOME FUND (NOTE 1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS 98.1%
BONDS 96.5%
Ascension Parish Sales and Use Tax,
$ 300,000 Gravity Drainage District No. 1, 7.25%, 12/01/06 .................................................. $ 321,561
300,000 Gravity Drainage District No. 1, 7.25%, 12/01/07 .................................................. 321,561
200,000 Gravity Drainage District No. 1, 7.25%, 12/01/08 .................................................. 214,032
500,000 Bastrop, Inc., IDB, PCR, Refunding, International Paper Co. Project, 6.90%, 03/01/07 ................. 524,525
150,000 Baton Rouge Public Improvement, Sales and Use Tax Revenue, AMBAC Insured, 7.00%, 08/01/08 ............ 160,796
Caddo Parish GO,
60,000 Series A, MBIA Insured, 7.20%, 02/01/08 ........................................................... 63,532
200,000 Series B, MBIA Insured, 7.20%, 02/01/08 ........................................................... 211,774
200,000 Caddo Parish School District GO, Refunding, MBIA Insured, Pre-Refunded, 7.20%, 03/01/05 .............. 208,974
400,000 Calcasieu Parish Memorial Hospital Service District Revenue, Lake Charles Memorial Hospital
Project, BIG Insured, Pre-Refunded, 7.50%, 12/01/18 ................................................. 426,260
50,000 Calcasieu Parish Public School ID No. 30, GO, Ward 4, Unlimited Tax, Pre-Refunded, 8.00%,
08/01/04 ............................................................................................. 54,705
Calcasieu Parish Public Trust Mortgage Authority Revenue, Refunding,
1,355,000 Series A, 7.75%, 06/01/12 ......................................................................... 1,437,208
1,260,000 Series B, 6.875%, 11/01/12 ........................................................................ 1,282,579
1,380,000 Denham Springs-Livingston Housing and Mortgage Finance Authority, SFMR, ETM 08/01/00, 7.20%,
08/01/10 ............................................................................................. 1,509,761
1,500,000 DeSoto Parish Environmental Improvement Revenue, International Paper Co. Project, Series A,
7.70%, 11/01/18 ..................................................................................... 1,648,080
DeSoto Parish GO,
150,000 School District No. 1, Pre-Refunded, 8.00%, 01/01/09 .............................................. 164,462
50,000 School District No. 2, 8.00%, 08/01/06 ............................................................ 55,418
East Baton Rouge Mortgage Finance Authority,
840,000 MBS, Series A, 7.875%, 08/01/23 ................................................................... 890,744
1,305,000 SF Purchase, Series F, GNMA Secured, 7.875%, 12/01/21 ............................................. 1,394,262
East Baton Rouge Parish Public Improvement, Sales and Use Tax,
145,000 MBIA Insured, 7.25%, 02/01/09 ..................................................................... 153,452
425,000 MBIA Insured, 7.25%, 02/01/13 ..................................................................... 445,689
50,000 Franklin Public Improvement GO, Sales and Use Tax Revenue, Refunding, 8.40%, 12/01/03 ................ 54,077
500,000 Greater New Orleans Expressway Revenue, Refunding, 6.00%, 11/01/16 ................................... 486,960
Iberville Parish Consolidated School District No. 005,
245,000 GO, Unlimited Tax, Pre-Refunded, 8.00%, 10/01/04 .................................................. 272,580
125,000 Pre-Refunded, 8.125%, 10/01/08 .................................................................... 139,575
125,000 Jefferson Parish Home Mortgage Authority, SFMR, GNMA Secured, Series A, 8.30%, 04/01/20 .............. 132,474
Jefferson Parish Road District No. 1, GO,
100,000 FGIC Insured, Pre-Refunded, 7.40%, 03/01/06 ....................................................... 106,716
50,000 FGIC Insured, Pre-Refunded, 7.40%, 03/01/08 ....................................................... 53,358
500,000 Jefferson Parish School Board, Sales and Use Tax Revenue, Series A, ETM 02/01/02, 7.35%, 02/01/03..... 523,370
400,000 Lafayette Parish Consolidated School District No. 1, FGIC Insured, Pre-Refunded, 7.70%, 03/01/07...... 439,572
415,000 Lafayette Public Electric Power Authority Revenue, Refunding, 7.25%, 11/01/12 ........................ 442,693
Lafayette Public Improvement, Sales Tax Revenue,
25,000 Refunding, Series 1988, FGIC Insured, Pre-Refunded, 8.00%, 03/01/08 ............................... 27,501
500,000 Series 1989, FGIC Insured, Pre-Refunded, 7.20%, 05/01/12 .......................................... 544,865
Lafayette Public Trust Financing Authority, SFMR,
535,891 Refunding, Series A, 8.50%, 11/15/12 .............................................................. 574,776
30,000 Series A, ETM 04/01/11, 7.20%, 04/01/11 ........................................................... 32,543
95,000 Lafourche Parish Home Mortgage Authority, SFMR, ETM 07/01/00, 7.40%, 07/01/10 ........................ 103,687
3,000,000 Lake Charles Harbor and Terminal District, Port Facilities Revenue, Refunding, Occidental Petroleum
Corp., 7.20%, 12/01/20 .............................................................................. 3,151,500
</TABLE>
The accompanying notes are an integral part of these financial statements.
69
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STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN LOUISIANA TAX-FREE INCOME FUND (NOTE 1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
$ 750,000 Lake Charles Nonprofit HDC, Section 8 Assisted, Mortgage Revenue, Refunding, Chateau Project,
Series 1990-A, CGIC Insured, 7.875%, 02/15/25 ........................................................ $ 804,998
1,750,000 Leesville, Inc., IDBR, Refunding, Wal-Mart Stores, Inc. Project, 7.10%, 03/01/11 ...................... 1,817,970
500,000 Louisiana Gas Fuel Tax Revenue, 7.25%, 11/15/04 ....................................................... 539,765
Louisiana Mortgage, HFAR,
2,795,000 MF, Refunding, Series A, FHA Insured, 7.00%, 07/01/22 .............................................. 2,859,117
750,000 MF, Westview Project, FHA Insured, 7.80%, 04/01/30 ................................................. 787,103
25,000 SF, GNMA Secured, 9.125%, 11/01/18 ................................................................. 26,289
780,000 SF, GNMA Secured, 8.30%, 11/01/20 .................................................................. 812,542
1,600,000 Louisiana Office Capital Facility Corp., Non-Profit Corp., 7.75%, 12/01/10 ............................ 1,742,304
Louisiana Public Facilities Authority, Hospital Revenue, Refunding,
75,000 Touro Infirmary Project, Series A, BIG Insured, Pre-Refunded, 8.00%, 06/01/09 ...................... 82,839
3,000,000 Women's Hospital Foundation Project, 7.25%, 10/01/22 ............................................... 3,014,130
65,000 Women's Hospital Foundation Project, FGIC Insured, Pre-Refunded, 8.125%, 10/01/14 .................. 72,579
Louisiana Public Facilities Authority Revenue,
930,000 Alton Ochsner Medical Foundation Project, Series C, MBIA Insured, 6.50%, 05/15/22 .................. 947,903
63,606 MFHR, Pontchartrain Apartments, Carriage House Apartments Project, Series A, GNMA Secured,
8.375%, 07/20/23 .................................................................................. 67,116
200,000 Refunding, Jefferson Parish Eastbank Office, FGIC Insured, 7.70%, 08/01/10 ......................... 220,158
2,532,997 SFM Purchase, Series C, 8.45%, 12/01/12 ............................................................ 2,698,529
1,500,000 Student Loan, Series A, Sub-Series 3, 7.00%, 09/01/06 .............................................. 1,566,465
50,000 Tulane University, Series B, Pre-Refunded, 8.00%, 08/15/15 ......................................... 54,312
35,000 Louisiana Public Facilities Authority, SFM Purchase, Series C, GNMA Secured, 8.80%, 04/01/13 .......... 36,516
5,000,000 Louisiana Stadium District, Hotel Occupancy Tax and Stadium Revenue, Refunding, Series A,
FGIC Insured, 6.00%, 07/01/16 ........................................................................ 4,928,550
1,500,000 Louisiana State GO, Series A, CGIC Insured, Pre-Refunded, 7.375%, 05/01/05 ............................ 1,575,315
Louisiana State Offshore Terminal Authority, Deepwater Port Revenue, Refunding, Loop, Inc. Project,
First Stage,
1,000,000 Series B, 7.20%, 09/01/08 .......................................................................... 1,075,050
1,000,000 Series E, 7.60%, 09/01/10 .......................................................................... 1,090,720
1,050,000 Mississipi River Bridge Authority Revenue, 6.75%, 11/01/12 ............................................ 1,092,903
50,000 Morgan City GO, Sales and Use Tax Revenue, Refunding, Pre-Refunded, 8.40%, 12/01/03 ................... 55,120
Natchitoches Parish GO, Consolidated School,
125,000 District No. 7, Pre-Refunded, 8.30%, 03/01/10 ...................................................... 139,892
230,000 District No. 7, Series B, Pre-Refunded, 7.50%, 03/01/09 ............................................ 252,430
235,000 District No. 7, Series B, Pre-Refunded, 7.50%, 03/01/10 ............................................ 257,917
65,000 New Orleans Audubon Park Commission, Aquarium Project, MBIA Insured, Pre-Refunded, 7.90%,
10/01/08 ............................................................................................. 70,794
560,000 New Orleans Home Mortgage Authority, SFMR, Series A, ETM 04/01/00, 7.50%, 10/01/18 .................... 586,034
50,000 New Orleans International Airport Revenue, Series A, FGIC Insured, Pre-Refunded, 8.875%, 08/01/17...... 55,178
300,000 New Orleans Public Improvement GO, CGIC Insured, 7.125%, 10/01/03 ..................................... 318,357
2,000,000 New Orleans GO, Refunding, AMBAC Insured, 6.00%, 09/01/21 ............................................. 1,953,340
1,000,000 New Roads Electric System Revenue, 7.00%, 07/01/17 .................................................... 1,033,700
50,000 Orleans Levee District Public Improvement, Refunding, Series A, 8.25%, 11/01/15 ....................... 50,656
Orleans Parish Law Enforcement District, GO,
185,000 AMBAC Insured, 7.10%, 05/01/05 ..................................................................... 197,247
750,000 AMBAC Insured, 7.10%, 05/01/10 ..................................................................... 792,112
3,500,000 Ouachita Parish Hospital Service Revenue, District No. 1, Glenwood Regional Medical Center, 7.50%,
07/01/21 ............................................................................................. 3,637,410
75,000 Plaquemines Parish GO, Unlimited Tax, Pre-Refunded, 8.40%, 08/01/06 ................................... 82,557
</TABLE>
The accompanying notes are an integral part of these financial statements.
70
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STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN LOUISIANA TAX-FREE INCOME FUND (NOTE 1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
Puerto Rico Commonwealth Aqueduct and Sewer Authority Revenue,
$ 500,000 Series A, 7.90%, 07/01/07 ......................................................................... $ 548,695
1,000,000 Series A, 7.875%, 07/01/17 ........................................................................ 1,088,650
350,000 Series A, 7.00%, 07/01/19 ......................................................................... 361,994
500,000 Puerto Rico Commonwealth GO, Series 1990, Pre-Refunded, 7.70%, 07/01/20 .............................. 572,510
Puerto Rico Commonwealth Highway Authority Revenue,
500,000 Series Q, Pre-Refunded, 6.625%, 07/01/18 .......................................................... 554,455
220,000 Series R, 7.20%, 07/01/01 ......................................................................... 240,563
1,000,000 Puerto Rico Commonwealth Highway Transportation Authority Revenue, Series S, Pre-Refunded,
8.00%, 07/01/18 ..................................................................................... 1,157,380
Puerto Rico Commonwealth Infrastructure Financing Authority, Special Tax Revenue,
525,000 Series 1988-A, 7.90%, 07/01/07 .................................................................... 569,767
100,000 Series 1988-A, 7.75%, 07/01/08 .................................................................... 107,921
Puerto Rico Electric Power Authority Revenue,
100,000 Refunding, Series M, Pre-Refunded, 8.00%, 07/01/08 ................................................ 111,467
1,400,000 Series P, 7.00%, 07/01/21 ......................................................................... 1,490,454
Puerto Rico Electric Power Authority Revenue, Refunding, Water Resources,
560,000 Series N, 7.125%, 07/01/14 ........................................................................ 587,905
1,040,000 Series N, Pre-Refunded, 7.125%, 07/01/14 .......................................................... 1,143,740
Puerto Rico HFC, SFMR, Portfolio No. 1,
85,000 Series A, GNMA Secured, 7.80%, 10/15/21 ........................................................... 89,099
305,000 Series B, GNMA Secured, 7.65%, 10/15/22 ........................................................... 322,815
1,000,000 Series C, GNMA Secured, 6.85%, 10/15/23 ........................................................... 1,035,340
150,000 Puerto Rico Industrial, Medical and Environmental Facilities, PCFA Revenue, Baxter Travenol Labs.,
Series A, 8.00%, 09/01/12 ........................................................................... 165,969
Puerto Rico PBA, Guaranteed Public Education and Health Facilities,
100,000 Series H, Pre-Refunded, 7.875%, 07/01/16 .......................................................... 108,909
1,000,000 Series J, Pre-Refunded, 7.25%, 07/01/17 ........................................................... 1,088,620
75,000 Rapides Parish GO, Consolidated School District No. 52, Pineville, 8.40%, 03/01/03 ................... 81,432
1,370,000 Rapides Parish Housing and Mortgage Finance Authority, SFM, ETM 08/01/00, 7.25%, 08/01/10 ............ 1,406,127
St. Bernard Parish Home Mortgage Authority Revenue, SFMR,
1,017,352 Refunding, Series A, 8.00%, 03/25/12 .............................................................. 1,093,348
435,000 Series A, FGIC Insured, ETM 09/01/00, 7.50%, 09/01/10 ............................................. 488,905
2,500,000 St. Charles Parish, PCR, Louisiana Power and Light Co. Project, 7.50%, 06/01/21 ...................... 2,586,275
St. Charles Parish, Solid Waste Disposal Revenue,
1,500,000 Louisiana Power and Light Co. Project, 7.05%, 04/01/22 ............................................ 1,523,805
750,000 Louisiana Power and Light Co. Project, Series A, 7.00%, 12/01/22 .................................. 760,972
2,365,000 St. James Parish COP, Juvenile Detention Facility, Pre-Refunded, 7.50%, 07/01/10 ..................... 2,449,880
St. John's Baptist Parish,
430,000 Sales Tax District, 7.30%, 12/01/08 ............................................................... 461,506
275,000 Sales Tax District, 7.30%, 12/01/09 ............................................................... 295,031
50,000 St. Mary's Parish Public Improvement, Sales and Use Tax Revenue, Refunding, Pre-Refunded, 8.40%,
12/01/03 ............................................................................................ 55,120
677,118 St. Mary's Public Trust Financing Authority, SFMR, Refunding, Series A, 7.625%, 03/25/12 ............. 720,223
125,000 St. Tammany's Parish Hospital Service Revenue, District No. 2, Pre-Refunded, 8.00%, 10/01/08 ......... 139,071
St. Tammany's Public Trust Financing Authority, SFMR,
50,000 Series A, 7.20%, 07/01/11 ......................................................................... 53,838
165,000 Series A, ETM 07/01/00, 7.20%, 07/01/10 ........................................................... 183,229
150,000 Shreveport GO, Series A, Pre-Refunded, 7.50%, 01/01/09 ............................................... 162,057
3,500,000 Shreveport Water and Sewer Revenue, Refunding, Series A, FGIC Insured, 5.95%, 12/01/14 ............... 3,451,665
5,500,000 Tangipahoa Parish Hospital Service Revenue, District No. 1, Refunding, AMBAC Insured, 6.25%,
02/01/24 ............................................................................................ 5,503,850
</TABLE>
The accompanying notes are an integral part of these financial statements.
71
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STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN LOUISIANA TAX-FREE INCOME FUND (NOTE 1)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
$ 125,000 Terrebonne Parish Hospital Service Revenue, District No. 1, Refunding, Terrebonne General Medical
Center Project, BIG Insured, 7.50%, 04/01/15 ...................................................... $ 132,620
205,000 Ville Platte Utilities Revenue, Refunding, Pre-Refunded, 7.80%, 05/01/02 ........................... 226,301
West Feliciana Parish, PCR,
6,500,000 Gulf States Utilities, 7.70%, 12/01/14 .......................................................... 6,844,305
5,000,000 Refunding, Gulf States Utilities, 8.00%, 12/01/24 ................................................ 5,303,050
------------
TOTAL BONDS (Cost $96,430,706) ............................................................... 101,240,400
------------
(c)ZERO COUPON BONDS 1.6%
5,000,000 Shreveport Water and Sewer Revenue, Refunding, Series B, FGIC Insured, (original accretion rate
7.05%), 12/01/11 (Cost $1,554,139) ................................................................ 1,711,250
------------
TOTAL LONG TERM INVESTMENTS (COST $98,984,845) ............................................... 102,951,650
------------
(e)SHORT TERM INVESTMENTS .2%
200,000 Caddo Parish IDBR, Grymaster Corp. Project, Weekly VRDN and Put, 3.85%, 01/01/03
(COST $200,000) ................................................................................... 200,000
------------
TOTAL INVESTMENTS (COST $98,184,845) 98.3% .............................................. 103,151,650
OTHER ASSETS AND LIABILITIES, NET 1.7% .................................................. 1,828,141
------------
NET ASSETS 100.0% ....................................................................... $104,979,791
============
At February 28, 1995, the net unrealized appreciation based on the cost of investments
for income tax purposes of $98,184,845 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ................................................................... $ 5,127,332
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ................................................................... (160,527)
------------
Net unrealized appreciation ...................................................................... $ 4,966,805
============
</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
(c)Zero coupon bonds. The current effective yield may vary. The original
accretion rate will remain constant.
(e)Variable rate demand notes (VRDNs) are tax-exempt obligations which contain a
floating or variable interest rate adjustment formula and an unconditional
right of demand to receive payment of the principal balance plus accrued
interest 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.
72
<PAGE>
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================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN MARYLAND TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS 98.0%
$ 200,000 Anne Arundel County GO, Second Issue, 7.75%, 03/15/08 ........................................... $ 221,546
1,650,000 Anne Arundel County Mortgage Revenue, Refunding, Series A, MBIA Insured, 6.00%, 01/01/26 ........ 1,620,267
9,500,000 Anne Arundel County PCR, Refunding, Baltimore Gas and Electric Co. Project, 6.00%, 04/01/24 ..... 9,307,625
3,000,000 Baltimore Convention Center Revenue, FGIC Insured, 6.15%, 09/01/19 .............................. 3,023,490
545,000 Baltimore COP, Refunding, Series C, MBIA Insured, 7.25%, 04/01/16 ............................... 582,676
90,000 Baltimore County Authority Revenue, Series 1989, Pre-Refunded, 7.20%, 07/01/19 .................. 96,289
600,000 Baltimore County GO, Pension Fund, Pre-Refunded, 7.75%, 07/01/16 ................................ 627,720
Baltimore County Mortgage Revenue, Refunding, Old Orchard Apartments Project,
1,000,000 Series A, MBIA Insured, 7.00%, 07/01/16 ...................................................... 1,059,240
3,000,000 Series A, MBIA Insured, 7.125%, 01/01/27 ..................................................... 3,170,370
Baltimore Economic Development Lease Revenue, Refunding,
1,825,000 Armistead Partnership, Series A, 6.75%, 08/01/02 ............................................. 1,912,326
3,225,000 Armistead Partnership, Series A, 7.00%, 08/01/11 ............................................. 3,345,228
1,000,000 Baltimore GO, Series B, 7.15%, 10/15/08 ......................................................... 1,112,740
1,850,000 Baltimore Port Facilities Revenue, Consolidated Coal Sales, Series A, 6.50%, 10/01/11 ........... 1,917,618
250,000 Bel Air COP, Parking Facilities, CGIC Insured, Pre-Refunded, 7.80%, 06/01/10 .................... 279,972
1,750,000 Calvert County PCR, Refunding, Baltimore Gas and Electric Co. Project, 5.55%, 07/15/14 .......... 1,637,598
350,000 Frederick County College Revenue, Hood College Project, 7.20%, 07/01/09 ......................... 371,973
500,000 Frederick County EDR, Refunding, Manekin Frederick Project, Series A, 7.50%, 12/01/14 ........... 549,510
200,000 Frederick County GO, Public Facilities, Pre-Refunded, 7.20%, 04/01/07 ........................... 219,272
10,000,000 Gaithersburg Hospital Facilities Improvement Revenue, Shady Grove Hospital, Series A, 8.25%.
09/01/21 ....................................................................................... 10,612,200
3,445,000 Gaithersburg Nursing Home Revenue, Refunding, Shady Grove Adventist, Series A, 9.00%, 09/01/22... 3,484,721
1,250,000 Howard County EDR, Refunding, 7.75%, 06/01/12 ................................................... 1,356,962
215,000 Howard County Metropolitan District, Series A, Pre-Refunded, 7.40%, 02/15/18 .................... 235,044
300,000 Kent County College Revenue, Refunding, Washington College Project, 7.70%, 07/01/18 ............. 326,262
1,900,000 Maryland Environmental Services, COP, Water and Waste Facilities, Series A, 6.70%, 06/01/11 ..... 2,001,574
650,000 Maryland Local Government Insurance Trust Capitalization Program, Series A, 7.125%, 08/01/09 .... 702,708
350,000 Maryland State CDA, Department of Economic and Community Development, SF Program,
First Series, 7.00%, 04/01/14 .................................................................. 361,074
1,000,000 Maryland State CDA, Department of Economic and Community Development, SFHR Program,
Fourth Series, 7.30%, 04/01/17 ................................................................. 1,050,180
Maryland State CDA, Department of Housing and Community Development,
130,000 Infrastructure Financing, Series A, AMBAC Insured, 7.25%, 06/01/09 ........................... 141,511
2,000,000 MFH Mortgage, Series E, 7.10%, 05/15/28 ...................................................... 2,067,320
1,000,000 MFHR Mortgage, Series A, 7.80%, 05/15/32 ..................................................... 1,056,550
1,800,000 MFHR Mortgage, Series A, 6.85%, 05/15/33 ..................................................... 1,835,352
1,000,000 MFHR Mortgage, Series D, 7.70%, 05/15/20 ..................................................... 1,069,970
995,000 SF Program, First Series, 7.375%, 04/01/10 ................................................... 1,041,347
140,000 SF Program, First Series, 7.40%, 04/01/17 .................................................... 146,296
750,000 SF Program, Second Series, 7.60%, 04/01/23 ................................................... 789,577
375,000 SF Program, Second Series, 7.85%, 04/01/29 ................................................... 397,950
300,000 SF Program, Third Series, 7.375%, 04/01/26 ................................................... 309,336
1,500,000 SF Program, Third Series, 7.25%, 04/01/27 .................................................... 1,561,080
1,000,000 SF Program, Fourth Series, 7.45%, 04/01/32 ................................................... 1,040,400
1,990,000 SF Program, Fifth Series, 6.85%, 04/01/11 .................................................... 2,076,127
35,000 SF Program, Sixth Series, 8.125%, 04/01/17 ................................................... 36,622
Maryland State Community Development Administration, MFHR,
200,000 Department of Economics and Community Development, Series A, 7.375%, 05/15/26 ................ 205,638
30,000 Department of Housing and Community Development, Series A, 7.50%, 05/15/31 ................... 31,288
1,000,000 Maryland State EDC Lease Revenue, Hilton Street Facilities, Series A, 7.00%, 01/01/10 ........... 1,045,060
</TABLE>
The accompanying notes are an integral part of these financial statements.
73
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================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN MARYLAND TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
Maryland State Health and Higher Educational Facilities Authority Revenue,
$ 750,000 Bon Secours Heartland, Issue A, Pre-Refunded, 7.375%, 09/01/17 ................................ $ 838,118
1,000,000 Doctors Community Hospital, Pre-Refunded, 8.75%, 07/01/12 ..................................... 1,184,310
250,000 Doctors Community Hospital, Pre-Refunded, 8.75%, 07/01/22 ..................................... 296,078
150,000 Franklin Square Hospital, MBIA Insured, 7.50%, 07/01/19 ....................................... 161,762
700,000 Good Samaritan Hospital, Pre-Refunded, 7.50%, 07/01/21 ........................................ 778,428
100,000 Hartford Memorial Hospital and Fallston General Hospital, 8.50%, 07/01/14 ..................... 105,614
500,000 Holy Cross Hospital, Series A, AMBAC Insured, 7.125%, 07/01/10 ................................ 540,125
100,000 Howard County General Hospital, Pre-Refunded, 7.00%, 07/01/17 ................................. 106,665
1,500,000 Johns Hopkins Hospital, Pre-Refunded, 7.00%, 07/01/23 ......................................... 1,657,755
1,700,000 Kernan Hospital, Connie Lee Insured, 6.10%, 07/01/24 .......................................... 1,659,030
1,095,000 Mercy Medical Center, Pre-Refunded, 8.00%, 07/01/20 ........................................... 1,237,328
2,370,000 Montgomery General Hospital, Connie Lee Insured, 5.625%, 07/01/18 ............................. 2,181,016
100,000 North Arundel Hospital, BIG Insured, Pre-Refunded, 7.875%, 07/01/21 ........................... 110,698
3,000,000 Refunding, Doctors Community Hospital, 5.75%, 07/01/13 ........................................ 2,512,710
2,000,000 Refunding, Good Samaritan Hospital, 5.75%, 07/01/19 ........................................... 1,845,180
150,000 Refunding, Johns Hopkins Hospital, 7.375%, 07/01/09 ........................................... 159,326
100,000 Refunding, Johns Hopkins University, 7.375%, 07/01/08 ......................................... 107,684
1,000,000 Refunding, Sinai Hospital of Baltimore Project, AMBAC Insured, 5.50%, 07/01/13 ................ 942,670
1,000,000 Sinai Hospital of Baltimore, AMBAC Insured, Pre-Refunded, 7.00%, 07/01/19 ..................... 1,105,170
1,350,000 Maryland State IDA Financing, EDR, FSA Insured, 7.10%, 07/01/18 .................................. 1,446,282
6,000,000 Maryland State IDAR Financing, American Center Physics Headquarters, 6.625%, 01/01/17 ............ 5,894,040
500,000 Maryland State Stadium Authority, Sports Facilities Lease Revenue, Series D, 7.60%, 12/15/19 ..... 545,035
Maryland State Transportation Facilities Authority Revenue,
5,400,000 Refunding, Series 1992, 5.75%, 07/01/13 ....................................................... 5,164,020
500,000 Series 1985, 7.00%, 07/01/16 .................................................................. 504,675
Maryland Water Quality Financing Administration Revenue, Revolving Loan Fund,
1,245,000 Series A, 7.25%, 09/01/11 ..................................................................... 1,351,833
1,000,000 Series A, 6.55%, 09/01/14 ..................................................................... 1,045,320
1,565,000 Series B, 6.70%, 09/01/13 ..................................................................... 1,647,601
Montgomery County Housing Opportunities Commission, MFMR,
1,580,000 Series A, 7.25%, 07/01/11 ..................................................................... 1,658,099
2,410,000 Series A, 7.00%, 07/01/23 ..................................................................... 2,472,588
Montgomery County Housing Opportunities Commission, SFMR,
2,075,000 Series A, 6.80%, 07/01/17 ..................................................................... 2,110,254
465,000 Series A, 7.50%, 07/01/17 ..................................................................... 491,947
195,000 Series A, 7.625%, 07/01/17 .................................................................... 202,831
275,000 Montgomery County Parking Revenue, Silver Spring Parking Lot District, Series A, Pre-Refunded,
7.00%, 06/01/08 ................................................................................. 292,045
500,000 Morgan State University Academic and Auxiliary Facilities Fees Revenue, Series A, MBIA Insured,
Pre-Refunded, 7.00%, 07/01/20 ................................................................... 552,585
Northeast Solid Waste Disposal Authority Revenue, Montgomery County Resources Recreation
Project,
3,100,000 Series A, 6.20%, 07/01/10 ..................................................................... 3,016,114
6,000,000 Series A, 6.30%, 07/01/16 ..................................................................... 5,774,940
Ocean City, Refunding,
1,880,000 MBIA Insured, 5.75%, 03/15/12 ................................................................. 1,843,998
1,120,000 MBIA Insured, 5.75%, 03/15/13 ................................................................. 1,097,835
1,180,000 MBIA Insured, 5.75%, 03/15/14 ................................................................. 1,155,940
2,050,000 Prince George's County COP, Real Estate Acquisition Program II, MBIA Insured, 6.00%, 09/15/14 .... 2,038,295
130,000 Prince George's County GO, Consolidated Public Improvement, Series A, Pre-Refunded, 7.20%,
02/01/08 ........................................................................................ 141,324
</TABLE>
The accompanying notes are an integral part of these financial statements.
74
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================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN MARYLAND TAX-FREE INCOME FUND (NOTE 1)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
Prince George's County Hospital Revenue,
$ 3,500,000 Dimensions Health Corp., Pre-Refunded, 7.25%, 07/01/17 ........................................... $ 3,991,260
1,000,000 Dimensions Health Corp., Pre-Refunded, 7.00%, 07/01/22 ........................................... 1,125,280
5,500,000 Prince George's County Housing Authority, MFHR, Emerson House Project, Series A, 7.00%,
04/15/19 ........................................................................................... 5,592,070
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 ................................................... 2,957,304
2,750,000 Prince George's County IDA Lease Revenue, Upper Marlboro Justice Center Project, MBIA Insured,
5.80%, 06/30/14 .................................................................................... 2,665,933
500,000 Prince George's County, Maryland Parking Authority Revenue, Refunding, Justice Center Facilities
Project, 6.45%, 05/01/05 ........................................................................... 529,595
Prince George's County PCR, Refunding,
1,200,000 Potomac Electric Project, 6.00%, 09/01/22 ........................................................ 1,160,820
2,975,000 Potomac Electric Project, 6.375%, 01/15/23 ....................................................... 2,993,058
1,570,000 Prince George's County Solid Waste Management System Revenue, Series 1990, Pre-Refunded,
7.00%, 06/30/08 .................................................................................... 1,735,054
1,000,000 Puerto Rico Commonwealth Highway and Transportation Authority Revenue, Refunding, Series X,
5.50%, 07/01/19 .................................................................................... 913,740
1,145,000 Rockville Mortgage Revenue, Refunding, Summit Apartments Project, Series A, MBIA Insured, 5.70%,
01/01/26 ........................................................................................... 1,066,602
Washington Suburban Sanitary District,
100,000 General Construction, Pre-Refunded, 7.25%, 12/01/09 .............................................. 109,587
1,200,000 General Construction, Refunding, Pre-Refunded, 7.375%, 01/01/07 ................................... 1,277,208
------------
TOTAL LONG TERM INVESTMENTS (COST $146,737,427) ............................................... 150,132,388
------------
(e)SHORT TERM INVESTMENTS .2%
100,000 Baltimore County Housing Mortgage Revenue, Refunding, Spring Hill Project, Weekly VRDN and Put,
4.00%, 09/20/28 .................................................................................... 100,000
200,000 Puerto Rico Commonwealth Government Development Bank, Refunding, Weekly VRDN and Put,
3.90%, 12/01/15 .................................................................................... 200,000
------------
TOTAL SHORT TERM INVESTMENTS (COST $300,000) .................................................. 300,000
------------
TOTAL INVESTMENTS (COST $147,037,427) 98.2% .............................................. 150,432,388
OTHER ASSETS AND LIABILITIES, NET 1.8% ................................................... 2,712,189
------------
NET ASSETS 100.0% ........................................................................ $153,144,577
============
At February 28, 1995, the net unrealized appreciation based on the cost of investments
for income tax purposes of $147,037,427 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost .................................................................... $ 5,247,201
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value .................................................................... (1,852,240)
------------
Net unrealized appreciation ....................................................................... $ 3,394,961
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
75
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================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
FRANKLIN MARYLAND TAX-FREE INCOME FUND
- --------------------------------------------------------------------------------
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.
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
(e)Variable rate demand notes (VRDNs) are tax-exempt obligations which contain a
floating or variable interest rate adjustment formula and an unconditional
right of demand to receive payment of the principal balance plus accrued
interest 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.
76
<PAGE>
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================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN MISSOURI TAX-FREE INCOME FUND (NOTE 1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS 98.2%
$ 500,000 Audrain County Hospital Revenue, Refunding, Audrain Medical Center Project, AMBAC Insured,
7.35%, 11/01/08 .................................................................................... $ 559,345
600,000 Bi-State Development Agency, Missouri-Illinois Metropolitan District Revenue, Refunding, Arch
Parking Facility, 7.25%, 01/02/13 .................................................................. 614,262
3,000,000 Bi-State Development Agency, Missouri-Illinois Metropolitan No. 5, Refunding, American Commercial
Terminals, 7.75%, 06/01/10 ......................................................................... 3,226,650
1,400,000 Bowling Green School District R1, Building Corp. Leasehold Revenue, MBIA Insured, 6.50%, 03/01/13.... 1,449,910
1,180,000 Christian County Reorganized School District No. R-6, AMBAC Insured, 7.05%, 03/01/11 ................ 1,278,400
Franklin County Consolidated School District No. 2, GO,
500,000 FGIC Insured, Pre-Refunded, 7.20%, 03/01/05 ...................................................... 532,265
500,000 FGIC Insured, Pre-Refunded, 7.25%, 03/01/06 ...................................................... 532,950
Guam Airport Authority Revenue,
1,075,000 Refunding, Series A, 6.50%, 10/01/23 ............................................................. 1,065,282
500,000 Series B, 6.60%, 10/01/10 ........................................................................ 501,095
4,000,000 Series B, 6.70%, 10/01/23 ........................................................................ 3,989,640
3,000,000 Jackson County IDAR, St. Joseph's Health Care Center Corp., MBIA Insured, 6.50%, 07/01/19 ........... 3,083,970
880,000 Jackson County Lease COP, Longview Recreation Complex Project, Pre-Refunded, 8.00%, 11/01/07 ........ 958,276
370,000 Jefferson County Reorganized School District No. R-3, AMBAC Insured, 7.00%, 03/01/09 ................ 393,514
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 ........................................... 209,960
150,000 Series 1987, 7.125%, 06/01/14 .................................................................... 154,908
Joplin School District Building Corp., Leasehold Revenue, Capital Improvement Project,
200,000 FGIC Insured, Pre-Refunded, 7.40%, 09/01/03 ...................................................... 211,232
100,000 FGIC Insured, Pre-Refunded, 7.45%, 03/01/04 ...................................................... 105,687
605,000 Kansas City Airport Revenue, General Improvement, Series B, CGIC Insured, 6.875%, 09/01/12 .......... 640,005
Kansas City MAC, Leasehold Revenue, Capital Improvement,
7,790,000 Citywide Infrastructure, Series B, CGIC Insured, 6.50%, 03/01/14 ................................. 8,073,712
1,750,000 Refunding, Roe Bartel, Series B-1, AMBAC Insured, 7.125%, 04/15/16 ............................... 1,867,583
2,905,000 Roe Bartel, Series B, AMBAC Insured, 6.625%, 04/15/15 ............................................ 3,035,115
1,665,000 Truman Medical Center, Series A, 7.00%, 11/01/11 ................................................. 1,745,719
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 .............................................. 2,033,002
3,525,000 Kansas City Tax Increment Financing Commission, Tax Increment Revenue, Briarcliff West Project,
Series B, 7.00%, 11/01/14 .......................................................................... 3,614,711
1,800,000 Kansas City Water Revenue, 7th Issue, Series A, 7.00%, 12/01/08 ..................................... 1,888,398
75,000 Lee's Summit, COP, 8.50%, 08/01/02 .................................................................. 79,263
40,000 Marion County Nursing Home District Revenue, Refunding, Pre-Refunded, 9.00%, 08/01/03 ............... 43,697
1,500,000 Missouri Higher Education Loan Authority Student Revenue, Series A, 5.45%, 02/15/09 ................. 1,344,285
1,000,000 Missouri School Board Association, COP, Lease Participation, North St. Francois County Project,
MBIA Insured, Pre-Refunded, 7.375%, 04/01/10 ....................................................... 1,080,040
Missouri School Board Association, COP, Pooled Finance Program,
130,000 Series A-3, BIG Insured, 7.875%, 03/01/06 ........................................................ 137,839
225,000 Series A-5, BIG Insured, 7.375%, 03/01/06 ........................................................ 241,805
Missouri State Environmental Improvement and Energy Resources Authority, PCR,
950,000 Revolving Fund, Lee's Summit, Series B, 7.125%, 12/01/10 ......................................... 1,022,295
4,500,000 Revolving Fund, Series A, 6.55%, 07/01/14 ........................................................ 4,664,430
2,000,000 Revolving Fund Program, Series B, 7.20%, 07/01/16 ................................................ 2,190,700
1,945,000 Revolving Fund, Springfield Project, Series A, 7.00%, 10/01/10 ................................... 2,079,030
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 ................................................................. 53,150
20,000 Series 1984 G-5, 7.90%, 11/15/14 ................................................................. 21,110
230,000 Series 1984 G-6, 7.90%, 11/15/14 ................................................................. 243,161
</TABLE>
The accompanying notes are an integral part of these financial statements.
77
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================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN MISSOURI TAX-FREE INCOME FUND (NOTE 1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
$ 2,390,000 Missouri State Environmental Improvement and Energy Resources Authority, Union Electric Project,
7.40%, 05/01/20 .................................................................................... $2,591,262
Missouri State Health and Educational Facilities Authority, Health Facilities Revenue,
2,000,000 Barnes Hospital, Pre-Refunded, 7.125%, 12/15/20 .................................................. 2,235,340
2,000,000 Bethesda Eye Institute, Pre-Refunded, 6.80%, 11/01/16 ............................................ 2,218,160
100,000 Bethesda Health Group, Inc. Project, Pre-Refunded, 8.00%, 04/01/13 ............................... 109,494
2,500,000 Children's Mercy Hospital Project, MBIA Insured, 5.65%, 05/15/23 ................................. 2,323,900
3,500,000 Lake of The Ozarks General Hospital, 8.00%, 02/15/11 ............................................. 3,674,370
200,000 Memorial Community Hospital, Association of Jefferson City, 8.25%, 04/15/99 ...................... 206,642
125,000 Refunding, Charles E. Still Osteopathic Hospital Project, 7.625%, 02/01/08 ....................... 127,569
865,000 Refunding, Heartland Health Systems Project, 8.125%, 10/01/10 .................................... 955,393
1,500,000 Refunding, Heartland Health Systems Project, AMBAC Insured, 5.625%, 08/15/10 ..................... 1,432,200
570,000 Refunding, St. John's Regional Medical Center, MBIA Insured, Pre-Refunded, 7.70%, 09/01/15 ....... 609,649
2,500,000 Refunding & Improvement, Christian Health, Series A, FGIC Insured, Pre-Refunded, 6.875%,
02/15/21 ......................................................................................... 2,761,875
950,000 Sisters of St. Mary's Health Care Project, BIG Insured, Pre-Refunded, 7.75%, 06/01/16 ............ 1,046,188
175,000 Spelman-St. Luke's Hospital Corp. Project, Pre-Refunded, 7.875%, 10/01/18 ........................ 194,175
Missouri State Health and Educational Facilities Authority Revenue,
5,000,000 Health Midwest, Series A, MBIA Insured, 6.40%, 02/15/15 .......................................... 5,108,800
700,000 Health Midwest, Series B, MBIA Insured, 6.10%, 06/01/11 .......................................... 706,720
1,990,000 Health Midwest, Series B, MBIA Insured, 6.25%, 06/01/14 .......................................... 2,029,999
1,100,000 Health Midwest, Series B, MBIA Insured, 6.25%, 02/15/22 .......................................... 1,108,921
2,745,000 Heartland Health System Project, AMBAC Insured, 6.35%, 11/15/17 .................................. 2,798,335
1,000,000 Refunding, SSM Health Care, Series AA, MBIA Insured, 6.25%, 06/01/16 ............................. 1,011,760
50,000 Refunding, St. Louis University, Series A, AMBAC Insured, 7.875%, 06/01/12 ....................... 53,584
300,000 Refunding & Improvement, Freeman Hospital Project, Pre-Refunded, 7.40%, 09/01/13 ................. 318,183
1,200,000 Refunding & Improvement, St. Luke's Hospital of Kansas City Project, MBIA Insured,
Pre-Refunded, 7.00%, 11/15/13 .................................................................... 1,344,864
250,000 Refunding & Improvement, St. Luke's Hospital of Kansas City Project, MBIA Insured,
Pre-Refunded, 6.50%, 11/15/17 .................................................................... 273,173
Missouri State Housing Development Commission,
185,000 SFMR, Series A, GNMA Secured, 7.90%, 02/01/21 .................................................... 195,874
490,000 SFMR, Series A, GNMA Secured, 7.625%, 02/01/22 ................................................... 523,766
445,000 SFMR, Series B, GNMA Secured, 7.625%, 06/01/21 ................................................... 473,048
1,915,000 SFMR, Series B, GNMA Secured, 7.75%, 06/01/22 .................................................... 2,000,735
1,705,000 SFMR, Series C, GNMA Secured, 6.90%, 07/01/18 .................................................... 1,789,636
2,240,000 Series B, GNMA Secured, 6.40%, 12/01/24 .......................................................... 2,246,138
135,000 Missouri State Housing Development Commission, MFHR, FHA Insured, 8.50%, 12/01/29 ................... 143,996
Missouri State Regional Convention Center and Sports Complex Authority, Convention and Sports
Project,
2,000,000 Refunding, Series A, 5.50%, 08/15/21 ............................................................. 1,767,200
700,000 Series A, Pre-Refunded, 6.90%, 08/15/06 .......................................................... 780,423
2,750,000 Series A, Pre-Refunded, 6.80%, 08/15/11 .......................................................... 3,047,358
4,600,000 Series A, Pre-Refunded, 6.90%, 08/15/21 .......................................................... 5,128,494
Missouri State Western College Revenue,
1,250,000 Housing System, MBIA Insured, 5.875%, 10/01/24 ................................................... 1,196,813
5,000,000 Refunding, Student Housing, Pre-Refunded, 8.00%, 10/01/16 ........................................ 5,832,350
1,000,000 Moberly Combined Waterworks and Sewerage System, Refunding & Improvement Bonds,
FGIC Insured, Pre-Refunded, 7.50%, 08/01/15 ........................................................ 1,129,740
50,000 Moberly IDA, Hospital Revenue, Refunding, Moberly Regional Medical Center, Inc. Project,
Pre-Refunded, 8.75%, 03/01/16 ...................................................................... 55,028
300,000 North Kansas City School District Facilities Authority, BIG Insured, 7.40%, 03/01/06 ................ 319,209
</TABLE>
The accompanying notes are an integral part of these financial statements.
78
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================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN MISSOURI TAX-FREE INCOME FUND (NOTE 1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
$ 5,000,000 Phelps County Hospital Revenue, Refunding, Phelps County Regional Medical Center, Connie Lee
Insured, 6.00%, 05/15/13 .......................................................................... $ 4,907,300
250,000 Platte County Reorganized School District No. R-5, Pre-Refunded, 7.25%, 03/01/06 ................... 265,762
Puerto Rico Commonwealth Aqueduct and Sewer Authority Revenue,
40,000 Refunding, Series 1985-A, FSA Insured, Pre-Refunded, 9.00%, 07/01/09 ............................ 50,905
500,000 Series 1988-A, 7.90%, 07/01/07 .................................................................. 548,695
375,000 Series 1988-A, 7.875%, 07/01/17 ................................................................. 408,244
75,000 Puerto Rico Commonwealth Highway Authority Revenue, Series P, Pre-Refunded, 8.125%, 07/01/13 ....... 83,884
30,000 Puerto Rico Commonwealth IDC, General Purpose Revenues, 8.00%, 01/01/03 ............................ 30,230
Puerto Rico Commonwealth Infrastructure Financing Authority, Special Tax Revenue,
200,000 Series 1988-A, 7.90%, 07/01/07 .................................................................. 217,054
975,000 Series 1988-A, 7.75%, 07/01/08 .................................................................. 1,052,230
Puerto Rico Commonwealth Public Improvement GO,
25,000 Series 1986, Pre-Refunded, 7.90%, 07/01/11 ...................................................... 26,847
120,000 Series A, Pre-Refunded, 7.75%, 07/01/13 ......................................................... 132,968
Puerto Rico Electric Power Authority Revenue, Refunding,
15,000 Series 1987-L, Pre-Refunded, 8.40%, 07/01/15 .................................................... 16,497
25,000 Series 1988-M, Pre-Refunded, 8.00%, 07/01/08 .................................................... 27,867
Puerto Rico Electric Power Authority Revenue, Water Resources,
1,110,000 Refunding, Series N, 7.125%, 07/01/14 ........................................................... 1,165,311
1,965,000 Refunding, Series N, Pre-Refunded, 7.125%, 07/01/14 ............................................. 2,161,009
280,000 Series O, 7.125%, 07/01/14 ...................................................................... 293,952
520,000 Series O, Pre-Refunded, 7.125%, 07/01/14 ........................................................ 571,870
380,000 Puerto Rico HFC, MFMR, Portfolio A, Series 1, 7.50%, 04/01/22 ...................................... 401,231
Puerto Rico HFC, SFMR,
165,000 Portfolio No. 1, Series A, GNMA Secured, 7.80%, 10/15/21 ........................................ 172,956
2,000,000 Portfolio No. 1, Series C, GNMA Secured, 6.85%, 10/15/23 ........................................ 2,070,680
500,000 Portfolio No. 1, Series D, GNMA Secured, 6.85%, 10/15/24 ........................................ 517,670
Puerto Rico Industrial, Medical and Environmental Facilities, PCFA Revenue,
350,000 Baxter Travenol Labs., Series A, 8.00%, 09/01/12 ................................................ 387,261
300,000 Upjohn Co. Project, 7.50%, 12/01/23 ............................................................. 322,656
130,000 Puerto Rico Municipal Finance Agency, Series 1988-A, 8.25%, 07/01/08 ............................... 142,818
Puerto Rico PBA, Guaranteed Public Education and Health Facilities,
175,000 Series H, Pre-Refunded, 7.875%, 07/01/16 ........................................................ 190,591
1,750,000 Series H, Pre-Refunded, 7.25%, 07/01/17 ......................................................... 1,905,085
980,000 Series J, Pre-Refunded, 7.00%, 07/01/19 ......................................................... 1,059,409
1,000,000 Raymore Missouri, CGIC Insured, 6.00%, 03/01/14 .................................................... 996,620
500,000 St. Charles County Community College, Pre-Refunded, 7.25%, 03/01/06 ................................ 551,535
1,000,000 St. Charles County Francis Howell School District, FGIC Insured, Pre-Refunded, 6.90%, 03/01/11...... 1,096,190
St. Charles Public Facility Authority, Leasehold Revenue,
3,000,000 Refunding, AMBAC Insured, 5.80%, 02/01/10 ....................................................... 2,964,480
1,500,000 Series 1990, AMBAC Insured, Pre-Refunded, 7.20%, 03/01/10 ....................................... 1,640,505
2,000,000 St. Louis Airport Revenue, Refunding & Improvement, Lambert-St. Louis International Airport,
FGIC Insured, 6.125%, 07/01/15 .................................................................... 2,004,700
St. Louis County Housing Authority, MFHR, Refunding,
1,000,000 Kensington Square Apartments Project, 6.55%, 03/01/14 ........................................... 1,019,110
2,750,000 Kensington Square Apartments Project, 6.65%, 03/01/20 ........................................... 2,802,250
295,000 St. Louis County IDA, Health Facilities Revenue, Refunding & Improvement, First Mortgage, Normandy
Osteopathic Hospitals Project, 9.125%, 08/01/13 ................................................... 310,656
35,000 St. Louis County Mortgage Revenue, GNMA Secured, 8.125%, 09/01/19 .................................. 37,190
St. Louis County Regional Convention and Sports Complex Authority, Convention and Sports Project,
4,765,000 Refunding, Series B, 5.50%, 08/15/13 ............................................................ 4,304,415
1,000,000 Refunding, Series B, 5.50%, 08/15/16 ............................................................ 890,430
</TABLE>
The accompanying notes are an integral part of these financial statements.
79
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STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN MISSOURI TAX-FREE INCOME FUND (NOTE 1)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
St. Louis County Regional Convention and Sports Complex Authority, Convention and Sports Project,
(cont.)
$ 5,565,000 Refunding, Series B, 5.75%, 08/15/21 ............................................................ $ 4,976,724
600,000 Series B, Pre-Refunded, 6.80%, 08/15/04 ......................................................... 664,878
5,050,000 Series B, Pre-Refunded, 7.00%, 08/15/21 ......................................................... 5,664,332
250,000 St. Louis Land Clearance RDA, Leasehold Revenue, Capital Improvement, Pre-Refunded, 7.60%,
08/15/08 .......................................................................................... 270,290
St. Louis Municipal Finance Corp., Leasehold Revenue, Refunding,
1,000,000 Series A, 5.85%, 07/15/09 ....................................................................... 944,270
10,000,000 Series A, 6.00%, 07/15/13 ....................................................................... 9,406,400
470,000 St. Louis Parking Facilities Revenue, 6.625%, 12/15/21 ............................................. 470,103
375,000 St. Louis Public School District Building Corp., Leasehold Revenue, Capital Improvement,
Series 1989-A, FGIC Insured, 7.40%, 04/01/09 ...................................................... 392,332
St. Louis Regional Convention and Sports Complex Authority,
4,295,000 Series C, 7.75%, 08/15/01 ....................................................................... 4,423,592
11,900,000 Series C, 7.90%, 08/15/21 ....................................................................... 12,596,269
19,000,000 Sikeston Electric Revenue, Refunding, MBIA Insured, 6.25%, 06/01/22 ................................ 19,236,740
250,000 Southwest University Housing System Revenue, FGIC Insured, Pre-Refunded, CGIC Insured,
7.00%, 10/01/10 ................................................................................... 267,547
5,000,000 Springfield Waterworks Revenue, Series A, 5.60%, 05/01/23 .......................................... 4,689,400
300,000 Sullivan County Public Water Supply District No. 1, Waterworks Revenue, Refunding,
CGIC Insured, 7.70%, 12/15/13 ..................................................................... 326,739
500,000 Washington County GO, Industrial Bonds, Pauwels Transformers Project, Series A, 7.60%, 12/01/09..... 532,110
2,000,000 West Plains IDA, Hospital Revenue, Ozarks Medical Center Project, Series A, 8.625%, 09/15/20 ....... 2,152,140
1,600,000 West Plains Improvement Authority, Leasehold Revenue, Civic Center, Inc. Project, FGIC Insured,
6.85%, 04/01/06 ................................................................................... 1,720,480
------------
TOTAL LONG TERM INVESTMENTS (COST $215,252,078) .............................................. 223,320,169
------------
(e)SHORT TERM INVESTMENTS .3%
Kansas City IDAR, Research Health Services System,
200,000 MBIA Insured, Daily VRDN and Put, 3.80%, 10/15/14 ............................................... 200,000
200,000 MBIA Insured, Daily VRDN and Put, 3.80%, 04/15/15 ............................................... 200,000
100,000 Missouri State Health and Educational Facilities Authority Revenue, Refunding, Sister of Mercy,
Series B, Weekly VRDN and Put, 4.05%, 06/01/14 .................................................... 100,000
100,000 Puerto Rico Commonwealth, Government Development Bank, Refunding, Weekly VRDN and Put,
3.90%, 12/01/15 ................................................................................... 100,000
------------
TOTAL SHORT TERM INVESTMENTS (COST $600,000) ................................................. 600,000
------------
TOTAL INVESTMENTS (COST $215,852,078) 98.5% ............................................. 223,920,169
OTHER ASSETS AND LIABILITIES, NET 1.5% .................................................. 3,521,337
------------
NET ASSETS 100.0% ....................................................................... $227,441,506
============
At February 28, 1995, the net unrealized appreciation based on the cost of investments
for income tax purposes of $215,853,953 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ................................................................... $ 10,535,695
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ................................................................... (2,469,479)
------------
Net unrealized appreciation ...................................................................... $ 8,066,216
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
80
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STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
FRANKLIN MISSOURI TAX-FREE INCOME FUND
- --------------------------------------------------------------------------------
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
(e)Variable rate demand notes (VRDNs) are tax-exempt obligations which contain a
floating or variable interest rate adjustment formula and an unconditional
right of demand to receive payment of the principal balance plus accrued
interest 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.
81
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STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN NORTH CAROLINA TAX-FREE INCOME FUND (NOTE 1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS 97.8%
$ 500,000 Albemarle GO, Water and Sewer, Unlimited Tax, Pre-Refunded, 7.10%, 05/01/07 .......................... $ 545,045
1,075,000 Appalachian State University Revenue, Appalachian State Teachers College Utility System,
MBIA Insured, 6.10%, 05/15/13 ....................................................................... 1,083,546
2,000,000 Buncombe County Metropolitan Sewage District System Revenue, Series B, Pre-Refunded, 6.75%,
07/01/16 ............................................................................................ 2,207,500
100,000 Charlotte Airport Revenue, 8.50%, 07/01/17 ........................................................... 108,947
2,250,000 Charlotte COP, Convention Facility Project, AMBAC Insured, Pre-Refunded, 7.00%, 12/01/11 ............. 2,522,858
Charlotte-Mecklenburg Hospital Authority, Health Care System Revenue, Refunding,
6,100,000 Series 1992, 6.25%, 01/01/20 ...................................................................... 6,148,617
150,000 Series G, Pre-Refunded, 7.875%, 10/01/15 .......................................................... 163,662
350,000 Series I, Pre-Refunded, 7.80%, 10/01/18 ........................................................... 388,717
Charlotte Special Facilities Revenue, Piedmont Aviation, Inc. Project,
425,000 Douglas International Airport, 8.375%, 07/01/17 ................................................... 375,951
1,405,000 Douglas International Airport, 9.00%, 07/01/17 .................................................... 1,322,779
200,000 Chowan County Hospital Revenue, Refunding, 7.625%, 10/01/10 .......................................... 200,172
1,500,000 Coastal Solid Waste Disposal System Authority Revenue, Refunding, Regional Solid Waste
Management, 6.50%, 06/01/08 ......................................................................... 1,528,980
1,000,000 County of Cleveland GO, AMBAC Insured, Pre-Refunded, 7.10%, 06/01/06 ................................. 1,108,540
1,450,000 Craven County Finance Corp. Revenue, Municipal Lease Purchase, COP, School Building Project,
8.00%, 06/01/10 ..................................................................................... 1,556,097
1,400,000 Craven County Regional Medical Facility, MBIA Insured, Pre-Refunded, 7.20%, 10/01/19 ................. 1,565,620
Cumberland County COP, Civic Center Project,
3,500,000 Series A, AMBAC Insured, 6.40%, 12/01/19 .......................................................... 3,586,660
3,765,000 Series A, AMBAC Insured, 6.40%, 12/01/24 .......................................................... 3,842,371
Cumberland County Hospital Facility System Revenue,
110,000 BIG Insured, Pre-Refunded, 7.875%, 10/01/14 ....................................................... 122,436
2,000,000 MBIA Insured, 6.00%, 10/01/21 ..................................................................... 1,991,980
1,000,000 Dare County Utility System Revenue, MBIA Insured, 5.75%, 06/01/14 .................................... 986,170
Davie County GO,
350,000 North Carolina Water, Unlimited Tax, 7.10%, 04/01/10 .............................................. 373,674
250,000 North Carolina Water, Unlimited Tax, 7.10%, 04/01/11 .............................................. 266,343
2,000,000 Duplin County COP, Social Service Administrative Building, Solid Waste Project, FGIC Insured,
6.75%, 09/01/12 ..................................................................................... 2,112,160
1,650,000 Durham COP, Series 1991, 6.875%, 04/01/09 ............................................................ 1,770,747
Durham County COP,
3,000,000 Hospital and Office Facilities Project, 6.00%, 05/01/14 ........................................... 3,009,390
1,700,000 Hospital and Office Facilities Project, 6.00%, 05/01/17 ........................................... 1,697,773
3,000,000 Durham County COP, Jail Facilities and Computer Equipment Project, 6.625%, 05/01/14 .................. 3,126,990
1,650,000 Fayetteville Public Works Commission Revenue, FGIC Insured, Pre-Refunded, 7.00%, 03/01/11 ............ 1,815,908
500,000 Fayetteville Sewer and Public Improvement, Pre-Refunded, 7.10%, 05/01/06 ............................. 547,015
750,000 Gaston County Industrial Facilities and PCFA Revenue, 7.70%, 10/01/12 ................................ 818,663
2,200,000 Gastonia Combined Utilities System Revenue, MBIA Insured, 6.10%, 05/01/19 ............................ 2,208,602
Greensboro COP,
1,610,000 Coliseum Arena Expansion Project, 6.75%, 12/01/09 ................................................. 1,696,538
350,000 Greensboro Center City Corp., Pre-Refunded, 7.90%, 07/01/09 ....................................... 387,706
500,000 Greensboro GO, Pre-Refunded, 6.90%, 05/01/08 ......................................................... 549,175
1,320,000 Greensboro HDC, Mortgage Revenue, Refunding, Series A, MBIA Insured, 6.70%, 01/01/24 ................. 1,345,450
1,000,000 Guam Power Authority Revenue, Series A, 6.375%, 10/01/08 ............................................. 1,003,130
400,000 Halifax County Insured Facility, PCR, Solid Waste Disposal Champion International Corp., 8.15%,
11/01/19 ............................................................................................ 430,008
200,000 Haywood County Insured Facility, PCR, Solid Waste Disposal Champion International Corp., 8.10%,
11/01/09 ............................................................................................ 214,442
1,500,000 Highpoint Special Obligation Sales Tax Revenue, Solid Waste Management Project, 7.15%, 07/01/01....... 1,587,510
</TABLE>
The accompanying notes are an integral part of these financial statements.
82
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STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN NORTH CAROLINA TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
$ 3,155,000 Kinston Housing Authority Mortgage Revenue, Refunding, Kinston Towers Project, 6.75%, 12/01/18.... $ 3,150,835
500,000 Lincoln County GO, Pre-Refunded, 6.90%, 06/01/08 ................................................. 549,725
Martin County Industrial Facilities and PCFA Revenue,
3,000,000 Refunding, 6.375%, 01/01/10 ................................................................... 3,044,430
7,000,000 Solid Waste, Weyerhaeuser Co., 5.65%, 12/01/23 ................................................ 6,067,250
6,000,000 Mecklenburg County Public Improvement, 5.50%, 04/01/13 ........................................... 5,819,400
1,000,000 Mooresville Grade School District, COP, AMBAC Insured, 6.35%, 10/01/14 ........................... 1,016,410
1,000,000 New Hanover County Industrial Facilities and PCFA Revenue, Refunding, 6.70%, 07/01/19 ............ 1,014,380
North Carolina Eastern Municipal Power Agency System Revenue,
1,000,000 Refunding, Series 1987-A, Pre-Refunded, 7.50%, 01/01/15 ....................................... 1,066,490
775,000 Refunding, Series 1987-A, Pre-Refunded, 7.25%, 01/01/21 ....................................... 791,384
400,000 Refunding, Series 1988-A, 8.00%, 01/01/21 ..................................................... 439,412
750,000 Refunding, Series 1989-A, Pre-Refunded, 7.75%, 01/01/12 ....................................... 834,585
9,000,000 Refunding, Series 1991-A, 6.50%, 01/01/17 ..................................................... 8,743,860
3,000,000 Refunding, Series 1991-A, 6.50%, 01/01/18 ..................................................... 2,947,170
1,050,000 Series 1988-A, Pre-Refunded, 8.00%, 01/01/21 .................................................. 1,153,456
6,000,000 Series 1993-A, 6.40%, 01/01/21 ................................................................ 5,744,160
3,000,000 Series 1993-D, 5.875%, 01/01/13 ............................................................... 2,759,010
North Carolina Educational Facilities Finance Agency Revenue,
190,000 Highpoint College Project, 7.10%, 12/01/07 .................................................... 205,848
205,000 Highpoint College Project, 7.10%, 12/01/08 .................................................... 221,652
220,000 Highpoint College Project, 7.10%, 12/01/09 .................................................... 236,155
2,930,000 North Carolina HFA, MFR, Refunding, Series B, 6.90%, 07/01/24 .................................... 3,033,312
4,855,000 North Carolina HFA, Refunding, Series F, 6.70%, 01/01/27 ......................................... 4,974,336
North Carolina HFA, SFMR,
40,000 Series C, 8.00%, 03/01/17 ..................................................................... 41,602
120,000 Series H, 8.05%, 03/01/19 ..................................................................... 124,636
220,000 Series J, 7.40%, 03/01/22 ..................................................................... 228,903
520,000 Series M, 7.85%, 09/01/28 ..................................................................... 544,367
North Carolina HFA, SFR,
3,400,000 Refunding, Series S, 6.95%, 03/01/17 .......................................................... 3,540,318
2,195,000 Series X, 6.65%, 09/01/19 ..................................................................... 2,230,844
North Carolina Medical Care Commission Health Care Facilities Revenue,
700,000 Gaston Health Care Support Project, 7.25%, 02/15/19 ........................................... 730,373
1,250,000 Stanley Memorial Hospital, 7.80%, 10/01/19 .................................................... 1,308,513
North Carolina Medical Care Commission Hospital Revenue,
2,000,000 Alamance Health Services, Inc. Project, FSA Insured, 5.50%, 08/15/24 .......................... 1,811,520
3,500,000 Halifax Memorial Hospital Project, 6.75%, 08/15/24 ............................................ 3,434,025
160,000 Memorial Mission Hospital Project, MBIA Insured, Pre-Refunded, 7.80%, 10/01/18 ................ 177,699
1,850,000 Presbyterian Hospital Project, Pre-Refunded, 7.375%, 10/01/20 ................................. 2,084,395
4,700,000 Refunding, Annie Pen Memorial Hospital Project, 7.50%, 08/15/21 ............................... 4,775,952
100,000 Refunding, Carolina Medicorp Project, Series A, Pre-Refunded, 7.875%, 05/01/15 ................ 108,114
3,750,000 Refunding, Presbyterian Health Services Project, 5.50%, 10/01/20 .............................. 3,362,400
250,000 Refunding, St. Joseph's Hospital Project, AMBAC Insured, Pre-Refunded, 7.25%, 10/01/14 ........ 273,205
3,000,000 Roanoke-Chowan Hospital Project, Pre-Refunded, 7.75%, 10/01/19 ................................ 3,119,790
195,000 Scotland Memorial Hospital, MBIA Insured, Pre-Refunded, 8.625%, 10/01/11 ...................... 220,884
1,000,000 Wayne Memorial Hospital Project, AMBAC Insured, 6.00%, 10/01/21 ............................... 974,050
3,240,000 Wilson Memorial Hospital Project, AMBAC Insured, 6.50%, 11/01/20 .............................. 3,308,040
North Carolina Municipal Power Agency No. 1, Catawba Electric Revenue,
450,000 Refunding, Series 1988, Pre-Refunded, 7.875%, 01/01/19 ........................................ 493,250
10,500,000 Refunding, Series 1992, 6.25%, 01/01/17 ....................................................... 10,242,645
615,000 Series 1986, 7.00%, 01/01/18 .................................................................. 623,032
7,135,000 Series 1986, Pre-Refunded, 7.00%, 01/01/18 .................................................... 7,353,331
</TABLE>
The accompanying notes are an integral part of these financial statements.
83
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STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN NORTH CAROLINA TAX-FREE INCOME FUND (NOTE 1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
$ 400,000 Northampton County Insured Facility, PCR, Solid Waste Disposal Champion International Corp., 8.05%,
11/01/04 ............................................................................................ $ 428,428
1,000,000 Onslow County Combinated Enterprise System Revenue, MBIA Insured, 6.00%, 06/01/15 .................... 1,001,500
Orange County GO,
350,000 Series 1989, Pre-Refunded, 7.20%, 05/01/08 ........................................................ 382,827
430,000 Series 1990, Pre-Refunded, 6.90%, 06/01/09 ........................................................ 474,690
1,195,000 Pender County COP, Pre-Refunded, 7.70%, 06/01/11 ..................................................... 1,369,530
2,165,000 Person County COP, Person County Law Enforcement Center Project, Series 1991, MBIA Insured,
7.125%, 06/01/11 .................................................................................... 2,346,860
Pitt County COP,
2,750,000 FGIC Insured, 6.90%, 04/01/08 ..................................................................... 2,958,587
750,000 FGIC Insured, 6.00%, 04/01/12 ..................................................................... 747,577
Polk County School GO,
700,000 FGIC Insured, 6.70%, 05/01/08 ..................................................................... 751,387
700,000 FGIC Insured, 6.70%, 05/01/09 ..................................................................... 746,480
Puerto Rico Commonwealth Aqueduct and Sewer Authority Revenue,
1,000,000 Series 1988-A, 7.875%, 07/01/17 ................................................................... 1,088,650
250,000 Series 1988-A, 7.00%, 07/01/19 .................................................................... 258,567
250,000 Puerto Rico Commonwealth Electric Power Authority Revenue, Refunding, Series 1988-M,
Pre-Refunded, 8.00%, 07/01/08 ....................................................................... 278,667
Puerto Rico Commonwealth Electric Power Authority Revenue, Water Resources,
2,045,000 Refunding, Series N, Pre-Refunded, 7.125%, 07/01/14 ............................................... 2,248,989
2,000,000 Refunding, Series U, 6.00%, 07/01/14 .............................................................. 1,966,140
1,010,000 Series 0, 7.125%, 07/01/14 ........................................................................ 1,060,328
1,000,000 Series P, 7.00%, 07/01/21 ......................................................................... 1,064,610
1,000,000 Series T, 6.375%, 07/01/24 ........................................................................ 1,011,530
Puerto Rico Commonwealth GO,
500,000 Public Improvement, Series 1987, Pre-Refunded, 7.25%, 07/01/12 .................................... 537,755
200,000 Series 1986, Pre-Refunded, 7.90%, 07/01/11 ........................................................ 214,774
500,000 Series 1990, Pre-Refunded, 7.25%, 07/01/10 ........................................................ 559,595
Puerto Rico Commonwealth Highway Authority Revenue,
100,000 Refunding, Series N, Pre-Refunded, 8.00%, 07/01/03 ................................................ 111,467
170,000 Series P, Pre-Refunded, 8.125%, 07/01/13 .......................................................... 190,138
1,250,000 Series R, 7.15%, 07/01/00 ......................................................................... 1,353,987
Puerto Rico Commonwealth Infrastructure Financing Authority, Special Tax Revenue,
250,000 Series 1988-A, 7.75%, 07/01/08 .................................................................... 269,802
250,000 Series 1988-A, 7.50%, 07/01/09 .................................................................... 267,622
410,000 Puerto Rico HFC, MFMR, Portfolio A, Series I, 7.50%, 04/01/22 ........................................ 432,907
Puerto Rico HFC, SFMR,
220,000 Portfolio No. 1, Series A, GNMA Secured, 7.80%, 10/15/21 .......................................... 230,608
3,500,000 Portfolio No. 1, Series C, GNMA Secured, 6.85%, 10/15/23 .......................................... 3,623,690
300,000 Puerto Rico Industrial, Medical and Environmental Facilities, PCFA Revenue, Upjohn Co. Project,
7.50%, 12/01/23 ..................................................................................... 322,656
125,000 Puerto Rico Municipal Finance Agency, Series 1988-A, 8.25%, 07/01/08 ................................. 137,325
1,000,000 Puerto Rico PBA, Guaranteed Public Education and Health Facilities, Series J, Pre-Refunded,
7.25%, 07/01/17 ..................................................................................... 1,088,620
1,460,000 Raeford HDC, First Lien Revenue, Refunding, Yadkin Trail, Series A, 6.00%, 07/15/22 .................. 1,419,748
Robeson County GO,
110,000 Refunding, 7.20%, 06/01/10 ........................................................................ 117,292
115,000 Refunding, 7.20%, 06/01/11 ........................................................................ 122,400
120,000 Refunding, 7.20%, 06/01/12 ........................................................................ 127,722
145,000 Refunding, Pre-Refunded, 7.80%, 06/01/11 .......................................................... 159,896
</TABLE>
The accompanying notes are an integral part of these financial statements.
84
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STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN NORTH CAROLINA TAX-FREE INCOME FUND (NOTE 1)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
$ 1,750,000 Robeson County Industrial Facilities and PCFA Revenue, Refunding, Campbell Soup Co. Project,
6.40%, 12/01/06 ................................................................................... $ 1,818,617
1,000,000 Rutherford County COP, Public Facilities Project, FGIC Insured, 6.25%, 06/01/23 .................... 1,007,100
1,000,000 Scotland County COP, Jail/Courthouse Project, CGIC Insured, 6.75%, 03/01/11 ........................ 1,055,400
1,000,000 Shelby Producing Facilities System Revenue, Capital Improvement, 6.625%, 06/01/17 .................. 1,020,960
Southern Pines GO,
150,000 Refunding, Pre-Refunded, 7.40%, 06/01/08 ........................................................ 163,165
200,000 Series 1990, Pre-Refunded, 6.90%, 03/01/08 ...................................................... 218,314
400,000 Series 1990, Pre-Refunded, 6.90%, 03/01/09 ...................................................... 436,628
1,000,000 Stokes County COP, MBIA Insured, 7.00%, 03/01/06 ................................................... 1,082,050
50,000 University of North Carolina at Chapel Hill, Utility System Revenue, Pre-Refunded, 7.30%, 08/01/11.. 53,320
100,000 University of North Carolina at Charlotte Revenue, Refunding, Series K, Pre-Refunded, 7.375%,
01/01/03 .......................................................................................... 108,035
250,000 University of North Carolina at Wilmington, Student Union System Revenue, AMBAC Insured, 6.90%,
01/01/07 .......................................................................................... 269,450
250,000 Wake County Hospital Revenue, MBIA Insured, 7.40%, 10/01/16 ........................................ 268,990
10,000,000 Wake County Industrial Facilities and PCFA Revenue, Carolina Power and Light Co. Project, 6.90%,
04/01/09 .......................................................................................... 10,495,500
400,000 Wilmington City GO, Sanitary Sewer, 6.90%, 03/01/05 ................................................ 429,132
445,000 Winston Salem SFMR, 8.00%, 09/01/07 ................................................................ 474,210
------------
TOTAL LONG TERM INVESTMENTS (COST $206,050,766) .............................................. 211,617,242
------------
(e)SHORT TERM INVESTMENTS .4%
100,000 Halifax County Industrial Facilities and PCFA Revenue, Daily VRDN and Put, 4.20%, 12/01/19 ......... 100,000
North Carolina Medical Care Commission Revenue,
200,000 Duke University Hospital Project, Series C, Weekly VRDN and Put, 4.05%, 06/01/15 ................ 200,000
100,000 Park Ridge Hospital Project, Weekly VRDN and Put, 4.05%, 08/15/18 ............................... 100,000
100,000 Refunding, Moses H. Cone Memorial Hospital Project, Weekly VRDN and Put, 4.00%, 10/01/23 ........ 100,000
300,000 Puerto Rico Commonwealth, Government Development Bank, Refunding, Weekly VRDN and Put,
3.90%, 12/01/15 ................................................................................... 300,000
------------
TOTAL SHORT TERM INVESTMENTS (COST $800,000) ................................................. 800,000
------------
TOTAL INVESTMENTS (COST $206,850,766) 98.2% ............................................. 212,417,242
OTHER ASSETS AND LIABILITIES, NET 1.8% .................................................. 3,846,254
------------
NET ASSETS 100.0% ....................................................................... $216,263,496
============
At February 28, 1995, the net unrealized appreciation based on the cost of investments
for income tax purposes of $206,852,586 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ................................................................... $ 7,782,189
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ................................................................... (2,217,533)
------------
Net unrealized appreciation ...................................................................... $ 5,564,656
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
85
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STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
FRANKLIN NORTH CAROLINA TAX-FREE INCOME FUND
- --------------------------------------------------------------------------------
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.
FSA - Financial Security Assistance
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
(e)Variable rate demand notes (VRDNs) are tax-exempt obligations which contain a
floating or variable interest rate adjustment formula and an unconditional
right of demand to receive payment of the principal balance plus accrued
interest 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.
86
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STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN TEXAS TAX-FREE INCOME FUND (NOTE 1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS 97.3%
$2,250,000 Alliance Airport Authority, Inc., Texas Special Facilities Revenue, American Airlines, Inc.
Project, 7.00%, 12/01/11 .......................................................................... $ 2,229,997
Austin Combined Utility System Revenue,
2,000,000 Refunding, AMBAC Insured, 7.00%, 05/15/16 ....................................................... 2,117,060
800,000 Series A, AMBAC Insured, 6.75%, 11/15/07 ........................................................ 857,976
50,000 Series A, Pre-Refunded, 8.00%, 11/15/16 ......................................................... 57,379
2,000,000 Series C, Pre-Refunded, 7.30%, 05/15/17 ......................................................... 2,238,975
115,000 Bexar County HFC Revenue, GNMA Secured, 8.10%, 03/01/24 ............................................ 120,319
Brazos Higher Education Authority Revenue, Student Loan, Inc.,
1,000,000 Refunding, Series A-2, 6.80%, 12/01/04 .......................................................... 1,035,100
1,300,000 Series B-2, 8.25%, 06/01/23 ..................................................................... 1,307,332
Brazos River Authority, PCR, Collateralized,
70,000 Houston Light and Power Co. Project, Series A, 7.875%, 11/01/18 ................................. 72,767
150,000 Texas Utilities Electric Co. Project, Series A, 7.875%, 03/01/17 ................................ 155,880
500,000 Texas Utilities Electric Co. Project, Series A, 7.875%, 03/01/21 ................................ 525,155
100,000 Brazos River Authority Revenue, Refunding, Collateralized, Houston Light and Power Co. Project,
Series A, 7.625%, 05/01/19 ........................................................................ 106,535
Brazos River Authority, Special Facilities Revenue, Lake Alan Henry,
1,200,000 AMBAC Insured, 7.00%, 08/15/11 .................................................................. 1,273,884
1,000,000 AMBAC Insured, 6.80%, 08/15/21 .................................................................. 1,043,980
Brownsville Utilities System Priority Revenue,
5,000,000 AMBAC Insured, 6.875%, 09/01/10 ................................................................. 5,285,250
50,000 Series A, Pre-Refunded, 8.00%, 09/01/14 ......................................................... 53,323
2,265,000 Caldwell County GO, Refunding, AMBAC Insured, Pre-Refunded, 7.00%, 08/15/15 ........................ 2,438,567
80,000 Cameron County HFC, Collateralized Mortgage Obligation, Refunding, Series B, FGIC Insured, 7.85%,
03/01/24 .......................................................................................... 84,604
Cimarron MUD, Refunding, Waterworks and Sewer System, Asset Guaranteed,
2,775,000 Combined Tax and Revenue, 7.50%, 03/01/15 ....................................................... 2,991,478
1,225,000 Combined Tax and Revenue, Pre-Refunded, 7.50%, 03/01/15 ......................................... 1,347,280
4,000,000 Clinton ISD, Refunding, 7.00%, 03/01/15 ............................................................ 4,164,160
50,000 Coastal Water Authority, Water Conveyance System Revenue, Pre-Refunded, 8.20%, 12/15/07 ............ 54,250
1,750,000 Comal County Health Facilities Development Corp. Revenue, Refunding, McKenna Memorial Hospital,
FHA Insured, 7.375%, 01/15/21 ..................................................................... 1,850,065
1,500,000 Coppell ISD, Refunding, 6.50%, 08/15/26 ............................................................ 1,540,320
1,545,000 Corpus Christi HFC, SFMR, Refunding, Series A, MBIA Insured, 7.70%, 07/01/11 ....................... 1,650,570
Dallas Civic Center Convention Complex Revenue,
1,000,000 Refunding, Senior Lien, AMBAC Insured, 6.75%, 01/01/12 .......................................... 1,032,120
2,000,000 Senior Lien, AMBAC Insured, 7.00%, 01/01/10 ..................................................... 2,119,860
Dallas-Ft. Worth International Airport Facilities Improvement Corp. Revenue,
1,000,000 American Airlines, Inc., 8.00%, 11/01/24 ........................................................ 1,039,730
2,000,000 Delta Airlines, Inc., 7.625%, 11/01/21 .......................................................... 2,040,860
1,015,000 Dallas-Ft. Worth Regional Airport Revenue, American Special Facilities, 7.25%, 11/01/12 ............ 1,014,726
160,000 Dallas HFC, SFMR, GNMA Secured, 7.85%, 12/01/10 .................................................... 167,763
500,000 Dallas Housing Corp. Capital Projects Revenue, Refunding, Section 8, Assisted Projects, 7.70%,
08/01/05 .......................................................................................... 524,300
1,250,000 Denison Hospital Authority Revenue, Texoma Medical Center, Inc. Project, 7.00%, 08/15/14 ........... 1,220,138
2,000,000 Ector County Hospital District Revenue, Medical Center Hospital, 7.30%, 04/15/12 ................... 2,066,860
El Paso County HFC, SFMR, Refunding,
60,000 Series 1988, GNMA Secured, 8.20%, 09/01/20 ...................................................... 63,266
735,000 Series A, 8.75%, 10/01/11 ....................................................................... 771,441
1,355,000 Ft. Worth HFC, HMR, Refunding, Series A, 8.50%, 10/01/11 ........................................... 1,484,795
25,000 Ft. Worth HFC, SFMR, GNMA Secured, 8.25%, 12/01/11 ................................................. 25,537
100,000 Gonzales County Hospital District, GO, Refunding, MBIA Insured, 7.65%, 02/15/07 .................... 107,699
</TABLE>
The accompanying notes are an integral part of these financial statements.
87
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STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN TEXAS TAX-FREE INCOME FUND (NOTE 1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
$1,200,000 Gulf Coast Waste Disposal Authority, PCR, Union Carbide Chemical and Plastic Co., 7.45%, 08/01/04...... $1,232,736
1,000,000 Gulf Coast Waste Disposal Authority Revenue, Champion International Corp., Series A, 6.875%,
12/01/28 ............................................................................................. 1,002,480
5,000,000 Harris County Health Facilities Development Corp., Health Care System Revenue, Sisters of Charity,
7.10%, 07/01/21 ...................................................................................... 5,225,600
Harris County Health Facilities Development Corp., Hospital Revenue,
225,000 Memorial Hospital System, AMBAC Insured, 7.00%, 06/01/12 ........................................... 235,103
45,000 The Herman Trust, Pre-Refunded, 9.00%, 10/01/17 .................................................... 50,215
750,000 Harris County Health Facilities Development Corp. Revenue, Herman Hospital Project, FSA Insured,
7.00%, 10/01/14 ...................................................................................... 790,898
500,000 Harris County Health Facilities Development Corp., Special Facilities Revenue, Texas Medical Center
Project, MBIA Insured, 7.375%, 05/15/20 .............................................................. 532,260
50,000 Harris County Hospital District Mortgage Revenue, Refunding, Pre-Refunded, 8.50%, 04/01/15 ............ 52,995
80,000 Harris County MUD No. 208, Waterworks and Sewer System, Unlimited Tax, Pre-Refunded, 8.00%,
11/01/13 ............................................................................................. 87,685
70,000 Harris County Public Facilities Corp., Detention Facility Mortgage Revenue, Series 1988, MBIA Insured,
Pre-Refunded, 7.75%, 12/15/07 ........................................................................ 77,825
Harris County, Toll Road,
1,750,000 Multimode Senior Lien, Series A, Pre-Refunded, 7.30%, 08/15/07 ..................................... 1,879,570
2,250,000 Multimode Senior Lien, Series A, Pre-Refunded, 7.40%, 08/15/17 ..................................... 2,420,730
830,000 Multimode Senior Lien, Series C, Pre-Refunded, 8.125%, 08/15/17 .................................... 923,267
250,000 Senior Lien Revenue, Refunding, Pre-Refunded, 8.70%, 08/15/17 ...................................... 278,670
250,000 Hidalgo County Health Services Corp. Revenue, Refunding, Mission Hospital, Series B, BIG Insured,
7.35%, 08/01/25 ...................................................................................... 271,060
2,000,000 Houston Airport System Revenue, Sub Lien, Series B, FGIC Insured, 6.625%, 07/01/22 .................... 2,084,660
Houston Public Improvement GO,
500,000 Pre-Refunded, 6.75%, 03/01/11 ...................................................................... 538,075
1,900,000 Pre-Refunded, 6.80%, 03/01/12 ...................................................................... 2,049,511
Houston Water and Sewer System Revenue,
50,000 Exchange, Prior Lien, Pre-Refunded, 8.125%, 12/01/17 ............................................... 54,975
100,000 Exchange, Prior Lien, Series A, MBIA Insured, Pre-Refunded, 7.125%, 12/01/16 ....................... 105,912
2,930,000 Exchange, Prior Lien, Series A, Pre-Refunded, 7.125%, 12/01/16 ..................................... 3,103,222
285,000 Irving Hospital Authority Revenue, Irving Health Care System, Series 1990, FGIC Insured, 7.25%,
07/01/15 ............................................................................................. 302,519
125,000 Keller Waterworks and Sewer System Revenue, Refunding, AMBAC Insured, Pre-Refunded, 7.70%,
01/01/10 ............................................................................................. 136,581
50,000 La Joya ISD, Unlimited Tax, Refunding, Hidalgo County, Pre-Refunded, 8.30%, 08/01/99 .................. 52,456
200,000 Laredo Airport, Certificates of Obligation, Limited Tax, AMBAC Insured, 7.00%, 08/01/09 ............... 210,930
400,000 Laredo International Toll Bridge System Revenue, 7.40%, 10/01/06 ...................................... 442,616
2,000,000 Leon County PCR, Refunding, Nucor Corp. Project, Series A, 7.375%, 08/01/09 ........................... 2,163,820
Lower Colorado River Authority Revenue, Refunding,
75,000 Priority, MBIA Insured, Pre-Refunded, 7.625%, 01/01/16 ............................................. 81,617
1,500,000 Priority, Series A, AMBAC Insured, Pre-Refunded, 7.00%, 01/01/11 ................................... 1,660,125
205,000 Series B, AMBAC Insured, 7.00%, 01/01/11 ........................................................... 219,916
295,000 Series B, AMBAC Insured, Pre-Refunded, 7.00%, 01/01/11 ............................................. 326,491
1,000,000 Lower Neches Valley Authority IDC, Marine Terminal Revenue, Refunding, Mobil Oil Refining Corp.
Project, 6.85%, 05/01/12 ............................................................................. 1,025,550
10,000 Lubbock HFC, SFMR, Refunding, Mortgage Extension Program, Series B, BIG Insured, 8.875%,
12/01/12 ............................................................................................. 10,428
1,200,000 Matagorda County Navigation District No. 1, PCR, Central Power and Light Co. Project, 7.50%,
12/15/14 ............................................................................................. 1,276,188
</TABLE>
The accompanying notes are an integral part of these financial statements.
88
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STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN TEXAS TAX-FREE INCOME FUND (NOTE 1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
Matagorda County Navigation District No. 1 Revenue, Refunding, Collateralized, Houston Light and
Power Co.,
$ 100,000 Series B, 7.70%, 02/01/19 .......................................................................... $ 105,646
1,500,000 Series C, FGIC Insured, 7.125%, 07/01/19 ........................................................... 1,584,645
50,000 Metropolitan Health Facilities Development Corp. Revenue, Refunding & Improvement, Wilson N.
Jones Memorial Hospital Project, Pre-Refunded, 7.75%, 01/01/05 ....................................... 53,494
1,000,000 Midland County Hospital District Revenue, Midland Memorial Hospital, 7.50%, 06/01/16 .................. 991,440
Montgomery County Library, Refunding,
775,000 FGIC Insured, 6.75%, 09/01/10 ...................................................................... 808,193
825,000 FGIC Insured, 6.75%, 09/01/11 ...................................................................... 857,827
285,000 North Harris Co., Junior College District, FGIC Insured, 7.20%, 08/15/10 .............................. 303,642
500,000 North Texas Municipal Water District, Regional Waste Water Revenue, Refunding & Improvement,
MBIA Insured, Pre-Refunded, 7.20%, 06/01/10 .......................................................... 547,640
Panhandle-Plains Higher Education Authority, Inc., Student Loan Revenue,
1,500,000 Refunding, Series B, 9.00%, 06/01/21 ............................................................... 1,518,900
2,600,000 Series B, 9.00%, 06/01/21 .......................................................................... 2,631,616
1,000,000 Series B, 8.75%, 06/01/23 .......................................................................... 1,003,050
100,000 Richardson GO, Limited Tax, Series 1989, Pre-Refunded, 7.00%, 03/01/08................................. 104,390
2,000,000 Round Rock ISD, Refunding, MBIA Insured, Pre-Refunded, 6.75%, 08/15/08 ................................ 2,173,380
Sabine River Authority, PCR, Refunding, Collateralized,
1,715,000 Texas Utility Electric Co. Project, 7.75%, 04/01/16 ................................................ 1,780,547
1,200,000 Texas Utility Electric Co. Project, FGIC Insured, 6.55%, 10/01/22 .................................. 1,223,820
San Antonio Electric and Gas Revenue,
100,000 Refunding, 7.00%, 02/01/09 ......................................................................... 105,291
900,000 Refunding, Pre-Refunded, 7.00%, 02/01/09 ........................................................... 970,812
20,000 San Antonio Sewer Improvement Revenue, Prior Lien, Pre-Refunded, 7.90%, 05/01/14 ...................... 21,521
San Antonio Water Revenue,
50,000 Prior Lien, Pre-Refunded, 7.90%, 05/01/11 .......................................................... 52,592
2,750,000 Prior Lien, Pre-Refunded, 7.125%, 05/01/16 ......................................................... 2,994,530
300,000 Refunding, Prior Lien, Series A, Pre-Refunded, 7.35%, 05/01/07 ..................................... 324,591
350,000 South Padre Island, Certificate of Obligation, Pre-Refunded, 7.875%, 03/01/10 ......................... 390,632
50,000 Texarkana Health Facilities Development Corp., Hospital Revenue, Refunding & Improvement,
Wadley Regional Medical Center Project, 8.50%, 10/01/12 .............................................. 52,724
500,000 Texas City IDC, Marine Terminal Revenue, Refunding, Arco Pipe Line Co. Project, 7.375%, 10/01/20 565,040
Texas HFA, SFMR,
50,000 Series 1986-A, 8.25%, 03/01/16 ..................................................................... 51,238
35,000 Series 1987-B, 8.20%, 03/01/16 ..................................................................... 36,101
1,410,000 Texas Housing Agency Residential Development Revenue, Series A, 7.60%, 07/01/16........................ 1,472,759
55,000 Texas Municipal Power Agency Revenue, Pre-Refunded, 8.00%, 09/01/12 ................................... 58,737
4,610,000 Texas National Research Laboratory Commission Financing Corp. Lease Revenue, Superconducting
Super Collider Project, 7.10%, 12/01/21 .............................................................. 4,675,047
500,000 Texas Public Finance Authority Building Revenue, Series B, MBIA Insured, Pre-Refunded, 7.00%,
02/01/10 ............................................................................................. 546,515
1,720,000 Texas State Department of Housing and Community Affairs, HMR, Refunding, Series A,
GNMA Secured, 6.95%, 07/01/23 ........................................................................ 1,780,424
1,855,000 Texas State Higher Education Coordinating Board, College Student Loan Revenue, Senior Lien,
7.70%, 10/01/25 ...................................................................................... 1,944,763
Texas State National Research Laboratory Commission, GO,
1,000,000 Superconducting Super Collider Project, Pre-Refunded, 7.125%, 04/01/11 ............................. 1,104,860
400,000 Superconducting Super Collider Project, Pre-Refunded, 7.125%, 04/01/20 ............................. 441,944
Texas State Turnpike Authority Revenue, Dallas North Tollway,
225,000 Series 1989, 7.125%, 01/01/15 ...................................................................... 237,231
2,270,000 Series 1990, AMBAC Insured, Pre-Refunded, 7.125%, 01/01/15 ......................................... 2,473,097
</TABLE>
The accompanying notes are an integral part of these financial statements.
89
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STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN TEXAS TAX-FREE INCOME FUND (NOTE 1)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
$ 50,000 Texas State Turnpike Authority Revenue, Mountain Creek Lake Bridge, 7.00%, 01/01/07 ................. $ 51,142
950,000 Texas Water Resources Finance Authority Revenue, 7.625%, 08/15/08 ................................... 1,014,752
2,500,000 Titus County Hospital District Revenue, Refunding & Improvement, Titus County Memorial Hospital,
6.125%, 08/15/13 ................................................................................... 2,148,300
Travis County HFC, SFMR,
90,000 GNMA Secured, 8.20%, 04/01/22 .................................................................... 93,250
5,000 Ryan Mortgage Co. Administration, MBIA Insured, 9.00%, 11/15/06 .................................. 5,170
550,000 Trinity River Authority, Regional Waste Water System Improvement Revenue, AMBAC Insured,
Pre-Refunded, 7.10%, 08/01/16 ...................................................................... 601,315
250,000 Trinity River Authority, Tax Big Bear Creek Interceptor, System Control, MBIA Insured, 7.40%,
02/01/09............................................................................................ 266,827
University of Texas, Financing System Revenue, Refunding,
1,000,000 Series A, 7.00%, 08/15/07 ........................................................................ 1,092,750
2,000,000 Series B, 6.75%, 08/15/13 ........................................................................ 2,095,380
500,000 Waco Health Facilities Development Corp., Hospital Revenue, Hillcrest Baptist Medical Center
Project, MBIA Insured, 7.125%, 09/01/14 ............................................................ 538,770
1,300,000 Weatherford Utility System Revenue, MBIA Insured, 7.00%, 09/01/11 ................................... 1,384,721
160,000 Webb County GO, Limited Tax, CGIC Insured, Pre-Refunded, 7.25%, 02/15/09 ............................ 172,718
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 ................................................. 1,096,660
50,000 Wichita County, Wichita Falls General Hospital Revenue, Refunding, 7.50%, 09/01/09 .................. 52,462
1,000,000 Wylie ISD, Refunding, 7.00%, 08/15/24 ............................................................... 1,096,920
200,000 Ysleta GO, ISD, Unlimited Tax, AMBAC Insured, Pre-Refunded, 7.10%, 08/15/05 ......................... 216,112
------------
TOTAL LONG TERM INVESTMENTS (COST $120,390,219) ............................................... 127,103,915
------------
(e)SHORT TERM INVESTMENTS 1.2%
600,000 Harris County IDC, PCR, Exxon Project, Series A, Daily VRDN and Put, 3.90%, 03/01/24 ................ 600,000
800,000 Red River Authority PCR, Refunding, Southwestern Public Services Co., Weekly VRDN and Daily Put,
4.00%, 07/01/11 .................................................................................... 800,000
100,000 Texas Port Development Corp., Marine Terminal Revenue, Refunding, Stolt Terminals Project,
Weekly VRDN and Put, 3.95%, 01/15/14 ............................................................... 100,000
100,000 Tarrant County Health Facilities Development Corp. Revenue, Harris Methodist Health System,
Weekly VRDN and Put, 4.10%, 09/01/18 ............................................................... 100,000
------------
TOTAL SHORT TERM INVESTMENTS (COST $1,600,000) ................................................ 1,600,000
------------
TOTAL INVESTMENTS (COST $121,990,219) 98.5% .............................................. 128,703,915
OTHER ASSETS AND LIABILITIES, NET 1.5% ................................................... 1,980,467
------------
NET ASSETS 100.0% ........................................................................ $130,684,382
============
At February 28, 1995, the net unrealized appreciation based on the cost of investments
for income tax purposes of $121,990,219 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ...................................................................... $ 7,056,548
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ...................................................................... (342,852)
------------
Net unrealized appreciation ....................................................................... $ 6,713,696
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
90
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================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
FRANKLIN TEXAS TAX-FREE INCOME FUND
- --------------------------------------------------------------------------------
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 Finance 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
(e)Variable rate demand notes (VRDNs) are tax-exempt obligations which contain a
floating or variable interest rate adjustment formula and an unconditional
right of demand to receive payment of the principal balance plus accrued
interest 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.
91
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STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN VIRGINIA TAX-FREE INCOME FUND (NOTE 1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS 98.1%
$5,000,000 Albermarle County IDAR, Refunding, Martha Jefferson Hospital, 5.875%, 10/01/13 ...................... $ 4,650,300
1,125,000 Albermarle County IDAR, University of Virginia Health Services Foundation, 6.50%, 10/01/22 .......... 1,110,724
1,690,000 Alexandria IDAR, Alexandria/Arlington Waste Resource Recovery, 7.40%, 01/01/08 ...................... 1,720,014
1,375,000 Appomattox River Water Authority Revenue, Refunding, Pre-Refunded, 7.50%, 10/01/13 .................. 1,457,995
2,085,000 Arlington County GO, 6.00%, 08/01/13 ................................................................ 2,108,873
2,000,000 Arlington County IDA, Hospital Facility Revenue, Arlington Hospital, Series A, Pre-Refunded, 7.125%,
09/01/21 ........................................................................................... 2,250,020
100,000 Ashland GO, Refunding, Pre-Refunded, 7.75%, 08/01/12 ................................................ 110,184
Augusta County IDAR,
1,000,000 Augusta Hospital Corp. Project, AMBAC Insured, 6.625%, 09/01/12 .................................. 1,041,060
5,000,000 Augusta Hospital Corp. Project, Pre-Refunded, 7.00%, 09/01/21 .................................... 5,561,600
1,230,000 Blacksburg Polytechnic Institute, Sanitation Authority Sewer System Revenue, 6.25%, 11/01/12 ........ 1,233,407
950,000 Campbell County Utilities Services Authority, Water and Sewer Revenue, MBIA Insured,
Pre-Refunded, 7.25%, 10/01/19 ...................................................................... 1,051,422
2,000,000 Charlottesville IDAR, Martha Jefferson Hospital, Pre-Refunded, 7.375%, 10/01/20 ..................... 2,253,400
1,190,000 Chesapeake Bay Bridge and Tunnel Commission District Revenue, Refunding, General Resolution,
MBIA Insured, 6.375%, 07/01/22 ..................................................................... 1,219,536
Chesapeake Hospital Authority Facilities Revenue,
2,500,000 Chesapeake General Hospital, 8.20%, 07/01/05 ..................................................... 2,805,250
450,000 Chesapeake General Hospital, BIG Insured, Pre-Refunded, 7.625%, 07/01/18 ......................... 494,734
245,000 Chesapeake IDA, Nursing Home Revenue, Sentara Life Care Corp. Project, 8.00%, 11/01/17 .............. 269,255
3,940,000 Chesapeake IDA, Public Facilities Lease Revenue, Chesapeake Jail Project, MBIA Insured, 6.00%,
06/01/12 ........................................................................................... 3,974,790
50,000 Chesapeake Water and Sewer System Revenue, Pre-Refunded, 7.75%, 07/01/17 ............................ 54,031
50,000 Chesterfield County COP, Pre-Refunded, 7.90%, 12/15/01 .............................................. 53,694
2,000,000 Covington-Alleghany County IDA, Alleghany Hospital Facilities Revenue, 6.875%, 04/01/22 ............. 2,001,860
5,000,000 Covington-Alleghany County IDA, PCR, Refunding, Westvaco Corp. Project, 6.65%, 09/01/18 ............. 5,129,100
2,000,000 Danville COP, Social Services, 7.625%, 04/01/13 ..................................................... 2,181,440
Danville GO,
655,000 Series 1991, 6.75%, 02/01/10 ..................................................................... 691,307
705,000 Series 1991, 6.75%, 02/01/11 ..................................................................... 740,476
5,000,000 Danville IDA, Hospital Revenue, Refunding, Danville Regional Medical Center, FGIC Insured, 6.50%,
10/01/24 ........................................................................................... 5,138,850
1,000,000 Fairfax County EDA, Parking Revenue, Huntington Metrorail, 7.00%, 09/01/10 .......................... 1,069,790
1,500,000 Fairfax County EDA, Resource Recovery Revenue, Ogden Martin System of Fairfax, Inc. Project,
Series 1988-A, 7.75%, 02/01/11 ..................................................................... 1,642,740
150,000 Fairfax County IDAR, Refunding, Fairfax Hospital Association, Series A, Pre-Refunded, 7.875%,
10/01/17 ........................................................................................... 161,526
1,000,000 Fairfax County Sewer Revenue, Series A, AMBAC Insured, Pre-Refunded, 7.00%, 11/15/16 ................ 1,098,440
2,500,000 Fairfax County Water Authority Revenue, Series 1989, Pre-Refunded, 7.25%, 01/01/27 .................. 2,771,625
2,040,000 Frederick County IDA Lease Revenue, Government Complex Facilities Project, MBIA Insured, 6.50%,
12/01/09 ........................................................................................... 2,133,534
250,000 Frederick Winchester Sewer Service Authority Revenue, Refunding, AMBAC Insured, Pre-Refunded,
7.20%, 10/01/08 .................................................................................... 276,185
165,000 Fredericksburg IDAR, Crossover Revenue, Refunding, Mary Washington Hospital, AMBAC Insured,
Pre-Refunded, 7.80%, 07/01/14 ...................................................................... 182,277
40,000 Front Royal and Warren County IDAR, Refunding, Mortgage, Heritage Hall No. 13, FHA Insured,
8.25%, 07/15/05 .................................................................................... 40,603
Guam Airport Authority Revenue, Refunding,
830,000 Series A, 6.375%, 10/01/10 ....................................................................... 826,306
1,000,000 Series A, 6.50%, 10/01/23 ........................................................................ 990,960
3,000,000 Halifax County IDA, Exempt Facilities Revenue, Old Dominion Electric Cooperative Project, 6.50%,
12/01/12 ........................................................................................... 3,025,410
</TABLE>
The accompanying notes are an integral part of these financial statements.
92
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================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN VIRGINIA TAX-FREE INCOME FUND (NOTE 1)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
Hampton Museum Revenue,
$1,200,000 Series 1989, Pre-Refunded, 7.50%, 01/01/14 ....................................................... $ 1,320,612
1,000,000 Series 1990, Pre-Refunded, 7.30%, 01/01/14 ....................................................... 1,106,230
965,000 Hampton Redevelopment and Housing Authority, MFHR, Magruder Pines Apartment Project, 7.125%,
05/01/08 ........................................................................................... 978,471
1,500,000 Hampton Roads Medical College General Revenue, Refunding, Series A, 6.875%, 11/15/16 ................ 1,551,780
3,500,000 Hampton Roads Sanitation District, Primary Pledge Sewer Revenue, Pre-Refunded, 7.20%, 07/01/09....... 3,851,855
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 ........................................................... 304,323
Henrico County IDAR,
250,000 Bon Secours, Maryview Nursing Center, Series B, Pre-Refunded, 7.625%, 08/15/18 ................... 274,705
870,000 Bon Secours, St. Mary's Hospital, Series C, 7.50%, 09/01/07 ...................................... 956,817
Henry County Public Service Authority, Water and Sewer Revenue,
300,000 FGIC Insured, Pre-Refunded, 7.75%, 11/15/18 ...................................................... 317,181
1,500,000 FGIC Insured, Pre-Refunded, 7.20%, 11/15/19 ...................................................... 1,668,885
1,250,000 Leesburg Utilities System Revenue, MBIA Insured, 6.30%, 07/01/17 .................................... 1,271,862
650,000 Loudoun County Sanitation Authority, Water and Sewer System Revenue, AMBAC Insured,
Pre-Refunded, 7.50%, 01/01/10 ...................................................................... 717,723
190,000 Lynchburg IDA, Hospital Facilities Revenue, Refunding, First Mortgage, Centra Health, Inc., 8.125%,
01/01/16 ........................................................................................... 205,734
1,155,000 Lynchburg IDAR, Refunding, Randolph Macon Women's College, Pre-Refunded, 7.125%, 09/01/17 ........... 1,255,878
50,000 Manassas GO, Series 1988-A, Pre-Refunded, 7.20%, 03/01/06 ........................................... 53,154
500,000 Manassas IDA, Hospital Revenue, Prince William Hospital, Pre-Refunded, 8.125%, 04/01/19 ............. 562,450
1,180,000 Martinsville IDA, Hospital Facility Revenue, Memorial Hospital of Martinsville and Henry, 7.00%,
01/01/11 ........................................................................................... 1,217,241
4,500,000 Mecklenburg County IDAR, Exempt Facility, Series A, 7.35%, 05/01/08 ................................. 4,666,545
1,000,000 Metropolitan Washington D.C. Airports, General Airport Authority Revenue, Series A, 7.60%, 10/01/14.. 1,087,610
150,000 Nelson County Service Authority, Water and Sewer Revenue, FGIC Insured, Pre-Refunded, 7.875%,
07/01/18 ........................................................................................... 157,900
Norfolk IDAR,
50,000 Children's Hospital of the Kings' Daughters, Inc., Series A, 8.375%, 06/01/12 .................... 54,159
75,000 Children's Hospital of the Kings' Daughters, Inc., Series B, Pre-Refunded, 7.75%, 06/01/07 ....... 76,507
3,500,000 Children's Hospital of the Kings' Group, Inc., AMBAC Insured, Pre-Refunded, 7.00%, 06/01/11....... 3,902,045
20,000 Medical Center Hospital Project, Series A, 7.00%, 11/01/07 ....................................... 21,005
30,000 Medical Center Hospital Project, Series A, Pre-Refunded, 7.00%, 11/01/07 ......................... 31,545
Northern Virginia Transportation District Commission, Commuter Rail Revenue,
360,000 Railway Express Project, CGIC Insured, 7.00%, 07/01/05 ........................................... 394,679
640,000 Railway Express Project, CGIC Insured, Pre-Refunded, 7.00%, 07/01/05 ............................. 707,309
1,000,000 Railway Express Project, CGIC Insured, Pre-Refunded, 7.00%, 07/01/10 ............................. 1,105,170
1,000,000 Peninsula Airport Commission Revenue, Airport Improvement, 7.25%, 07/15/11 .......................... 1,091,080
5,480,000 Peninsula Ports Authority, Coal Terminal Revenue, Refunding, Coal Terminal Association
Project, 7.375%, 06/01/20 .......................................................................... 5,705,173
50,000 Peninsula Ports Authority Hospital Revenue, Refunding, Whittaker Memorial Hospital Project,
FHA Insured Mortgage, 8.70%, 08/01/23 .............................................................. 53,343
6,000,000 Peninsula Ports Authority Revenue, Refunding, Riverside Health System Project, Series A, 6.625%,
07/01/18 ........................................................................................... 6,113,940
50,000 Portsmouth Public Utility, GO, Refunding, Pre-Refunded, 7.50%, 11/01/12 ............................. 54,288
2,200,000 Prince William County IDA, Commuter Parking Facilities Project, 7.25%, 03/01/11 ..................... 2,355,584
1,250,000 Prince William County IDAR, Refunding, Prince William Hospital Project, 5.625%, 04/01/12 ............ 1,156,312
Puerto Rico Commonwealth Aqueduct and Sewer Authority Revenue,
1,000,000 Series A, 7.90%, 07/01/07 ........................................................................ 1,097,390
2,700,000 Series A, 7.875%, 07/01/17 ....................................................................... 2,939,355
1,500,000 Series A, 7.00%, 07/01/19 ........................................................................ 1,551,405
</TABLE>
The accompanying notes are an integral part of these financial statements.
93
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================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN VIRGINIA TAX-FREE INCOME FUND (NOTE 1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
Puerto Rico Commonwealth Electric Power Authority Revenue, Water Resources,
$ 55,000 Refunding, Series L, Pre-Refunded, 8.40%, 07/01/15 ............................................... $ 60,488
600,000 Refunding, Series M, Pre-Refunded, 8.00%, 07/01/08 ............................................... 668,802
1,500,000 Series P, 7.00%, 07/01/21 ........................................................................ 1,596,915
Puerto Rico Commonwealth GO,
10,000 Public Improvement, Refunding, 7.125%, 07/01/02 .................................................. 10,628
5,000 Public Improvement, Refunding, Pre-Refunded, 7.125%, 07/01/02 .................................... 5,364
75,000 Public Improvement, Series 1988, Pre-Refunded, 7.75%, 07/01/13 ................................... 83,105
500,000 Public Improvement, Series 1990, Pre-Refunded, 7.70%, 07/01/20 ................................... 572,510
25,000 Series 1986, Pre-Refunded, 7.90%, 07/01/11 ....................................................... 26,847
1,000,000 Series 1990, Pre-Refunded, 7.30%, 07/01/20 ....................................................... 1,126,500
Puerto Rico Commonwealth Highway Authority Revenue,
2,000,000 Refunding, Series R, 7.20%, 07/01/01 ............................................................. 2,186,940
225,000 Series P, Pre-Refunded, 8.125%, 07/01/13 ......................................................... 251,653
1,000,000 Series Q, Pre-Refunded, 8.00%, 07/01/18 .......................................................... 1,157,380
40,000 Puerto Rico Commonwealth IDC, General Purpose Revenues, 8.00%, 01/01/03 ............................. 40,307
Puerto Rico Commonwealth Infrastructure Financing Authority, Special Tax Revenue,
350,000 Series 1988-A, 7.90%, 07/01/07 ................................................................... 379,845
750,000 Series 1988-A, 7.75%, 07/01/08 ................................................................... 809,408
Puerto Rico HFC Revenue,
20,000 FHA Mortgage Insured, Section 8 Assisted, 6th Portfolio, Pre-Refunded, 7.75%, 12/01/26 ........... 23,477
2,460,000 MFM, Series A-1, 7.50%, 04/01/22 ................................................................. 2,597,440
340,000 Puerto Rico HFC, SFMR, GNMA Secured, Series B-1, 7.65%, 10/15/22 .................................... 359,859
Puerto Rico Industrial, Medical and Environmental Facilities, PCFA Revenue,
300,000 Baxter Travenol Labs., Series A, 8.00%, 09/01/12 ................................................. 331,938
250,000 Upjohn Co. Project, 7.50%, 12/01/23 .............................................................. 268,880
185,000 Puerto Rico Municipal Finance Agency, Series 1988-A, 8.25%, 07/01/08 ................................ 203,241
Puerto Rico PBA, Guaranteed, Public Education and Health Facilities,
750,000 Series H, Pre-Refunded, 7.125%, 07/01/09 ......................................................... 813,623
175,000 Series H, Pre-Refunded, 7.875%, 07/01/16 ......................................................... 190,591
100,000 Series H, Pre-Refunded, 7.25%, 07/01/17 .......................................................... 108,862
1,000,000 Series J, Pre-Refunded, 7.125%, 07/01/09 ......................................................... 1,084,830
1,925,000 Series J, Pre-Refunded, 7.25%, 07/01/17 .......................................................... 2,095,594
5,000,000 Puerto Rico Telephone Authority Revenue, Series L, 6.125%, 01/01/22 ................................. 5,001,100
Richmond IDAR,
1,000,000 Retreat Hospital, 7.25%, 07/01/11 ................................................................ 1,021,720
4,820,000 Retreat Hospital, 7.35%, 07/01/21 ................................................................ 4,924,257
Richmond Metropolitan Authority, Expressway Revenue,
2,000,000 AMBAC Insured, 7.00%, 10/15/13 ................................................................... 2,127,480
2,500,000 Refunding, Series A, FGIC Insured, 6.375%, 07/15/16 .............................................. 2,548,200
5,000,000 Series B, FGIC Insured, 6.25%, 07/15/22 .......................................................... 5,034,650
2,000,000 Richmond Public Improvement GO, Series A, 6.25%, 01/15/21 ........................................... 2,005,940
175,000 Richmond Public Utilities Revenue, Series A, Pre-Refunded, 8.00%, 01/15/18 .......................... 192,423
2,500,000 Richmond Redevelopment and Housing Authority Mortgage Revenue, Refunding, MF, Series A,
FHA Insured, 6.50%, 04/01/27 ....................................................................... 2,496,500
3,000,000 Roanoke IDAR, Roanoke Memorial Hospital, Pre-Refunded, 7.50%, 07/01/20 .............................. 3,384,690
4,250,000 South Boston IDAR, Halifax-Community Hospital, Inc. Project, 7.375%, 09/01/11 ....................... 4,388,933
Southeastern Public Service Authority Revenue, Senior Regional Solid Waste System,
1,000,000 Refunding, BIG Insured, 6.00%, 07/01/15 .......................................................... 996,400
1,800,000 Refunding, Series B, BIG Insured, Pre-Refunded, 7.00%, 07/01/13 .................................. 1,967,130
40,000 Series B, Pre-Refunded, 9.00%, 07/01/05 .......................................................... 43,037
10,000 Series B, Pre-Refunded, 9.25%, 07/01/15 .......................................................... 10,791
945,000 Staunton IDA, Facilities Revenue, Refunding, Mary Baldwin College, Series B, 8.00%, 11/01/17 ........ 1,020,005
</TABLE>
The accompanying notes are an integral part of these financial statements.
94
<PAGE>
FRANKLIN TAX-FREE TRUST
================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN VIRGINIA TAX-FREE INCOME FUND (NOTE 1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
$ 200,000 Suffolk GO, Series 1988, Pre-Refunded, 7.40%, 08/01/05 .............................................. $ 214,974
370,000 Suffolk IDAR, Louise Obici Memorial Hospital, 7.875%, 01/01/05 ...................................... 392,052
1,000,000 University of Virginia, Hospital Revenue, Refunding, Series D, Pre-Refunded, 7.15%, 06/01/17 ........ 1,083,520
50,000 Virginia Beach Development Authority, General Hospital Facility Revenue, Series A, Pre-Refunded,
8.75%, 12/01/17 .................................................................................... 55,182
1,500,000 Virginia Beach, GO, Series A, Pre-Refunded, 6.875%, 03/01/09 ........................................ 1,649,820
Virginia College Building Authority, Educational Facilities Revenue,
750,000 Hampton University Project, Series A, Pre-Refunded, 7.75%, 04/01/14 .............................. 834,345
1,750,000 Marymount University Project, 7.00%, 07/01/22 .................................................... 1,793,015
2,345,000 Refunding, Washington and Lee University Project, 5.75%, 01/01/19 ................................ 2,208,756
200,000 Virginia Education Loan Authority, Guaranteed, Student Loan Program Revenue, Series B, 8.00%,
03/01/04 ........................................................................................... 210,152
900,000 Virginia Polytechnic Institute Revenue, Dormitory and Dining Hall, BIG Insured, 7.00%, 06/01/09...... 961,047
400,000 Virginia Port Authority Revenue, Commonwealth Port Fund, 8.20%, 07/01/08 ............................ 442,436
Virginia State HDA, Commonwealth Mortgage,
1,000,000 Series A, 7.10%, 01/01/17 ........................................................................ 1,043,060
5,500,000 Series A, 7.15%, 01/01/33 ........................................................................ 5,698,990
5,000 Series A-1, 8.10%, 01/01/17 ...................................................................... 5,220
5,000,000 Series B-1, 7.20%, 07/01/17 ...................................................................... 5,327,500
1,250,000 Series B-2, 7.625%, 07/01/17 ..................................................................... 1,298,438
215,000 Series B-3, 7.625%, 01/01/17 ..................................................................... 224,419
250,000 Series B-3, 7.375%, 07/01/17 ..................................................................... 262,558
2,000,000 Series B-3, 6.80%, 01/01/27 ...................................................................... 2,020,840
5,000,000 Series B-4, 6.85%, 07/01/17 ...................................................................... 5,122,100
2,000,000 Series B-4, 6.55%, 01/01/27 ...................................................................... 1,976,020
800,000 Series D-1, 7.50%, 07/01/17 ...................................................................... 832,808
1,500,000 Series D-2, 7.35%, 07/01/17 ...................................................................... 1,561,410
1,000,000 Series D-3, 7.375%, 07/01/17 ..................................................................... 1,050,230
1,000,000 Series H-2, 6.55%, 01/01/17 ...................................................................... 1,013,010
9,000,000 Virginia State HDA, MF, Series F, 7.10%, 05/01/13 ................................................... 9,429,030
2,000,000 Virginia State Resources Authority, Sewer System Revenue, Refunding, Harrisonburg Rockingham
Region, Series A, 6.00%, 05/01/22 .................................................................. 1,986,020
Virginia State Resources Authority, Water and Sewer System Revenue,
1,000,000 Lot #7, Rapidan Service Authority, 7.125%, 10/01/16 .............................................. 1,062,540
400,000 Pooled Loan Program, Series A, 7.35%, 11/01/16 ................................................... 428,680
100,000 Pooled Loan Program, Series A, 7.45%, 11/01/16 ................................................... 107,431
100,000 Pooled Loan Program, Series A, 7.85%, 11/01/17 ................................................... 109,829
190,000 Pooled Loan Program, Series A, Pre-Refunded, 7.35%, 11/01/16 ..................................... 208,873
Virginia State Resources Authority, Water System Revenue,
1,000,000 Refunding, Series A, 6.125%, 04/01/19 ............................................................ 1,000,110
85,000 Series 1988, Pre-Refunded, 7.875%, 10/01/18 ...................................................... 94,313
Virginia State Transportation Board, Transportation Contract Revenue,
9,000,000 Refunding, U.S. Route 28 Project, 6.50%, 04/01/18 ................................................ 9,316,980
475,000 U.S. Route 28 Project, Pre-Refunded, 7.80%, 03/01/16 ............................................. 521,712
2,500,000 U.S. Route 58 Corridor Development Program, 6.00%, 05/15/19 ...................................... 2,487,100
3,000,000 U.S. Route 58 Corridor Development Program, Pre-Refunded, 6.90%, 05/15/12 ........................ 3,217,050
3,295,000 Washington County IDA, College Facilities Revenue, Emory and Henry College Project, 6.375%,
04/01/23 ........................................................................................... 3,246,135
3,000,000 Washington County IDA, Hospital Facilities Revenue, First Mortgage, Johnston Memorial Hospital,
7.00%, 07/01/22 .................................................................................... 3,103,200
5,450,000 West Point IDA, Solid Waste Disposal Revenue, Refunding, Chesapeake Corp. Project, Series B,
6.25%, 03/01/19 .................................................................................... 5,177,827
</TABLE>
The accompanying notes are an integral part of these financial statements.
95
<PAGE>
FRANKLIN TAX-FREE TRUST
================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN VIRGINIA TAX-FREE INCOME FUND (NOTE 1)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
$2,000,000 Winchester IDA, Educational Facilities Revenue, Refunding, First Mortgage, Shenandoah University
Project, Asset Guaranteed, 6.80%, 10/01/24 ......................................................... $ 2,094,540
600,000 Winchester IDA, Hospital Facility Revenue, First Mortgage, Winchester Medical Center, Inc.,
Pre-Refunded, 8.125%, 01/01/14 ..................................................................... 629,352
------------
TOTAL LONG TERM INVESTMENTS (COST $239,201,047) ............................................... 251,180,870
------------
(e)SHORT TERM INVESTMENTS .3%
300,000 Peninsula Port Facilities Authority Revenue, Refunding, Shell Oil Co., Series A, Daily VRDN and Put,
3.75%, 12/01/05 .................................................................................... 300,000
200,000 Puerto Rico Commonwealth Government Development Bank, Refunding, Weekly VRDN and Put,
3.90%, 12/01/15 .................................................................................... 200,000
200,000 Richmond IDAR, Cogentrix of Richmond Project, Series B, Daily VRDN and Put, 4.30%, 12/01/07 ......... 200,000
------------
TOTAL SHORT TERM INVESTMENTS (COST $700,000) .................................................. 700,000
------------
TOTAL INVESTMENTS (COST $239,901,047) 98.4% .............................................. 251,880,870
OTHER ASSETS AND LIABILITIES, NET 1.6% ................................................... 4,083,839
------------
NET ASSETS 100.0% ........................................................................ $255,964,709
============
At February 28, 1995, the net unrealized appreciation based on the cost of investments
for income tax purposes of $239,901,047 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ...................................................................... $ 12,766,880
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ...................................................................... (787,057)
------------
Net unrealized appreciation ....................................................................... $ 11,979,823
============
</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 - Federal 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
PBA - Public Building Authority
PCFA - Pollution Control Financing Authority
PCR - Pollution Control Revenue
SFMR - Single-Family Mortgage Revenue
(e)Variable rate demand notes (VRDNs) are tax-exempt obligations which contain a
floating or variable interest rate adjustment formula and an unconditional
right of demand to receive payment of the principal balance plus accrued
interest 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.
96
<PAGE>
FRANKLIN TAX-FREE TRUST
================================================================================
FINANCIAL STATEMENTS
STATEMENTS OF ASSETS AND LIABILITIES
FEBRUARY 28, 1995
<TABLE>
<CAPTION>
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
------------ -------------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Assets:
Investments in securities:
At identified cost.................................. $160,843,530 $1,186,241,700 $112,825,108 $32,483,797 $ 98,184,845
============ ============== ============ =========== ============
At value............................................ 166,958,827 1,243,128,028 117,807,147 32,292,335 103,151,650
Cash................................................. 105,011 228,201 263,671 118,284 163,685
Receivables:
Interest............................................ 2,944,381 24,023,736 1,692,666 584,406 1,764,150
Capital shares sold................................. 485,250 3,135,200 146,047 9,669 92,906
Investment securities sold.......................... 5,000 4,994,407 -- 377,509 8,594
------------ -------------- ------------ ----------- ------------
Total assets.................................... 170,498,469 1,275,509,572 119,909,531 33,382,203 105,180,985
------------ -------------- ------------ ----------- ------------
Liabilities:
Payables:
Investment securities purchased:
Regular delivery................................... -- 5,900,980 2,844,237 -- --
When-issued basis (Note 1)......................... -- -- -- 495,699 --
Distributions payable to shareholders............... 173,536 1,360,278 138,725 34,013 109,933
Capital shares repurchased.......................... 169,432 2,562,881 78,638 11 21,957
Management fees..................................... 81,285 495,401 59,115 15,880 54,153
Distribution fees................................... 10,500 82,713 6,820 1,803 6,078
Shareholder servicing costs......................... 2,612 16,033 2,350 564 1,626
Accrued expenses and other liabilities............... 10,235 72,851 8,310 2,929 7,447
Total liabilities............................... 447,600 10,491,137 3,138,195 550,899 201,194
------------ -------------- ------------ ----------- ------------
Net assets, at value.................................. $170,050,869 $1,265,018,435 $116,771,336 $32,831,304 $104,979,791
============ ============== ============ =========== ============
Net assets consist of:
Undistributed net investment income.................. $ 326,607 $ 3,546,965 $ 98,646 $ 21,081 $ 214,417
Unrealized appreciation (depreciation) on investments 6,115,297 56,886,328 4,982,039 (191,462) 4,966,805
Accumulated net realized loss........................ (1,788,455) (7,677,876) (1,626,453) (785,764) (3,253,709)
Capital shares....................................... 165,397,420 1,212,263,018 113,317,104 33,787,449 103,052,278
------------ -------------- ------------ ----------- ------------
Net assets, at value.................................. $170,050,869 $1,265,018,435 $116,771,336 $32,831,304 $104,979,791
============ ============== ============ =========== ============
Shares outstanding.................................... 15,037,977 111,493,189 10,115,092 3,113,643 9,517,644
============ ============== ============ =========== ============
Net asset value per share............................. $11.31 $11.35 $11.54 $10.54 $11.03
============ ============== ============ =========== ============
Representative computation (Alabama
Tax-Free Income Fund) of net asset
value and offering price per share:
Net asset value and redemption price per share
($170,050,869/15,037,977).......................... $11.31
============
Maximum offering price (100/95.75 of $11.31)........ $11.81
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
97
<PAGE>
FRANKLIN TAX-FREE TRUST
================================================================================
FINANCIAL STATEMENTS (CONT.)
STATEMENTS OF ASSETS AND LIABILITIES (CONT.)
FEBRUARY 28, 1995
<TABLE>
<CAPTION>
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
------------ -------------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Assets:
Investments in securities:
At identified cost.................................. $147,037,427 $215,852,078 $206,850,766 $121,990,219 $239,901,047
============ ============ ============ ============ ============
At value............................................ 150,432,388 223,920,169 212,417,242 128,703,915 251,880,870
Cash................................................. 292,995 284,391 215,346 92,905 181,697
Receivables:
Interest............................................ 2,859,688 3,216,204 3,627,576 2,253,558 4,619,881
Capital shares sold................................. 505,736 470,896 357,820 151,726 626,391
Investment securities sold.......................... -- -- 30,000 -- --
------------ ------------ ------------ ------------ ------------
Total assets.................................... 154,090,807 227,891,660 216,647,984 131,202,104 257,308,839
------------ ------------ ------------ ------------ ------------
Liabilities:
Payables:
Distributions payable to shareholders............... 156,234 225,096 219,364 139,515 261,236
Capital shares repurchased.......................... 692,779 86,600 34,465 294,541 929,801
Management fees..................................... 74,197 105,092 100,505 64,868 117,051
Distribution fees................................... 8,900 13,212 12,500 7,691 14,516
Shareholder servicing costs......................... 3,300 4,500 3,800 2,100 4,800
Accrued expenses and other liabilities............... 10,820 15,654 13,854 9,007 16,726
------------ ------------ ------------ ------------ ------------
Total liabilities............................... 946,230 450,154 384,488 517,722 1,344,130
------------ ------------ ------------ ------------ ------------
Net assets, at value.................................. $153,144,577 $227,441,506 $216,263,496 $130,684,382 $255,964,709
============ ============ ============ ============ ============
Net assets consist of:
Undistributed net investment income.................. $ 300,019 $ 179,382 $ 125,919 $ 275,469 $ 487,430
Unrealized appreciation on investments............... 3,394,961 8,068,091 5,566,476 6,713,696 11,979,823
Accumulated net realized loss........................ (940,325) (2,437,526) (2,985,896) (1,239,674) (3,370,284)
Capital shares....................................... 150,389,922 221,631,559 213,556,997 124,934,891 246,867,740
------------ ------------ ------------ ------------ ------------
Net assets, at value.................................. $153,144,577 $227,441,506 $216,263,496 $130,684,382 $255,964,709
============ ============ ============ ============ ============
Shares outstanding.................................... 14,026,485 19,874,717 19,023,013 11,617,264 22,584,171
============ ============ ============ ============ ============
Net asset value per share............................. $10.92 $11.44 $11.37 $11.25 $11.33
============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
98
<PAGE>
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================================================================================
FINANCIAL STATEMENTS (CONT.)
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED FEBRUARY 28, 1995
<TABLE>
<CAPTION>
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
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Investment income:
Interest (Note 1)...................................... $11,176,207 $86,208,185 $7,571,983 $1,881,610 $7,268,568
----------- ----------- ---------- ---------- ----------
Expenses:
Management fees, net (Note 5)......................... 969,002 5,976,798 703,628 34,216 661,267
Distribution fees (Note 5)............................. 101,352 753,709 68,470 17,764 62,959
Shareholder servicing costs (Note 5)................... 38,629 226,880 28,307 5,783 21,073
Reports to shareholders................................ 41,862 292,514 34,665 8,075 22,918
Custodian fees......................................... 16,686 126,387 11,485 2,793 10,678
Registration and filing fees........................... 14,195 69,410 11,462 10,198 8,894
Professional fees...................................... 6,680 35,541 5,287 1,801 5,081
Trustees' fees and expenses............................ 2,873 21,784 1,968 - 1,834
Other.................................................. 21,036 63,983 13,519 5,609 16,954
----------- ----------- ---------- ---------- ----------
Total expenses.................................... 1,212,315 7,567,006 878,791 86,239 811,658
----------- ----------- ---------- ---------- ----------
Net investment income (Note 8)................... 9,963,892 78,641,179 6,693,192 1,795,371 6,456,910
----------- ----------- ---------- ---------- ----------
Realized and unrealized loss on investments:
Net realized loss...................................... (1,785,827) (6,760,745) (1,426,675) (759,461) (3,100,285)
Net unrealized depreciation ........................... (6,044,705) (45,647,422) (3,279,116) (805,246) (2,523,882)
----------- ----------- ---------- ---------- ----------
Net realized and unrealized loss on investments......... (7,830,532) (52,408,167) (4,705,791) (1,564,707) (5,624,167)
----------- ----------- ---------- ---------- ----------
Net increase in net assets resulting from operations.... $ 2,133,360 $26,233,012 $1,987,401 $ 230,664 $ 832,743
=========== =========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
99
<PAGE>
FRANKLIN TAX-FREE TRUST
================================================================================
FINANCIAL STATEMENTS (CONT.)
STATEMENTS OF OPERATIONS (CONT.)
FOR THE YEAR ENDED FEBRUARY 28, 1995
<TABLE>
<CAPTION>
FRANKLIN FRANKLIN FRANKLIN FRANKLIN FRANKLIN
MARYLAND MISSOURI NORTH CAROLINA TEXAS VIRIGINIA
TAX-FREE TAX-FREE TAX-FREE TAX-FREE TAX-FREE
INCOME FUND INCOME FUND INCOME FUND INCOME FUND INCOME FUND
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Investment income:
Interest (Note 1)....................................... $9,963,848 $14,477,053 $13,652,825 $9,275,538 $16,578,797
---------- ----------- ----------- ---------- -----------
Expenses:
Management fees (Note 5)................................ 877,941 1,246,460 1,181,708 804,364 1,385,287
Distribution fees (Note 5).............................. 89,815 132,880 125,373 79,560 146,307
Shareholder servicing costs (Note 5).................... 42,050 54,310 46,160 28,279 58,947
Reports to shareholders................................. 41,195 57,732 51,460 33,849 64,520
Custodian fees.......................................... 15,018 22,280 21,170 13,581 25,239
Registration and filing fees............................ 15,753 25,079 21,781 11,826 18,027
Professional fees....................................... 6,188 8,097 7,750 5,845 8,824
Trustees' fees and expenses............................. 2,558 3,814 3,592 2,328 4,299
Other................................................... 17,264 23,284 21,169 22,344 25,915
---------- ----------- ----------- ---------- -----------
Total expenses..................................... 1,107,782 1,573,936 1,480,163 1,001,976 1,737,365
---------- ----------- ----------- ---------- -----------
Net investment income (Note 8).................... 8,856,066 12,903,117 12,172,662 8,273,562 14,841,432
---------- ----------- ----------- ---------- -----------
Realized and unrealized loss on investments:
Net realized loss....................................... (302,688) (1,832,356) (2,746,697) (1,211,703) (3,093,260)
Net unrealized depreciation ............................ (6,128,504) (8,063,083) (7,384,751) (5,076,016) (7,958,005)
---------- ----------- ----------- ---------- -----------
Net realized and unrealized loss on investments.......... (6,431,192) (9,895,439) (10,131,448) (6,287,719) (11,051,265)
---------- ----------- ----------- ---------- -----------
Net increase in net assets resulting from operations..... $2,424,874 $ 3,007,678 $ 2,041,214 $1,985,843 $ 3,790,167
========== =========== =========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
100
<PAGE>
FRANKLIN TAX-FREE TRUST
================================================================================
FINANCIAL STATEMENTS (CONT.)
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED FEBRUARY 28, 1995 AND 1994
<TABLE>
<CAPTION>
FRANKLIN ALABAMA FRANKLIN FLORIDA FRANKLIN GEORGIA
TAX-FREE INCOME FUND TAX-FREE INCOME FUND TAX-FREE INCOME FUND
------------------------- ------------------------------- -------------------------
1995 1994 1995 1994 1995 1994
----------- ----------- ------------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income.................. $ 9,963,892 $ 9,332,882 $ 78,641,179 $ 75,833,515 $ 6,693,192 $ 5,864,078
Net realized gain (loss) from security
transactions.......................... (1,785,827) 321,801 (6,760,745) (749,863) (1,426,675) (168,244)
Net unrealized appreciation
(depreciation) on investments......... (6,044,705) 937,965 (45,647,422) 9,610,252 (3,279,116) 1,274,809
Net increase in net assets ------------ ------------ -------------- -------------- ------------ ------------
resulting from operations.......... 2,133,360 10,592,648 26,233,012 84,693,904 1,987,401 6,970,643
Distributions to shareholders from
undistributed net investment income
(Note 8)................................ (9,804,407) (9,293,001) (76,589,571) (75,386,380) (6,715,463) (5,877,454)
Increase (decrease) in net assets from
capital share transactions (Note 2)..... (692,543) 32,635,283 (46,207,701) 187,447,805 617,009 28,771,716
Net increase (decrease) in net ------------ ------------ -------------- -------------- ------------ ------------
assets............................ (8,363,590) 33,934,930 (96,564,260) 196,755,329 (4,111,053) 29,864,905
Net assets:
Beginning of year....................... 178,414,459 144,479,529 1,361,582,695 1,164,827,366 120,882,389 91,017,484
------------ ------------ -------------- -------------- ------------ ------------
End of year............................. $170,050,869 $178,414,459 $1,265,018,435 $1,361,582,695 $116,771,336 $120,882,389
============ ============ ============== ============== ============ ============
Undistributed net investment income
included in net assets:
Beginning of year...................... $ 167,122 $ 127,241 $ 1,495,357 $ 1,048,222 $ 120,917 $ 134,293
============ ============ ============== ============== ============ ============
End of year............................ $ 326,607 $ 167,122 $ 3,546,965 $ 1,495,357 $ 98,646 $ 120,917
============ ============ ============== ============== ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
101
<PAGE>
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================================================================================
FINANCIAL STATEMENTS (CONT.)
STATEMENTS OF CHANGES IN NET ASSETS (CONT.)
FOR THE YEARS ENDED FEBRUARY 28, 1995 AND 1994
<TABLE>
<CAPTION>
FRANKLIN KENTUCKY FRANKLIN LOUISIANA FRANKLIN MARYLAND
TAX-FREE INCOME FUND TAX-FREE INCOME FUND TAX-FREE INCOME FUND
--------------------- -------------------------- -------------------------
1995 1994 1995 1994 1995 1994
--------- -------- ---------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income........................... $ 1,795,371 $ 1,137,209 $ 6,456,910 $ 6,172,128 $ 8,856,066 $ 7,840,495
Net realized loss from security transactions.... (759,461) (24,595) (3,100,285) (59,400) (302,688) (359,934)
Net unrealized appreciation (depreciation)
on investments................................. (805,246) 37,543 (2,523,882) (107,011) (6,128,504) 1,306,640
----------- ----------- ------------ ------------ ------------ ------------
Net increase in net assets resulting from....
operations.................................. 230,664 1,150,157 832,743 6,005,717 2,424,874 8,787,201
Distributions to shareholders from undistributed..
net investment income (Note 8)................... (1,815,911) (1,147,824) (6,308,597) (6,234,171) (8,652,494) (7,858,844)
Increase (decrease) in net assets from capital
share transactions (Note 2)...................... 6,359,314 16,376,806 (5,515,489) 20,831,780 2,689,253 39,881,603
----------- ----------- ------------ ------------ ------------ ------------
Net increase (decrease) in net assets....... 4,774,067 16,379,139 (10,991,343) 20,603,326 (3,538,367) 40,809,960
Net assets:
Beginning of year................................ 28,057,237 11,678,098 115,971,134 95,367,808 156,682,944 115,872,984
----------- ----------- ------------ ------------ ------------ ------------
End of year...................................... $32,831,304 $28,057,237 $104,979,791 $115,971,134 $153,144,577 $156,682,944
=========== =========== ============ ============ ============ ============
Undistributed net investment income included
in net assets:
Beginning of year............................. $ 41,621 $ 52,236 $ 66,104 $ 128,147 $ 96,447 $ 114,796
=========== =========== ============ ============ ============ ============
End of year................................... $ 21,081 $ 41,621 $ 214,417 $ 66,104 $ 300,019 $ 96,447
=========== ============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
102
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===============================================================================
Financial Statements (cont.)
Statements of Changes in Net Assets (cont.)
for the years ended February 28, 1995 and 1994
<TABLE>
<CAPTION>
Franklin Missouri Franklin North Carolina
Tax-Free Income Fund Tax-Free Income Fund
-------------------------- --------------------------
1995 1994 1995 1994
----------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income................................................. $ 12,903,117 $ 11,153,773 $ 12,172,662 $ 10,384,043
Net realized loss from security transactions.......................... (1,832,356) (285,048) (2,746,697) (14,532)
Net unrealized appreciation (depreciation) on investments............. (8,063,083) 3,196,567 (7,384,751) 459,121
------------ ------------ ------------ ------------
Net increase in net assets resulting from operations.............. 3,007,678 14,065,292 2,041,214 10,828,632
Distributions to shareholders from undistributed net investment income
(Note 8)............................................................... (12,863,835) (11,309,399) (12,187,559) (10,491,146)
Increase in net assets from capital share transactions (Note 2)......... 9,149,155 61,270,283 10,870,334 58,684,849
------------ ------------ ------------ ------------
Net increase (decrease) in net assets............................. (707,002) 64,026,176 723,989 59,022,335
Net assets:
Beginning of year...................................................... 228,148,508 164,122,332 215,539,507 156,517,172
------------ ------------ ------------ ------------
End of year............................................................ $227,441,506 $228,148,508 $216,263,496 $215,539,507
============ ============ ============ ============
Undistributed net investment income included in net assets:
Beginning of year...................................................... $ 140,100 $ 295,726 $ 140,816 $ 247,919
============ ============ ============ ============
End of year............................................................ $ 179,382 $ 140,100 $ 125,919 $ 140,816
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
103
<PAGE>
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===============================================================================
FINANCIAL STATEMENTS (CONT.)
STATEMENTS OF CHANGES IN NET ASSETS (CONT.)
FOR THE YEARS ENDED FEBRUARY 28, 1995 AND 1994
<TABLE>
<CAPTION>
FRANKLIN TEXAS FRANKLIN VIRGINIA
TAX-FREE INCOME FUND TAX-FREE INCOME FUND
-------------------------- --------------------------
1995 1994 1995 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income................................................. $ 8,273,562 $ 8,525,935 $ 14,841,432 $ 13,459,666
Net realized loss from security transactions.......................... (1,211,703) (6,425) (3,093,260) (105,751)
Net unrealized appreciation (depreciation) on investments............. (5,076,016) 486,584 (7,958,005) 2,454,550
------------ ------------ ------------ ------------
Net increase in net assets resulting from operations.............. 1,985,843 9,006,094 3,790,167 15,808,465
Distributions to shareholders from undistributed net investment income
(Note 8)............................................................... (8,088,325) (8,600,524) (14,680,932) (13,555,847)
Increase (decrease) in net assets from capital share transactions (Note 2) (11,897,120) 8,889,326 5,942,403 47,489,812
------------ ------------ ------------ ------------
Net increase (decrease) in net assets............................. (17,999,602) 9,294,896 (4,948,362) 49,742,430
Net assets:
Beginning of year...................................................... 148,683,984 139,389,088 260,913,071 211,170,641
------------ ------------ ------------ ------------
End of year............................................................ $130,684,382 $148,683,984 $255,964,709 $260,913,071
============ ============ ============ ============
Undistributed net investment income included in net assets:
Beginning of year...................................................... $ 90,232 $ 164,821 $ 326,930 $ 423,111
============ ============ ============ ============
End of year............................................................ $ 275,469 $ 90,232 $ 487,430 $ 326,930
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
104
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FRANKLIN TAX-FREE TRUST
===============================================================================
Notes to Financial Statements
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.
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
ask 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.
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 of 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.
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.
105
<PAGE>
FRANKLIN TAX-FREE TRUST
================================================================================
NOTES TO FINANCIAL STATEMENTS (CONT.)
2. TRUST SHARES
At February 28, 1995, there were an unlimited number of no par value shares of
beneficial interest authorized. Transactions in each of the Fund's shares for
the years ended February 28, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
FRANKLIN ALABAMA FRANKLIN FLORIDA FRANKLIN GEORGIA FRANKLIN KENTUCKY
TAX-FREE INCOME FUND TAX-FREE INCOME FUND TAX-FREE INCOME FUND TAX-FREE INCOME FUND
---------------------- ------------------------ ---------------------- ---------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
--------- ----------- --------- ------------ --------- ----------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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 reinvest-
ment 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
========= =========== =========== ============ ========= =========== ========= ===========
1994
Shares sold ............... 3,321,282 $39,132,187 20,791,782 $245,249,836 2,737,098 $32,937,492 1,300,522 $14,674,973
Shares issued in reinvest-
ment of distributions .... 267,133 3,157,652 1,393,284 16,444,248 215,072 2,589,205 49,881 562,175
Shares redeemed ........... (740,903) (8,776,901) (7,241,252) (85,600,886) (788,209) (9,480,655) (62,559) (703,782)
Changes from exercise of
exchange privilege:
Shares sold ............. 168,608 1,991,007 5,130,195 60,727,191 371,559 4,469,116 200,247 2,242,725
Shares redeemed ......... (242,472) (2,868,662) (4,166,648) (49,372,584) (144,415) (1,743,442) (35,193) (399,285)
--------- ----------- ----------- ------------ --------- ----------- --------- -----------
Net increase ............ 2,773,648 $32,635,283 15,907,361 $187,447,805 2,391,105 $28,771,716 1,452,898 $16,376,806
========= =========== =========== ============ ========= =========== ========= ===========
<CAPTION>
FRANKLIN LOUISIANA FRANKLIN MARYLAND FRANKLIN MISSOURI
TAX-FREE INCOME FUND TAX-FREE INCOME FUND TAX-FREE INCOME FUND
------------------------- ----------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ----------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
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
========== =========== ========= =========== ========== ===========
1994
Shares sold ...................................... 2,393,847 $27,877,547 4,319,120 $49,064,979 5,546,392 $66,129,899
Shares issued in reinvestment of distributions ... 177,136 2,060,087 279,161 3,176,233 367,726 4,393,202
Shares redeemed .................................. (669,137) (7,807,523) (1,243,167) (14,181,590) (1,063,359) (12,724,928)
Changes from exercise of exchange privilege:
Shares sold ..................................... 140,192 1,630,998 487,082 5,550,930 475,900 5,658,703
Shares redeemed ................................. (250,369) (2,929,329) (326,855) (3,728,949) (182,558) (2,186,593)
---------- ----------- -------- ----------- ---------- ---------
Net increase .................................... 1,791,669 $20,831,780 3,515,341 $39,881,603 5,144,101 $61,270,283
========== =========== ========= =========== ========== ===========
</TABLE>
106
<PAGE>
FRANKLIN TAX-FREE TRUST
===============================================================================
NOTES TO FINANCIAL STATEMENTS (CONT.)
<TABLE>
<CAPTION>
2. TRUST SHARES (cont.)
FRANKLIN NORTH CAROLINA FRANKLIN TEXAS FRANKLIN VIRGINIA
TAX-FREE INCOME FUND TAX-FREE INCOME FUND TAX-FREE INCOME FUND
------------------------- ------------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
----------- ----------- ---------- ------------ ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
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
1994
Shares sold ..................................... 5,035,926 $60,327,594 1,747,338 $ 20,481,817 4,917,262 $58,208,459
Shares issued in reinvestment of distributions .. 370,585 4,445,622 220,766 2,591,223 461,382 5,464,467
Shares redeemed ................................. (915,917) (10,997,113) (1,158,810) (13,614,644) (1,492,565) (17,662,585)
Changes from exercise of exchange privilege:
Shares sold .................................... 705,248 8,434,070 302,934 3,555,574 436,951 5,145,408
Shares redeemed ................................ (293,067) (3,525,324) (351,413) (4,124,644) (311,057) (3,665,937)
----------- ----------- ---------- ------------ ---------- -----------
Net increase ................................... 4,902,775 $58,684,849 760,815 $ 8,889,326 4,011,973 $47,489,812
=========== =========== ========== ============ ========== ===========
</TABLE>
3. DISTRIBUTIONS AND CAPITAL LOSS CARRYOVERS
At February 28, 1995, for tax purposes, the Funds had accumulated net capital
loss carryovers as follows:
<TABLE>
<CAPTION>
FRANKLIN FRANKLIN FRANKLIN FRANKLIN FRANKLIN
ALABAMA FLORIDA GEORGIA KENTUCKY LOUISANA
TAX-FREE TAX-FREE TAX-FREE TAX-FREE TAX-FREE
INCOME FUND INCOME FUND INCOME FUND INCOME FUND INCOME FUND
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Capital loss carryovers
Expiring in: 1999........................................... -- $ 104,889 -- -- --
2000........................................... -- -- -- $ 495 --
2001........................................... $ 1,878 62,379 $ 29,153 1,213 $ 94,024
2002........................................... -- 749,863 168,244 24,595 59,400
2003........................................... 1,785,827 6,760,745 1,429,056 759,461 3,100,285
---------- ---------- ---------- -------- ----------
$1,787,705 $7,677,876 $1,626,453 $785,764 $3,253,709
========== ========== ========== ======== ==========
</TABLE>
<TABLE>
<CAPTION>
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
----------- ----------- -------------- ---------- -----------
<S> <C> <C> <C> <C> <C>
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
======== ========== ========== ========== ==========
</TABLE>
For tax purposes, the aggregate cost of securities is higher (and unrealized
appreciation is lower) than for financial reporting purposes at February 28,
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 Fund.
107
<PAGE>
FRANKLIN TAX-FREE TRUST
===============================================================================
NOTES TO FINANCIAL STATEMENTS (CONT.)
4. PURCHASES AND SALES OF SECURITIES
Aggregate purchases and sales of securities (excluding purchases and sales of
short-term securities) for the year ended February 28, 1995 were as follows:
<TABLE>
<CAPTION>
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
------------ ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Purchases ................................................... $33,014,000 $179,090,623 $46,300,206 $15,843,687 $34,251,280
=========== ============ =========== =========== ===========
Sales ....................................................... $35,838,142 $214,425,167 $41,224,682 $ 9,764,204 $39,857,825
=========== ============ =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
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
------------ ----------- -------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Purchases.................................................... $32,745,762 $55,900,042 $63,327,298 $ 8,518,051 $60,000,823
=========== =========== =========== =========== ===========
Sales ....................................................... $30,072,333 $43,650,932 $51,851,597 $21,135,832 $54,043,453
=========== =========== =========== =========== ===========
</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 based 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 year ended
February 28, 1995, Franklin Advisers, Inc. agreed in advance to waive $155,856
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 received by Franklin/Templeton Distributors, Inc. and the amounts
which were subsequently paid to other dealers for the year ended February 28,
1995 were as follows:
<TABLE>
<CAPTION>
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
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Total commissions received ................................... $643,138 $3,251,098 $523,120 $241,431 $334,861
======== ========== ======== ======== ========
Paid to other dealers ........................................ $611,161 $3,083,771 $497,134 $231,761 $317,646
======== ========== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
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
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Total commissions received ................................... $764,216 $1,080,398 $1,089,308 $243,044 $998,646
======== ========== ========== ======== ========
Paid to other dealers......................................... $726,520 $1,027,614 $1,037,779 $228,882 $946,658
======== ========== ========== ======== ========
</TABLE>
Commissions are deducted from the gross proceeds received from the
sales of the Funds' shares, and as such are not expenses of the Funds.
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 year ended
February 28, 1995 aggregated $550,418, of which $449,944 was paid to
Franklin/Templeton Investor Services, Inc.
Effective May 1, 1994, the Funds implemented a plan of distribution under Rule
12b-1 of the Investment Company Act of 1940, pursuant to which the Funds will
reimburse Franklin/Templeton Distributors, Inc. in an amount up to a maximum of
0.10% per annum of the Fund's average daily net assets for costs incurred in the
promotion, offering and marketing of the Funds shares. Fees incurred by the
Funds under the agreement aggregated $1,578,189 for the year ended February 28,
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.
108
<PAGE>
FRANKLIN TAX-FREE TRUST
===============================================================================
NOTES TO FINANCIAL STATEMENTS (CONT.)
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, Guam and Puerto Rico.
7. SUBSEQUENT EVENT
All of the funds within this report (except the Franklin Kentucky Tax-Free
Income Fund) will be offering an additional class of shares effective May 1,
1995.
8. FINANCIAL HIGHLIGHTS
Selected data for each share of beneficial interest outstanding throughout the
year, by Fund, are as follows:
<TABLE>
<CAPTION>
PER SHARE OPERATING PERFORMANCE
- ----------------------------------------------------------------------------------------------------------------------------------
NET
NET ASSET REALIZED & DISTRIBUTIONS DISTRIBUTIONS NET ASSET
YEAR VALUE AT NET UNREALIZED TOTAL FROM FROM NET FROM VALUE
ENDED BEGINNING INVESTMENT GAIN(LOSS) INVESTMENT INVESTMENT CAPITAL TOTAL AT END
FEBRUARY 28 OF YEAR INCOME ON SECURITIES OPERATIONS INCOME GAINS DISTRIBUTIONS OF YEAR
- ----------------------------------------------------------------------------------------------------------------------------------
FRANKLIN ALABAMA TAX-FREE INCOME FUND:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1991 $10.74 $ .71 $.068 $ .778 $(.768) $ -- $(.768) $10.75
1992 10.75 .66 .346 1.006 (.756) -- (.756) 11.00
1993 11.00 .68 .714 1.394 (.684) -- (.684) 11.71
1994 11.71 .66 .094 .754 (.664) -- (.664) 11.80
1995 11.80 .66 (.500) .160 (.650) -- (.650) 11.31
FRANKLIN FLORIDA TAX-FREE INCOME FUND:
1991 10.73 .73 .091 .821 (.801) -- (.801) 10.75
1992 10.75 .71 .348 1.058 (.768) -- (.768) 11.04
1993 11.04 .71 .647 1.357 (.717) -- (.717) 11.68
1994 11.68 .70 .086 .786 (.696) -- (.696) 11.77
1995 11.77 .69 (.436) .254 (.674) -- (.674) 11.35
FRANKLIN GEORGIA TAX-FREE INCOME FUND:
1991 10.90 .72 .098 .818 (.778) -- (.778) 10.94
1992 10.94 .65 .349 .999 (.759) -- (.759) 11.18
1993 11.18 .68 .658 1.338 (.668) -- (.668) 11.85
1994 11.85 .66 .154 .814 (.664) -- (.664) 12.00
1995 12.00 .66 (.458) .202 (.662) -- (.662) 11.54
FRANKLIN KENTUCKY TAX-FREE INCOME FUND:
1992+ 10.00 .15 .164 .314 (.014) -- (.014) 10.30
1993 10.30 .57 .832 1.402 (.652) -- (.652) 11.05
1994 11.05 .63 .164 .794 (.664) -- (.664) 11.18
1995 11.18 .61 (.625) (.015) (.625) -- (.625) 10.54
FRANKLIN LOUISIANA TAX-FREE INCOME FUND:
1991 10.58 .71 .182 .892 (.792) -- (.792) 10.68
1992 10.68 .67 .326 .996 (.776) -- (.776) 10.90
1993 10.90 .69 .668 1.358 (.668) -- (.668) 11.57
1994 11.57 .67 (.005) .665 (.675) -- (.675) 11.56
1995 11.56 .66 (.549) .111 (.641) -- (.641) 11.03
FRANKLIN MARYLAND TAX-FREE INCOME FUND:
1991 10.31 .68 .096 .776 (.716) -- (.716) 10.37
1992 10.37 .64 .300 .940 (.710) -- (.710) 10.60
1993 10.60 .65 .672 1.322 (.652) -- (.652) 11.27
1994 11.27 .64 .092 .732 (.642) -- (.642) 11.36
1995 11.36 .63 (.453) .177 (.617) -- (.617) 10.92
FRANKLIN MISSOURI TAX-FREE INCOME FUND:
1991 10.64 .69 .154 .844 (.744) -- (.744) 10.74
<CAPTION>
RATIO/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------
RATIO OF NET
RATIO OF INVESTMENT
NET ASSETS AT EXPENSES INCOME PORTFOLIO
TOTAL END OF YEAR TO AVERAGE TO AVERAGE TURNOVER
RETURN ++ (IN 000'S) NET ASSETS ** NET ASSETS RATE
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FRANKLIN ALABAMA TAX-FREE INCOME FUND:
1991 7.27% $ 50,182 .70% 6.45% 28.36%
1992 9.51 96,254 .71 6.21 1.21
1993 12.84 144,480 .68 6.04 11.27
1994 6.35 178,414 .64 5.62 14.87
1995 1.54 170,051 .72 5.88 19.85
FRANKLIN FLORIDA TAX-FREE INCOME FUND:
1991 7.69 605,720 .57 6.76 10.80
1992 10.02 886,110 .54 6.60 16.69
1993 12.45 1,164,827 .54 6.30 11.72
1994 6.63 1,361,583 .52 5.90 11.77
1995 2.36 1,265,018 .59 6.15 14.34
FRANKLIN GEORGIA TAX-FREE INCOME FUND:
1991 7.53 32,011 .56 6.53 1.20
1992 9.32 68,546 .72 6.11 6.18
1993 12.09 91,017 .71 5.91 17.10
1994 6.77 120,882 .69 5.48 16.75
1995 1.87 116,771 .76 5.76 36.17
FRANKLIN KENTUCKY TAX-FREE INCOME FUND:
1992+ 8.37* 3,032 -- 3.52* 53.90
1993 13.81 11,678 -- 6.11 18.41
1994 7.07 28,057 -- 5.73 13.22
1995 .11 32,831 .29 5.94 32.92
FRANKLIN LOUISIANA TAX-FREE INCOME FUND:
1991 8.50 35,862 .56 6.60 .76
1992 9.49 72,923 .70 6.33 10.51
1993 12.61 95,368 .70 6.18 23.37
1994 5.63 115,971 .68 5.70 17.63
1995 1.14 104,980 .75 5.98 32.28
FRANKLIN MARYLAND TAX-FREE INCOME FUND:
1991 7.57 33,421 .54 6.50 12.14
1992 9.21 71,538 .71 6.15 16.65
1993 12.64 115,873 .71 6.00 14.73
1994 6.40 156,683 .66 5.58 18.38
1995 1.78 153,145 .73 5.86 20.30
FRANKLIN MISSOURI TAX-FREE INCOME FUND:
1991 7.96 55,560 .72 6.42 40.08
</TABLE>
109
<PAGE>
FRANKLIN TAX-FREE TRUST
===============================================================================
NOTES TO FINANCIAL STATEMENTS (CONT.)
8. FINANCIAL HIGHLIGHTS (CONT.)
<TABLE>
<CAPTION>
PER SHARE OPERATING PERFORMANCE
- ----------------------------------------------------------------------------------------------------------------------------------
NET
NET ASSET REALIZED & DISTRIBUTIONS DISTRIBUTIONS NET ASSET
YEAR VALUE AT NET UNREALIZED TOTAL FROM FROM NET FROM VALUE
ENDED BEGINNING INVESTMENT GAIN(LOSS) INVESTMENT INVESTMENT CAPITAL TOTAL AT END
FEBRUARY 28 OF YEAR INCOME ON SECURITIES OPERATIONS INCOME GAINS DISTRIBUTIONS OF YEAR
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FRANKLIN MISSOURI TAX-FREE INCOME FUND: (CONT.)
1992 $10.74 $.65 $ .409 $1.059 $(.729) $-- $(.729) $11.07
1993 11.07 .68 .676 1.356 (.676) -- (.676) 11.75
1994 11.75 .66 .206 .866 (.676) -- (.676) 11.94
1995 11.94 .65 (.501) .149 (.649) -- (.649) 11.44
FRANKLIN NORTH CAROLINA TAX-FREE INCOME FUND:
1991 10.79 .70 .124 .824 (.742) (.012) (.754) 10.86
1992 10.86 .64 .352 .992 (.732) -- (.732) 11.12
1993 11.12 .67 .754 1.424 (.664) -- (.664) 11.88
1994 11.88 .65 .054 .704 (.664) -- (.664) 11.92
1995 11.92 .65 (.550) .10 (.650) -- (.650) 11.37
FRANKLIN TEXAS TAX-FREE INCOME FUND:
1991 10.74 .73 .104 .834 (.804) -- (.804) 10.77
1992 10.77 .67 .370 1.040 (.780) -- (.780) 11.03
1993 11.03 .69 .661 1.351 (.691) -- (.691) 11.69
1994 11.69 .69 .032 .722 (.692) -- (.692) 11.72
1995 11.72 .68 (.487) .193 (.663) -- (.663) 11.25
FRANKLIN VIRGINIA TAX-FREE INCOME FUND:
1991 10.63 .69 .136 .826 (.756) -- (.756) 10.70
1992 10.70 .66 .362 1.022 (.742) -- (.742) 10.98
1993 10.98 .67 .704 1.374 (.664) -- (.664) 11.69
1994 11.69 .67 .136 .806 (.676) -- (.676) 11.82
1995 11.82 .66 (.499) .161 (.651) -- (.651) 11.33
<CAPTION>
RATIO/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------
RATIO OF NET
RATIO OF INVESTMENT
YEAR NET ASSETS AT EXPENSES INCOME PORTFOLIO
ENDED TOTAL END OF YEAR TO AVERAGE TO AVERAGE TURNOVER
FEBRUARY 28 RETURN ++ (IN 000'S) NET ASSETS ** NET ASSETS RATE
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FRANKLIN MISSOURI TAX-FREE INCOME FUND: (CONT.)
1992 10.04% $110,940 .71% 6.21% 16.40%
1993 12.40 164,122 .67 6.03 10.28
1994 7.29 228,149 .64 5.55 11.02
1995 1.44 227,442 .70 5.75 19.84
FRANKLIN NORTH CAROLINA TAX-FREE INCOME FUND:
1991 7.66 50,328 .74 6.37 7.99
1992 9.28 106,960 .71 6.03 3.16
1993 12.97 156,517 .67 5.86 8.48
1994 5.81 215,540 .63 5.44 3.86
1995 1.06 216,263 .70 5.75 25.05
FRANKLIN TEXAS TAX-FREE INCOME FUND:
1991 7.81 29,036 .40 6.46 .55
1992 9.84 123,722 .70 6.14 6.44
1993 12.41 139,389 .66 6.15 12.33
1994 6.09 148,684 .65 5.85 20.18
1995 1.80 130,684 .73 6.05 6.36
FRANKLIN VIRGINIA TAX-FREE INCOME FUND:
1991 7.82 82,662 .72 6.38 2.56
1992 9.71 152,615 .68 6.17 4.33
1993 12.67 211,171 .65 5.98 5.74
1994 6.80 260,913 .62 5.65 6.86
1995 1.56 255,965 .69 5.86 21.73
</TABLE>
*Annualized
+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, and assumes reinvestment of dividends at the maximum offering price and
of capital gains, if any, at net asset value. Effective May 1, 1994, with the
implementation of the Rule 12b-1 distribution plan, as discussed in Note 5, the
Funds' existing sales charge on reinvested dividends were eliminated.
**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:
<TABLE>
<CAPTION>
RATIO OF
EXPENSES
TO AVERAGE
NET ASSETS
----------
Franklin Alabama Tax-Free Income Fund:
<S> <C>
1991 ............................................. .72%
Franklin Georgia Tax-Free Income Fund:
1991 ............................................. .74
Franklin Kentucky Tax-Free Income Fund:
1992+ ............................................ .82*
1993 ............................................. .81
1994 ............................................. .71
1995 ............................................. .80
Franklin Louisiana Tax-Free Income Fund:
1991 ............................................. .72
Franklin Maryland Tax-Free Income Fund:
1991 ............................................. .73
Franklin Texas Tax-Free Income Fund:
1991 ............................................. .75
</TABLE>
During this fiscal year, each Fund paid distributions from undistributed net
investment income in the amounts shown in the Statement of Changes in Net
Assets. Each Fund hereby designates the total amount of these distributions
as exempt-interest dividends under Section 852(b)(5) of the Internal Revenue
Code.
110
<PAGE>
FRANKLIN TAX-FREE TRUST
===============================================================================
REPORT OF INDEPENDENT AUDITORS
To the Shareholders and Board of Trustees
of the Franklin Tax-Free Trust:
We have audited the accompanying statements of assets and liabilities of the
funds comprising the Franklin Tax-Free Trust, including each Fund's statement of
investments in securities and net assets, as of February 28, 1995, and the
related statements of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the periods indicated thereon. These
financial statements and financial highlights are the responsibility of the
Trust's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
February 28, 1995 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significiant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
funds comprising the Franklin Tax-Free Trust as of February 28, 1995, the
results of their operations for the year then ended, the changes in their net
assets for each of the two years in the period then ended, and the financial
highlights for each of the periods indicated thereon, in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
San Francisco, California
April 4, 1995
111
<PAGE>
Franklin Tax-Free Trust II
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 form the fund's securities breakdown by quality as a
percentage of total net assets.
Portfolio Breakdown on 2/28/95
AAA 60.5%
AA 5.1%
A 10.4%
BBB 24.0%
GRAPHIC MATERIAL (2)
This bar chart shows the comparison between the fund's distribution rate of
5.49% and taxable equivalent distribution rate of 9.56%.
GRAPHIC MATERIAL (3)
The following line graph hypothetically compares the performance of the Franklin
Alabama Tax-Free Income Fund to that of the Lehman Brothers Municipal Bond Index
and the Consumer Price Index (CPI), based on a $10,000 investment from 9/1/87 to
2/28/95.
Period Ending AL TF Inc. LB Muni. Index CPI
9/1/87 9,573 10,000 10,000
9/30/87 8,936 -3.69% 9,631 0.52% 10,052
10/31/87 8,955 0.35% 9,665 0.26% 10,078
11/30/87 9,373 2.61% 9,917 0.09% 10,087
12/31/87 9,535 1.45% 10,061 0.00% 10,087
1/31/88 9,996 3.56% 10,419 0.26% 10,113
2/29/88 10,116 1.06% 10,529 0.26% 10,140
3/31/88 9,910 -1.16% 10,407 0.43% 10,183
4/30/88 9,953 0.76% 10,486 0.52% 10,236
5/31/88 9,997 -0.29% 10,456 0.34% 10,271
6/30/88 10,188 1.46% 10,609 0.43% 10,315
7/31/88 10,202 0.65% 10,678 0.42% 10,359
8/31/88 10,276 0.09% 10,687 0.42% 10,402
9/30/88 10,478 1.81% 10,881 0.67% 10,472
10/31/88 10,722 1.76% 11,072 0.33% 10,506
11/30/88 10,628 -0.92% 10,970 0.08% 10,515
12/31/88 10,774 1.02% 11,082 0.17% 10,533
1/31/89 11,003 2.07% 11,311 0.50% 10,585
2/28/89 10,914 -1.14% 11,183 0.41% 10,629
3/31/89 10,898 -0.24% 11,156 0.58% 10,690
4/30/89 11,099 2.37% 11,420 0.65% 10,760
5/31/89 11,344 2.08% 11,658 0.57% 10,821
6/30/89 11,505 1.36% 11,816 0.24% 10,847
7/31/89 11,584 1.36% 11,977 0.24% 10,873
8/31/89 11,492 -0.98% 11,859 0.16% 10,891
9/30/89 11,433 -0.30% 11,824 0.32% 10,925
10/31/89 11,544 1.22% 11,968 0.48% 10,978
11/30/89 11,711 1.75% 12,178 0.24% 11,004
12/31/89 11,835 0.82% 12,277 0.16% 11,022
1/31/90 11,752 -0.47% 12,220 1.03% 11,135
2/28/90 11,888 0.89% 12,329 0.47% 11,188
3/31/90 11,870 0.03% 12,332 0.55% 11,249
4/30/90 11,774 -0.72% 12,243 0.16% 11,267
5/31/90 12,025 2.18% 12,510 0.23% 11,293
6/30/90 12,154 0.88% 12,620 0.54% 11,354
7/31/90 12,352 1.48% 12,807 0.38% 11,397
8/31/90 12,025 -1.45% 12,622 0.92% 11,502
9/30/90 12,053 0.06% 12,629 0.84% 11,599
10/31/90 12,220 1.81% 12,858 0.60% 11,668
11/30/90 12,480 2.01% 13,116 0.22% 11,694
12/31/90 12,461 0.44% 13,174 0.00% 11,694
1/31/91 12,690 1.34% 13,350 0.60% 11,764
2/28/91 12,789 0.87% 13,466 0.15% 11,782
3/31/91 12,854 0.04% 13,472 0.15% 11,799
4/30/91 13,014 1.34% 13,652 0.15% 11,817
5/31/91 13,104 0.89% 13,774 0.30% 11,853
6/30/91 13,097 -0.10% 13,760 0.29% 11,887
7/31/91 13,285 1.22% 13,928 0.15% 11,905
8/31/91 13,412 1.32% 14,112 0.29% 11,939
9/30/91 13,615 1.30% 14,295 0.44% 11,992
10/31/91 13,695 0.90% 14,424 0.15% 12,010
11/30/91 13,737 0.28% 14,464 0.29% 12,045
12/31/91 14,006 2.15% 14,775 0.07% 12,053
1/31/92 14,054 0.23% 14,809 0.15% 12,071
2/29/92 14,026 0.03% 14,814 0.36% 12,115
3/31/92 14,049 0.04% 14,820 0.51% 12,176
4/30/92 14,174 0.89% 14,952 0.14% 12,193
5/31/92 14,365 1.18% 15,128 0.14% 12,211
6/30/92 14,570 1.68% 15,382 0.36% 12,254
7/31/92 15,037 3.00% 15,844 0.21% 12,280
8/31/92 14,864 -0.98% 15,688 0.28% 12,315
9/30/92 14,901 0.65% 15,790 0.28% 12,349
10/31/92 14,647 -0.98% 15,636 0.35% 12,392
11/30/92 14,990 1.79% 15,915 0.14% 12,410
12/31/92 15,214 1.02% 16,078 -0.07% 12,401
1/31/93 15,397 1.16% 16,264 0.49% 12,462
2/28/93 15,878 3.62% 16,853 0.35% 12,505
3/31/93 15,804 -1.06% 16,674 0.35% 12,549
4/30/93 15,921 1.01% 16,843 0.28% 12,584
5/31/93 15,998 0.56% 16,937 0.14% 12,602
6/30/93 16,226 1.67% 17,220 0.14% 12,620
7/31/93 16,234 0.13% 17,242 0.00% 12,620
8/31/93 16,535 2.08% 17,601 0.28% 12,655
9/30/93 16,750 1.14% 17,802 0.21% 12,681
10/31/93 16,811 0.19% 17,836 0.41% 12,733
11/30/93 16,760 -0.88% 17,679 0.07% 12,742
12/31/93 17,077 2.11% 18,052 0.00% 12,742
1/31/94 17,240 1.14% 18,257 0.27% 12,777
2/28/94 16,917 -2.59% 17,785 0.34% 12,820
3/31/94 16,333 -4.07% 17,061 0.34% 12,864
4/30/94 16,396 0.85% 17,206 0.14% 12,882
5/31/94 16,504 0.87% 17,355 0.07% 12,891
6/30/94 16,450 -0.61% 17,250 0.34% 12,935
7/31/94 16,720 1.83% 17,565 0.27% 12,970
8/31/94 16,784 0.35% 17,627 0.40% 13,021
9/30/94 16,598 -1.47% 17,368 0.27% 13,057
10/31/94 16,307 -1.78% 17,058 0.07% 13,066
11/30/94 15,972 -1.81% 16,750 0.13% 13,083
12/31/94 16,322 2.20% 17,118 0.00% 13,083
1/31/95 16,765 2.86% 17,608 0.40% 13,135
2/28/95 17,180 2.91% 18,120 0.40% 13,188
GRAPHIC MATERIAL (4)
This chart shows in pie chart format the fund's securities breakdown by quality
as a percentage of the fund's total net assets.
Portfolio Breakdown on 2/28/95
AAA 50.9%
AA 4.5%
A 10.0%
BBB 31.7%
Below Investment Grade 2.9%
GRAPHIC MATERIAL (5)
This bar chart shows a comparison between the fund's distribution rate of 5.77%
and the taxable equivalent distribution rate of 9.55%.
GRAPHIC MATERIAL (6)
The following line graph hypothetically compares the performance of the Franklin
Florida Tax-Free Income Fund to that of the Lehman Brothers Municipal Bond Index
and the Consumer Price Index (CPI), based on a $10,000 investment from 9/1/87 to
2/28/95.
Period Ending Florida Tax-Free LB Muni Index CPI
9/1/87 9,572 10,000 10,000
9/30/87 9,040 -3.69% 9,631 0.52% 10,052
10/31/87 9,040 0.35% 9,665 0.26% 10,078
11/30/87 9,420 2.61% 9,917 0.09% 10,087
12/31/87 9,612 1.45% 10,061 0.00% 10,087
1/31/88 10,074 3.56% 10,419 0.26% 10,113
2/29/88 10,267 1.06% 10,529 0.26% 10,140
3/31/88 10,075 -1.16% 10,407 0.43% 10,183
4/30/88 10,115 0.76% 10,486 0.52% 10,236
5/31/88 10,145 -0.29% 10,456 0.34% 10,271
6/30/88 10,334 1.46% 10,609 0.43% 10,315
7/31/88 10,375 0.65% 10,678 0.42% 10,359
8/31/88 10,443 0.09% 10,687 0.42% 10,402
9/30/88 10,652 1.81% 10,881 0.67% 10,472
10/31/88 10,903 1.76% 11,072 0.33% 10,506
11/30/88 10,797 -0.92% 10,970 0.08% 10,515
12/31/88 10,939 1.02% 11,082 0.17% 10,533
1/31/89 11,163 2.07% 11,311 0.50% 10,585
2/28/89 11,047 -1.14% 11,183 0.41% 10,629
3/31/89 11,045 -0.24% 11,156 0.58% 10,690
4/30/89 11,275 2.37% 11,420 0.65% 10,760
5/31/89 11,526 2.08% 11,658 0.57% 10,821
6/30/89 11,663 1.36% 11,816 0.24% 10,847
7/31/89 11,757 1.36% 11,977 0.24% 10,873
8/31/89 11,647 -0.98% 11,859 0.16% 10,891
9/30/89 11,569 -0.30% 11,824 0.32% 10,925
10/31/89 11,720 1.22% 11,968 0.48% 10,978
11/30/89 11,904 1.75% 12,178 0.24% 11,004
12/31/89 12,013 0.82% 12,277 0.16% 11,022
1/31/90 11,910 -0.47% 12,220 1.03% 11,135
2/28/90 12,076 0.89% 12,329 0.47% 11,188
3/31/90 12,062 0.03% 12,332 0.55% 11,249
4/30/90 11,958 -0.72% 12,243 0.16% 11,267
5/31/90 12,241 2.18% 12,510 0.23% 11,293
6/30/90 12,353 0.88% 12,620 0.54% 11,354
7/31/90 12,560 1.48% 12,807 0.38% 11,397
8/31/90 12,208 -1.45% 12,622 0.92% 11,502
9/30/90 12,288 0.06% 12,629 0.84% 11,599
10/31/90 12,471 1.81% 12,858 0.60% 11,668
11/30/90 12,749 2.01% 13,116 0.22% 11,694
12/31/90 12,743 0.44% 13,174 0.00% 11,694
1/31/91 12,954 1.34% 13,350 0.60% 11,764
2/28/91 13,044 0.87% 13,466 0.15% 11,782
3/31/91 13,099 0.04% 13,472 0.15% 11,799
4/30/91 13,276 1.34% 13,652 0.15% 11,817
5/31/91 13,368 0.89% 13,774 0.30% 11,853
6/30/91 13,363 -0.10% 13,760 0.29% 11,887
7/31/91 13,581 1.22% 13,928 0.15% 11,905
8/31/91 13,725 1.32% 14,112 0.29% 11,939
9/30/91 13,920 1.30% 14,295 0.44% 11,992
10/31/91 14,002 0.90% 14,424 0.15% 12,010
11/30/91 14,060 0.28% 14,464 0.29% 12,045
12/31/91 14,343 2.15% 14,775 0.07% 12,053
1/31/92 14,357 0.23% 14,809 0.15% 12,071
2/29/92 14,371 0.03% 14,814 0.36% 12,115
3/31/92 14,412 0.04% 14,820 0.51% 12,176
4/30/92 14,544 0.89% 14,952 0.14% 12,193
5/31/92 14,729 1.18% 15,128 0.14% 12,211
6/30/92 14,903 1.68% 15,382 0.36% 12,254
7/31/92 15,437 3.00% 15,844 0.21% 12,280
8/31/92 15,278 -0.98% 15,688 0.28% 12,315
9/30/92 15,280 0.65% 15,790 0.28% 12,349
10/31/92 15,037 -0.98% 15,636 0.35% 12,392
11/30/92 15,351 1.79% 15,915 0.14% 12,410
12/31/92 15,582 1.02% 16,078 -0.07% 12,401
1/31/93 15,787 1.16% 16,264 0.49% 12,462
2/28/93 16,214 3.62% 16,853 0.35% 12,505
3/31/93 16,157 -1.06% 16,674 0.35% 12,549
4/30/93 16,295 1.01% 16,843 0.28% 12,584
5/31/93 16,420 0.56% 16,937 0.14% 12,602
6/30/93 16,658 1.67% 17,220 0.14% 12,620
7/31/93 16,685 0.13% 17,242 0.00% 12,620
8/31/93 16,939 2.08% 17,601 0.28% 12,655
9/30/93 17,122 1.14% 17,802 0.21% 12,681
10/31/93 17,248 0.19% 17,836 0.41% 12,733
11/30/93 17,173 -0.88% 17,679 0.07% 12,742
12/31/93 17,457 2.11% 18,052 0.00% 12,742
1/31/94 17,639 1.14% 18,257 0.27% 12,777
2/28/94 17,324 -2.59% 17,785 0.34% 12,820
3/31/94 16,785 -4.07% 17,061 0.34% 12,864
4/30/94 16,866 0.85% 17,206 0.14% 12,882
5/31/94 16,963 0.87% 17,355 0.07% 12,891
6/30/94 16,941 -0.61% 17,250 0.34% 12,935
7/31/94 17,191 1.83% 17,565 0.27% 12,970
8/31/94 17,230 0.35% 17,627 0.40% 13,021
9/30/94 17,072 -1.47% 17,368 0.27% 13,057
10/31/94 16,867 -1.78% 17,058 0.07% 13,066
11/30/94 16,556 -1.81% 16,750 0.13% 13,083
12/31/94 16,875 2.20% 17,118 0.00% 13,083
1/31/95 17,319 2.86% 17,608 0.40% 13,135
2/28/95 17,735 2.91% 18,120 0.40% 13,188
GRAPHIC MATERIAL (7)
This pie chart shows the fund's securities breakdown by quality as a percentage
of total net assets.
Portfolio Breakdown on 2/28/95
AAA 65.9%
AA 15.7%
A 7.4%
BBB 6.7%
BB 4.3%
GRAPHIC MATERIAL (8)
This bar chart shows the comparison between the fund's distribution rate of
5.48% and the taxable equivalent distribution rate of 9.65%.
GRAPHIC MATERIAL (9)
The following line graph hypothetically compares the performance of the Franklin
Georgia Tax-Free Income Fund to that of the Lehman Brothers Municipal Bond Index
and the Consumer Price Index (CPI), based on a $10,000 investment from 9/1/87 to
2/28/95.
Period Ending Georgia Tax-Free LB Muni Index CPI
9/1/87 9,573 10,000 10,000
9/30/87 8,928 -3.69% 9,631 0.52% 10,052
10/31/87 8,975 0.35% 9,665 0.26% 10,078
11/30/87 9,326 2.61% 9,917 0.09% 10,087
12/31/87 9,507 1.45% 10,061 0.00% 10,087
1/31/88 9,982 3.56% 10,419 0.26% 10,113
2/29/88 10,126 1.06% 10,529 0.26% 10,140
3/31/88 9,925 -1.16% 10,407 0.43% 10,183
4/30/88 9,944 0.76% 10,486 0.52% 10,236
5/31/88 9,973 -0.29% 10,456 0.34% 10,271
6/30/88 10,140 1.46% 10,609 0.43% 10,315
7/31/88 10,179 0.65% 10,678 0.42% 10,359
8/31/88 10,259 0.09% 10,687 0.42% 10,402
9/30/88 10,498 1.81% 10,881 0.67% 10,472
10/31/88 10,738 1.76% 11,072 0.33% 10,506
11/30/88 10,644 -0.92% 10,970 0.08% 10,515
12/31/88 10,786 1.02% 11,082 0.17% 10,533
1/31/89 10,989 2.07% 11,311 0.50% 10,585
2/28/89 10,897 -1.14% 11,183 0.41% 10,629
3/31/89 10,867 -0.24% 11,156 0.58% 10,690
4/30/89 11,126 2.37% 11,420 0.65% 10,760
5/31/89 11,386 2.08% 11,658 0.57% 10,821
6/30/89 11,544 1.36% 11,816 0.24% 10,847
7/31/89 11,642 1.36% 11,977 0.24% 10,873
8/31/89 11,571 -0.98% 11,859 0.16% 10,891
9/30/89 11,510 -0.30% 11,824 0.32% 10,925
10/31/89 11,642 1.22% 11,968 0.48% 10,978
11/30/89 11,818 1.75% 12,178 0.24% 11,004
12/31/89 11,940 0.82% 12,277 0.16% 11,022
1/31/90 11,856 -0.47% 12,220 1.03% 11,135
2/28/90 12,013 0.89% 12,329 0.47% 11,188
3/31/90 12,005 0.03% 12,332 0.55% 11,249
4/30/90 11,933 -0.72% 12,243 0.16% 11,267
5/31/90 12,195 2.18% 12,510 0.23% 11,293
6/30/90 12,302 0.88% 12,620 0.54% 11,354
7/31/90 12,511 1.48% 12,807 0.38% 11,397
8/31/90 12,187 -1.45% 12,622 0.92% 11,502
9/30/90 12,170 0.06% 12,629 0.84% 11,599
10/31/90 12,337 1.81% 12,858 0.60% 11,668
11/30/90 12,632 2.01% 13,116 0.22% 11,694
12/31/90 12,614 0.44% 13,174 0.00% 11,694
1/31/91 12,855 1.34% 13,350 0.60% 11,764
2/28/91 12,955 0.87% 13,466 0.15% 11,782
3/31/91 12,996 0.04% 13,472 0.15% 11,799
4/30/91 13,169 1.34% 13,652 0.15% 11,817
5/31/91 13,259 0.89% 13,774 0.30% 11,853
6/30/91 13,254 -0.10% 13,760 0.29% 11,887
7/31/91 13,442 1.22% 13,928 0.15% 11,905
8/31/91 13,583 1.32% 14,112 0.29% 11,939
9/30/91 13,773 1.30% 14,295 0.44% 11,992
10/31/91 13,841 0.90% 14,424 0.15% 12,010
11/30/91 13,897 0.28% 14,464 0.29% 12,045
12/31/91 14,158 2.15% 14,775 0.07% 12,053
1/31/92 14,205 0.23% 14,809 0.15% 12,071
2/29/92 14,177 0.03% 14,814 0.36% 12,115
3/31/92 14,200 0.04% 14,820 0.51% 12,176
4/30/92 14,338 0.89% 14,952 0.14% 12,193
5/31/92 14,527 1.18% 15,128 0.14% 12,211
6/30/92 14,718 1.68% 15,382 0.36% 12,254
7/31/92 15,207 3.00% 15,844 0.21% 12,280
8/31/92 15,034 -0.98% 15,688 0.28% 12,315
9/30/92 15,082 0.65% 15,790 0.28% 12,349
10/31/92 14,812 -0.98% 15,636 0.35% 12,392
11/30/92 15,149 1.79% 15,915 0.14% 12,410
12/31/92 15,381 1.02% 16,078 -0.07% 12,401
1/31/93 15,508 1.16% 16,264 0.49% 12,462
2/28/93 15,944 3.62% 16,853 0.35% 12,505
3/31/93 15,869 -1.06% 16,674 0.35% 12,549
4/30/93 16,052 1.01% 16,843 0.28% 12,584
5/31/93 16,154 0.56% 16,937 0.14% 12,602
6/30/93 16,434 1.67% 17,220 0.14% 12,620
7/31/93 16,441 0.13% 17,242 0.00% 12,620
8/31/93 16,723 2.08% 17,601 0.28% 12,655
9/30/93 16,938 1.14% 17,802 0.21% 12,681
10/31/93 17,000 0.19% 17,836 0.41% 12,733
11/30/93 16,937 -0.88% 17,679 0.07% 12,742
12/31/93 17,211 2.11% 18,052 0.00% 12,742
1/31/94 17,415 1.14% 18,257 0.27% 12,777
2/28/94 17,054 -2.59% 17,785 0.34% 12,820
3/31/94 16,477 -4.07% 17,061 0.34% 12,864
4/30/94 16,541 0.85% 17,206 0.14% 12,882
5/31/94 16,649 0.87% 17,355 0.07% 12,891
6/30/94 16,583 -0.61% 17,250 0.34% 12,935
7/31/94 16,866 1.83% 17,565 0.27% 12,970
8/31/94 16,932 0.35% 17,627 0.40% 13,021
9/30/94 16,763 -1.47% 17,368 0.27% 13,057
10/31/94 16,505 -1.78% 17,058 0.07% 13,066
11/30/94 16,189 -1.81% 16,750 0.13% 13,083
12/31/94 16,567 2.20% 17,118 0.00% 13,083
1/31/95 17,008 2.86% 17,608 0.40% 13,135
2/28/95 17,375 2.91% 18,120 0.40% 13,188
GRAPHIC MATERIAL (10)
This pie chart shows the fund's securities breakdown by quality as a percentage
of the fund's total net assets.
Portfolio Breakdown on 2/28/95
AAA 49.8%
AA 18.7%
A 16.5%
BBB 11.8%
BB 3.2%
GRAPHIC MATERIAL (11)
This bar chart shows the comparison between the fund's distribution rate of
5.56% and the taxable equivalent distribution rate of 9.79%.
GRAPHIC MATERIAL (12)
The following line graph hypothetically compares the performance of the Franklin
Kentucky Tax-Free Income Fund to that of the Lehman Brothers Municipal Bond
Index and the Consumer Price Index (CPI), based on a $10,000 investment from
9/1/87 to 2/28/95.
Period Ending Kentucky Tax-Free LB Muni Index CPI
11/1/91 9,579 10,000 10,000
11/30/91 9,589 0.28% 10,028 0.29% 10,029
12/31/91 9,780 2.15% 10,244 0.07% 10,036
1/31/92 9,847 0.23% 10,267 0.15% 10,051
2/29/92 9,856 0.03% 10,270 0.36% 10,087
3/31/92 9,881 0.04% 10,274 0.51% 10,139
4/30/92 9,962 0.89% 10,366 0.14% 10,153
5/31/92 10,112 1.18% 10,488 0.14% 10,167
6/30/92 10,253 1.68% 10,664 0.36% 10,204
7/31/92 10,669 3.00% 10,984 0.21% 10,225
8/31/92 10,487 -0.98% 10,877 0.28% 10,254
9/30/92 10,512 0.65% 10,947 0.28% 10,282
10/31/92 10,338 -0.98% 10,840 0.35% 10,318
11/30/92 10,633 1.79% 11,034 0.14% 10,333
12/31/92 10,788 1.02% 11,147 -0.07% 10,326
1/31/93 10,914 1.16% 11,276 0.49% 10,376
2/28/93 11,254 3.62% 11,684 0.35% 10,413
3/31/93 11,177 -1.06% 11,560 0.35% 10,449
4/30/93 11,295 1.01% 11,677 0.28% 10,478
5/31/93 11,382 0.56% 11,742 0.14% 10,493
6/30/93 11,615 1.67% 11,938 0.14% 10,508
7/31/93 11,652 0.13% 11,954 0.00% 10,508
8/31/93 11,887 2.08% 12,203 0.28% 10,537
9/30/93 12,060 1.14% 12,342 0.21% 10,559
10/31/93 12,139 0.19% 12,365 0.41% 10,602
11/30/93 12,006 -0.88% 12,256 0.07% 10,610
12/31/93 12,289 2.11% 12,515 0.00% 10,610
1/31/94 12,423 1.14% 12,658 0.27% 10,639
2/28/94 12,073 -2.59% 12,330 0.34% 10,675
3/31/94 11,385 -4.07% 11,828 0.34% 10,711
4/30/94 11,477 0.85% 11,929 0.14% 10,726
5/31/94 11,603 0.87% 12,032 0.07% 10,734
6/30/94 11,494 -0.61% 11,959 0.34% 10,770
7/31/94 11,760 1.83% 12,178 0.27% 10,799
8/31/94 11,794 0.35% 12,220 0.40% 10,842
9/30/94 11,517 -1.47% 12,041 0.27% 10,872
10/31/94 11,182 -1.78% 11,826 0.07% 10,879
11/30/94 10,903 -1.81% 11,612 0.13% 10,893
12/31/94 11,243 2.20% 11,868 0.00% 10,893
1/31/95 11,688 2.86% 12,207 0.40% 10,937
2/28/95 12,101 2.91% 12,562 0.40% 10,981
GRAPHIC MATERIAL (13)
This pie chart shows the fund's securities breakdown by quality as a percentage
of total net assets.
Portfolio Breakdown on 2/28/95
AAA 41.7%
AA 6.9%
A 23.1%
BBB 28.3%
GRAPHIC MATERIAL (14)
This bar chart shows a comparison of the fund's distribution rate of 5.63% and
the taxable equivalent distribution rate of 9.91%.
GRAPHIC MATERIAL (15)
The following line graph hypothetically compares the performance of the Franklin
Louisiana Tax-Free Income Fund to that of the Lehman Brothers Municipal Bond
Index and the Consumer Price Index (CPI), based on a $10,000 investment from
5/1/91 to 12/31/94.
Period Ending Louisiana Tax-Free LB Muni Index CPI
9/1/87 9,573 10,000 10,000
9/30/87 8,955 -3.69% 9,631 0.52% 10,052
10/31/87 8,993 0.35% 9,665 0.26% 10,078
11/30/87 9,307 2.61% 9,917 0.09% 10,087
12/31/87 9,480 1.45% 10,061 0.00% 10,087
1/31/88 9,962 3.56% 10,419 0.26% 10,113
2/29/88 10,069 1.06% 10,529 0.26% 10,140
3/31/88 9,868 -1.16% 10,407 0.43% 10,183
4/30/88 9,909 0.76% 10,486 0.52% 10,236
5/31/88 9,961 -0.29% 10,456 0.34% 10,271
6/30/88 10,130 1.46% 10,609 0.43% 10,315
7/31/88 10,152 0.65% 10,678 0.42% 10,359
8/31/88 10,218 0.09% 10,687 0.42% 10,402
9/30/88 10,405 1.81% 10,881 0.67% 10,472
10/31/88 10,624 1.76% 11,072 0.33% 10,506
11/30/88 10,549 -0.92% 10,970 0.08% 10,515
12/31/88 10,698 1.02% 11,082 0.17% 10,533
1/31/89 10,911 2.07% 11,311 0.50% 10,585
2/28/89 10,834 -1.14% 11,183 0.41% 10,629
3/31/89 10,830 -0.24% 11,156 0.58% 10,690
4/30/89 11,047 2.37% 11,420 0.65% 10,760
5/31/89 11,317 2.08% 11,658 0.57% 10,821
6/30/89 11,473 1.36% 11,816 0.24% 10,847
7/31/89 11,586 1.36% 11,977 0.24% 10,873
8/31/89 11,507 -0.98% 11,859 0.16% 10,891
9/30/89 11,448 -0.30% 11,824 0.32% 10,925
10/31/89 11,553 1.22% 11,968 0.48% 10,978
11/30/89 11,735 1.75% 12,178 0.24% 11,004
12/31/89 11,841 0.82% 12,277 0.16% 11,022
1/31/90 11,748 -0.47% 12,220 1.03% 11,135
2/28/90 11,889 0.89% 12,329 0.47% 11,188
3/31/90 11,895 0.03% 12,332 0.55% 11,249
4/30/90 11,811 -0.72% 12,243 0.16% 11,267
5/31/90 12,092 2.18% 12,510 0.23% 11,293
6/30/90 12,213 0.88% 12,620 0.54% 11,354
7/31/90 12,417 1.48% 12,807 0.38% 11,397
8/31/90 12,133 -1.45% 12,622 0.92% 11,502
9/30/90 12,105 0.06% 12,629 0.84% 11,599
10/31/90 12,277 1.81% 12,858 0.60% 11,668
11/30/90 12,580 2.01% 13,116 0.22% 11,694
12/31/90 12,611 0.44% 13,174 0.00% 11,694
1/31/91 12,834 1.34% 13,350 0.60% 11,764
2/28/91 12,938 0.87% 13,466 0.15% 11,782
3/31/91 12,982 0.04% 13,472 0.15% 11,799
4/30/91 13,148 1.34% 13,652 0.15% 11,817
5/31/91 13,254 0.89% 13,774 0.30% 11,853
6/30/91 13,249 -0.10% 13,760 0.29% 11,887
7/31/91 13,456 1.22% 13,928 0.15% 11,905
8/31/91 13,588 1.32% 14,112 0.29% 11,939
9/30/91 13,785 1.30% 14,295 0.44% 11,992
10/31/91 13,843 0.90% 14,424 0.15% 12,010
11/30/91 13,915 0.28% 14,464 0.29% 12,045
12/31/91 14,153 2.15% 14,775 0.07% 12,053
1/31/92 14,189 0.23% 14,809 0.15% 12,071
2/29/92 14,187 0.03% 14,814 0.36% 12,115
3/31/92 14,223 0.04% 14,820 0.51% 12,176
4/30/92 14,338 0.89% 14,952 0.14% 12,193
5/31/92 14,520 1.18% 15,128 0.14% 12,211
6/30/92 14,703 1.68% 15,382 0.36% 12,254
7/31/92 15,245 3.00% 15,844 0.21% 12,280
8/31/92 15,056 -0.98% 15,688 0.28% 12,315
9/30/92 15,080 0.65% 15,790 0.28% 12,349
10/31/92 14,847 -0.98% 15,636 0.35% 12,392
11/30/92 15,157 1.79% 15,915 0.14% 12,410
12/31/92 15,400 1.02% 16,078 -0.07% 12,401
1/31/93 15,575 1.16% 16,264 0.49% 12,462
2/28/93 16,028 3.62% 16,853 0.35% 12,505
3/31/93 15,942 -1.06% 16,674 0.35% 12,549
4/30/93 16,050 1.01% 16,843 0.28% 12,584
5/31/93 16,117 0.56% 16,937 0.14% 12,602
6/30/93 16,424 1.67% 17,220 0.14% 12,620
7/31/93 16,447 0.13% 17,242 0.00% 12,620
8/31/93 16,697 2.08% 17,601 0.28% 12,655
9/30/93 16,863 1.14% 17,802 0.21% 12,681
10/31/93 16,885 0.19% 17,836 0.41% 12,733
11/30/93 16,851 -0.88% 17,679 0.07% 12,742
12/31/93 17,116 2.11% 18,052 0.00% 12,742
1/31/94 17,251 1.14% 18,257 0.27% 12,777
2/28/94 16,963 -2.59% 17,785 0.34% 12,820
3/31/94 16,350 -4.07% 17,061 0.34% 12,864
4/30/94 16,369 0.85% 17,206 0.14% 12,882
5/31/94 16,507 0.87% 17,355 0.07% 12,891
6/30/94 16,436 -0.61% 17,250 0.34% 12,935
7/31/94 16,710 1.83% 17,565 0.27% 12,970
8/31/94 16,760 0.35% 17,627 0.40% 13,021
9/30/94 16,613 -1.47% 17,368 0.27% 13,057
10/31/94 16,359 -1.78% 17,058 0.07% 13,066
11/30/94 15,983 -1.81% 16,750 0.13% 13,083
12/31/94 16,296 2.20% 17,118 0.00% 13,083
1/31/95 16,765 2.86% 17,608 0.40% 13,135
2/28/95 17,159 2.91% 18,120 0.40% 13,188
GRAPHIC MATERIAL (16)
This pie chart shows the fund's securities breakdown by quality as a percentage
of the fund's total net assets.
Portfolio Breakdown on 2/28/95
AAA 31.5%
AA 20.2%
A 29.5%
BBB 18.8%
GRAPHIC MATERIAL (17)
This bar chart shows a comparison between the fund's distribution rate of 5.47%
and the taxable equivalent distribution rate of 10.02%.
GRAPHIC MATERIAL (18)
The following line graph hypothetically compares the performance of the Franklin
Maryland Tax-Free Income Fund to that of the Lehman Brothers Municipal Bond
Index and the Consumer Price Index(CPI), based on a $10,000 investment from
10/3/88 to 2/28/95.
Period Ending Maryland Tax-Free LB Muni Index CPI
10/3/88 9,579 10,000 10,000
10/31/88 9,588 1.76% 10,176 0.33% 10,033
11/30/88 9,521 -0.92% 10,082 0.08% 10,041
12/31/88 9,617 1.02% 10,185 0.17% 10,058
1/31/89 9,761 2.07% 10,396 0.50% 10,108
2/28/89 9,699 -1.14% 10,278 0.41% 10,150
3/31/89 9,686 -0.24% 10,253 0.58% 10,209
4/30/89 9,905 2.37% 10,496 0.65% 10,275
5/31/89 10,106 2.08% 10,714 0.57% 10,334
6/30/89 10,239 1.36% 10,860 0.24% 10,358
7/31/89 10,334 1.36% 11,008 0.24% 10,383
8/31/89 10,261 -0.98% 10,900 0.16% 10,400
9/30/89 10,217 -0.30% 10,867 0.32% 10,433
10/31/89 10,303 1.22% 11,000 0.48% 10,483
11/30/89 10,460 1.75% 11,192 0.24% 10,508
12/31/89 10,557 0.82% 11,284 0.16% 10,525
1/31/90 10,482 -0.47% 11,231 1.03% 10,634
2/28/90 10,601 0.89% 11,331 0.47% 10,684
3/31/90 10,555 0.03% 11,334 0.55% 10,742
4/30/90 10,483 -0.72% 11,253 0.16% 10,760
5/31/90 10,722 2.18% 11,498 0.23% 10,784
6/30/90 10,848 0.88% 11,599 0.54% 10,843
7/31/90 11,006 1.48% 11,771 0.38% 10,884
8/31/90 10,741 -1.45% 11,600 0.92% 10,984
9/30/90 10,730 0.06% 11,607 0.84% 11,076
10/31/90 10,892 1.81% 11,817 0.60% 11,143
11/30/90 11,140 2.01% 12,055 0.22% 11,167
12/31/90 11,129 0.44% 12,108 0.00% 11,167
1/31/91 11,347 1.34% 12,270 0.60% 11,234
2/28/91 11,435 0.87% 12,377 0.15% 11,251
3/31/91 11,479 0.04% 12,382 0.15% 11,268
4/30/91 11,624 1.34% 12,548 0.15% 11,285
5/31/91 11,691 0.89% 12,659 0.30% 11,319
6/30/91 11,702 -0.10% 12,647 0.29% 11,351
7/31/91 11,838 1.22% 12,801 0.15% 11,368
8/31/91 11,952 1.32% 12,970 0.29% 11,401
9/30/91 12,123 1.30% 13,138 0.44% 11,452
10/31/91 12,192 0.90% 13,257 0.15% 11,469
11/30/91 12,227 0.28% 13,294 0.29% 11,502
12/31/91 12,471 2.15% 13,580 0.07% 11,510
1/31/92 12,512 0.23% 13,611 0.15% 11,527
2/29/92 12,506 0.03% 13,615 0.36% 11,569
3/31/92 12,524 0.04% 13,620 0.51% 11,628
4/30/92 12,636 0.89% 13,742 0.14% 11,644
5/31/92 12,809 1.18% 13,904 0.14% 11,660
6/30/92 12,971 1.68% 14,137 0.36% 11,702
7/31/92 13,375 3.00% 14,561 0.21% 11,727
8/31/92 13,236 -0.98% 14,419 0.28% 11,760
9/30/92 13,266 0.65% 14,512 0.28% 11,793
10/31/92 13,052 -0.98% 14,370 0.35% 11,834
11/30/92 13,353 1.79% 14,627 0.14% 11,851
12/31/92 13,557 1.02% 14,777 -0.07% 11,842
1/31/93 13,725 1.16% 14,948 0.49% 11,900
2/28/93 14,131 3.62% 15,489 0.35% 11,942
3/31/93 14,061 -1.06% 15,325 0.35% 11,984
4/30/93 14,181 1.01% 15,480 0.28% 12,017
5/31/93 14,238 0.56% 15,566 0.14% 12,034
6/30/93 14,499 1.67% 15,826 0.14% 12,051
7/31/93 14,541 0.13% 15,847 0.00% 12,051
8/31/93 14,776 2.08% 16,177 0.28% 12,085
9/30/93 14,858 1.14% 16,361 0.21% 12,110
10/31/93 14,926 0.19% 16,392 0.41% 12,160
11/30/93 14,878 -0.88% 16,248 0.07% 12,168
12/31/93 15,207 2.11% 16,591 0.00% 12,168
1/31/94 15,340 1.14% 16,780 0.27% 12,201
2/28/94 15,064 -2.59% 16,345 0.34% 12,243
3/31/94 14,480 -4.07% 15,680 0.34% 12,284
4/30/94 14,494 0.85% 15,813 0.14% 12,301
5/31/94 14,630 0.87% 15,951 0.07% 12,310
6/30/94 14,563 -0.61% 15,854 0.34% 12,352
7/31/94 14,821 1.83% 16,144 0.27% 12,385
8/31/94 14,877 0.35% 16,200 0.40% 12,435
9/30/94 14,688 -1.47% 15,962 0.27% 12,468
10/31/94 14,400 -1.78% 15,678 0.07% 12,477
11/30/94 14,058 -1.81% 15,394 0.13% 12,493
12/31/94 14,435 2.20% 15,733 0.00% 12,493
1/31/95 14,884 2.86% 16,183 0.40% 12,543
2/28/95 15,334 2.91% 16,654 0.40% 12,593
GRAPHIC MATERIAL (19)
This pie chart shows the fund's securities breakdown by quality as a percentage
of the fund's total net assets.
Portfolio Breakdown on 2/28/95
AAA 58.0%
AA 12.9%
A 13.3%
BBB 15.8%
GRAPHIC MATERIAL (20)
This bar chart shows the comparison between the fund's distribution rate 5.32%
and the taxable equivalent distribution rate of 9.37%.
GRAPHIC MATERIAL (21)
The following line graph hypothetically compares the performance of the Franklin
Missouri Tax-Free Income Fund to that of the Lehman Brothers Municipal Bond
Index and the Consumer Price Index (CPI), based on a $10,000 investment from
9/1/87 to 2/28/95.
Period Ending Missouri Tax-Free LB Muni Index CPI
9/1/87 9,573 10,000 10,000
9/30/87 8,967 -3.69% 9,631 0.52% 10,052
10/31/87 8,957 0.35% 9,665 0.26% 10,078
11/30/87 9,289 2.61% 9,917 0.09% 10,087
12/31/87 9,466 1.45% 10,061 0.00% 10,087
1/31/88 9,902 3.56% 10,419 0.26% 10,113
2/29/88 9,975 1.06% 10,529 0.26% 10,140
3/31/88 9,788 -1.16% 10,407 0.43% 10,183
4/30/88 9,843 0.76% 10,486 0.52% 10,236
5/31/88 9,888 -0.29% 10,456 0.34% 10,271
6/30/88 10,070 1.46% 10,609 0.43% 10,315
7/31/88 10,116 0.65% 10,678 0.42% 10,359
8/31/88 10,186 0.09% 10,687 0.42% 10,402
9/30/88 10,387 1.81% 10,881 0.67% 10,472
10/31/88 10,629 1.76% 11,072 0.33% 10,506
11/30/88 10,539 -0.92% 10,970 0.08% 10,515
12/31/88 10,662 1.02% 11,082 0.17% 10,533
1/31/89 10,868 2.07% 11,311 0.50% 10,585
2/28/89 10,776 -1.14% 11,183 0.41% 10,629
3/31/89 10,767 -0.24% 11,156 0.58% 10,690
4/30/89 10,997 2.37% 11,420 0.65% 10,760
5/31/89 11,238 2.08% 11,658 0.57% 10,821
6/30/89 11,366 1.36% 11,816 0.24% 10,847
7/31/89 11,462 1.36% 11,977 0.24% 10,873
8/31/89 11,400 -0.98% 11,859 0.16% 10,891
9/30/89 11,338 -0.30% 11,824 0.32% 10,925
10/31/89 11,436 1.22% 11,968 0.48% 10,978
11/30/89 11,601 1.75% 12,178 0.24% 11,004
12/31/89 11,701 0.82% 12,277 0.16% 11,022
1/31/90 11,616 -0.47% 12,220 1.03% 11,135
2/28/90 11,772 0.89% 12,329 0.47% 11,188
3/31/90 11,763 0.03% 12,332 0.55% 11,249
4/30/90 11,709 -0.72% 12,243 0.16% 11,267
5/31/90 11,969 2.18% 12,510 0.23% 11,293
6/30/90 12,084 0.88% 12,620 0.54% 11,354
7/31/90 12,268 1.48% 12,807 0.38% 11,397
8/31/90 12,031 -1.45% 12,622 0.92% 11,502
9/30/90 11,999 0.06% 12,629 0.84% 11,599
10/31/90 12,198 1.81% 12,858 0.60% 11,668
11/30/90 12,479 2.01% 13,116 0.22% 11,694
12/31/90 12,481 0.44% 13,174 0.00% 11,694
1/31/91 12,671 1.34% 13,350 0.60% 11,764
2/28/91 12,745 0.87% 13,466 0.15% 11,782
3/31/91 12,807 0.04% 13,472 0.15% 11,799
4/30/91 12,988 1.34% 13,652 0.15% 11,817
5/31/91 13,075 0.89% 13,774 0.30% 11,853
6/30/91 13,054 -0.10% 13,760 0.29% 11,887
7/31/91 13,263 1.22% 13,928 0.15% 11,905
8/31/91 13,375 1.32% 14,112 0.29% 11,939
9/30/91 13,562 1.30% 14,295 0.44% 11,992
10/31/91 13,651 0.90% 14,424 0.15% 12,010
11/30/91 13,716 0.28% 14,464 0.29% 12,045
12/31/91 13,975 2.15% 14,775 0.07% 12,053
1/31/92 14,009 0.23% 14,809 0.15% 12,071
2/29/92 14,043 0.03% 14,814 0.36% 12,115
3/31/92 14,078 0.04% 14,820 0.51% 12,176
4/30/92 14,201 0.89% 14,952 0.14% 12,193
5/31/92 14,364 1.18% 15,128 0.14% 12,211
6/30/92 14,528 1.68% 15,382 0.36% 12,254
7/31/92 15,029 3.00% 15,844 0.21% 12,280
8/31/92 14,843 -0.98% 15,688 0.28% 12,315
9/30/92 14,892 0.65% 15,790 0.28% 12,349
10/31/92 14,625 -0.98% 15,636 0.35% 12,392
11/30/92 14,977 1.79% 15,915 0.14% 12,410
12/31/92 15,212 1.02% 16,078 -0.07% 12,401
1/31/93 15,395 1.16% 16,264 0.49% 12,462
2/28/93 15,834 3.62% 16,853 0.35% 12,505
3/31/93 15,789 -1.06% 16,674 0.35% 12,549
4/30/93 15,893 1.01% 16,843 0.28% 12,584
5/31/93 15,985 0.56% 16,937 0.14% 12,602
6/30/93 16,268 1.67% 17,220 0.14% 12,620
7/31/93 16,346 0.13% 17,242 0.00% 12,620
8/31/93 16,660 2.08% 17,601 0.28% 12,655
9/30/93 16,889 1.14% 17,802 0.21% 12,681
10/31/93 16,923 0.19% 17,836 0.41% 12,733
11/30/93 16,833 -0.88% 17,679 0.07% 12,742
12/31/93 17,234 2.11% 18,052 0.00% 12,742
1/31/94 17,397 1.14% 18,257 0.27% 12,777
2/28/94 17,020 -2.59% 17,785 0.34% 12,820
3/31/94 16,398 -4.07% 17,061 0.34% 12,864
4/30/94 16,448 0.85% 17,206 0.14% 12,882
5/31/94 16,585 0.87% 17,355 0.07% 12,891
6/30/94 16,519 -0.61% 17,250 0.34% 12,935
7/31/94 16,774 1.83% 17,565 0.27% 12,970
8/31/94 16,840 0.35% 17,627 0.40% 13,021
9/30/94 16,609 -1.47% 17,368 0.27% 13,057
10/31/94 16,333 -1.78% 17,058 0.07% 13,066
11/30/94 16,013 -1.81% 16,750 0.13% 13,083
12/31/94 16,359 2.20% 17,118 0.00% 13,083
1/31/95 16,828 2.86% 17,608 0.40% 13,135
2/28/95 17,269 2.91% 18,120 0.40% 13,188
GRAPHIC MATERIAL (22)
This pie chart shows the fund's securities breakdown by quality as a percentage
of the fund's total net assets.
Portfolio Breakdown on 2/28/95
AAA 37.7%
AA 19.2%
A 34.5%
BBB 7.8%
BB 0.8%
GRAPHIC MATERIAL (23)
This bar chart shows the comparison between the fund's distribution rate 5.46%
and the taxable equivalent distribution rate of 9.80%.
GRAPHIC MATERIAL (24)
The following line graph hypothetically compares the performance of the Franklin
North Carolina Tax-Free Income Fund to that of the Lehman Brothers Municipal
Bond Index and the Consumer Price Index(CPI), based on a $10,000 investment from
9/1/87 to 2/28/95.
Period Ending North Carolina Tax-Free LB Muni Index CPI
9/1/87 9,579 10,000 10,000
9/30/87 8,948 -3.69% 9,631 0.52% 10,052
10/31/87 9,006 0.35% 9,665 0.26% 10,078
11/30/87 9,388 2.61% 9,917 0.09% 10,087
12/31/87 9,578 1.45% 10,061 0.00% 10,087
1/31/88 10,050 3.56% 10,419 0.26% 10,113
2/29/88 10,175 1.06% 10,529 0.26% 10,140
3/31/88 9,960 -1.16% 10,407 0.43% 10,183
4/30/88 9,989 0.76% 10,486 0.52% 10,236
5/31/88 10,017 -0.29% 10,456 0.34% 10,271
6/30/88 10,234 1.46% 10,609 0.43% 10,315
7/31/88 10,293 0.65% 10,678 0.42% 10,359
8/31/88 10,354 0.09% 10,687 0.42% 10,402
9/30/88 10,596 1.81% 10,881 0.67% 10,472
10/31/88 10,819 1.76% 11,072 0.33% 10,506
11/30/88 10,708 -0.92% 10,970 0.08% 10,515
12/31/88 10,862 1.02% 11,082 0.17% 10,533
1/31/89 11,100 2.07% 11,311 0.50% 10,585
2/28/89 11,017 -1.14% 11,183 0.41% 10,629
3/31/89 11,007 -0.24% 11,156 0.58% 10,690
4/30/89 11,270 2.37% 11,420 0.65% 10,760
5/31/89 11,502 2.08% 11,658 0.57% 10,821
6/30/89 11,662 1.36% 11,816 0.24% 10,847
7/31/89 11,747 1.36% 11,977 0.24% 10,873
8/31/89 11,672 -0.98% 11,859 0.16% 10,891
9/30/89 11,597 -0.30% 11,824 0.32% 10,925
10/31/89 11,694 1.22% 11,968 0.48% 10,978
11/30/89 11,869 1.75% 12,178 0.24% 11,004
12/31/89 11,980 0.82% 12,277 0.16% 11,022
1/31/90 11,903 -0.47% 12,220 1.03% 11,135
2/28/90 12,047 0.89% 12,329 0.47% 11,188
3/31/90 12,047 0.03% 12,332 0.55% 11,249
4/30/90 11,970 -0.72% 12,243 0.16% 11,267
5/31/90 12,244 2.18% 12,510 0.23% 11,293
6/30/90 12,374 0.88% 12,620 0.54% 11,354
7/31/90 12,559 1.48% 12,807 0.38% 11,397
8/31/90 12,285 -1.45% 12,622 0.92% 11,502
9/30/90 12,264 0.06% 12,629 0.84% 11,599
10/31/90 12,442 1.81% 12,858 0.60% 11,668
11/30/90 12,725 2.01% 13,116 0.22% 11,694
12/31/90 12,739 0.44% 13,174 0.00% 11,694
1/31/91 12,932 1.34% 13,350 0.60% 11,764
2/28/91 13,005 0.87% 13,466 0.15% 11,782
3/31/91 13,056 0.04% 13,472 0.15% 11,799
4/30/91 13,227 1.34% 13,652 0.15% 11,817
5/31/91 13,327 0.89% 13,774 0.30% 11,853
6/30/91 13,305 -0.10% 13,760 0.29% 11,887
7/31/91 13,492 1.22% 13,928 0.15% 11,905
8/31/91 13,617 1.32% 14,112 0.29% 11,939
9/30/91 13,794 1.30% 14,295 0.44% 11,992
10/31/91 13,871 0.90% 14,424 0.15% 12,010
11/30/91 13,924 0.28% 14,464 0.29% 12,045
12/31/91 14,204 2.15% 14,775 0.07% 12,053
1/31/92 14,237 0.23% 14,809 0.15% 12,071
2/29/92 14,232 0.03% 14,814 0.36% 12,115
3/31/92 14,253 0.04% 14,820 0.51% 12,176
4/30/92 14,363 0.89% 14,952 0.14% 12,193
5/31/92 14,526 1.18% 15,128 0.14% 12,211
6/30/92 14,716 1.68% 15,382 0.36% 12,254
7/31/92 15,247 3.00% 15,844 0.21% 12,280
8/31/92 15,071 -0.98% 15,688 0.28% 12,315
9/30/92 15,119 0.65% 15,790 0.28% 12,349
10/31/92 14,928 -0.98% 15,636 0.35% 12,392
11/30/92 15,255 1.79% 15,915 0.14% 12,410
12/31/92 15,477 1.02% 16,078 -0.07% 12,401
1/31/93 15,674 1.16% 16,264 0.49% 12,462
2/28/93 16,128 3.62% 16,853 0.35% 12,505
3/31/93 16,068 -1.06% 16,674 0.35% 12,549
4/30/93 16,185 1.01% 16,843 0.28% 12,584
5/31/93 16,248 0.56% 16,937 0.14% 12,602
6/30/93 16,504 1.67% 17,220 0.14% 12,620
7/31/93 16,513 0.13% 17,242 0.00% 12,620
8/31/93 16,855 2.08% 17,601 0.28% 12,655
9/30/93 17,042 1.14% 17,802 0.21% 12,681
10/31/93 17,089 0.19% 17,836 0.41% 12,733
11/30/93 16,997 -0.88% 17,679 0.07% 12,742
12/31/93 17,285 2.11% 18,052 0.00% 12,742
1/31/94 17,448 1.14% 18,257 0.27% 12,777
2/28/94 17,096 -2.59% 17,785 0.34% 12,820
3/31/94 16,426 -4.07% 17,061 0.34% 12,864
4/30/94 16,518 0.85% 17,206 0.14% 12,882
5/31/94 16,640 0.87% 17,355 0.07% 12,891
6/30/94 16,514 -0.61% 17,250 0.34% 12,935
7/31/94 16,812 1.83% 17,565 0.27% 12,970
8/31/94 16,877 0.35% 17,627 0.40% 13,021
9/30/94 16,647 -1.47% 17,368 0.27% 13,057
10/31/94 16,326 -1.78% 17,058 0.07% 13,066
11/30/94 15,916 -1.81% 16,750 0.13% 13,083
12/31/94 16,296 2.20% 17,118 0.00% 13,083
1/31/95 16,800 2.86% 17,608 0.40% 13,135
2/28/95 17,275 2.91% 18,120 0.40% 13,188
GRAPHIC MATERIAL (25)
This pie chart shows the fund's securities breakdown by quality as a percentage
of the fund's total net assets.
Portfolio Breakdown on 2/28/95
AAA 58.4%
AA 10.5%
A 11.3%
BBB 18.2%
BB 1.6%
GRAPHIC MATERIAL (26)
This bar chart shows a comparison between the fund's distribution rate of 5.72%
and the taxable equivalent distribution rate of 9.47%.
GRAPHIC MATERIAL (27)
The following line graph hypothetically compares the performance of the Franklin
Texas Tax-Free Income Fund to that of the Lehman Brothers Municipal Bond Index
and the Consumer Price Index (CPI), based on a $10,000 investment from 9/1/87 to
2/28/95.
Date Texas Tax-Free LB Muni Index CPI
9/1/87 9,574 10,000 10,000
9/30/87 8,987 -3.69% 9,631 0.52% 10,052
10/31/87 9,025 0.35% 9,665 0.26% 10,078
11/30/87 9,460 2.61% 9,917 0.09% 10,087
12/31/87 9,684 1.45% 10,061 0.00% 10,087
1/31/88 10,119 3.56% 10,419 0.26% 10,113
2/29/88 10,191 1.06% 10,529 0.26% 10,140
3/31/88 9,993 -1.16% 10,407 0.43% 10,183
4/30/88 10,017 0.76% 10,486 0.52% 10,236
5/31/88 10,071 -0.29% 10,456 0.34% 10,271
6/30/88 10,244 1.46% 10,609 0.43% 10,315
7/31/88 10,309 0.65% 10,678 0.42% 10,359
8/31/88 10,346 0.09% 10,687 0.42% 10,402
9/30/88 10,583 1.81% 10,881 0.67% 10,472
10/31/88 10,844 1.76% 11,072 0.33% 10,506
11/30/88 10,759 -0.92% 10,970 0.08% 10,515
12/31/88 10,879 1.02% 11,082 0.17% 10,533
1/31/89 11,082 2.07% 11,311 0.50% 10,585
2/28/89 11,027 -1.14% 11,183 0.41% 10,629
3/31/89 11,035 -0.24% 11,156 0.58% 10,690
4/30/89 11,252 2.37% 11,420 0.65% 10,760
5/31/89 11,502 2.08% 11,658 0.57% 10,821
6/30/89 11,648 1.36% 11,816 0.24% 10,847
7/31/89 11,741 1.36% 11,977 0.24% 10,873
8/31/89 11,673 -0.98% 11,859 0.16% 10,891
9/30/89 11,616 -0.30% 11,824 0.32% 10,925
10/31/89 11,721 1.22% 11,968 0.48% 10,978
11/30/89 11,904 1.75% 12,178 0.24% 11,004
12/31/89 12,022 0.82% 12,277 0.16% 11,022
1/31/90 11,941 -0.47% 12,220 1.03% 11,135
2/28/90 12,049 0.89% 12,329 0.47% 11,188
3/31/90 12,035 0.03% 12,332 0.55% 11,249
4/30/90 11,963 -0.72% 12,243 0.16% 11,267
5/31/90 12,221 2.18% 12,510 0.23% 11,293
6/30/90 12,344 0.88% 12,620 0.54% 11,354
7/31/90 12,548 1.48% 12,807 0.38% 11,397
8/31/90 12,243 -1.45% 12,622 0.92% 11,502
9/30/90 12,216 0.06% 12,629 0.84% 11,599
10/31/90 12,413 1.81% 12,858 0.60% 11,668
11/30/90 12,716 2.01% 13,116 0.22% 11,694
12/31/90 12,748 0.44% 13,174 0.00% 11,694
1/31/91 12,961 1.34% 13,350 0.60% 11,764
2/28/91 13,029 0.87% 13,466 0.15% 11,782
3/31/91 13,074 0.04% 13,472 0.15% 11,799
4/30/91 13,266 1.34% 13,652 0.15% 11,817
5/31/91 13,372 0.89% 13,774 0.30% 11,853
6/30/91 13,369 -0.10% 13,760 0.29% 11,887
7/31/91 13,552 1.22% 13,928 0.15% 11,905
8/31/91 13,685 1.32% 14,112 0.29% 11,939
9/30/91 13,883 1.30% 14,295 0.44% 11,992
10/31/91 13,955 0.90% 14,424 0.15% 12,010
11/30/91 14,015 0.28% 14,464 0.29% 12,045
12/31/91 14,296 2.15% 14,775 0.07% 12,053
1/31/92 14,294 0.23% 14,809 0.15% 12,071
2/29/92 14,332 0.03% 14,814 0.36% 12,115
3/31/92 14,370 0.04% 14,820 0.51% 12,176
4/30/92 14,486 0.89% 14,952 0.14% 12,193
5/31/92 14,668 1.18% 15,128 0.14% 12,211
6/30/92 14,865 1.68% 15,382 0.36% 12,254
7/31/92 15,354 3.00% 15,844 0.21% 12,280
8/31/92 15,138 -0.98% 15,688 0.28% 12,315
9/30/92 15,176 0.65% 15,790 0.28% 12,349
10/31/92 14,944 -0.98% 15,636 0.35% 12,392
11/30/92 15,266 1.79% 15,915 0.14% 12,410
12/31/92 15,495 1.02% 16,078 -0.07% 12,401
1/31/93 15,670 1.16% 16,264 0.49% 12,462
2/28/93 16,163 3.62% 16,853 0.35% 12,505
3/31/93 16,049 -1.06% 16,674 0.35% 12,549
4/30/93 16,144 1.01% 16,843 0.28% 12,584
5/31/93 16,211 0.56% 16,937 0.14% 12,602
6/30/93 16,475 1.67% 17,220 0.14% 12,620
7/31/93 16,499 0.13% 17,242 0.00% 12,620
8/31/93 16,764 2.08% 17,601 0.28% 12,655
9/30/93 16,945 1.14% 17,802 0.21% 12,681
10/31/93 16,983 0.19% 17,836 0.41% 12,733
11/30/93 17,036 -0.88% 17,679 0.07% 12,742
12/31/93 17,292 2.11% 18,052 0.00% 12,742
1/31/94 17,433 1.14% 18,257 0.27% 12,777
2/28/94 17,181 -2.59% 17,785 0.34% 12,820
3/31/94 16,691 -4.07% 17,061 0.34% 12,864
4/30/94 16,772 0.85% 17,206 0.14% 12,882
5/31/94 16,898 0.87% 17,355 0.07% 12,891
6/30/94 16,875 -0.61% 17,250 0.34% 12,935
7/31/94 17,092 1.83% 17,565 0.27% 12,970
8/31/94 17,145 0.35% 17,627 0.40% 13,021
9/30/94 17,016 -1.47% 17,368 0.27% 13,057
10/31/94 16,841 -1.78% 17,058 0.07% 13,066
11/30/94 16,560 -1.81% 16,750 0.13% 13,083
12/31/94 16,813 2.20% 17,118 0.00% 13,083
1/31/95 17,144 2.86% 17,608 0.40% 13,135
2/28/95 17,493 2.91% 18,120 0.40% 13,188
GRAPHIC MATERIAL (28)
This pie chart shows the fund's securities breakdown by quality as a percentage
of the fund's total net assets.
Portfolio Breakdown on 2/28/95
AAA 35.6%
AA 30.7%
A 22.5%
BBB 11.2%
GRAPHIC MATERIAL (29)
This bar chart shows the comparison between the fund's distribution rate of
5.48% and the taxable equivalent distribution rate of 9.63%.
GRAPHIC MATERIAL (30)
The following line graph hypothetically compares the performance of the Franklin
Virginia Tax-Free Income Fund to that of the Lehman Brothers Municipal Bond
Index and the Consumer Price Index (CPI), based on a $10,000 investment from
9/1/87 to 2/28/95.
Period Ending Virginia Tax-Free LB Muni Index CPI
9/1/87 9,571 10,000 10,000
9/30/87 8,980 -3.69% 9,631 0.52% 10,052
10/31/87 8,990 0.35% 9,665 0.26% 10,078
11/30/87 9,447 2.61% 9,917 0.09% 10,087
12/31/87 9,641 1.45% 10,061 0.00% 10,087
1/31/88 10,048 3.56% 10,419 0.26% 10,113
2/29/88 10,148 1.06% 10,529 0.26% 10,140
3/31/88 9,937 -1.16% 10,407 0.43% 10,183
4/30/88 9,950 0.76% 10,486 0.52% 10,236
5/31/88 9,993 -0.29% 10,456 0.34% 10,271
6/30/88 10,174 1.46% 10,609 0.43% 10,315
7/31/88 10,237 0.65% 10,678 0.42% 10,359
8/31/88 10,310 0.09% 10,687 0.42% 10,402
9/30/88 10,505 1.81% 10,881 0.67% 10,472
10/31/88 10,742 1.76% 11,072 0.33% 10,506
11/30/88 10,653 -0.92% 10,970 0.08% 10,515
12/31/88 10,780 1.02% 11,082 0.17% 10,533
1/31/89 10,979 2.07% 11,311 0.50% 10,585
2/28/89 10,899 -1.14% 11,183 0.41% 10,629
3/31/89 10,881 -0.24% 11,156 0.58% 10,690
4/30/89 11,106 2.37% 11,420 0.65% 10,760
5/31/89 11,363 2.08% 11,658 0.57% 10,821
6/30/89 11,515 1.36% 11,816 0.24% 10,847
7/31/89 11,615 1.36% 11,977 0.24% 10,873
8/31/89 11,543 -0.98% 11,859 0.16% 10,891
9/30/89 11,481 -0.30% 11,824 0.32% 10,925
10/31/89 11,593 1.22% 11,968 0.48% 10,978
11/30/89 11,761 1.75% 12,178 0.24% 11,004
12/31/89 11,864 0.82% 12,277 0.16% 11,022
1/31/90 11,800 -0.47% 12,220 1.03% 11,135
2/28/90 11,926 0.89% 12,329 0.47% 11,188
3/31/90 11,918 0.03% 12,332 0.55% 11,249
4/30/90 11,843 -0.72% 12,243 0.16% 11,267
5/31/90 12,107 2.18% 12,510 0.23% 11,293
6/30/90 12,214 0.88% 12,620 0.54% 11,354
7/31/90 12,413 1.48% 12,807 0.38% 11,397
8/31/90 12,104 -1.45% 12,622 0.92% 11,502
9/30/90 12,084 0.06% 12,629 0.84% 11,599
10/31/90 12,275 1.81% 12,858 0.60% 11,668
11/30/90 12,562 2.01% 13,116 0.22% 11,694
12/31/90 12,565 0.44% 13,174 0.00% 11,694
1/31/91 12,772 1.34% 13,350 0.60% 11,764
2/28/91 12,895 0.87% 13,466 0.15% 11,782
3/31/91 12,935 0.04% 13,472 0.15% 11,799
4/30/91 13,109 1.34% 13,652 0.15% 11,817
5/31/91 13,198 0.89% 13,774 0.30% 11,853
6/30/91 13,202 -0.10% 13,760 0.29% 11,887
7/31/91 13,404 1.22% 13,928 0.15% 11,905
8/31/91 13,532 1.32% 14,112 0.29% 11,939
9/30/91 13,735 1.30% 14,295 0.44% 11,992
10/31/91 13,815 0.90% 14,424 0.15% 12,010
11/30/91 13,869 0.28% 14,464 0.29% 12,045
12/31/91 14,140 2.15% 14,775 0.07% 12,053
1/31/92 14,160 0.23% 14,809 0.15% 12,071
2/29/92 14,168 0.03% 14,814 0.36% 12,115
3/31/92 14,189 0.04% 14,820 0.51% 12,176
4/30/92 14,313 0.89% 14,952 0.14% 12,193
5/31/92 14,478 1.18% 15,128 0.14% 12,211
6/30/92 14,682 1.68% 15,382 0.36% 12,254
7/31/92 15,191 3.00% 15,844 0.21% 12,280
8/31/92 15,040 -0.98% 15,688 0.28% 12,315
9/30/92 15,088 0.65% 15,790 0.28% 12,349
10/31/92 14,829 -0.98% 15,636 0.35% 12,392
11/30/92 15,159 1.79% 15,915 0.14% 12,410
12/31/92 15,384 1.02% 16,078 -0.07% 12,401
1/31/93 15,568 1.16% 16,264 0.49% 12,462
2/28/93 16,013 3.62% 16,853 0.35% 12,505
3/31/93 15,952 -1.06% 16,674 0.35% 12,549
4/30/93 16,070 1.01% 16,843 0.28% 12,584
5/31/93 16,162 0.56% 16,937 0.14% 12,602
6/30/93 16,448 1.67% 17,220 0.14% 12,620
7/31/93 16,456 0.13% 17,242 0.00% 12,620
8/31/93 16,760 2.08% 17,601 0.28% 12,655
9/30/93 16,951 1.14% 17,802 0.21% 12,681
10/31/93 17,045 0.19% 17,836 0.41% 12,733
11/30/93 17,011 -0.88% 17,679 0.07% 12,742
12/31/93 17,291 2.11% 18,052 0.00% 12,742
1/31/94 17,458 1.14% 18,257 0.27% 12,777
2/28/94 17,135 -2.59% 17,785 0.34% 12,820
3/31/94 16,547 -4.07% 17,061 0.34% 12,864
4/30/94 16,611 0.85% 17,206 0.14% 12,882
5/31/94 16,705 0.87% 17,355 0.07% 12,891
6/30/94 16,607 -0.61% 17,250 0.34% 12,935
7/31/94 16,879 1.83% 17,565 0.27% 12,970
8/31/94 16,960 0.35% 17,627 0.40% 13,021
9/30/94 16,757 -1.47% 17,368 0.27% 13,057
10/31/94 16,462 -1.78% 17,058 0.07% 13,066
11/30/94 16,092 -1.81% 16,750 0.13% 13,083
12/31/94 16,492 2.20% 17,118 0.00% 13,083
1/31/95 16,986 2.86% 17,608 0.40% 13,135
2/28/95 17,406 2.91% 18,120 0.40% 13,188
TABLE OF CONTENTS PAGE
<TABLE>
<CAPTION>
<S> <C>
LETTER FROM THE CHAIRMAN ......................... 1
MANAGER'S DISCUSSION ............................. 4
FUND REPORTS
Franklin Arizona
Tax-Free Income Fund ............................. 6
Franklin Colorado
Tax-Free Income Fund ............................. 10
Franklin Connecticut
Tax-Free Income Fund ............................. 14
Franklin Indiana
Tax-Free Income Fund ............................. 18
Franklin New Jersey
Tax-Free Income Fund ............................. 22
Franklin Oregon
Tax-Free Income Fund ............................. 26
Franklin Pennsylvania
Tax-Free Income Fund ............................. 30
Franklin Puerto Rico
Tax-Free Income Fund ............................. 34
Franklin Federal Intermediate-Term
Tax-Free Income Fund ............................. 38
Franklin High Yield
Tax-Free Income Fund ............................. 42
SPECIAL FEATURE: PORTFOLIO TALK
FRANKLIN'S MUNICIPAL BOND DEPARTMENT ............. 46
STATEMENT OF INVESTMENTS ......................... 49
FINANCIAL STATEMENTS ............................. 111
NOTES TO FINANCIAL STATEMENTS .................... 119
REPORT OF INDEPENDENT AUDITORS ................... 125
</TABLE>
<PAGE>
MESSAGE FROM THE CHAIRMAN
================================================================================
April 14, 1995
Dear Shareholder:
This is the tenth annual report of the Franklin Tax-Free Trust for the fiscal
year ended February 28, 1995.
Calendar year 1994 was the worst for bonds since the Trust's inception in 1985.
In fact, the 20-year U.S. Treasury bond recorded its poorest performance since
1967.(1) Concerns about rising inflation, brought on by continued strong
economic growth, prompted the Federal Reserve Board to raise interest rates
six times during the Trust's fiscal year. Bond prices declined across all
maturities, as did the share values of the funds in the Franklin Tax-Free Trust.
By the end of February 1995, however, the Federal Reserve Board's dedication to
slowing economic growth by raising interest rates appeared to be having the
intended effect -- economic growth had stabilized at a sustainable level, while
inflation remained subdued.
Although the Fed's actions caused significant short-term volatility, its
commitment to fighting inflation should benefit the Trust and its shareholders
over the long run.
Following the stellar performance of bonds in the early 1990s, 1994 came as a
reminder that bond prices can fall as well as rise. Although rising interest
rates generally cause bond prices to fall, they also bring higher bond yields.
This could ultimately lead to higher distributions of tax-free income for the
Trust's shareholders.
Periods of volatility also provide us with a glimpse of how mutual funds can
lower the risks of investing. 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.
These advantages of mutual fund investing -- diversification and professional
management -- became even more apparent recently, in light of the
(1) Source: Ibbotson Associates. Based on one-year total returns of long-term
government bonds from January 1926 to December 1994.
1
<PAGE>
================================================================================
municipal bankruptcy filing of Orange County, California.(2) This situation
might have devastated individual bondholders, but the direct impact on
Franklin's tax-free income funds has been minimal to date, because most of our
funds are widely diversified.(3)
For another reason to look at the potential benefits of mutual funds, consider
this: Investors in individual municipal bonds suffered declines of 15% or more
during 1994, while those invested in diversified, long-term municipal debt funds
fared a little better, averaging declines of approximately 7%.(4) As you'll see
in the fund reports that follow, for the year ended February 28, 1995, the
majority of the funds in the Trust outperformed the average performance of other
municipal bond funds in their respective categories, according to Lipper
Analytical Services, Inc.
As we've said in past reports, Franklin's tax-free funds practice a conservative
investment strategy, focusing on providing our shareholders with a high level of
current income exempt from federal and, in most cases, state and local income
taxes.(5) The funds' managers maintain a long-term investment approach, and we
encourage shareholders to do the same.
Looking forward, the prospects of a slowing economy and a presidential election
in 1996 should stabilize or even lower interest rates, which bodes well for
tax-free investors in 1995.
On the pages that follow, you'll find specific information about each fund, as
well as additional information from our portfolio managers about the current
state of and outlook for the municipal bond market. In addition, an in-depth
conversation with portfolio managers from our Municipal Bond Department can be
found on page 46 of this report.
As always, we welcome your questions, appreciate your trust and support, and
look forward to serving you in the years to come.
Sincerely,
Charles B. Johnson
Chairman
(2) The Orange County and related bankruptcy proceedings are ongoing, and the
funds' managers continue to monitor proceedings.
(3) Most of Franklin's tax-free funds are diversified; however, a few are
classified as non-diversified under the Investment Company Act of 1940. The
risks of investing in a non-diversified fund, such as increased susceptibility
to adverse economic or regulatory developments, are described in the fund's
prospectus.
(4) Source: Average individual municipal bond figures calculated by Delphi
Hanover Corp.; average municipal bond mutual fund figures according to Lipper
Analytical Services, Inc., a nationally recognized mutual fund research company,
are based on cumulative total return from 12/31/93 to 12/31/94.
(5) For investors subject to federal or state alternative minimum tax, all or a
portion of these dividends may be subject to such tax, depending on the fund.
Distributions of capital gains and of ordinary income from accrued market
discount, if any, are generally taxable.
2
<PAGE>
TAX-FREE INVESTING
================================================================================
A penny saved is a penny earned, or so the saying goes. But with regular federal
income tax taking up to 39.6% of your investment income, it can be hard to save
those pennies in the first place.
Fortunately, there is a solution to today's high tax bite: Franklin's tax-free
income funds. As a tax-free income fund shareholder, you earn monthly income
dividends free from regular federal income tax and, in many cases, state and
local taxes as well.*
LOOK AT IT IN DOLLARS AND SENSE
Tax-free income can make quite an impact on the dollar amount you take home.
Of course, the yields used in the example below are for illustrative purposes
only and do not represent the yield or the past or future performance of any
Franklin or Templeton fund. What they do represent is the advantage of tax-free
investing. Investors in the maximum regular federal income tax bracket of 39.6%
would need to earn 9.11% in a taxable investment to keep the same amount of
income earned with a 5.5% tax-free yield.
A TAXING SITUATION
With a $100,000 fully taxable investment yielding 7.5%,
you might earn $7,500 annually, but you could*...
<TABLE>
<CAPTION>
KEEP ONLY: $5,175 KEEP ONLY: $4,800 KEEP ONLY: $4,530 EARN AND KEEP:
<S> <C> <C> <C>
31% Federal Tax Rate 36% Federal Tax Rate 39.6% Federal Tax Rate $5,500
</TABLE>
FRANKLIN'S SOLUTION
With a $100,000 tax-free investment yielding 5.5%, that income could be
free from regular federal income tax.*
*For investors subject to federal or state alternative minimum tax, all or a
portion of these dividends may be subject to such tax, depending on the fund.
Distributions of capital gains and of ordinary income from accrued market
discount, if any, are generally taxable. The example assumes a fixed rate of
return, no fluctuation in principal, and the stated federal income tax rates.
State and local tax rates are not reflected. Franklin fund dividends and share
price will vary with market conditions. The example assumes two different yields
(tax-free 5.5% and taxable 7.5%) because a taxable investment's higher yield
compensates for taxes incurred on the earned income.
3
<PAGE>
MANAGER'S DISCUSSION
================================================================================
Dear Shareholder:
Nineteen ninety-four reminded all of us that volatility is a fundamental market
condition. Not only did we see an unprecedented six interest rate increases
during the year, we also witnessed the largest municipal bankruptcy filing in
history by Orange County, California. The municipal bond market experienced
unusual volatility in 1994, despite a significant decrease in the municipal bond
supply, which was expected to drive prices higher.
The first two months of 1995, however, have brought welcome news. After raising
interest rates 75 basis points (three-quarters of a percentage point) in
November 1994, the Federal Reserve Board raised rates once more at their
February meeting. Investors perceived that the latest increase might be the
last. In addition, the economic news following this latest hike has been fairly
positive -- economic growth has slowed, inflation has remained subdued, and the
securities markets have reacted favorably, with the Dow Jones Industrial
Average(R) breaking the 4,000 mark for the first time in history. Of more
interest to us is the municipal bond market which, in recent weeks, appears to
be recovering. In the first two months of 1995, for example, municipal bond
prices have increased 6.7%.(1)
In managing Franklin's tax-free funds, we seek to provide our shareholders with
a high level of current income exempt from federal income taxes and, in many
cases, state and local taxes as well.(2) To achieve this goal, we generally
purchase current coupon bonds at a slight discount. We also practice a "buy and
hold" strategy, choosing to hang onto higher coupon bonds (even when they trade
at a premium) for the higher income they provide to shareholders. This helps us
to maintain a low port-
(1) Source: Bond Buyer 40 Index
(2) For investors subject to federal or state alternative minimum tax, all or a
portion of these dividends may be subject to such tax, depending on the fund.
Distributions of capital gains and of ordinary income from accrued market
discount, if any, are generally taxable.
4
<PAGE>
================================================================================
folio turnover, potentially shielding the fund from capital gains, which are
taxable to shareholders. In contrast, many municipal bond funds that seek
capital appreciation trade their securities more actively to capture capital
gains -- and pass on the tax implications to their shareholders.
We believe that our strategy also helps to protect the funds from extreme price
volatility. Since bonds that trade at a premium are generally slower to react to
market fluctuations, the large percentage of such bonds in our portfolios helped
to dampen the effects of the uncertain bond market in 1994. In short, we believe
that our investment approach provides portfolios that pay a high level of
tax-free income while enjoying relatively stable share prices.
Looking forward, we believe 1995 will be a promising year for fixed income
markets, as it appears that interest rates may stabilize. We also expect the
supply of newly issued municipal bonds to be roughly $140 to $150 billion in
1995 -- slightly less than last year, and significantly lower than in 1993.
Additionally, tax-free yields remain attractive relative to the taxable yields
available from Treasuries and other fixed-income securities. For example, the
current yield-to-maturity available from the Bond Buyer 40 (an index of 40
municipal bonds) was 6.42% on February 28, 1995. For investors in the maximum
federal income tax bracket of 39.6%, this tax-free yield equals a yield of
10.63% from a taxable investment -- considerably higher than the yields
available on taxable bonds of comparable quality. For example, the 10-year
Treasury note and 30-year Treasury bond yielded 7.22% and 7.42%, respectively,
on February 28, 1995.(3) Because of the relatively high yields and reduced
supply available, we expect municipal bonds to perform well in 1995.
Sincerely,
Thomas J. Kenny
Senior Vice President - Director,
Municipal Bond Department
(3) Source: Micropal
5
<PAGE>
FRANKLIN ARIZONA TAX-FREE INCOME FUND
================================================================================
FUND OBJECTIVE:
Seeks to provide high current income exempt from regular federal and Arizona
state personal income taxes through a diversified portfolio consisting primarily
of Arizona municipal bonds.*
The fund's fiscal year was difficult for municipal bonds and other fixed-income
investments. Rising interest rates caused the prices of most bonds to decline,
and the derivative-induced bankruptcy of Orange County, California added to the
volatility in the municipal bond market.
On a positive note, higher interest rates enabled us to sell some of the fund's
lower coupon securities and purchase higher yielding, current coupon bonds. As a
result, the fund's average coupon rose slightly from 6.78% on February 28, 1994,
to 6.85% on February 28, 1995. This action enabled us to raise the fund's
monthly dividend to 5.4 cents per share from its previous level of 5.3 cents,
effective with the March 1995 distribution.
While our investment strategy focuses on income rather than total return, the
fund reported a respectable total return of +1.67% for the fiscal year -- better
than the average total return of other Arizona municipal bond funds. According
to Lipper Analytical Services, Inc., the average total return of Arizona
municipal bond funds was +1.21% for the year ended February 28, 1995.**
(See Appendix for description of Graphic Material 1)
We remain conservative in our management of the fund. At the end of the fiscal
year, 68% of the fund's securities were rated AAA -- the highest rating possible
- -- by Standard & Poor's, or were judged to be of comparable quality by the
fund's managers. We evaluate each issue on an individual basis, favoring highly
rated "essential service" bonds. These secu-
*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.
**The fund was ranked #8 out of 25 Arizona municipal bond funds for the one-year
period, and #3 out of 7 funds for the five-year period ended February 28, 1995,
as measured by Lipper Analytical Services, Inc., a nationally recognized mutual
fund rating organization. Lipper rankings do not include sales charges, and may
have been different if these factors had been considered. Past performance
cannot guarantee future results.
6
<PAGE>
================================================================================
rities tend to have a more reliable income stream as they are backed by
dependable revenue generated from projects such as schools, 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. Like all mutual funds,
however, the principal value of the fund's holdings as well as the price of its
shares will fluctuate with market conditions.
We also seek to reduce the fund's risk through diversification. On February 28,
1995, the fund's assets spanned a broad range of cities and counties throughout
Arizona. Furthermore, we purchase securities from a variety of municipal
sectors, as the table to the right illustrates.
Our outlook for the fund is positive. Recent economic reports indicate that U.S.
economic growth has stabilized at a healthy and sustainable level, while
inflation has remained subdued. More signs of a slowing economy should result in
a gradual decline in interest rates, which could positively affect bond prices
and thus, the fund's price per share.
About 58% of the state's population resides in the greater Phoenix area, showing
Arizona's shift from rural to urbanized living.+ Currently, Phoenix's capital
improvement program is on schedule, with the main focus on improving the
downtown region.
- -------------------------------------------
FRANKLIN ARIZONA TAX-FREE INCOME FUND
Portfolio Breakdown on February 28, 1995
As a percentage of total net assets
<TABLE>
<CAPTION>
% OF TOTAL
SECTOR NET ASSETS
- -------------------------------------------
<S> <C>
Pre-Refunded 32.1%
- -------------------------------------------
Utilities 24.1%
- -------------------------------------------
Education 8.8%
- -------------------------------------------
Hospitals 8.6%
- -------------------------------------------
Other Revenue 6.5%
- -------------------------------------------
Transportation 6.3%
- -------------------------------------------
Housing 5.3%
- -------------------------------------------
Certificates of Participation 3.0%
- -------------------------------------------
Industrial 2.5%
- -------------------------------------------
General Obligations 1.4%
- -------------------------------------------
Miscellaneous 0.6%
- -------------------------------------------
Health Care 0.4%
- -------------------------------------------
Sales Tax 0.4%
- -------------------------------------------
</TABLE>
For a complete list of portfolio holdings, please see page 49 of this report.
Projects include a new museum, upgrades to the America West Arena, and efforts
to bring a major league baseball team to the area.
+Source: Standard & Poor's Creditweek Municipal, 7/11/94.
7
<PAGE>
================================================================================
PERFORMANCE SUMMARY
The Franklin Arizona Tax-Free Income Fund's share price, as measured by net
asset value, declined from $11.58 on February 28, 1994, to $11.11 on February
28, 1995.
The fund continued to meet its investment objective of providing high current
income to shareholders. For the one-year period ended February 28, 1995, your
fund paid monthly income distributions totaling 63.8 cents ($0.638) per share.++
Due to five years of declining interest rates, it became necessary to adjust
your monthly dividend from 5.5 cents ($0.055) per share to 5.3 cents ($0.053)
per share, effective with the April 1994 distribution. However, we are pleased
to report that the fund's monthly dividend was increased to 5.4 cents ($0.054)
per share effective with the March 1995 distribution. 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 5.59%,
based on an annualization of the new monthly dividend of 5.4 cents ($0.054) per
share and the maximum offering price of $11.60 on February 28, 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
Arizona state personal income tax bracket of 43.8%, you would have to earn 9.95%
from a taxable investment to match your fund's tax-free distribution rate.
(See Appendix for description of Graphic Material 2)
The Franklin Arizona Tax-Free Income Fund provided a total return of +1.67% for
the one-year period ended February 28, 1995. Total return measures the change in
value of an investment during the period indicated, assuming reinvestment of
dividends and capital gains, if any. This calculation does not include the
initial sales charge. Past performance is not predictive of future results.
Since 1987, the Franklin Arizona Tax-Free Income Fund's performance has exceeded
the Consumer Price Index (CPI), keeping your purchasing power well ahead of
inflation -- a primary goal of any investment. The fund, however, underperformed
the unmanaged Lehman Brothers Municipal Bond
++Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distribution may vary, depending on the date
you purchased your shares and any account activity during the month. Income
distributions and total return calculations include all accrued income earned by
the fund during the reporting period.
8
<PAGE>
================================================================================
Index as illustrated by the chart below. The Lehman Index has some inherent
performance differentials over any fund, as it holds no cash in its portfolio
and involves no sales charges or management expenses. In addition, the index
includes municipal securities from across the country while your fund is
composed primarily of Arizona municipal bonds. Of course, an investor cannot
invest directly in an index.
Your fund's managers maintain a long-term investment perspective and we
encourage our shareholders to do the same. While the fund may experience
volatility from time to time, we believe that its performance will be rewarding
over the long term. For example, as the table to the right demonstrates, the
fund has provided an average annual total return of +7.37% since its inception.
FRANKLIN ARIZONA TAX-FREE INCOME FUND
Periods ended February 28, 1995
<TABLE>
<CAPTION>
SINCE
INCEPTION
1-YEAR 5-YEAR (9/1/87)
- --------------------------------------------------------
<S> <C> <C> <C>
Cumulative Total Return(1) 1.67% 45.11% 78.03%
Average Annual
Total Return(2) -2.62% 6.79% 7.37%
</TABLE>
<TABLE>
<S> <C>
Distribution Rate(3) 5.59%
Taxable Equivalent Distribution Rate(4) 9.95%
30-Day Standardized Yield(5) 5.15%
Taxable Equivalent Yield(4) 9.16%
- --------------------------------------------------------
</TABLE>
(1) Cumulative total returns measure the change in value of an investment over
the periods indicated and do not include the maximum 4.25% initial sales charge
stated in the prospectus. See note below.
(2) Average annual total return represents the average annual change in value of
an investment over the specified periods. The figures have been restated to
reflect the maximum 4.25% initial sales charge. See note below.
(3) Based on an annualization of the fund's current 5.4 cent per share monthly
dividend and the maximum offering price of $11.60 on February 28, 1995.
(4) Taxable equivalent distribution rate and yield assume the 1995 maximum
combined federal and Arizona state personal income tax bracket of 43.8%, 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 2/28/95.
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 implemented
a plan of distribution under Rule 12b-1 and eliminated the sales charge on
reinvested dividends, which will affect future performance. 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 is not predictive of future results.
(See Appendix for description of Graphic Material 3)
*This performance graph assumes an initial $10,000 investment and includes the
maximum 4.25% sales charge, all fund expenses and account fees. It also assumes
that your dividends and capital gains were reinvested at net asset value. The
Lehman Brothers Municipal Bond Index includes price appreciation or depreciation
and distributions as a percentage of the original investment. Past performance
cannot guarantee future results.
9
<PAGE>
FRANKLIN COLORADO TAX-FREE INCOME FUND
================================================================================
FUND OBJECTIVE:
Seeks to provide high current income exempt from regular federal and Colorado
state personal income taxes through a diversified portfolio consisting primarily
of Colorado municipal bonds.*
The fund's fiscal year was difficult for municipal bonds and other fixed-income
investments. Rising interest rates caused prices of most bonds to decline, and
the derivative-induced bankruptcy of Orange County, California added to the
volatility in the municipal bond market.
On a positive note, higher interest rates enabled us to sell some of the fund's
lower coupon securities and purchase higher yielding, current coupon bonds. As a
result, the fund's average coupon rose slightly from 6.88% on February 28, 1994,
to 7.07% on February 28, 1995. This action should be significant in helping the
fund increase its income-generating power.
While our investment strategy focuses on income rather than total return, the
fund reported a respectable total return of +1.09% for the fiscal year -- higher
than the average total return of other Colorado municipal bond funds. According
to Lipper Analytical Services, Inc., the average total return of Colorado
municipal bond funds was +0.73% for the year ended February 28, 1995.**
(See Appendix for description of Graphic Material 4)
We remain conservative in our management of the fund. At the end of the fiscal
year, 58% of the fund's securities were rated AAA -- the highest rating possible
- -- by Standard & Poor's, or were judged to be of comparable quality by the
fund's managers. We evaluate each issue on an individual basis, favoring highly
rated "essential service" bonds. These securities tend to have a more reliable
income stream as they are backed by dependable revenue generated from projects
such as schools, 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
*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.
**The fund was ranked #6 out of 15 Colorado municipal bond funds for the
one-year period, and #1 out of 6 funds for the five-year period ended February
28, 1995, as measured by Lipper Analytical Services, Inc., a nationally
recognized mutual fund rating organization. Lipper rankings do not include sales
charges; past expense limitations increased the fund's total returns. Rankings
may have been different if these factors had been considered. Past performance
cannot guarantee future results.
10
<PAGE>
================================================================================
to be very attractive in a municipal cost-cutting environment. Like all mutual
funds, however, the principal value of the fund's holdings as well as the price
of its shares will fluctuate with market conditions.
We also seek to reduce the fund's risk through diversification. On February 28,
1995, the fund's assets spanned a broad range of cities and counties throughout
Colorado. Furthermore, we purchase securities from a variety of municipal
sectors, as the table to the right illustrates.
Our outlook for the fund is positive. Recent economic reports indicate that U.S.
economic growth has stabilized at a healthy and sustainable level, while
inflation has remained subdued. More signs of a slowing economy should
eventually result in a gradual decline in interest rates, which could positively
affect bond prices and thus, the fund's price per share.
Colorado's population growth is accelerating. Fueled by the state's economic
strength, migration to Colorado has been positive for each of the last three
years. The state's economic vitality has been evident through the national
recession and recovery. Colorado has added almost 145,000 new jobs since 1990,
mostly in the services, trade and government sectors.+
Construction employment in the state has been strong, bolstered by development
of the Denver International Airport, the first new airport built in the U.S. in
twenty years. As the nation's largest public works project, DIA brought
thousands of jobs to the Denver area. However, with the completion of the
project, job losses are currently being experienced within the construction
sector. These losses have been absorbed into other public infrastructure
projects and residential housing. Still, this sector is likely to lose jobs as
population growth slows. Consequently, economic projections for 1995 are for
weaker employment growth.
- --------------------------------------------
FRANKLIN COLORADO TAX-FREE INCOME FUND
Portfolio Breakdown on February 28, 1995
As a percentage of total net assets
<TABLE>
<CAPTION>
% OF TOTAL
SECTOR NET ASSETS
- --------------------------------------------
<S> <C>
Pre-Refunded 20.0%
- --------------------------------------------
Hospitals 16.3%
- --------------------------------------------
Housing 13.8%
- --------------------------------------------
Education 11.9%
- --------------------------------------------
Transportation 10.8%
- --------------------------------------------
Utilities 6.0%
- --------------------------------------------
Sales Tax 5.9%
- --------------------------------------------
Certificates of Participation 4.6%
- --------------------------------------------
Health Care 3.8%
- --------------------------------------------
Industrial 2.3%
- --------------------------------------------
Miscellaneous 1.7%
- --------------------------------------------
General Obligations 1.3%
- --------------------------------------------
Tax Allocation 1.0%
- --------------------------------------------
Other Revenue 0.6%
- --------------------------------------------
</TABLE>
For a complete list of portfolio holdings, please see page 56 of this report.
+Source: Standard & Poor's Creditweek Municipal, 9/5/94
11
<PAGE>
================================================================================
PERFORMANCE SUMMARY
The Franklin Colorado Tax-Free Income Fund's share price, as measured by net
asset value, declined from $11.94 on February 28, 1994, to $11.38 on February
28, 1995.
The fund continued to meet its investment objective of providing high current
income to its shareholders. For the one-year period ended February 28, 1995,
your fund paid monthly income distributions totaling 66.0 cents ($0.660) per
share.++ 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 5.55%,
based on an annualization of the current monthly dividend of 5.5 cents ($0.055)
per share and the maximum offering price of $11.89 on February 28, 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 Colorado state personal income tax bracket of 42.6%, you would have
to earn 9.58% from a taxable investment to match your fund's tax-free
distribution rate.
(See Appendix for description of Graphic Material 5)
The Franklin Colorado Tax-Free Income Fund provided a total return of +1.09% for
the one-year period ended February 28, 1995. Total return measures the change in
value of an investment during the period indicated, assuming reinvestment of
dividends and capital gains. This calculation does not include the initial sales
charge. Past performance is not predictive of future results.
Since 1987, the Franklin Colorado Tax-Free Income Fund's performance has
exceeded the Consumer Price Index (CPI), keeping your purchasing power well
ahead of inflation -- a primary goal of any investment. The fund, however, has
slightly underperformed the unmanaged Lehman Brothers Municipal Bond Index as
illustrated by the chart on the following page. The Lehman Index has some
inherent performance differentials over any fund, as
++Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distribution may vary, depending on the date
you purchased your shares and any account activity during the month. Income
distributions and total return calculations include all accrued income earned by
the fund during the reporting period.
12
<PAGE>
================================================================================
it holds no cash in its portfolio and involves no sales charges or management
expenses. In addition, the index includes municipal securities from across the
country while your fund is composed primarily of Colorado municipal bonds. An
investor cannot invest directly in an index.
Your fund's managers maintain a long-term investment perspective and we
encourage our shareholders to do the same. While the fund may experience
volatility from time to time, we believe that its performance will be rewarding
over the long term. For example, as the table to the right demonstrates, the
fund has provided an average annual total return of +7.61% since its inception.
FRANKLIN COLORADO TAX-FREE INCOME FUND
Periods ended February 28, 1995
SINCE
INCEPTION
1-YEAR 5-YEAR (9/1/87)
- --------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
Cumulative Total Return(1) 1.09% 45.11% 81.12%
Average Annual
Total Return(2) -3.21% 6.95% 7.61%
</TABLE>
<TABLE>
<S> <C>
Distribution Rate(3) 5.55%
Taxable Equivalent Distribution Rate(4) 9.58%
30-Day Standardized Yield(5) 5.34%
Taxable Equivalent Yield(4) 9.30%
- --------------------------------------------------------
</TABLE>
(1) Cumulative total returns measure the change in value of an investment over
the periods indicated and do not include the maximum 4.25% initial sales charge
stated in the prospectus. See note below.
(2) Average annual total return represents the average annual change in value of
an investment over the specified periods. The figures have been restated to
reflect the maximum 4.25% initial sales charge. See note below.
(3) Based on an annualization of the fund's current 5.5 cent per share monthly
dividend and the maximum offering price of $11.89 on February 28, 1995.
(4) Taxable equivalent distribution rate and yield assume the 1995 maximum
combined federal and Colorado 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 the
fund's portfolio for the 30 days ended 2/28/95.
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 implemented
a plan of distribution under Rule 12b-1 and eliminated the sales charge on
reinvested dividends, which will affect future performance. 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 is not predictive of future results.
Past expense reductions by the fund's manager increased the fund's total
returns.
(See Appendix for description of Graphic Material 6)
*This performance graph assumes an initial $10,000 investment and includes the
maximum 4.25% sales charge, all fund expenses and account fees. It also assumes
that your dividends and capital gains were reinvested at net asset value. The
Lehman Brothers Municipal Bond Index includes price appreciation or depreciation
and distributions as a percentage of the original investment. Past performance
cannot guarantee future results.
13
<PAGE>
FRANKLIN CONNECTICUT TAX-FREE INCOME FUND
================================================================================
FUND OBJECTIVE:
Seeks to provide high current income exempt from regular federal and Connecticut
state personal income taxes through a diversified portfolio consisting primarily
of Connecticut municipal bonds.*
The fund's fiscal year was difficult for municipal bonds and other fixed-income
investments. Rising interest rates caused prices of most bonds to decline, and
the derivative-induced bankruptcy of Orange County, California added to the
volatility in the municipal bond market.
On a positive note, higher interest rates enabled us to sell some of the fund's
lower coupon securities and purchase higher yielding, current coupon bonds. As a
result, the fund's average coupon rose from 6.65% on February 28, 1994, to 7.02%
on February 28, 1995. This action should be significant in helping the fund
increase its income-generating power.
While our investment strategy focuses on income rather than total return, the
fund reported a total return of +0.40% for the fiscal year -- double the average
total return of other Connecticut municipal bond funds. According to Lipper
Analytical Services, Inc., the average total return of Connecticut municipal
bond funds was +0.20% for the year ended February 28, 1995.**
(See Appendix for description of Graphic Material 7)
Rising interest rates also reduced the yield spread between the various credit
qualities. As a result, we were able to upgrade the fund's average credit
quality without sacrificing much in the way of yield. At the end of the fiscal
year, the percentage of the fund's AAA-rated securities, or securities we judge
to be of comparable quality, had risen to 28% from 16% at the beginning of the
year. The fund's BBB-rated securities declined from almost 30% to 24% on
February 28, 1995.
We evaluate each issue on an individual basis, favoring highly rated "essential
service" bonds. These securities tend to have more reliable income
*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.
The risks of investing in a non-diversified fund, such as increased
susceptibility to adverse economic or regulatory developments, are described in
the prospectus.
**The fund was ranked #7 in total return out of 14 Connecticut municipal bond
funds for the one-year period, and #5 out of 5 funds for the five-year period
ended February 28, 1995, as measured by Lipper Analytical Services, Inc., a
nationally recognized mutual fund rating organization. Lipper rankings do not
include sales charges; past expense limitations increased the fund's total
returns. Rankings may have been different if these factors had been considered.
Past performance cannot guarantee future results.
14
<PAGE>
================================================================================
streams as they are backed by dependable revenue sources generated from projects
such as schools, 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.
Like all mutual funds, however, the principal value of the fund's holdings as
well as the price of its shares will fluctuate with market conditions.
We also seek to reduce the fund's risk by investing the fund's assets in a broad
range of municipalities. On February 28, 1995, the fund's assets spanned a broad
range of cities and counties throughout Connecticut. Furthermore, we purchase
securities from a variety of municipal sectors, as the table to the right
illustrates.
Our outlook for the fund is positive. Recent economic reports indicate that U.S.
economic growth has stabilized at a healthy and sustainable level, while
inflation has remained subdued. More signs of a slowing economy should
eventually result in a gradual decline in interest rates, which could positively
affect bond prices and thus, the fund's price per share.
Connecticut state bond issuance was down almost 60% in 1994, compared with the
prior year. This reduction in supply, coupled with an increase in demand, tended
to mitigate the otherwise negative performance of municipals in the rising
interest rate environment, which typified the first nine months of the fund's
fiscal year. This supply/demand imbalance continued to help strengthen bond
prices during the market's recovery of the last three months. Additionally, with
Connecticut having the highest per capita personal income in the nation, the
state's municipal bonds remain an attractive investment.
Connecticut state operations for the past three years have produced significant
budget surpluses. Debt is manageable and the economy is stabilizing, although
downsizing continues to pressure the defense, insurance, and financial
industries. Governor John G. Rowland's proposed budget includes a decrease in
corporate tax rates to attract business to the state, a modest tax rate
reduction on a portion of residents' wages, and the cutting of state spending
for the first time in 35 years.
- -----------------------------------------
FRANKLIN CONNECTICUT TAX-FREE INCOME FUND
Portfolio Breakdown on February 28, 1995
As a percentage of total net assets
<TABLE>
<CAPTION>
% OF TOTAL
SECTOR NET ASSETS
- -----------------------------------------
<S> <C>
Housing 21.6%
- -----------------------------------------
Utilities 19.0%
- -----------------------------------------
General Obligations 17.9%
- -----------------------------------------
Hospitals 15.3%
- -----------------------------------------
Pre-Refunded 10.7%
- -----------------------------------------
Education 8.9%
- -----------------------------------------
Health Care 2.9%
- -----------------------------------------
Transportation 2.3%
- -----------------------------------------
Industrial 1.4%
- -----------------------------------------
</TABLE>
For a complete list of portfolio holdings, please see page 60 of this report.
15
<PAGE>
================================================================================
PERFORMANCE SUMMARY
The Franklin Connecticut Tax-Free Income Fund's share price, as measured by net
asset value, declined from $11.23 on February 28, 1994, to $10.64 on February
28, 1995.
The fund continued to meet its investment objective of providing high current
income to its shareholders. For the one-year period ended February 28, 1995,
your fund paid monthly income distributions totaling 61.2 cents ($0.612) per
share.++ Dividends will vary based on the earnings of the fund's portfolio, and
past distributions are not necessarily indicative of future results.
At the end of the reporting period, your fund's distribution rate was 5.51%,
based on an annualization of the current monthly dividend of 5.1 cents ($0.051)
per share and the maximum offering price of $11.11 on February 28, 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 Connecticut state personal income tax bracket of 42.3%, you would
have to earn 9.55% from a taxable investment to match your fund's tax-free
distribution rate.
(See Appendix for description of Graphic Material 8)
The Franklin Connecticut Tax-Free Income Fund provided a total return of +0.40%
for the one-year period ended February 28, 1995. Total return measures the
change in value of an investment during the period indicated, assuming
reinvestment of dividends and capital gains, if any. This calculation does not
include the initial sales charge. Past performance is not predictive of future
results.
Since 1988, the Franklin Connecticut Tax-Free Income Fund's performance has
exceeded the Consumer Price Index (CPI), keeping your purchasing power well
ahead of inflation -- a primary goal of any investment. The fund, however,
underperformed the unmanaged Lehman Brothers Municipal Bond Index as illustrated
by the chart on the following page. The Lehman Index has some inherent
performance differentials over any fund, as it holds no
++Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distribution may vary, depending on the date
you purchased your shares and any account activity during the month. Income
distributions and total return calculations include all accrued income earned by
the fund during the reporting period.
16
<PAGE>
================================================================================
cash in its portfolio and involves no sales charges or management expenses. In
addition, the index includes municipal securities from across the country while
your fund is composed primarily of Connecticut municipal bonds. Of course, an
investor cannot invest directly in an index.
Your fund's managers maintain a long-term investment perspective and we
encourage our shareholders to do the same. While the fund may experience
volatility from time to time, we believe that its performance will be rewarding
over the long term. For example, as the table to the right demonstrates, the
fund has provided an average annual total return of +6.37% since its inception.
FRANKLIN CONNECTICUT TAX-FREE INCOME FUND
Periods ended February 28, 1995
<TABLE>
<CAPTION>
SINCE
INCEPTION
1-YEAR 5-YEAR (10/3/88)
- --------------------------------------------------------
<S> <C> <C> <C>
Cumulative Total Return(1) 0.40% 39.33% 55.07%
Average Annual
Total Return(2) -3.88% 5.93% 6.37%
</TABLE>
<TABLE>
<S> <C>
Distribution Rate(3) 5.51%
Taxable Equivalent Distribution Rate(4) 9.55%
30-Day Standardized Yield(5) 5.44%
Taxable Equivalent Yield(4) 9.43%
- --------------------------------------------------------
</TABLE>
(1) Cumulative total returns measure the change in value of an investment over
the periods indicated and do not include the maximum 4.25% initial sales charge
stated in the prospectus. See note below.
(2) Average annual total return represents the average annual change in value of
an investment over the specified periods. The figures have been restated to
reflect the maximum 4.25% initial sales charge. See note below.
(3) Based on an annualization of the fund's current 5.1 cent per share monthly
dividend and the maximum offering price of $11.11 on February 28, 1995.
(4) Taxable equivalent distribution rate and yield assume the 1995 maximum
combined federal and Connecticut state income tax bracket of 42.3%, 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 2/28/95.
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 implemented
a plan of distribution under Rule 12b-1 and eliminated the sales charge on
reinvested dividends, which will affect future performance. 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 is not predictive of future results.
Past expense reductions by the fund's manager increased the fund's total return.
(See Appendix for description of Graphic Material 9)
*This performance graph assumes an initial $10,000 investment and includes the
maximum 4.25% sales charge, all fund expenses and account fees. It also assumes
that your dividends and capital gains were reinvested at net asset value. The
Lehman Brothers Municipal Bond Index includes price appreciation or depreciation
and distributions as a percentage of the original investment. Past performance
cannot guarantee future results.
17
<PAGE>
FRANKLIN INDIANA TAX-FREE INCOME FUND
================================================================================
FUND OBJECTIVE:
Seeks to provide high current income exempt from regular federal and Indiana
state personal income taxes through a diversified portfolio consisting primarily
of Indiana municipal bonds.*
The fund's fiscal year was difficult for municipal bonds and other fixed-income
investments. Rising interest rates caused prices of most bonds to decline, and
the derivative-induced bankruptcy of Orange County, California added to the
volatility in the municipal bond market.
We were able to take advantage of the higher interest rate environment during
the last quarter of 1994, as the fund's higher yield and coupon illustrate: the
fund's average coupon rose to 7.22% on February 28, 1995, from 6.93% on February
28, 1994, and its 30-day yield rose significantly to 5.21% on February 28, 1995,
from 4.32% a year earlier. Modest increases in the fund's dividend rate are
possible in the future should this trend continue.
Rising interest rates also reduced the yield spread between various credit
qualities. As a result, we were able to upgrade the fund's average credit
quality without sacrificing much in the way of yield. At the end of the fiscal
year, the percentage of the fund's securities rated AAA, or judged to be of
comparable quality by the fund's managers, had risen to 51.3% from 33% at the
beginning of the year. Increasing the percentage of pre-refunded bonds over the
reporting period from 23% to 28% of total net assets contributed to the fund's
higher credit quality.
We evaluate each issue on an individual basis, favoring highly rated "essential
service" bonds. These securities tend to have a more reliable income stream as
they are backed by dependable revenue generated from projects such as schools,
utilities, and water, power and sewer projects, to name a few. As a result,
these bonds tend to be less affected by budgetary and political changes,
(See Appendix for description of Graphic Material 10)
*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.
18
<PAGE>
================================================================================
and are believed to be very attractive in a municipal cost-cutting environment.
Like all mutual funds, however, the principal value of the fund's holdings as
well as the price of its shares will fluctuate with market conditions.
We also seek to reduce the fund's risk through diversification. On February 28,
1995, the fund's assets spanned a broad range of cities and counties throughout
Indiana. Furthermore, we purchase securities from a variety of municipal
sectors, as the table to the right illustrates.
Our outlook for the fund is positive. Recent economic reports indicate that U.S.
economic growth has stabilized at a healthy and sustainable level, while
inflation has remained subdued. More signs of a slowing economy should
eventually result in a gradual decline in interest rates, which could positively
affect bond prices and thus, the fund's price per share.
Indiana's economy continues to rely heavily on its dominant manufacturing
sector. The state demonstrated significant volatility in the 1980s due to its
dependency on durable manufacturing, particularly in the steel and automobile
industries. Over the last two years, however, Indiana has experienced strong
employment and income growth, exceeding that of its neighboring Great Lakes
states. The manufacturing sector has seen positive growth, fueled by the
national economic recovery.**
Growth in the manufacturing sector has contributed to growth in the services and
trade industries within the state. In addition, Indiana -- and Indianapolis in
particular -- has become an ideal low-cost alternative for professional services
and office support operations.
- --------------------------------------------
FRANKLIN INDIANA TAX-FREE INCOME FUND
Portfolio Breakdown on February 28, 1995
As a percentage of total net assets
<TABLE>
<CAPTION>
% OF TOTAL
SECTOR NET ASSETS
- --------------------------------------------
<S> <C>
Pre-Refunded 28.2%
- --------------------------------------------
Hospitals 23.1%
- --------------------------------------------
Education 15.5%
- --------------------------------------------
Other Revenue 11.5%
- --------------------------------------------
Industrial 9.2%
- --------------------------------------------
Utilities 6.3%
- --------------------------------------------
Certificates of Participation 4.6%
- --------------------------------------------
Housing 1.3%
- --------------------------------------------
Transportation 0.2%
- --------------------------------------------
Tax Assessment Bonds 0.1%
- --------------------------------------------
</TABLE>
FOR A COMPLETE LIST OF PORTFOLIO HOLDINGS, PLEASE SEE PAGE 63 OF THIS REPORT.
**Source: Standard & Poor's Creditweek Municipal, 2/21/94.
19
<PAGE>
================================================================================
PERFORMANCE SUMMARY
The Franklin Indiana Tax-Free Income Fund's share price, as measured by net
asset value, declined from $12.01 on February 28, 1994, to $11.40 on February
28, 1995.
The fund continued to meet its investment objective of providing high current
income to shareholders. For the one-year period ended February 28, 1995, your
fund paid monthly income distributions totaling 66.0 cents ($0.660) per share.+
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 5.54%,
based on an annualization of the current monthly dividend of 5.5 cents ($0.055)
per share and the maximum offering price of $11.91 on February 28, 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 Indiana state personal income tax bracket of 41.7%, you would have
to earn 9.50% from a taxable investment to match your fund's tax-free
distribution rate.
(See Appendix for description of Graphic Material 11)
The Franklin Indiana Tax-Free Income Fund provided a total return of +0.62% for
the one-year period ended February 28, 1995. Total return measures the change in
value of an investment during the period indicated, assuming reinvestment of
dividends and capital gains, if any. This calculation does not include the
initial sales charge. Past performance is not predictive of future results.
Since 1987, the Franklin Indiana Tax-Free Income Fund's performance has exceeded
the Consumer Price Index (CPI), keeping your purchasing power well ahead of
inflation -- a primary goal of any investment. The fund, however, has slightly
underperformed the unmanaged Lehman Brothers Municipal Bond Index as illustrated
by the chart on the following page. The Lehman Index has some inherent
performance differentials over any fund, as it
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distribution may vary, depending on the date
you purchased your shares and any account activity during the month. Income
distributions and total return calculations include all accrued income earned by
the fund during the reporting period.
20
<PAGE>
================================================================================
holds no cash in its portfolio and involves no sales charges or management
expenses. In addition, the index includes municipal securities from across the
country while your fund is composed primarily of Indiana municipal bonds. Of
course, an investor cannot invest directly in an index.
Your fund's managers maintain a long-term investment perspective and we
encourage our shareholders to do the same. While the fund may experience
volatility from time to time, we believe that its performance will be rewarding
over the long term. For example, as the table to the right demonstrates, the
fund has provided an average annual total return of +7.76% since its inception.
FRANKLIN INDIANA TAX-FREE INCOME FUND
Periods ended February 28, 1995
<TABLE>
<CAPTION>
SINCE
INCEPTION
1-YEAR 5-YEAR (9/1/87)
- --------------------------------------------------------
<S> <C> <C> <C>
Cumulative Total Return(1) 0.62% 45.73% 82.94%
Average Annual
Total Return(2) -3.64% 6.89% 7.76%
</TABLE>
<TABLE>
<S> <C>
Distribution Rate(3) 5.54%
Taxable Equivalent Distribution Rate(4) 9.50%
30-Day Standardized Yield(5) 5.21%
Taxable Equivalent Yield(4) 8.94%
- --------------------------------------------------------
</TABLE>
(1) Cumulative total returns measure the change in value of an investment over
the periods indicated and do not include the maximum 4.25% initial sales charge
stated in the prospectus. See note below.
(2) Average annual total return represents the average annual change in value of
an investment over the specified periods. The figures have been restated to
reflect the maximum 4.25% initial sales charge. See note below.
(3) Based on an annualization of the fund's current 5.5 cent per share monthly
dividend and the maximum offering price of $11.91 on February 28, 1995.
(4) Taxable equivalent distribution rate and yield assume the 1995 maximum
combined federal and Indiana state income tax bracket of 41.7%, 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 2/28/95.
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 implemented
a plan of distribution under Rule 12b-1 and eliminated the sales charge on
reinvested dividends, which will affect future performance. 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 is not predictive of future results. Past expense reductions by the
fund's manager increased the fund's total returns.
(See Appendix for description of Graphic Material 12)
*This performance graph assumes an initial $10,000 investment and includes the
maximum 4.25% sales charge, all fund expenses and account fees. It also assumes
that your dividends and capital gains were reinvested at net asset value. The
Lehman Brothers Municipal Bond Index includes price appreciation or depreciation
and distributions as a percentage of the original investment. Past performance
cannot guarantee future results.
21
<PAGE>
FRANKLIN NEWJERSEY TAX-FREE INCOME FUND
================================================================================
FUND OBJECTIVE:
Seeks to provide high current income exempt from regular federal and New Jersey
state personal income taxes through a diversified portfolio consisting primarily
of New Jersey municipal bonds.*
The fund's fiscal year was difficult for municipal bonds and other fixed-income
investments. Rising interest rates caused prices of most bonds to decline, and
the derivative-induced bankruptcy of Orange County, California added to the
volatility in the municipal bond market.
During the fiscal year, the fund's average coupon rose slightly from 6.73% on
February 28, 1994, to 6.83% on February 28, 1995. This action should be
significant in helping the fund increase its income-generating power.
While our investment strategy focuses on income rather than total return, the
fund reported a respectable total return of +1.15% for the fiscal year --
significantly higher than the average total return of other New Jersey municipal
bond funds. While you may find this surprising, the average total return of New
Jersey municipal bond funds was 0.00% for the year ended February 28, 1995,
according to Lipper Analytical Services, Inc.** The fund's total return placed
it eighth among 33 New Jersey municipal bond funds.
(See Appendix for description of Graphic Material 13)
We remain conservative in our management of the fund. At the end of the fiscal
year, over 50% of the fund's securities were rated AAA -- the highest rating
possible -- by Standard & Poor's, or were judged to be of comparable quality by
the fund's managers. We evaluate each issue on an individual basis, favoring
highly rated "essential service" bonds. These securities tend to have a more
reliable income stream as they are backed by dependable revenue generated from
schools, 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.
*For investors subject to 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.
**The fund was ranked #8 out of 33 New Jersey municipal bond funds for the
one-year period, and #9 out of 10 funds for the five-year period ended February
28, 1995, as measured by Lipper Analytical Services, Inc., a nationally
recognized mutual fund rating organization. Lipper rankings do not include sales
charges and may have been different if these factors had been considered. Past
performance cannot guarantee future results.
22
<PAGE>
================================================================================
Like all mutual funds, however, the principal value of the fund's holdings as
well as the price of its shares will fluctuate with market conditions.
We also seek to reduce the fund's risk through diversification. On February 28,
1995, the fund's assets spanned a broad range of cities and counties throughout
New Jersey. Furthermore, we purchase securities from a variety of municipal
sectors, as the following table illustrates.
Our outlook for the fund is positive. Recent economic reports indicate that U.S.
economic growth has stabilized at a healthy and sustainable level, while
inflation has remained subdued. More signs of a slowing economy should
eventually result in a gradual decline in interest rates, which could positively
affect bond prices and thus, the fund's price per share.
Within the state, "flow control" has been a hot topic for the past few years.
Current state franchise laws designate where haulers must dispose of their
waste. This allows many municipal resource recovery plants to survive, since
garbage inflow is guaranteed; however, these restrictions have been recently
challenged. Currently, the state regulators are awaiting a decision from the
local district courts to determine the constitutionality of these laws. Past
rulings have found flow control to be in violation of interstate commerce laws.
If flow control is deemed unconstitutional, many of the municipal waste
facilities will face hardships, as those who cannot cut rates will cease being
competitive.
The fund's exposure to this sector is approximately 4.0% of total net assets.
Rating agencies have downgraded a number of issues that were investment grade at
the time of issuance. These downgrades have increased the fund's percentage of
Ba-rated securities to approximately 2.5% of total net assets. However, these
ratings may be upgraded to investment grade pending the decision of the local
courts.
- -------------------------------------------
FRANKLIN NEW JERSEY TAX-FREE INCOME FUND
Portfolio Breakdown on February 28, 1995
As a percentage of total net assets
<TABLE>
<CAPTION>
% OF TOTAL
SECTOR NET ASSETS
- -------------------------------------------
<S> <C>
Utilities 20.0%
- -------------------------------------------
Pre-Refunded 18.2%
- -------------------------------------------
Hospitals 15.3%
- -------------------------------------------
Transportation 9.9%
- -------------------------------------------
Housing 9.8%
- -------------------------------------------
Education 7.4%
- -------------------------------------------
Other Revenue 6.6%
- -------------------------------------------
Certificates of Participation 4.3%
- -------------------------------------------
Industrial 3.5%
- -------------------------------------------
General Obligations 2.6%
- -------------------------------------------
Health Care 2.4%
- -------------------------------------------
</TABLE>
For a complete list of portfolio holdings, please see page 66 of this report.
23
<PAGE>
================================================================================
PERFORMANCE SUMMARY
The Franklin New Jersey Tax-Free Income Fund's share price, as measured by net
asset value, declined from $11.82 on February 28, 1994, to $11.28 on February
28, 1995.
The fund continued to meet its investment objective of providing high current
income to its shareholders. For the one-year period ended February 28, 1995,
your fund paid monthly income distributions totaling 64.9 cents ($0.649) per
share.++ Due to reduced income brought on by five years of declining interest
rates, it became necessary to adjust the monthly dividend from 5.6 cents
($0.056) per share to 5.5 cents ($0.055) per share in April of 1994. It was
necessary to further adjust the monthly dividend to 5.3 cents ($0.053) per
share, effective with the September 1994 dividend. Dividends will vary based on
the earnings of the fund's portfolio, and past distributions are not necessarily
predictive of future results.
(See Appendix for description of Graphic Material 14)
At the end of the reporting period, your fund's distribution rate was 5.40%,
based on an annualization of the current monthly dividend of 5.3 cents ($0.053)
per share and the maximum offering price of $11.78 on February 28, 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 New Jersey state personal income tax bracket of 43.6%, you would
have to earn 9.57% from a taxable investment to match your fund's tax-free
distribution rate.
The Franklin New Jersey Tax-Free Income Fund provided a total return of +1.15%
for the one-year period ended February 28, 1995. Total return measures the
change in value of an investment during the period indicated, assuming
reinvestment of dividends and capital gains, if any. This calculation does not
include the initial sales charge. Past performance is not predictive of future
results.
Since 1988, the Franklin New Jersey Tax-Free Income Fund's performance has
exceeded the Consumer Price Index (CPI), keeping your purchasing power well
ahead of inflation -- a primary goal of any investment. The fund, however,
underperformed.
++ Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distribution may vary, depending on the
date you purchased your shares and any account activity during the month.
Income distributions and total return calculations include all accrued income
earned by the fund during the reporting period.
24
<PAGE>
================================================================================
the unmanaged Lehman Brothers Municipal Bond Index as illustrated by the chart
below. The Lehman Index has some inherent performance differentials over any
fund, as it holds no cash in its portfolio and involves no sales charges or
management expenses. In addition, the index includes municipal securities from
across the country while your fund is composed primarily of New Jersey municipal
bonds. An investor cannot invest directly in an index.
Your fund's managers maintain a long-term investment perspective and we
encourage our shareholders to do the same. While the fund may experience
volatility from time to time, we believe that its performance will be rewarding
over the long term. For example, as the table to the right demonstrates, the
fund has provided an average annual total return of +7.60% since its inception.
(See Appendix for description of Graphic Material 15)
*This performance graph assumes an initial $10,000 investment and includes the
maximum 4.25% sales charge, all fund expenses and account fees. It also assumes
that your dividends and capital gains were reinvested at net asset value. The
Lehman Brothers Municipal Bond Index includes price appreciation or depreciation
and distributions as a percentage of the original investment. Past performance
cannot guarantee future results.
FRANKLIN NEW JERSEY TAX-FREE INCOME FUND
Periods ended February 28, 1995
<TABLE>
<CAPTION>
SINCE
INCEPTION
1-YEAR 5-YEAR (5/12/88)
- ----------------------------------------------------------
<S> <C> <C> <C>
Cumulative Total Return(1) 1.15% 44.42% 71.91%
Average Annual
Total Return(2) -3.11% 6.70% 7.60%
</TABLE>
<TABLE>
<S> <C>
Distribution Rate(3) 5.40%
Taxable Equivalent Distribution Rate(4) 9.57%
30-Day Standardized Yield(5) 5.33%
Taxable Equivalent Yield(4) 9.45%
- ----------------------------------------------------------
</TABLE>
(1) Cumulative total returns measure the change in value of an investment over
the periods indicated and do not include the maximum 4.25% initial sales charge
stated in the prospectus. See note below.
(2) Average annual total return represents the average annual change in value of
an investment over the specified periods. The figures have been restated to
reflect the maximum 4.25% initial sales charge. See note below.
(3) Based on an annualization of the fund's current 5.3 cent per share monthly
dividend and the maximum offering price of $11.78 on February 28, 1995.
(4) Taxable equivalent distribution rate and yield assume the 1995 maximum
combined federal and New Jersey state income tax bracket of 43.6%, 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 2/28/95.
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 implemented
a plan of distribution under Rule 12b-1 and eliminated the sales charge on
reinvested dividends, which will affect future performance. 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 is not predictive of future results.
25
<PAGE>
FRANKLIN OREGON TAX-FREE INCOME FUND
================================================================================
FUND OBJECTIVE:
Seeks to provide high current income exempt from regular federal and Oregon
state personal income taxes through a diversified portfolio consisting primarily
of Oregon municipal bonds.*
The fund's fiscal year was difficult for municipal bonds and other fixed-income
investments. Rising interest rates caused prices of most bonds to decline, and
the derivative-induced bankruptcy of Orange County, California added to the
volatility in the municipal bond market.
On a positive note, higher interest rates enabled us to sell some of the fund's
lower coupon securities and purchase higher yielding current coupon bonds. As a
result, the fund's average coupon rose slightly from 6.51% on February 28, 1994,
to 6.59% on February 28, 1995. This action should be significant in helping the
fund increase its income-generating power. In fact, we are pleased to report
that the fund's monthly dividend increased from 5.1 cents per share to 5.2 cents
per share, effective with the December 1994 distribution.
While our investment strategy focuses on income rather than total return, the
fund reported a respectable total return of +1.39% for the fiscal year -- more
than eight times the average total return of other Oregon municipal bond funds.
According to Lipper Analytical Services, Inc., the average total return of
Oregon municipal bond fundswas +0.16% for the year ended February 28, 1995.**
The fund's total return placed it third among 12 Oregon municipal bond funds.
(See Appendix for description of Graphic Material 16)
We remain conservative in our management of the fund. At the end of the fiscal
year, 46% of the fund's securities were rated AAA -- the highest rating possible
- -- by Standard & Poor's, or were judged to be of comparable quality by the
fund's managers. We evaluate each issue on an individual basis, favoring highly
rated "essential service" bonds. These securities tend to have a more reliable
income stream as they are backed by dependable revenue generated from projects
such as schools, 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.
Like all mutual funds, however, the princi-
*For all investors subject to 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.
**The fund was ranked #3 out of 12 Oregon tax-free income funds for the one-year
period, and #1 out of 5 funds for the five-year period ended February 28, 1995,
as measured by Lipper Analytical Services, Inc., a nationally recognized mutual
fund rating organization. Lipper rankings do not include sales charges and may
have been different if these factors had been considered. Past performance
cannot guarantee future results.
26
<PAGE>
================================================================================
pal value of the fund's holdings as well as the price of its shares will
fluctuate with market conditions.
We also seek to reduce the fund's risk through diversification. On February 28,
1995, the fund's assets spanned a broad range of cities and counties throughout
Oregon. Furthermore, we purchase securities from a variety of municipal sectors,
as the table to the right illustrates.
Our outlook for the fund is positive. Recent economic reports indicate that U.S.
economic growth has stabilized at a healthy and sustainable level, while
inflation has remained subdued. More signs of a slowing economy should
eventually result in a gradual decline in interest rates, which could positively
affect bond prices and thus, the fund's price per share.
Oregon's economy is enjoying a broad based upward trend. While the timber and
logging industries have plateaued, computer and other high-technology industries
have more than made up the difference. The state has enjoyed a steady influx of
population for the past several years, and the per capita income of Oregon's
residents has risen.++ As individuals enjoy more opportunities to reside and
work away from the home office, states like Oregon -- with beautiful coast
lines, and scenic mountain and river areas -- will draw many of the nation's
most talented workers.
++Source: Standard & Poor's Creditweek Municipal, September 12, 1994.
<TABLE>
<CAPTION>
FRANKLIN OREGON TAX-FREE INCOME FUND
Portfolio Breakdown on February 28, 1995
As a percentage of total net assets
% OF TOTAL
SECTOR NET ASSETS
- ----------------------------------------------------
<S> <C>
Hospitals 20.7%
- ----------------------------------------------------
Utilities 16.3%
- ----------------------------------------------------
Housing 15.8%
- ----------------------------------------------------
Pre-Refunded 13.8%
- ----------------------------------------------------
General Obligations 9.1%
- ----------------------------------------------------
Education 6.7%
- ----------------------------------------------------
Transportation 6.1%
- ----------------------------------------------------
Industrial 4.2%
- ----------------------------------------------------
Certificates of Participation 3.3%
- ----------------------------------------------------
Other Revenue 1.7%
- ----------------------------------------------------
Health Care 1.4%
- ----------------------------------------------------
Tax Allocation Bonds 0.9%
</TABLE>
For a complete list of portfolio holdings, please see page 71 of this report.
Bond issuance in Oregon has been uneven. As the state held elections in November
1994, citizens dealt with three amendments to their constitution. These
amendments were not successful, but by being on the ballot and being debated in
the media, the flow of bond finance was disrupted and somewhat volatile. Looking
forward, Oregon should continue to enjoy the benefits of a healthy national
economy, and move forward at a strong economic pace.
27
<PAGE>
================================================================================
PERFORMANCE SUMMARY
The Franklin Oregon Tax-Free Income Fund's share price, as measured by net asset
value, declined from $11.70 on February 28, 1994, to $11.22 on February 28,
1995.
The fund continued to meet its investment objective of providing high current
income to its shareholders. For the one-year period ended February 28, 1995,
your fund paid monthly income distributions totaling 61.5 cents ($0.615) per
share.+ We are pleased to report that, due to the fund's increased income, we
were able to raise the monthly dividend from 5.1 cents ($0.051) per share to 5.2
cents ($0.052) per share, effective with the December 1994 distribution.
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
5.32%, based on an annualization of the current monthly dividend of 5.2 cents
($0.052) per share and the maximum offering price of $11.72 on February 28,
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 45.0% combined federal and Oregon state personal income tax bracket,
you would have to earn 9.69% from a taxable investment to match your fund's
tax-free distribution rate.
(See Appendix for description of Graphic Material 17)
The Franklin Oregon Tax-Free Income Fund provided a total return of +1.39% for
the one-year period ended February 28, 1995. Total return measures the change in
value of an investment during the period indicated, assuming reinvestment of
dividends and capital gains, if any. This calculation does not include the
initial sales charge. Past performance is not predictive of future results.
Since 1988, the Franklin Oregon Tax-Free Income Fund's performance has exceeded
the Consumer Price Index (CPI), keeping your purchasing power well ahead of
inflation -- a primary goal of any investment. The fund, however, underperformed
the unmanaged Lehman Brothers Municipal Bond Index as illustrated by the chart
on the following page. The Lehman Index has some inherent per-
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distribution may vary, depending on the date
you purchased your shares and any account activity during the month. Income
distributions and total return calculations include all accrued income earned by
the fund during the reporting period.
28
<PAGE>
================================================================================
formance differentials over any fund, as it holds no cash in its portfolio and
involves no sales charges or management expenses. In addition, the index
includes municipal securities from across the country while your fund is
composed primarily of Oregon municipal bonds. An investor cannot invest directly
in an index.
Your fund's managers maintain a long-term investment perspective and we
encourage our shareholders to do the same. While the fund may experience
volatility from time to time, we believe that its performance will be rewarding
over the long term. For example, as the table to the right demonstrates, the
fund has provided an average annual total return of +6.93% since its inception.
(See Appendix for description of Graphic Material 18)
*This performance graph assumes an initial $10,000 investment and includes the
maximum 4.25% sales charge, all fund expenses and account fees. It also assumes
that your dividends and capital gains were reinvested at net asset value. The
Lehman Brothers Municipal Bond Index includes price appreciation or depreciation
and distributions as a percentage of the original investment. Past performance
cannot guarantee future results.
FRANKLIN OREGON TAX-FREE INCOME FUND
Periods ended February 28, 1995
<TABLE>
<CAPTION>
SINCE
INCEPTION
1-YEAR 5-YEAR (9/1/87)
- --------------------------------------------------------
<S> <C> <C> <C>
Cumulative Total Return(1) 1.39% 43.08% 72.65%
Average Annual
Total Return(2) -2.92% 6.50% 6.93%
</TABLE>
<TABLE>
<S> <C>
Distribution Rate(3) 5.32%
Taxable Equivalent Distribution Rate(4) 9.69%
30-Day Standardized Yield(5) 5.23%
Taxable Equivalent Yield(4) 9.52%
- --------------------------------------------------------
</TABLE>
(1) Cumulative total returns measure the change in value of an investment over
the periods indicated and do not include the maximum 4.25% initial sales charge
stated in the prospectus. See note below.
(2) Average annual total return represents the average annual change in value of
an investment over the specified periods. The figures have been restated to
reflect the maximum 4.25% initial sales charge. See note below.
(3) Based on an annualization of the fund's current 5.2 cent per share monthly
dividend and the maximum offering price of $11.72 on February 28, 1995.
(4) Taxable equivalent distribution rate and yield assume the 1995 maximum 45.0%
combined federal and Oregon state income tax bracket, 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 2/28/95.
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 implemented
a plan of distribution under Rule 12b-1 and eliminated the sales charge on
reinvested dividends, which will affect future performance. 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 is not predictive of future results.
29
<PAGE>
FRANKLIN PENNSYLVANIA TAX-FREE INCOME FUND
================================================================================
FUND OBJECTIVE:
Seeks to provide high current income exempt from regular federal and
Pennsylvania state personal income taxes through a diversified portfolio
consisting primarily of Pennsylvania municipal bonds.* The fund's shares are
also free from Pennsylvania personal property taxes.
The fund's fiscal year was difficult for municipal bonds and other fixed-income
investments. Rising interest rates caused prices of most bonds to decline, and
the derivative-induced bankruptcy of Orange County, California added to the
volatility in the municipal bond market.
As bond yields increased, we took the opportunity to sell some of the fund's
pre-refunded bonds at a premium, and bought current coupon bonds, a strategy
which enabled us to slightly increase the fund's income. In response, the fund's
average coupon rose slightly from 7.13% on February 28, 1994, to 7.18% on
February 28, 1995. This allowed us to increase the fund's monthly dividend from
5.1 cents per share to 5.2 cents per share, effective with the March 1995
distribution. Dividends will vary based on the fund's earnings, and past
distributions are not indicative of future trends.
(See Appendix for description of Graphic Material 19)
While our investment strategy focuses on income rather than total return, the
fund reported a respectable total return of +2.25% for the one year period --
more than triple the average total return of other Pennsylvania municipal bond
funds. According to Lipper Analytical Services, Inc., the average total return
of Pennsylvania municipal bond funds was +0.66% for the year ended February 28,
1995. The fund's total return placed it fifth among 45 Pennsylvania municipal
bond funds.**
*For all 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.
**The fund was ranked #5 out of 46 Pennsylvania municipal bond funds for the
one-year period, and #7 out of 45 funds for the five-year period ended February
28, 1995, as measured by Lipper Analytical Services, Inc., a nationally
recognized mutual fund rating organization. Lipper rankings do not include sales
charges and past expense limitations increased the fund's total returns.
Rankings may have been different if these factors had been considered. Past
performance cannot guarantee future results.
30
<PAGE>
================================================================================
We remain conservative in our management of the fund. At the end of the fiscal
year, over 40% of the fund's securities were rated AAA -- the highest rating
possible -- by Standard & Poor's, or were judged to be of comparable quality by
the fund's managers. We evaluate each issue on an individual basis, favoring
highly rated "essential service" bonds. These securities tend to have a more
reliable income stream as they are backed by dependable revenue generated from
projects such as schools, utilities, and water, power and sewer 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. Like all mutual funds, however, the principal value of
the fund's holdings as well as the price of its shares will fluctuate with
market conditions.
We also seek to reduce the fund's risk through diversification. On February 28,
1995, the fund's assets spanned a broad range of cities and counties throughout
Pennsylvania. Furthermore, we purchase securities from a variety of municipal
sectors, as the table to the right illustrates.
<TABLE>
<CAPTION>
FRANKLIN PENNSYLVANIA TAX-FREE INCOME FUND
Portfolio Breakdown on February 28, 1995
As a percentage of total net assets
% OF TOTAL
SECTOR NET ASSETS
- -----------------------------------------------------------
<S> <C>
Utilities 25.1%
- -----------------------------------------------------------
Pre-Refunded 25.0%
- -----------------------------------------------------------
Housing 16.8%
- -----------------------------------------------------------
Hospitals 14.0%
- -----------------------------------------------------------
Education 8.5%
- -----------------------------------------------------------
General Obligations 2.7%
- -----------------------------------------------------------
Other Revenue 2.5%
- -----------------------------------------------------------
Miscellaneous 2.4%
- -----------------------------------------------------------
Health Care 1.4%
- -----------------------------------------------------------
Industrial 1.0%
- -----------------------------------------------------------
Transportation 0.6%
</TABLE>
For a complete list of portfolio holdings, please see page 76 of this report.
Our outlook for the fund is positive. There was a lack of new supply in the
state in 1994, with municipal bond issuance down 74.5% from 1993. This lack of
supply, coupled with a strong demand for tax-exempt income, should help support
the prices of Pennsylvania bonds.
31
<PAGE>
================================================================================
PERFORMANCE SUMMARY
The Franklin Pennsylvania Tax-Free Income Fund's share price, as measured by net
asset value, declined from $10.56 on February 28, 1994, to $10.16 on February
28, 1995.
The fund continued to meet its investment objective of providing high current
income to its shareholders. For the one-year period ended February 28, 1995,
your fund paid monthly income distributions totaling 61.2 cents ($0.612) per
share.+ We are pleased to report that the fund's monthly dividend was increased
to 5.2 cents ($0.052) per share from 5.1 cents ($0.051) per share, effective
with the March 1995 distribution. 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 5.88%,
based on an annualization of the new monthly dividend of 5.2 cents ($0.052) per
share and the maximum offering price of $10.61 on February 28, 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
Pennsylvania state personal income tax bracket of 41.3%, you would have to earn
10.02% from a taxable investment to match your fund's tax-free distribution
rate.
(See Appendix for description of Graphic Material 20)
The Franklin Pennsylvania Tax-Free Income Fund provided a total return of +2.25%
for the one-year period ended February 28, 1995. Total return measures the
change in value of an investment during the period indicated, assuming
reinvestment of dividends and capital gains, if any. This calculation does not
include the initial sales charge. Past performance is not predictive of future
results.
Since 1988, the Franklin Pennsylvania Tax-Free Income Fund's performance has
exceeded the Consumer Price Index (CPI), keeping your purchasing power well
ahead of inflation -- a primary goal of any investment. The fund, however,
underperformed
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distribution may vary, depending on the date
you purchased your shares and any account activity during the month. Income
distributions and total return calculations include all accrued income earned by
the fund during the reporting period.
32
<PAGE>
================================================================================
the unmanaged Lehman Brothers Municipal Bond Index as illustrated by the chart
below. The Lehman Index has some inherent performance differentials over any
fund, as it holds no cash in its portfolio and involves no sales charges or
management expenses. In addition, the index includes municipal securities from
across the country while your fund is composed primarily of Pennsylvania
municipal bonds. An investor cannot invest directly in an index.
Your fund's managers maintain a long-term investment perspective and we
encourage our shareholders to do the same. While the fund may experience
volatility from time to time, we believe that its performance will be rewarding
over the long term. For example, as the table to the right demonstrates, the
fund has provided an average annual total return of +6.56% since its inception.
(See Appendix for description of Graphic Material 21)
*This performance graph assumes an initial $10,000 investment and includes the
maximum 4.25% sales charge, all fund expenses and account fees. It also assumes
that your dividends and capital gains were reinvested at net asset value. The
Lehman Brothers Municipal Bond Index includes price appreciation or depreciation
and distributions as a percentage of the original investment. Past performance
cannot guarantee future results.
FRANKLIN PENNSYLVANIA TAX-FREE INCOME FUND
Periods ended February 28, 1995
<TABLE>
<CAPTION>
SINCE
INCEPTION
1-YEAR 5-YEAR (12/1/86)
- --------------------------------------------------------
<S> <C> <C> <C>
Cumulative Total Return(1) 2.25% 46.18% 76.39%
Average Annual
Total Return(2) -2.10% 6.95% 6.56%
</TABLE>
<TABLE>
<S> <C>
Distribution Rate(3) 5.88%
Taxable Equivalent Distribution Rate(4) 10.02%
30-Day Standardized Yield(5) 5.35%
Taxable Equivalent Yield(4) 9.11%
- --------------------------------------------------------
</TABLE>
(1) Cumulative total returns measure the change in value of an investment over
the periods indicated and do not include the maximum 4.25% initial sales charge
stated in the prospectus. See note below.
(2) Average annual total return represents the average annual change in value of
an investment over the specified periods. The figures have been restated to
reflect the maximum 4.25% initial sales charge. See note below.
(3) Based on an annualization of the fund's current 5.2 cent per share monthly
dividend and the maximum offering price of $10.61 on February 28, 1995.
(4) Taxable equivalent distribution rate and yield assume the 1995 maximum 41.3%
combined federal and Pennsylvania state income tax bracket, 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 2/28/95.
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 implemented
a plan of distribution under Rule 12b-1 and eliminated the sales charge on
reinvested dividends, which will affect future performance. 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 is not predictive of future results.
Past expense reductions by the fund's managers increased the fund's total
returns.
33
<PAGE>
FRANKLIN PUERTO RICO TAX-FREE INCOME FUND
================================================================================
FUND OBJECTIVE:
Seeks to provide high current income exempt from regular federal and many
states' individual income taxes through a diversified portfolio consisting
primarily of Puerto Rico municipal bonds.*
The fund's fiscal year was difficult for municipal bonds and other fixed-income
investments. Rising interest rates caused prices of most bonds to decline, and
the derivative-induced bankruptcy of Orange County, California added to the
volatility in the municipal bond market.
The fund's average maturity rose slightly during the fiscal year, beginning the
period at 18 years, and ending the year at 18.3 years. The fund's average coupon
remained almost unchanged, falling from 7.02% on February 28, 1994, to 6.97% on
February 28, 1995. Towards the end of the fiscal year, we sold some of the
fund's pre-refunded bonds and purchased newer, current coupon bonds. Modest
dividend increases are possible in the future should this trend continue.
While our investment strategy focuses on income rather than total return, the
fund reported a total return of +1.64% for the one-year period -- more than
double the average total return of the municipal bond funds in Lipper's "Other
States" category. According to Lipper Analytical Services, Inc., the average
total return of these municipal bond funds was +0.64% for the year ended
February 28, 1995.**
(See Appendix for description of Graphic Material 22)
We remain conservative in our management of the fund. At the end of the fiscal
year, 27% of the fund's securities were rated AAA -- the highest rating possible
- -- by Standard & Poor's, or were judged to be of comparable quality by the
fund's managers. We evaluate each issue on an individual basis, favoring highly
rated "essential service" bonds. These securities tend to have a more reliable
income stream as they are backed by dependable revenue generated from projects
such as utilities, transportation, and water, power and sewer projects, to name
a few. As a result, these bonds tend to be less affect-
*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.
**The fund was ranked #7 out of 37 municipal bond funds in Lipper's "Other
States" category for the one-year period, and #2 out of 6 funds for the
five-year period ended February 28, 1995, as measured by Lipper Analytical
Services, Inc., a nationally recognized mutual fund rating organization. Lipper
rankings do not include sales charges; past expense limitations increased the
fund's total returns. Rankings may have been different if these factors had been
considered. Past performance cannot guarantee future results.
34
<PAGE>
================================================================================
ed by budgetary and political changes, and are believed to be very attractive in
a municipal cost-cutting environment. Like all mutual funds, however, the
principal value of the fund's holdings as well as the price of its shares will
fluctuate with market conditions.
We also seek to reduce the fund's risk through diversification. On February 28,
1995, the fund's assets spanned a variety of municipal sectors, as the table to
the right illustrates.
Our outlook for the fund is positive. Recent economic reports indicate that U.S.
economic growth has stabilized at a healthy and sustainable level, while
inflation has remained subdued. More signs of a slowing economy should
eventually result in a gradual decline in interest rates, which could positively
affect bond prices and thus, the fund's price per share.
Puerto Rico is highly dependent on manufacturing, which represents approximately
39% of its Gross Domestic Product (GDP).+ Governor Pedro Rosello is working hard
to diversify Puerto Rico's economy away from manufacturing and into tourism
(which currently accounts for 6% of the GDP) and service industry jobs. To move
away from reliance on section 936 corporations is a positive step for the
commonwealth (Section 936 of the IRS code allows Puerto Rican subsidiaries of
U.S. companies to do business in Puerto Rico and receive favorable tax
treatment).
+Source: Standard & Poor's Creditweek Municipal, 10/10/94.
FRANKLIN PUERTO RICO TAX-FREE INCOME FUND
Portfolio Breakdown on February 28, 1995
As a percentage of total net assets
<TABLE>
<CAPTION>
% OF TOTAL
SECTOR NET ASSETS
- ---------------------------------------------------------
<S> <C>
Utilities 30.6%
- ---------------------------------------------------------
Pre-Refunded 17.8%
- ---------------------------------------------------------
Transportation 13.2%
- ---------------------------------------------------------
Industria l9.8%
- ---------------------------------------------------------
Housing 6.2%
- ---------------------------------------------------------
Miscellaneous 4.9%
- ---------------------------------------------------------
General Obligations 4.3%
- ---------------------------------------------------------
Other Revenue 4.1%
- ---------------------------------------------------------
Education 3.9%
- ---------------------------------------------------------
Certificates of Participation 3.3%
- ---------------------------------------------------------
Hospitals 1.9%
</TABLE>
For a complete list of portfolio holdings, please see page 82 of this report.
The commonwealth recently announced an $8.5 billion infrastructure repair plan
to be financed by pension funds from Puerto Rico and the U.S., as well as
municipal bond issues, over the next 18 months. This will provide many
opportunities for the Franklin Puerto Rico Tax-Free Income Fund to diversify
credits, extend call protection, and possibly restructure the average maturity.
35
<PAGE>
================================================================================
Performance Summary
The Franklin Puerto Rico Tax-Free Income Fund's share price, as measured by net
asset value, declined from $11.83 on February 28, 1994, to $11.31 on February
28, 1995.
The fund continued to meet its investment objective of providing high current
income to its shareholders. For the one-year period ended February 28, 1995,
your fund paid monthly income distributions totaling 68.4 cents ($0.684) per
share.++ 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 5.79%,
based on an annualization of the current monthly dividend of 5.7 cents ($0.057)
per share and the maximum offering price of $11.81 on February 28, 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 9.59% from a taxable investment to
match your fund's tax-free distribution rate. For shareholders residing in
states in which the fund's income is exempt from state taxes, you would be
receiving double tax-free income.
(See Appendix for description of Graphic Material 23)
The Franklin Puerto Rico Tax-Free Income Fund provided a total return of +1.64%
for the one-year period ended February 28, 1995. Total return measures the
change in value of an investment during the period indicated, assuming
reinvestment of dividends and capital gains, if any. This calculation does not
include the initial sales charge. Past performance is not predictive of future
results.
Since 1985, the Franklin Puerto Rico Tax-Free Income Fund's performance has
exceeded the Consumer Price Index (CPI), keeping your purchasing power well
ahead of inflation -- a primary goal of any investment. The fund, however,
underperformed the unmanaged Lehman Brothers Municipal Bond Index as illustrated
by the chart on page 37. The
++Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distribution may vary, depending on the date
you purchased your shares and any account activity during the month. Income
distributions and total return calculations include all accrued income earned by
the fund during the reporting period.
36
<PAGE>
================================================================================
Lehman Index has some inherent performance differentials over any fund, as it
holds no cash in its portfolio and involves no sales charges or management
expenses. In addition, the index includes municipal securities from across the
country while your fund is composed primarily of Puerto Rico municipal bonds. An
investor cannot invest directly in an index.
Your fund's managers maintain a long-term investment perspective and we
encourage our shareholders to do the same. While the fund may experience
volatility from time to time, we believe that its performance will be rewarding
over the long term. For example, as the table to the right demonstrates, the
fund has provided an average annual total return of +7.62% since its inception.
(See Appendix for description of Graphic Material 24)
*This performance graph assumes an initial $10,000 investment and includes the
maximum 4.25% sales charge, all fund expenses and account fees. It also assumes
that your dividends and capital gains were reinvested at net asset value. The
Lehman Brothers Municipal Bond Index includes price appreciation or depreciation
and distributions as a percentage of the original investment. Past performance
cannot guarantee future results.
FRANKLIN PUERTO RICO TAX-FREE INCOME FUND
Periods ended February 28, 1995
<TABLE>
<CAPTION>
SINCE
INCEPTION
1-YEAR 5-YEAR (4/3/85)
- -------------------------------------------------------
<S> <C> <C> <C>
Cumulative Total Return(1) 1.64% 43.52% 116.14%
Average Annual
Total Return(2) -2.72% 6.56% 7.62%
</TABLE>
<TABLE>
<S> <C>
Distribution Rate(3) 5.79%
Taxable Equivalent Distribution Rate(4) 9.59%
30-Day Standardized Yield(5) 5.19%
Taxable Equivalent Yield(4) 8.59%
- -------------------------------------------------------
</TABLE>
1. Cumulative total returns measure the change in value of an investment over
the periods indicated and do not include the maximum 4.25% initial sales charge
stated in the prospectus. See note below.
2. Average annual total return represents the average annual change in value of
an investment over the specified periods. The figures have been restated to
reflect the maximum 4.25% initial sales charge. See note below.
3. Based on an annualization of the fund's current 5.7 cent per share monthly
dividend and the maximum offering price of $11.81 on February 28, 1995.
4. Taxable equivalent distribution rate and yield assume the 1995 maximum 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 2/28/95.
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 implemented
a plan of distribution under Rule 12b-1 and eliminated the sales charge on
reinvested dividends, which will affect future performance. 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 is not predictive of future results.
Past expense reductions by the fund's manager increased the fund's total
returns.
37
<PAGE>
FRANKLIN FEDERAL INTERMEDIATE-TERM TAX-FREE INCOME FUND
================================================================================
FUND OBJECTIVE:
Seeks to provide high current income exempt from regular federal income taxes
and preservation of capital through a portfolio of municipal bonds with an
average weighted maturity (the time in which a debt must be repaid) between
three and ten years.*
The fund's fiscal year was difficult for municipal bonds and other fixed-income
investments. Rising interest rates caused prices of most bonds to decline, and
the derivative-induced bankruptcy of Orange County, California added to the
volatility in the municipal bond market.
The higher interest rate environment of 1994 gave the fund an opportunity to
invest in higher coupon bonds. The fund's average coupon rose from 5.57% on
February 28, 1994, to 6.02% on February 28, 1995, which enabled us to increase
its monthly dividend from 4.4 cents per share to 4.5 cents per share, effective
with the March 1995 distribution.
Higher interest rates also helped increase the fund's 30-day yield, which at
5.34% on February 28, 1995, was significantly higher than the yield of the
average intermediate-term municipal bond fund. The fund's yield placed it
seventh among 108 intermediate-term municipal bond funds, as measured by Lipper
Analytical Services, Inc. According to Lipper, the average intermediate-term
municipal bond fund offered a 30-day yield of 4.70% on February 28, 1995.
And, despite the fund's focus on providing high current income, its total return
was also above average. For the one-year period ended February 28, 1995, the
fund reported a total return of +2.11% -- significantly higher than the +1.65%
total return of the average national tax-free intermediate-term bond fund.**
(See Appendix for description of Graphic Material 25)
*The fund's dividends are generally subject to state and local taxes. For
investors subject to federal or state 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. These dividends are generally subject to state and local income taxes,
if any.
The risks of investing in a non-diversified fund, such as increased
susceptibility to adverse economic or regulatory developments are described in
the prospectus.
**The fund was ranked #30 for total return out of 89 intermediate-term municipal
bond funds for the one-year period ended February 28, 1995, as measured by
Lipper Analytical Services, Inc., a nationally recognized mutual fund rating
organization. Lipper rankings do not include sales charges; past and present
expense limitations increased the fund's total returns. Rankings may have been
different if these factors had been considered. Past performance cannot
guarantee future results.
38
<PAGE>
================================================================================
In seeking to provide our shareholders with a high quality, conservative
investment, we invest in intermediate-term bonds with average maturities of
three to ten years. On February 28, 1995, the average maturity of the securities
held in the portfolio was 8.2 years, down from 8.4 years at the beginning of the
period. Intermediate-term bonds are generally less sensitive to interest rate
changes than are long-term bonds, and, therefore, tend to offer lower price
volatility. However, price fluctuations are unavoidable and your account's value
will vary with market conditions. As such, you may have a gain or loss when you
sell your shares.
We also seek to reduce the fund's risk through investment in a variety of
municipal sectors, as the table below illustrates. On February 28, 1995, the
fund's assets spanned a broad range of states, cities and counties throughout
the country.
Our outlook for the fund is positive. Recent economic reports indicate that U.S.
economic growth has stabilized at a healthy and sustainable level, while
inflation has remained subdued. More signs of a slowing economy should
eventually result in a gradual decline in interest rates, which could positively
affect bond prices and thus, the fund's price per share.
FRANKLIN FEDERAL INTERMEDIATE-TERM
TAX-FREE INCOME FUND
Portfolio Breakdown on February 28, 1995
As a percentage of total net assets
<TABLE>
<CAPTION>
% OF TOTAL
SECTOR NET ASSETS
- -------------------------------------------------------
<S> <C>
Hospitals 16.9%
- -------------------------------------------------------
Certificates of Participation 13.9%
- -------------------------------------------------------
Other Revenue 13.5%
- -------------------------------------------------------
Utilities 12.3%
- -------------------------------------------------------
Housing 8.0%
- -------------------------------------------------------
Industrial 7.5%
- -------------------------------------------------------
Education 7.2%
- -------------------------------------------------------
Marks-Roos Bonds 6.4%
- -------------------------------------------------------
Special Assessment Bonds 5.9%
- -------------------------------------------------------
Transportation 5.1%
- -------------------------------------------------------
General Obligations 3.3%
</TABLE>
For a complete list of portfolio holdings, please see page 85 of this report.
39
<PAGE>
================================================================================
PERFORMANCE SUMMARY
The Franklin Federal Intermediate-Term Tax-Free Income Fund's share price, as
measured by net asset value, declined from $10.80 on February 28, 1994, to
$10.48 on February 28, 1995.
The fund continued to meet its investment objective of providing high current
income to its shareholders. For the one-year period ended February 28, 1995,
your fund paid monthly income distributions totaling 52.8 cents ($0.528) per
share.+ We are pleased to inform you that we have adjusted the monthly dividend
from 4.4 cents ($0.044) per share to 4.5 cents ($0.045) per share, effective
with the March 1995 distribution. 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 5.04%,
based on an annualization of the monthly dividend of 4.5 cents ($0.045) per
share and the maximum offering price of $10.72 on February 28, 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 8.34% from a taxable investment to
match your fund's tax-free distribution rate.
(See Appendix for description of Graphic Material 26)
The Franklin Federal Intermediate-Term Tax-Free Income Fund provided a total
return of +2.11% for the one-year period ended February 28, 1995. Total return
measures the change in value of an investment during the period indicated,
assuming reinvestment of dividends and capital gains, if any. This calculation
does not include the initial sales charge. Past performance is not predictive of
future results.
Since 1992, the Franklin Federal Intermediate-Term Tax-Free Income Fund's
performance has exceeded the Consumer Price Index (CPI), keeping your purchasing
power well ahead of inflation -- a primary
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distribution may vary, depending on the date
you purchased your shares and any account activity during the month. Income
distributions and total return calculations include all accrued income earned by
the fund during the reporting period.
40
<PAGE>
================================================================================
goal of any investment. The fund, however, has slightly underperformed the
unmanaged Lehman Brothers 10-Year Municipal Bond Index as illustrated by the
chart below. The Lehman Index has some inherent performance differentials over
any fund, as it holds no cash in its portfolio and involves no sales charges or
management expenses. An investor cannot invest directly in an index.
Your fund's managers maintain a long-term investment perspective and we
encourage our shareholders to do the same. While the fund may experience
volatility from time to time, we believe that its performance will be rewarding
over the long term. For example, as the table to the right demonstrates, the
fund has provided an average annual total return of +5.68% since its inception.
(See Appendix for description of Graphic Material 27)
*This performance graph assumes an initial $10,000 investment and includes the
maximum 2.25% sales charge, fund expenses and account fees. It also assumes that
your dividends and capital gains were reinvested at net asset value. The Lehman
Brothers Municipal Bond Index includes price appreciation or depreciation and
distributions as a percentage of the original investment. Past performance
cannot guarantee future results.
FRANKLIN FEDERAL INTERMEDIATE-TERM
TAX-FREE INCOME FUND
Periods ended February 28, 1995
<TABLE>
<CAPTION>
SINCE
INCEPTION
1-YEAR (9/23/92)
- --------------------------------------------------------
<S> <C> <C>
Cumulative Total Return(1) 2.11% 17.03%
Average Annual Total Return(2) -0.20% 5.68%
</TABLE>
<TABLE>
<S> <C>
Distribution Rate(3) 5.04%
Taxable Equivalent Distribution Rate(4) 8.34%
30-Day Standardized Yield(5) 5.34%
Taxable Equivalent Yield(4) 8.84%
- --------------------------------------------------------
</TABLE>
(1) Cumulative total returns measure the change in value of an investment over
the periods indicated, assuming investment of dividends and capital gains at net
asset value, and do not include the maximum 2.25% initial sales charge stated in
the prospectus.
(2) Average annual total return includes the maximum 2.25% initial sales charge
and represents the average annual change in value of an investment over the
specified periods, assuming reinvestment of dividends and capital gains at net
asset value.
(3) Based on an annualization of the fund's current 4.5 cent per share monthly
dividend and the maximum offering price of $10.72 on February 28, 1995.
(4) Taxable equivalent distribution rate and yield assume the 1995 maximum 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 2/28/95.
The manager of the fund has agreed in advance to waive a portion of management
fees, which reduces expenses and increases distribution rate, yield and total
return to shareholders. If the manager had not taken this action, the fund's
distribution rate and total return would have been lower, and yield for the
period would have been 5.12%. The fee waiver may be discontinued at any time.
Investment return and principal value fluctuate so that your shares, when
redeemed, may be worth more or less than their original cost. Past performance
is not predictive of future results.
41
<PAGE>
FRANKLIN HIGH YIELD TAX-FREE INCOME FUND
================================================================================
FUND OBJECTIVE:
Seeks to provide high current income exempt from regular federal income tax
through a diversified portfolio consisting primarily of higher yielding, medium-
to lower-rated and non-rated municipal bonds.* As discussed in the fund's
prospectus, these securities entail greater risk than higher-rated municipal
securities.
The fund's fiscal year was difficult for municipal bonds and other fixed-income
investments. Rising interest rates caused prices of most bonds to decline, and
the derivative-induced bankruptcy of Orange County, California added to the
volatility in the municipal bond market.
Your fund currently does not own any direct Orange County obligations. We hold
two issues from municipalities that are invested in Orange County. These
municipalities are currently involved in settlement negotiations with Orange
County, and we do not expect these securities to adversely affect the fund.
On a positive note, higher interest rates enabled us to sell some of the fund's
lower coupon pre-refunded securities and purchase higher yielding current coupon
bonds. As a result, the fund's average coupon rose slightly from 7.90% on
February 28, 1994, to 8.01% on February 28, 1995. This action should help the
fund increase its income-generating power.
(See Appendix for description of Graphic Material 28)
While our investment strategy focuses on income rather than total return, the
fund reported a respectable total return of +2.32% for the one-year period --
more than double the average total return of other high yield municipal bond
funds. According to Lipper Analytical Services, Inc., the average total return
of high yield municipal bond funds was +1.06% for the year ended February 28,
1995.**
During 1994, the municipal bond market provided opportunities to reapportion the
high yield portfolio. The spread between AAA- and BBB-rated securities
*For investors subject to federal or state alternative minimum tax, all or a
portion of these dividends may be subject to such tax depending on the fund.
Distributions of capital gains and of ordinary income from accrued market
discount, if any, are generally taxable. These dividends are generally subject
to state and local income taxes, if any.
**The fund was ranked #11 in total return out of 35 high yield municipal bond
funds for the one-year period, and #6 out of 22 funds for the five-year period
ended February 28, 1995, as measured by Lipper Analytical Services, Inc., a
nationally recognized mutual fund rating organization. Lipper rankings do not
include sales charges; past expense limitations increased the fund's total
returns. Rankings may have been different if these factors had been considered.
Past performance cannot guarantee future results.
42
<PAGE>
================================================================================
widened, which generally occurs in a rising interest rate environment. As a
result, we purchased securities in the BBB and BB range, as we felt we were
being adequately compensated for the additional risk of lower quality
securities. The percentage of BBB and BB securities increased to 72.4% on
February 28, 1995, from 67.1% at the beginning of the period. We will continue
to monitor the spreads in the market and take advantage of them accordingly.
We also seek to reduce the fund's risk through diversification. On February 28,
1995, the fund's assets spanned a broad range of states, cities and counties
throughout the country. Furthermore, we purchase securities from a variety of
municipal sectors, as the table below illustrates.
Our outlook for the fund is positive. Recent economic reports indicate that U.S.
economic growth has stabilized at a healthy and sustainable level, while
inflation has remained subdued. More signs of a slowing economy should
eventually result in a gradual decline in interest rates, which should
positively affect bond prices and thus, the fund's price per share.
Municipal supply in 1995 is expected to decline once again, falling to
approximately $140 billion. Bond redemptions are expected to increase to
approximately $180 billion. We believe this puts the municipal market in a good
position to outperform the Treasury market in 1995.
FRANKLIN HIGH YIELD TAX-FREE INCOME FUND
Portfolio Breakdown on February 28, 1995
As a percentage of total net assets
<TABLE>
<CAPTION>
% OF TOTAL
SECTOR NET ASSETS
- ---------------------------------------------------------
<S> <C>
Utilities 19.8%
- ---------------------------------------------------------
Transportation 12.0%
- ---------------------------------------------------------
Hospitals 11.1%
- ---------------------------------------------------------
Pre-Refunded 9.3%
- ---------------------------------------------------------
Special Assessment Bonds 8.8%
- ---------------------------------------------------------
General Obligations 8.1%
- ---------------------------------------------------------
Health Care 6.8%
- ---------------------------------------------------------
Industrial 6.3%
- ---------------------------------------------------------
Other Revenue 5.5%
- ---------------------------------------------------------
Housing 3.2%
- ---------------------------------------------------------
Certificates of Participation 2.9%
- ---------------------------------------------------------
Mello-Roos Bonds 2.6%
- ---------------------------------------------------------
Tax Allocation Bonds 1.6%
- ---------------------------------------------------------
Sales Tax 1.1%
- ---------------------------------------------------------
Education 0.6%
- ---------------------------------------------------------
Marks-Roos Bonds 0.2%
- ---------------------------------------------------------
Miscellaneous 0.1%
</TABLE>
For a complete list of portfolio holdings, please see page 90 of this report.
43
<PAGE>
================================================================================
PERFORMANCE SUMMARY
The Franklin High Yield Tax-Free Income Fund's share price, as measured by net
asset value, declined from $11.25 on February 28, 1994, to $10.74 on February
28, 1995.
The fund continued to meet its investment objective of providing high current
income to its shareholders. For the one-year period ended February 28, 1995,
your fund paid monthly income distributions totaling 74 cents ($0.740) per
share.+ Due to reduced income earned by the fund, it was necessary to adjust the
monthly dividend from 6.4 cents ($0.064) per share to 6.2 cents ($0.062) per
share in April of 1994, and again to 6.1 cents ($0.061) per share, effective
with the September 1994 distribution. 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 6.52%,
based on an annualization of the current monthly dividend of 6.1 cents ($0.061)
per share and the maximum offering price of $11.22 on February 28, 1995.
(See Appendix for description of Graphic Material 29)
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 10.79% from a taxable investment to
match your fund's tax-free distribution rate.
The Franklin High Yield Tax-Free Income Fund provided a total return of +2.32%
for the one-year period ended February 28, 1995. Total return measures the
change in value of an investment during the period indicated, assuming
reinvestment of dividends and capital gains, if any. This calculation does not
include the initial sales charge. Past performance is not predictive of future
results.
Since 1988, the Franklin High Yield Tax-Free Income Fund's performance has
exceeded the Consumer Price Index (CPI), keeping your purchasing power well
ahead of inflation -- a primary goal of
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distribution may vary, depending on the date
you purchased your shares and any account activity during the month. Income
distributions and total return calculations include all accrued income earned by
the fund during the reporting period.
44
<PAGE>
================================================================================
any investment. The fund has also outperformed the unmanaged Lehman Brothers
Municipal Bond Index, as illustrated by the chart below, despite some inherent
performance differentials the index enjoys. For example, the Lehman Brothers
Index holds no cash in its portfolio and involves no sales charges or management
expenses. An investor cannot invest directly in an index.
Your fund's managers maintain a long-term investment perspective and we
encourage our shareholders to do the same. While the fund may experience
volatility from time to time, we believe that its performance will be rewarding
over the long term. For example, the fund has provided an average annual total
return of +7.94% since its inception.
(See Appendix for description of Graphic Material 30)
*This performance graph assumes an initial $10,000 investment and includes the
maximum 4.25% sales charge, fund expenses and account fees. It also assumes that
your dividends and capital gains were reinvested at net asset value. The Lehman
Brothers Municipal Bond Index includes price appreciation or depreciation and
distributions as a percentage of the original investment. Past performance
cannot guarantee future results.
FRANKLIN HIGH YIELD TAX-FREE INCOME FUND
Periods ended February 28, 1995
<TABLE>
<CAPTION>
SINCE
INCEPTION
1-YEAR 5-YEAR (3/18/86)
- --------------------------------------------------------
<S> <C> <C> <C>
Cumulative Total Return(1) 2.32% 48.14% 107.02%
Average Annual
Total Return(2) -2.04% 7.24% 7.94%
</TABLE>
<TABLE>
<S> <C>
Distribution Rate(3) 6.52%
Taxable Equivalent Distribution Rate(4) 10.79%
30-Day Standardized Yield(5) 6.46%
Taxable Equivalent Yield(4) 10.70%
- --------------------------------------------------------
</TABLE>
(1) Cumulative total returns measure the change in value of an investment over
the periods indicated and do not include the maximum 4.25% initial sales charge
stated in the prospectus. See note below.
(2) Average annual total return represents the average annual change in value of
an investment over the specified periods. The figures have been restated to
reflect the maximum 4.25% initial sales charge. See note below.
(3) Based on an annualization of the fund's current 6.1 cent per share monthly
dividend and the maximum offering price of $11.22 on February 28, 1995.
(4) Taxable equivalent distribution rate and yield assume the 1995 maximum 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 2/28/95.
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 implemented
a plan of distribution under Rule 12b-1 and eliminated the sales charge on
reinvested dividends, which will affect future performance. 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 is not predictive of future results.
Past expense reductions by the fund's manager increased the fund's total
returns.
45
<PAGE>
PORTFOLIO TALK
================================================================================
Last year, rising interest rates affected the performance of fixed-income
investments across the board. Municipal securities were no exception, and many
tax-conscious investors may be concerned about the current outlook for the
municipal market.
In the following interview, Tom Kenny, senior vice president of Franklin's
Municipal Bond Department, and portfolio managers Sheila Amoroso, Andrew
Jennings, Sr., and Bernie Schroer discuss rising interest rates and the current
municipal market environment. They also talk about the "plain vanilla"
investment approach that has made Franklin a well-respected name in the
tax-free mutual fund arena.
SOME OF THE SENIOR MEMBERS OF FRANKLIN'S MUNICIPAL BOND TEAM - FRONT ROW (L-R)
TOM KENNY, MARK ORSI, SHEILA AMOROSO, STELLA WONG. BACK ROW (L-R) JEFF WILSON,
TOM WALSH, RAFAEL COSTAS, ANDREW JENNINGS, SR., BERNIE SCHROER, DON DUERSON.
46
<PAGE>
================================================================================
WHAT IS YOUR GENERAL OVERVIEW OF THE MUNICIPAL BOND MARKET?
Tom Kenny: In 1992 and 1993, the municipal bond market saw a record supply of
new issues and refinancings, and investor demand was very strong. That changed
in 1994, when both the supply and demand for municipal securities were
significantly lower due to rising interest rates.
Looking ahead, I think investors will start to aggressively buy municipal
securities again. But, relative to 1992 or 1993, the supply of new municipal
issues will continue to be much lower. It goes back to basic economics; if
there are more buyers than supply, then prices will move up. That could result
in a stronger municipal market in the upcoming year.
WHAT ABOUT THE PERFORMANCE OF THE MUNICIPAL MARKET IN 1994?
Andrew Jennings: Because of the rapid rise in interest rates, last year was
difficult for bond funds. In fact, in terms of total return, it was the worst
year for the 20-year Treasury bond since 1967.(1) In light of these difficult
market conditions, we believe that the performance of Franklin's tax-free
income funds held up relatively well.
DID THE PERFORMANCE OF FRANKLIN'S TAX-FREE INCOME FUNDS MEET YOUR EXPECTATIONS?
Tom: Yes, relative to the overall market. Past performance cannot guarantee
future results; however, our tax-free income fund shareholders continued to
enjoy attractive yields.
In addition, we believe our conservative management philosophy resulted in
stronger performance than that of many other tax-free income funds. For
example, most of Franklin's tax-free income funds outperformed their peers
during the year ended February 28, 1995, according to Lipper Analytical
Services, Inc., a nationally recognized mutual fund research organization. Of
course, each Franklin tax-free income fund's performance is unique, and some
funds' returns may not have exceeded their category averages. I encourage
investors to contact Franklin Templeton Fund Information at 1-800/DIAL BEN
(1-800/342-5236) for specific performance figures related to Franklin's
tax-free income funds.
WHAT MAKES FRANKLIN'S TAX-FREE INCOME FUNDS STAND OUT FROM OTHER TAX-ADVANTAGED
INVESTMENTS AVAILABLE TODAY?
Tom: I think Franklin's conservative investment philosophy differentiates our
funds from many of today's investment alternatives. We believe our tax-free
income fund shareholders have come to rely on the fact that, with Franklin,
what you see is what you get.
WHAT IS FRANKLIN'S TAX-FREE INVESTMENT PHILOSOPHY?
Andrew: Two goals guide Franklin's tax-free income fund management approach.
We have always managed our tax-free income funds with an emphasis on
maximizing tax-free income and maintaining greater price stability than other
tax-free income funds with similar objectives.(2) Of course, it's impossible
to eliminate price volatility completely because municipal securities are
always reacting to a variety of factors, such as interest rate movements.
Sheila Amoroso: That's why Franklin takes a very "plain vanilla" investment
approach when it comes to managing our tax-free income funds.
WHAT DO YOU MEAN BY "PLAIN VANILLA"?
Andrew: Municipal securities are generally considered to be among the safest
investments available in terms of credit risk, but they are still extremely
complicated. Investors need only look at the recent publicity surrounding
derivative securities, and other elaborate hedging techniques that have
increased volatility, for evidence of the complex nature of some municipal
investments out there.
Sheila: Franklin avoids these riskier securities and investment techniques,
because we don't want to expose our shareholders' investments to an undue
amount of risk. Many exotic securities, such as derivatives, are extremely
sensitive to interest rate movements and can significantly increase a fund's
price volatility. As a result, Franklin chooses not to use derivatives in its
tax-free portfolios.(3)
(1) Source: Ibbotson Associates. Based on one-year total returns of long-term
government bonds from January 1926 to December 1994.
(2) For investors subject to federal or state alternative minimum tax, all or a
portion of these dividends may be subject to such tax, depending on the fund.
Distributions of capital gains and of ordinary income from accrued market
discount, if any, are generally taxable. Most of Franklin's tax-free income
funds have the objective of seeking as high a level of current income as is
consistent with prudent management, while seeking preservation of shareholders'
capital. Of course, all bond funds, including Franklin's, involve investment
risks, and there is no assurance that any fund's investment objectives will be
met.
(3) Franklin's tax-free income funds may use the following investments which
Franklin does not classify as derivative securities because they are highly
liquid and do not involve borrowing or leveraging a fund's portfolio: variable
rate demand notes; purchases of fixed income securities on a when-issued basis;
zero coupon bonds; certificates of participation on municipal leases; and/or
other transactions, which in the fund manager's opinion, are highly liquid and
do not involve leverage. Please read the funds' prospectuses for details of
these permissible investments.
47
<PAGE>
================================================================================
HAS FRANKLIN'S INVESTMENT STRATEGY CHANGED NOW THAT INTEREST RATES HAVE BEEN
RISING?
Andrew: No. We focus on the same objectives no matter what interest rates are
doing.
Bernie Schroer: That's right. And in light of today's market, shareholders
may want to consider dollar cost averaging when purchasing shares of a fund.
Over the long-term, they can take advantage of short-term price movements by
purchasing more shares of a fund when prices are lower.(4)
Tom: Franklin's commitment to research is really the backbone of its success
in the tax-free mutual fund market. This commitment doesn't change just
because interest rates are changing. Shareholders in our tax-free income funds
have one of the industry's largest municipal research teams dedicated to
searching for the most attractive securities on the market.(5)
Most of Franklin's tax-free income funds purchase only municipal securities
within the top four credit ratings of such national rating agencies as
Standard & Poor's, Moody's, or Fitch.(6) Our funds can also invest in
non-rated securities, which are deemed to be of comparable credit quality by
the funds' portfolio managers.(7)
Franklin, however, treats every municipal security as a non-rated issue. We
thoroughly examine each prospective issue and assign every security an
internal Franklin rating. Often, we'll go to the prospective project's site
and examine its creditworthiness firsthand.
And our research doesn't end when we purchase a bond; we constantly monitor
our portfolio holdings. National rating services only review individual bonds
periodically. Generally, by the time a municipal security receives a new
national rating, it will already be reflected in the issue's price. Franklin
tries to stay ahead of the industry by closely monitoring each municipal
security that we own in our tax-free income portfolios.
DO YOU THINK TAX-FREE MUTUAL FUNDS STILL MAKE SENSE FOR INVESTORS?
Andrew: Yes. Franklin's tax-free income fund shareholders have one of the most
respected municipal research departments working for them -- an important
consideration in today's market. They also enjoy the standard benefits of
investing in a mutual fund: monthly dividends, easy access to their money, and
diversification.(8)
Bernie: Franklin is the largest open-end municipal bond fund manager in the
nation, with more than $38 billion in
municipal securities under management.(9) Our tax-free income funds'
diversification is a major advantage for shareholders.8 For example, Orange
County's recent bankruptcy might have devastated individual bondholders, but
the direct impact on Franklin's tax-free income funds has been minimal to
date, because most of our funds are widely diversified.(10) Investing in a
Franklin tax-free income fund spreads our shareholders' risk over a variety of
securities, reducing the impact any one issue or municipality can have on the
overall portfolio.(11)
Tom: Investors may be concerned about the bond market's volatility over the
past year, but they should maintain a long-term perspective. There will always
be short-term price movements in a bond fund. That's why Franklin's tax-free
income funds are managed for income first, while seeking preservation of
shareholders' capital. Over the long run, Franklin's tax-free income funds can
offer investors a strong investment choice. I think our shareholders have
found that tax-free mutual funds are one of the most effective and convenient
ways to participate in the municipal securities market.
To learn more about Franklin's Tax-Free Income Funds, ask your investment
representative or call Franklin Templeton Fund Information at 1-800/DIAL BEN
(1-800/342-5236).
(4) Dollar cost averaging involves continuous investment in securities,
regardless of fluctuating price levels. Investors should consider their
financial ability to continue purchases through periods of low price levels or
changing economic conditions. Such a plan does not assure a profit and does not
protect against loss in a declining market.
(5) Source: Research & Ratings Review, Volume II, issue 8, February 28, 1994.
Franklin's municipal research team ranks 2nd out of 1,000 investment advisory
firms in terms of the number of municipal bond analysts, in a survey by TMS
Holdings, Inc. As of December 31, 1994, this ranking was unchanged.
(6) Bond credit ratings reflect the rating agency's assessment of the credit
quality of the bonds, and are subject to change. Ratings do not reflect the
yield or market price of the bonds, nor approval by the rating agency.
(7) All but two Franklin tax-free income funds follow this investment policy.
Franklin High Yield Tax-Free Income Fund and Franklin California High Yield
Municipal Fund invest primarily in higher-yielding, lower-rated securities. The
risks of investing in lower-rated securities are described in these funds'
prospectuses.
(8) Most of Franklin's tax-free income funds are diversified; however, a few are
classified as non-diversified under the Investment Company Act of 1940. The
risks of investing in a non-diversified fund, such as increased susceptibility
to adverse economic or regulatory developments, are described in each fund's
individual prospectus.
(9) Strategic Insight: December 31, 1994.
(10) The Orange County and related bankruptcy proceedings are ongoing, and the
funds' managers continue to monitor the proceedings.
(11) Because many Franklin tax-free income funds concentrate their investments
in a single state, these funds may be subject to greater risk of adverse
economic changes in their respective states than funds with greater geographical
diversification.
48
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================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN ARIZONA TAX-FREE INCOME FUND (NOTE 1)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS 98.8%
Arizona Educational Loan Marketing Corp. Revenue,
$10,000,000 Senior Series, 6.375%, 09/01/05 ............................................................. $10,140,200
1,000,000 Series B, 7.00%, 03/01/03 ................................................................... 1,053,620
1,000,000 Series B, 7.00%, 03/01/05 ................................................................... 1,040,830
1,000,000 Series B, MBIA Insured, 7.35%, 09/01/04 ..................................................... 1,056,250
775,000 Series B, MBIA Insured, 7.375%, 09/01/05 .................................................... 819,446
1,000,000 Sub-Series, 6.625%, 09/01/05 ................................................................ 1,022,400
1,000,000 Sub-Series, 5.70%, 12/01/08 ................................................................. 916,040
Arizona Health Facilities Authority, Hospital System Revenue,
2,000,000 Phoenix Baptist Hospital, MBIA Insured, 6.25%, 09/01/11 ..................................... 2,032,820
9,500,000 Refunding, Samaritan Health System, MBIA Insured, 5.625%, 12/01/15 .......................... 8,918,980
Arizona Health Facilities Authority Revenue,
770,000 Arizona Voluntary Hospital, Hospital Federal Pooled Loan Revenue, Series B, FGIC Insured, 7.75%,
10/01/07.................................................................................... 847,223
5,000,000 Arizona Voluntary Hospital, Series B, FGIC Insured, 7.25%, 10/01/13 ......................... 5,383,700
5,000,000 Arizona State COP, Refunding, Series B, AMBAC Insured, 6.25%, 09/01/10 ........................ 5,132,950
5,000,000 Arizona State Department of Administration, COP, FSA Insured, 6.625%, 09/01/08 ................ 5,259,550
Arizona State Municipal Financing Program, COP,
1,350,000 Dysart School, Series 22, BIG Insured, Pre-Refunded, 7.875%, 08/01/05 ....................... 1,437,372
85,000 Flagstaff School, Series 15, BIG Insured, 8.75%, 08/01/07 ................................... 92,318
500,000 Peoria School, Series 19, BIG Insured, ETM, 7.75%, 08/01/04 ................................. 591,770
255,000 Phoenix Civic Improvement, Series 17, BIG Insured, Pre-Refunded, 8.125%, 08/01/12 ........... 269,856
825,000 Phoenix Water, Series 10, BIG Insured, Pre-Refunded, 7.90%, 08/01/17 ........................ 890,604
3,250,000 Series 20, BIG Insured, ETM 08/01/06, 7.625%, 08/01/06 ...................................... 3,783,845
500,000 Series 25, BIG Insured, 7.875%, 08/01/14 .................................................... 606,570
2,500,000 Series 29, BIG Insured, Pre-Refunded, 7.125%, 08/01/14 ...................................... 2,727,450
Arizona State Transportation Board, Excise Tax Revenue, Maricopa County
Regional Area Road Fund, MBIA Insured,
3,985,000 Pre-Refunded, 7.00%, 07/01/05 ............................................................... 4,355,007
4,515,000 MBIA Insured, Pre-Refunded, 7.00%, 07/01/05 ................................................. 4,830,418
1,750,000 Series A, Pre-Refunded, 7.60%, 07/01/05 ..................................................... 1,922,655
1,750,000 Arizona State Transportation Board, Highway Revenue, Series 1990, Pre-Refunded,
7.00%, 07/01/09 .............................................................................. 1,920,625
Arizona State University System Revenue,
130,000 Series 1986-A, Pre-Refunded, 7.875%, 07/01/15 ............................................... 137,900
2,400,000 Series 1989, Pre-Refunded, 7.00%, 07/01/15 .................................................. 2,684,136
12,145,000 Series 1991, Pre-Refunded, 7.10%, 07/01/16 .................................................. 13,548,233
4,000,000 Arizona State Waste Management Authority, Financial Assistance Revenue, 6.80%, 07/01/11 ....... 4,281,360
Avondale Municipal Development Corp. Facilities Revenue,
80,000 Series 1987, AMBAC Insured, 8.85%, 07/01/13 ................................................. 82,683
700,000 Series 1992, MBIA Insured, 6.625%, 07/01/11 ................................................. 726,712
930,000 Casa Grande Excise Tax Revenue, Series 1995, 6.20%, 04/01/15 .................................. 936,863
Casa Grande IDA, PCR,
1,800,000 Frito Lay/Pepsico, 6.60%, 12/01/10 .......................................................... 1,858,446
500,000 Frito Lay/Pepsico, 6.65%, 12/01/14 .......................................................... 514,220
3,000,000 Central Arizona Water Conservation District Contract Revenue, Central Project, Series 1990-A,
Pre-Refunded, 7.65%, 11/01/09 ................................................................ 3,408,360
Chandler GO,
1,625,000 FGIC Insured, 6.85%, 07/01/14 ............................................................... 1,740,083
1,000,000 Refunding, Series 1991, FGIC Insured, Pre-Refunded, 7.00%, 07/01/12 ......................... 1,069,560
1,750,000 Series 1994, FGIC Insured, 6.80%, 07/01/13 .................................................. 1,874,233
Chandler Street and Highway Revenue,
1,250,000 Series 1994, MBIA Insured, 6.85%, 07/01/13 .................................................. 1,327,450
2,200,000 Series 1994, MBIA Insured, 6.90%, 07/01/14 .................................................. 2,344,056
</TABLE>
The accompanying notes are an integral part of these financial statements.
49
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STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN ARIZONA TAX-FREE INCOME FUND (NOTE 1)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Long Term Investments (cont.)
Chandler Water and Sewer Revenue, Refunding,
$ 6,715,000 Series 1991, FGIC Insured, Pre-Refunded, 7.00%, 07/01/12 .................................... $ 7,182,095
2,165,000 Series 1992, FGIC Insured, 6.25%, 07/01/13 .................................................. 2,192,171
City of Bullhead, Municipal Property Corp., Facilities Revenue,
2,125,000 Series 1990, MBIA Insured, 7.20%, 07/01/09 .................................................. 2,272,794
4,000,000 Series 1991, FGIC Insured, 7.20%, 07/01/10 .................................................. 4,297,280
Cochise County, Palominas Elementary School District No. 49, School Improvement, GO,
155,000 Series A, Pre-Refunded, 7.70%, 07/01/00 ..................................................... 167,327
165,000 Series A, Pre-Refunded, 7.80%, 07/01/01 ..................................................... 178,481
175,000 Series A, Pre-Refunded, 7.85%, 07/01/02 ..................................................... 189,487
5,000,000 Cochise County USD No. 68, Sierra Vista, Series B, FGIC Insured, Pre-Refunded, 7.625%, 07/01/10 5,631,600
1,095,000 Coconino County, Flagstaff USD No. 1, AMBAC Insured, 6.20%, 07/01/06 .......................... 1,130,358
Coconino County USD No. 8, Page Elementary School Improvement Project, GO,
1,500,000 Pre-Refunded, 7.125%, 07/01/06 .............................................................. 1,621,620
1,250,000 Pre-Refunded, 7.125%, 07/01/07 .............................................................. 1,351,350
525,000 Series D, AMBAC Insured, Pre-Refunded, 6.85%, 07/01/03 ...................................... 560,411
575,000 Series D, AMBAC Insured, Pre-Refunded, 6.90%, 07/01/04 ...................................... 614,652
600,000 Series D, AMBAC Insured, Pre-Refunded, 6.95%, 07/01/05 ...................................... 642,282
625,000 Series D, AMBAC Insured, Pre-Refunded, 7.00%, 07/01/06 ...................................... 669,988
725,000 Series D, AMBAC Insured, Pre-Refunded, 7.05%, 07/01/07 ...................................... 778,288
1,475,000 Eloy Municipal Property Corp., Facilities Revenue, Series 1989, 7.80%, 07/01/09 ............... 1,592,351
3,320,000 Gila County IDA, PCR, Refunding, ASARCO, Inc. Project, 8.90%, 07/01/06 ........................ 3,612,459
1,500,000 Gilbert Improvement District No. 11, FGIC Insured, 7.60%, 01/01/05 ............................ 1,559,325
Gilbert Water and Sewer Revenue, Refunding,
1,500,000 FGIC Insured, 6.50%, 07/01/12 ............................................................... 1,554,555
3,250,000 FGIC Insured, 6.50%, 07/01/22 ............................................................... 3,354,748
Glendale IDA, Educational Facilities Revenue, Refunding,
750,000 American Graduate School International, Connie Lee Insured, 6.75%, 07/01/09 ................. 802,005
1,000,000 American Graduate School International, Connie Lee Insured, 7.00%, 07/01/14 ................. 1,072,670
1,250,000 American Graduate School International, Connie Lee Insured, 7.125%, 07/01/20 ................ 1,342,875
750,000 Glendale IDA, Hospital Revenue, Northwest Development, Inc. Project, 8.875%, 01/01/16 ......... 787,035
2,400,000 Glendale Municipal Property Corp., Series 1991, MBIA Insured, 7.00%, 07/01/09 ................. 2,548,751
11,495,000 Greenlee County, IDA, PCR, Refunding, Phelps Dodge Corp. Project, 5.45%, 06/01/09 ............. 10,727,478
Guam Power Authority Revenue,
1,750,000 Series A, 6.375%, 10/01/08 .................................................................. 1,755,478
3,630,000 Series A, 6.30%, 10/01/12 ................................................................... 3,573,045
4,000,000 Series A, 6.30%, 10/01/22 ................................................................... 3,872,920
2,700,000 Lake Havasu City, Wastewater COP, FGIC Insured, 7.00%, 06/01/05 ............................... 2,922,804
8,000,000 Maricopa County COP, 6.00%, 06/01/04 .......................................................... 7,789,360
50,000 Maricopa County Hospital District No. 1, Facilities Revenue, East Valley Behavioral Health Facility,
FGIC Insured, Pre-Refunded, 7.80%, 06/01/14 .................................................. 54,090
1,265,000 Maricopa County IDA, SFMR, GNMA Secured, 8.00%, 09/01/09 ..................................... 1,331,615
Maricopa County IDAR,
1,855,000 Mercy Health System, Series A, MBIA Insured, Pre-Refunded, 7.125%, 07/01/07 ................. 2,036,141
750,000 Mercy Health System, Series C, MBIA Insured, Pre-Refunded, 7.15%, 07/01/15 .................. 823,958
Maricopa County IDAR, Hospital Facility Revenues, Refunding,
2,750,000 John C. Lincoln Hospital, FSA Insured, 7.50%, 12/01/13 ...................................... 3,030,115
17,800,000 Samaritan Hospital Health Services, Series A, MBIA Insured, 7.00%, 12/01/13 ................. 19,083,558
1,890,000 Samaritan Hospital Health Services, Series A, MBIA Insured, 7.00%, 12/01/16 ................. 2,112,642
600,000 Maricopa County Union High School District No. 216, Series A, Pre-Refunded, 7.80%, 07/01/07 ... 649,020
</TABLE>
The accompanying notes are an integral part of these financial statements.
50
<PAGE>
FRANKLIN TAX-FREE TRUST
================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN ARIZONA TAX-FREE INCOME FUND (NOTE 1)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Long Term Investments (cont.)
Maricopa County USD No. 8, Osborn School Improvement Project,
$ 500,000 Series B, Pre-Refunded, 7.10%, 07/01/05 ......................................................... $ 542,280
1,075,000 Series B, Pre-Refunded, 7.15%, 07/01/07 ......................................................... 1,167,955
1,885,000 Series B, Pre-Refunded, 7.20%, 07/01/09 ......................................................... 2,051,615
Maricopa County USD No. 11, Peoria,
6,300,000 Refunding, AMBAC Insured, 6.10%, 07/01/10 ....................................................... 6,502,104
2,800,000 Refunding, MBIA Insured, Pre-Refunded, 7.00%, 07/01/10 .......................................... 3,039,568
65,000 Series C, MBIA Insured, Pre-Refunded, 9.20%, 07/01/04 ........................................... 68,018
1,320,000 Maricopa County USD No. 40, Glendale Elementary School Improvement Bond, FGIC Insured,
Pre-Refunded, 6.50%, 07/01/06 ................................................................... 1,428,200
Maricopa County USD No. 41,
850,000 Gilbert, Series C, FGIC Insured, Pre-Refunded, 7.125%, 07/01/01 ................................. 914,405
750,000 Gilbert, Series C, FGIC Insured, Pre-Refunded, 7.20%, 07/01/02 .................................. 808,530
5,000,000 Gilbert, Series D, FGIC Insured, Pre-Refunded, 7.00%, 07/01/05 .................................. 5,423,850
1,175,000 Maricopa County USD No. 65, Littleton School Improvement, Series B, FGIC Insured,
6.40%, 07/01/14.................................................................................. 1,224,209
4,000,000 Maricopa County USD No. 68, Alhambra, Refunding & Improvement, AMBAC Insured,
5.625%, 07/01/13 ................................................................................ 3,770,720
1,000,000 Maricopa County USD No. 69, Paradise Valley, Series A, 7.10%, 07/01/05 ............................ 1,110,430
1,600,000 Maricopa County USD No. 80, Chandler, FGIC Insured, 6.00%, 07/01/13 ............................... 1,600,000
Maricopa County USD No. 89,
240,000 Dysart, Refunding & Improvement, FGIC Insured, 6.70%, 07/01/05 .................................. 254,212
1,760,000 Dysart, Refunding & Improvement, FGIC Insured, 6.75%, 07/01/06 .................................. 1,859,914
2,245,000 Maricopa County USD No. 91, Phoenix Elementary School, Pre-Refunded, 6.60%, 07/01/03 .............. 2,428,394
Maricopa County USD No. 92, Pendergast Elementary School,
250,000 FGIC Insured, Pre-Refunded, 7.20%, 07/01/02 ..................................................... 265,505
1,300,000 FGIC Insured, Pre-Refunded, 7.20%, 07/01/03 ..................................................... 1,380,626
3,000,000 Maricopa County USD No. 97, Deer Valley Project, Series D, MBIA Insured, Pre-Refunded, 6.90%,
07/01/01......................................................................................... 3,278,670
Maricopa County USD No. 98, Fountain Hills School, Improvement Bond,
1,300,000 Refunding, FGIC Insured, 6.625%, 07/01/10 ....................................................... 1,374,841
2,800,000 Series B, FGIC Insured, Pre-Refunded, 7.00%, 07/01/10 ........................................... 3,073,000
Maricopa County USD No. 214, Tolleson GO,
500,000 Pre-Refunded, 7.30%, 07/01/03 ................................................................... 535,435
2,000,000 Pre-Refunded, 7.35%, 07/01/04 ................................................................... 2,143,900
Mesa IDA, Health Care Facilities Revenue, Western Health Network,
750,000 Refunding, Series B-2, BIG Insured, 7.50%, 01/01/08 ............................................. 812,303
5,250,000 Series A-2, BIG Insured, 7.625%, 01/01/13 ....................................................... 5,601,750
250,000 Series A-3, BIG Insured, 7.625%, 01/01/13 ....................................................... 266,750
2,400,000 Series A-4, BIG Insured, 7.625%, 01/01/09 ....................................................... 2,560,800
Mohave County, Hospital District No. 1, GO,
1,500,000 Kingman Regional Medical Center Project, FGIC Insured, 6.50%, 06/01/15 .......................... 1,548,104
6,350,000 Kingman Regional Medical Center Project, Pre-Refunded, 8.375%, 06/01/15 ......................... 7,366,000
Mohave County, IDA, Citizens Utilities Project,
4,100,000 Series 1994, 6.60%, 05/01/29 .................................................................... 4,152,029
10,000,000 Series A, 7.15%, 02/01/26 ....................................................................... 10,452,600
5,000,000 Series B, 7.15%, 02/01/26 ....................................................................... 5,226,300
5,000,000 Series B, 5.80%, 11/15/28 ....................................................................... 4,574,000
Mohave County, IDA, Hospital Systems Revenue, Refunding,
1,595,000 Medical Environments, Inc., Phoenix Hospital and Medical Center, 5.80%, 07/01/99 ................ 1,605,718
1,700,000 Medical Environments, Inc., Phoenix Hospital and Medical Center, 7.00%, 07/01/16 ................ 1,618,655
1,000,000 Mohave County, Union High School District No. 30, Series B, FGIC Insured, Pre-Refunded, 6.70%,
07/01/11......................................................................................... 1,092,660
40,000,000 Navajo County PCR, Arizona Public Service Co., Series A, 5.875%, 08/15/28 ......................... 35,280,400
</TABLE>
The accompanying notes are an integral part of these financial statements.
51
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FRANKLIN TAX-FREE TRUST
================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN ARIZONA TAX-FREE INCOME FUND (NOTE 1)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
Nogales Municipal Development Authority, Inc., Municipal Facilities Revenue, Refunding,
$ 6,350,000 MBIA Insured, 7.20%, 06/01/08 ................................................................... $ 6,905,181
500,000 MBIA Insured, Pre-Refunded, 8.00%, 06/01/08 ..................................................... 549,575
3,700,000 Northern Arizona University System Revenue, Pre-Refunded, 7.50%, 06/01/06 ......................... 4,033,851
2,750,000 Northern Arizona University System Revenue, Refunding, FGIC Insured, 6.40%, 06/01/07 .............. 2,882,468
Peoria Municipal Development Authority, Inc., Municipal Facilities Revenue,
3,000,000 MBIA Insured, Pre-Refunded, 7.00%, 07/01/09 .................................................... 3,199,950
1,300,000 Series 1991, MBIA Insured, Pre-Refunded, 7.00%, 07/01/10 ........................................ 1,420,704
1,000,000 Peoria Municipal Development Authority, Water and Sewer Revenue, Refunding, FGIC Insured, 6.625%,
07/01/06......................................................................................... 1,056,280
Phoenix Airport Revenue,
700,000 Refunding, Series B, MBIA Insured, 6.20%, 07/01/10 .............................................. 705,586
1,680,000 Refunding, Series C, MBIA Insured, 6.30%, 07/01/10 .............................................. 1,713,869
1,785,000 Refunding, Series C, MBIA Insured, 6.40%, 07/01/11 .............................................. 1,828,108
570,000 Refunding, Series C, MBIA Insured, 6.40%, 07/01/12 .............................................. 581,429
1,800,000 Series D, MBIA Insured, 6.30%, 07/01/10 ......................................................... 1,836,288
3,825,000 Series D, MBIA Insured, 6.40%, 07/01/11 ......................................................... 3,917,374
820,000 Series D, MBIA Insured, 6.40%, 07/01/12 ......................................................... 836,441
Phoenix Civic Improvement Corp.,
5,000,000 Airport Terminal Excise Tax Revenue, Pre-Refunded, 7.80%, 07/01/11 ............................. 5,370,800
3,500,000 Airport Terminal Excise Tax Revenue, Pre-Refunded, 7.875%, 07/01/14 ............................. 3,765,195
275,000 Airport Terminal Excise Tax Revenue, Refunding, Pre-Refunded, 8.375%, 07/01/09 .................. 303,749
1,000,000 Municipal Facilities Excise Tax Revenue, MBIA Insured, 6.90%, 07/01/21 .......................... 1,060,380
4,210,000 Parking Facilities, Series B, FGIC Insured, Pre-Refunded, 7.50%, 07/01/09 ....................... 4,536,233
2,150,000 Phoenix Civic Plaza Building Corp., 6.00%, 07/01/14 ............................................... 2,140,046
Phoenix GO,
5,000,000 Refunding, 6.375%, 07/01/13 ..................................................................... 5,092,500
1,000,000 Refunding, Pre-Refunded, 7.15%, 07/01/08 ........................................................ 1,081,840
1,000,000 Refunding, Pre-Refunded, 7.375%, 07/01/11 ....................................................... 1,072,500
1,705,000 Refunding, Pre-Refunded, 7.375%, 07/01/12 ....................................................... 1,828,612
9,425,000 Series 1991, Pre-Refunded, 6.80%, 07/01/07 ...................................................... 10,189,556
Phoenix HFC, Mortgage Revenue,
2,750,000 Refunding, Project A, MBIA Insured, 6.50%, 07/01/24 ............................................. 2,756,655
1,750,000 Refunding, Section 8 Project, Series A, MBIA Insured, 6.90%, 01/01/23 ........................... 1,786,313
2,260,000 Refunding, Section 8 Project, Series A, MBIA Insured, 7.25%, 01/01/23 ........................... 2,290,578
Phoenix IDAR, Home Purchase Mortgage,
130,000 GNMA Secured, Series B, 7.70%, 10/01/11 ......................................................... 133,825
1,880,000 GNMA Secured, Series B, 8.20%, 04/01/22 ......................................................... 1,973,925
Phoenix Street and Highway Revenue,
5,000,000 Refunding, Series 1992, 6.60%, 07/01/07 ......................................................... 5,276,850
1,000,000 Series 1987, ETM, 6.80%, 07/01/03 ............................................................... 1,099,730
1,000,000 Series 1989, Pre-Refunded, 7.375%, 07/01/05 ..................................................... 1,072,500
3,310,000 Series 1989, Pre-Refunded, 7.375%, 07/01/06 ..................................................... 3,549,975
2,000,000 Series 1989, Pre-Refunded, 7.375%, 07/01/08 ..................................................... 2,145,000
4,665,000 Series 1990, Pre-Refunded, 7.125%, 07/01/10 ..................................................... 5,058,166
Pima County IDA, Health Care Revenue,
65,000 Carondelet St. Joseph's and St. Mary's, 8.00%, 07/01/13 ......................................... 71,047
2,250,000 Carondelet St. Joseph's and St. Mary's, MBIA Insured, 6.75%, 07/01/10 ........................... 2,352,982
535,000 Carondelet St. Joseph's and St. Mary's, Pre-Refunded, 8.00%, 07/01/13 ........................... 593,732
745,000 Pima County IDA, MFHR, Fountains La Cholla Project, FHA Mortgage Insured, 8.00%, 12/01/25 ......... 761,360
Pima County IDA, SFMR,
1,905,000 GNMA Secured, 8.00%, 09/01/09 ................................................................... 1,988,572
1,350,000 GNMA Secured, 6.40%, 11/01/09 ................................................................... 1,364,864
</TABLE>
The accompanying notes are an integral part of these financial statements.
52
<PAGE>
FRANKLIN TAX-FREE TRUST
================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN ARIZONA TAX-FREE INCOME FUND (NOTE 1)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
Pima County IDA, SFMR, (cont.)
$ 1,640,000 GNMA Secured, 8.125%, 09/01/20 .................................................................. $ 1,712,012
6,050,000 GNMA Secured, 6.750%, 11/01/27 .................................................................. 6,105,842
7,215,000 Pima County IDA, SFMR, Refunding, Series A, 7.625%, 02/01/12 ...................................... 7,449,055
Pima County Sewer Revenue,
1,200,000 Pre-Refunded, FGIC Insured, 6.75%, 07/01/15 ..................................................... 1,314,396
1,410,000 Series 1991, FGIC Insured, 6.75%, 07/01/15 ...................................................... 1,465,427
Pima County USD No. 1,
21,000,000 Tucson Project, FGIC Insured, 5.875%, 07/01/14 .................................................. 20,629,350
10,000,000 Tucson School Improvement, Series B, Pre-Refunded, 7.20%, 07/01/10 .............................. 11,018,100
7,000,000 Tucson School Improvement, Series C, MBIA Insured, Pre-Refunded, 6.875%, 07/01/10 ............... 7,714,000
3,400,000 Pima County USD No. 6, Marana, Series A, FGIC Insured, 5.75%, 07/01/12 ............................ 3,316,020
500,000 Pima County USD No. 10, Amphitheater School, Refunding & Improvement, Pre-Refunded, 7.70%,
07/01/03......................................................................................... 535,290
Pinal County USD No. 43, Apache Junction, Refunding & Improvement,
500,000 FGIC Insured, Pre-Refunded, 7.15%, 07/01/05 ..................................................... 533,234
500,000 FGIC Insured, Pre-Refunded, 7.15%, 07/01/06 ..................................................... 545,265
700,000 FGIC Insured, Pre-Refunded, 7.20%, 07/01/07 ..................................................... 764,715
2,360,000 Prescott Muni Property, Series 1990-C, MBIA Insured, Pre-Refunded, 7.00%, 07/01/10 ................ 2,560,057
6,405,000 Price Elliott Resh Park, Inc. Revenue, Refunding, Arizona State University Research Park,
MBIA Insured, 7.00%, 07/01/21 ................................................................... 6,905,807
Puerto Rico Commonwealth Aqueduct and Sewer Authority Revenue,
75,000 Refunding, Series 1985-A, Pre-Refunded, 9.00%, 07/01/09 ......................................... 95,447
6,000,000 Series 1988-A, 7.875%, 07/01/17 ................................................................. 6,531,900
2,315,000 Series 1988-A, 7.00%, 07/01/19 .................................................................. 2,394,335
750,000 Puerto Rico Commonwealth Highway Authority Revenue, Series P, Pre-Refunded, 8.125%, 07/01/13 ...... 838,845
Puerto Rico Commonwealth Infrastructure Financing Authority, Special Tax Revenue,
9,215,000 Series 1988-A, 7.75%, 07/01/08 .................................................................. 9,944,920
2,000,000 Series 1988-A, 7.50%, 07/01/09 .................................................................. 2,140,980
Puerto Rico Commonwealth Public Improvement GO,
130,000 Pre-Refunded, 7.90%, 07/01/11 ................................................................... 139,603
3,190,000 Series 1987, Pre-Refunded, 7.25%, 07/01/12 ...................................................... 3,430,877
1,000,000 Series 1990, Pre-Refunded, 7.625%, 07/01/10 ..................................................... 1,141,550
Puerto Rico Electric Power Authority, Power Revenue, Refunding,
125,000 Series 1987-L, Pre-Refunded, 8.40%, 07/01/15 .................................................... 137,473
3,000,000 Series 1988-M, Pre-Refunded, 8.00%, 07/01/08 .................................................... 3,344,010
2,000,000 Series 1989-N, 7.00%, 07/01/07 .................................................................. 2,103,520
2,205,000 Series 1989-N, 7.125%, 07/01/14 ................................................................. 2,314,875
3,490,000 Series 1989-N, Pre-Refunded, 7.125%, 07/01/14 ................................................... 3,838,127
1,510,000 Series 1989-0, 7.125%, 07/01/14 ................................................................. 1,585,243
2,540,000 Series 1989-0, Pre-Refunded, 7.125%, 07/01/14 ................................................... 2,793,365
600,000 Series 1991-P, 7.00%, 07/01/11 .................................................................. 638,766
1,445,000 Puerto Rico HFC, MFMR, Portfolio A, Series I, 7.50%, 04/01/22 ..................................... 1,525,732
40,000 Puerto Rico HFC Revenue, FHA Mortgage Insured, Section 8 Assisted, 6th Portfolio, Pre-Refunded,
7.75%, 12/01/26 ................................................................................. 46,953
1,295,000 Puerto Rico HFC, SFMR, Portfolio No. 1, Series 1988-B, GNMA Secured, 7.65%, 10/15/22 .............. 1,370,641
Puerto Rico PBA, Guaranteed Public Education and Health Facilities,
115,000 Refunding, Series F, Pre-Refunded, 8.875%, 07/01/12 ............................................. 119,122
1,585,000 Refunding, Series H, Pre-Refunded, 7.00%, 07/01/19 .............................................. 1,713,433
1,000,000 Series F, Pre-Refunded, 8.00%, 07/01/12 ......................................................... 1,074,730
1,000,000 Series H, Pre-Refunded, 7.875%, 07/01/16 ........................................................ 1,089,090
3,100,000 Series H, Pre-Refunded, 7.25%, 07/01/17 ......................................................... 3,374,722
3,555,000 Series J, Pre-Refunded, 7.25%, 07/01/17 ......................................................... 3,870,044
</TABLE>
The accompanying notes are an integral part of these financial statements.
53
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STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN ARIZONA TAX-FREE INCOME FUND (NOTE 1)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
Salt River Project, Agricultural Improvement and Power District, Electric System Revenue,
$ 6,000,000 Refunding, Series D, 6.25%, 01/01/27 ............................................................ $ 6,072,240
2,000,000 Series A, 6.50%, 01/01/22 ....................................................................... 2,058,920
4,600,000 Series A, 6.00%, 01/01/31 ....................................................................... 4,487,115
1,845,000 Series A, MBIA Insured, 6.00%, 01/01/31 ......................................................... 1,776,587
2,500,000 Series A, Pre-Refunded, 7.875%, 01/01/28 ........................................................ 2,740,275
9,975,000 Series B, 6.25%, 01/01/19 ....................................................................... 10,129,114
5,925,000 Series C, 6.20%, 01/01/12 ....................................................................... 6,037,042
110,000 Series E, Pre-Refunded, 8.25%, 01/01/13 ......................................................... 119,633
625,000 Series E, Pre-Refunded, 8.25%, 01/01/28 ......................................................... 679,731
3,270,000 San Luis Municipal Property Corp., Municipal Facilities Revenue, 8.125%, 07/01/19 ................. 3,441,086
8,000,000 Santa Cruz County IDAR, Citizens Utilities Co. Project, 6.60%, 05/01/29 ........................... 8,056,320
1,000,000 (d)Santa Cruz County USD No. 1, Nogales, 6.10%, 07/01/14 ............................................. 1,007,810
50,000 Scottsdale, City of, Municipal Property Corp., Refunding, Series 1987, Pre-Refunded, 7.75%,
07/01/05......................................................................................... 54,146
50,000 Scottsdale, City of, Street and Highway Revenue, 1983 Project, Series 1987-C, Pre-Refunded, 7.60%,
07/01/07......................................................................................... 51,516
Scottsdale IDA, Hospital Revenue, Scottsdale Memorial Hospital,
180,000 Refunding, Series 1987-A, AMBAC Insured, 8.50%, 09/01/17 ........................................ 198,792
1,660,000 Series A, AMBAC Insured, 7.05%, 09/01/18 ........................................................ 1,721,022
2,750,000 Series B, AMBAC Insured, 7.00%, 09/01/08 ........................................................ 2,881,422
Sedona Sewer Revenue,
3,800,000 Refunding, Series 1992, 6.75%, 07/01/07 ......................................................... 3,983,768
5,000,000 Refunding, Series 1992, 7.00%, 07/01/12 ......................................................... 5,149,000
6,500,000 Series A, Pre-Refunded, 7.50%, 07/01/20 ......................................................... 7,333,495
Tucson Airport Authority Revenue,
6,700,000 Refunding, MBIA Insured, 5.70%, 06/01/13 ........................................................ 6,406,808
1,090,000 Series A, MBIA Insured, 6.875%, 06/01/20 ........................................................ 1,137,371
1,175,000 Series B, MBIA Insured, 7.125%, 06/01/15 ........................................................ 1,236,030
1,125,000 Series B, MBIA Insured, 7.25%, 06/01/20 ......................................................... 1,188,169
4,950,000 Tucson GO, Series D, Pre-Refunded, 6.75%, 07/01/14 ................................................ 5,393,916
1,945,000 Tucson IDA, MFHR, La Entrada, Refunding, 7.40%, 07/01/26 .......................................... 2,028,363
900,000 Tucson Local Development Corp., Leasehold Revenue, Series F, FGIC Insured, Pre-Refunded, 7.30%,
07/01/10......................................................................................... 973,035
Tucson Water Revenue,
5,500,000 1981 Project, Series 1986, Pre-Refunded, 7.70%, 07/01/15 ........................................ 5,822,080
2,270,000 1984 Project, Series B, Pre-Refunded, 7.70%, 07/01/18 ........................................... 2,381,548
2,250,000 Refunding, MBIA Insured, 7.00%, 07/01/10 ........................................................ 2,350,283
6,750,000 Series D, Pre-Refunded, 7.10%, 07/01/18 ......................................................... 7,529,895
University of Arizona COP,
1,500,000 Residence Life Project, Series A, CGIC Insured, 5.80%, 09/01/13 ................................. 1,445,670
1,500,000 University of Arizona Telecommunications System, Pre-Refunded, 7.60%, 07/15/03 .................. 1,617,434
University of Arizona Medical Center Corp., Hospital Revenue,
225,000 Series 1986, Pre-Refunded, 8.10%, 07/01/16 ...................................................... 244,688
250,000 Series 1987, Pre-Refunded, 8.10%, 07/01/16 ...................................................... 271,875
5,000,000 Series 1991, MBIA Insured, Pre-Refunded, 7.00%, 07/01/11 ........................................ 5,579,750
6,500,000 Series 1991, MBIA Insured, Pre-Refunded, 6.875%, 07/01/21 ....................................... 7,210,320
University of Arizona System Revenue,
1,700,000 Series 1988, Pre-Refunded, 7.625%, 06/01/11 ..................................................... 1,860,497
6,405,000 Series 1990, Pre-Refunded, 7.00%, 06/01/15 ...................................................... 7,039,993
2,600,000 Series 1990-B, Pre-Refunded, 6.90%, 06/01/16 .................................................... 2,845,986
1,000,000 Series 1994, 6.25%, 06/01/11 .................................................................... 1,012,760
1,300,000 Series 1994, 6.35%, 06/01/14 .................................................................... 1,316,498
2,650,000 Williams Municipal Development Authority, Inc., Municipal Facilities Revenue, 7.625%, 07/01/05..... 2,771,026
</TABLE>
The accompanying notes are an integral part of these financial statements.
54
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STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN ARIZONA TAX-FREE INCOME FUND (NOTE 1)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
Yuma IDA, MFHR,
$ 1,000,000 Alexandrite Sands Apartments Project, 7.60%, 12/01/15 ........................................... $ 1,057,620
2,000,000 Alexandrite Sands Apartments Project, 7.70%, 12/01/29 ........................................... 2,065,600
------------
TOTAL LONG TERM INVESTMENTS (COST $678,368,827) ............................................. 712,578,137
------------
SHORT TERM INVESTMENTS .2%
295,000 Coconino County, Tuba City USD No. 15, Improvement and Development, Pre-Refunded, 7.70%,
07/01/95......................................................................................... 298,068
700,000 (e)Maricopa County IDA, Hospital Facilities Revenue, Samaritan Health Service Hospital, Series B-2,
MBIA Insured, Daily VRDN and Put, 3.80%, 12/01/08 ............................................... 700,000
100,000 (e)Pinal County, IDA, PCR, Magma Copper/Newmont Mining Corp., Daily VRDN and Put, 3.75%, 12/01/09..... 100,000
200,000 (e)Puerto Rico Commonwealth, Government Development Bank, Weekly VRDN and Put, 3.90%, 12/01/15 ....... 200,000
------------
TOTAL SHORT TERM INVESTMENTS (COST $1,295,000) .............................................. 1,298,068
------------
TOTAL INVESTMENTS (COST $679,663,827) 99.0% ............................................ 713,876,205
OTHER ASSETS AND LIABILITIES, NET 1.0% ................................................. 6,924,864
------------
NET ASSETS 100.0% ...................................................................... $720,801,069
============
At February 28, 1995, the net unrealized appreciation based on the cost of investments
for income tax purposes of $679,676,737 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ................................................................. $ 40,844,691
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ................................................................. (6,645,223)
------------
Net unrealized appreciation ..................................................................... $ 34,199,468
============
</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
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
MBIA - Municipal Bond Investors Assurance Corp.
MFHR - Multi-Family Housing Revenue
MFMR - Multi-Family Mortgage Revenue
PBA - Public Building Authority
PCR - Pollution Control Revenue
SFMR - Single Family Mortgage Revenue
USD - Unified School District
(d)See Note 1 regarding securities purchased on a when-issued basis.
(e)Variable rate demand notes (VRDNs) are tax-exempt obligations which contain
a floating or variable interest rate adjustment formula and an unconditional
right of demand to receive payment of the principal balance plus accrued
interest 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.
55
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STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN COLORADO TAX-FREE INCOME FUND (NOTE 1)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS 98.0%
Adams County PCR, Refunding, Public Service Co. of Colorado Project,
$ 770,000 Series A, 7.375%, 11/01/09 ...................................................................... $ 804,858
4,000,000 Series A, MBIA Insured, 5.875%, 04/01/14 ........................................................ 3,974,840
1,000,000 Adams County USD No. 12, GO, Refunding & Improvement, FGIC Insured, Pre-Refunded, 7.375%,
12/15/10......................................................................................... 1,112,410
400,000 Arapahoe County COP, Building Finance Corp., CGIC Insured, 7.50%, 12/01/10 ........................ 430,696
805,000 Arapahoe County COP, Refunding, CGIC Insured, 6.625%, 12/01/16 .................................... 853,574
500,000 Arapahoe County USD No. 5, Cherry Creek, 7.125%, 12/15/10 ......................................... 534,875
200,000 Arkansas River Power Authority Revenue, 8.35%, 12/01/09 ........................................... 211,112
5,000,000 Arvada Limited Sales and Use Tax Revenue, Pre-Refunded, 7.50%, 06/01/11 ........................... 5,590,900
75,000 Arvada MFR, Rental Housing, Arvada Manor Project, GNMA Secured, 8.25%, 12/01/25 ................... 76,694
1,000,000 Aspen Housing GO, Series A, FGIC Insured, Pre-Refunded, 7.20%, 04/15/10 ........................... 1,023,640
Auraria Higher Education Center,
2,500,000 Parking Facilities Revenue, Refunding, Pre-Refunded, 7.875%, 04/01/12 ........................... 2,794,375
2,000,000 Student Fee Revenue, Series A, AMBAC Insured, 6.50%, 11/01/16 ................................... 2,070,600
300,000 Student Fee Revenue, Series A, MBIA Insured, 7.35%, 05/01/09 .................................... 320,550
2,850,000 Aurora COP, Refunding, 6.25%, 12/01/09 ............................................................ 2,819,933
150,000 Aurora MFHR, Dayton Place Project, GNMA Secured, Series 1988-A, 8.25%, 01/20/29 ................... 156,131
750,000 Aurora Urban Renewal Authority, Tax Increment Revenue, 7.50%, 11/15/07 ............................ 805,260
1,000,000 Bayfield School District No. 10, MBIA Insured, 6.65%, 06/01/15 .................................... 1,054,520
1,000,000 Beaver Creek Metropolitan District GO, Unlimited Tax, Refunding, MBIA Insured, 7.25%, 12/01/09 .... 1,048,700
Boulder County Hospital Revenue,
2,000,000 Longmont United Hospital Project, 5.80%, 12/01/13 ............................................... 1,825,160
1,285,000 Longmont United Hospital Project, 5.875%, 12/01/20 .............................................. 1,152,748
3,000,000 Longmont United Hospital Project, Pre-Refunded, 8.20%, 12/01/20 ................................. 3,458,400
1,250,000 Boulder GO, Refunding, 7.20%, 08/15/13 ............................................................ 1,344,488
2,900,000 Castle Pines Metropolitan District, Refunding & Improvement, CGIC Insured, 7.625%, 12/01/15 ....... 3,229,527
1,750,000 Colorado Association of School Boards, COP, Pueblo School District No. 60, Project A, MBIA Insured,
7.25%, 12/01/09 ................................................................................. 1,871,345
Colorado Health Facilities Authority Revenue,
1,615,000 Birchwood Manor Project, Series A, GNMA Secured, 7.625%, 04/01/26 ............................... 1,675,013
955,000 Community Provider Pooled, CGIC Insured, 6.75%, 07/15/17 ........................................ 996,332
6,571,000 Community Provider Pooled, Series A, CGIC Insured, 7.25%, 07/15/17 .............................. 7,031,626
1,250,000 Mercy Medical Center, 6.20%, 11/15/15 ........................................................... 1,222,800
430,000 Oakbrook I Manor, Series A, GNMA Secured, 7.25%, 04/01/11 ....................................... 444,439
885,000 Oakbrook I Manor, Series A, GNMA Secured, 7.625%, 04/01/26 ...................................... 924,993
6,000,000 PSL Health System Project, Series B, 8.50%, 02/15/21 ............................................ 6,544,140
775,000 Refunding, Porter Memorial Hospital Project, Series A, Pre-Refunded, 7.40%, 02/01/16 ............ 851,369
2,000,000 Rose Medical Center, MBIA Insured, Pre-Refunded, 7.00%, 08/15/11 ................................ 2,229,320
1,000,000 Sisters of Charity Health Care System, 5.25%, 05/15/14 .......................................... 873,850
4,000,000 Sisters of Charity Health Care System, Series A, MBIA Insured, 6.00%, 05/15/13 .................. 4,003,640
3,000,000 Swedish Medical Center, Project A, 6.80%, 01/01/23 .............................................. 2,944,500
Colorado HFA, GO,
3,880,000 MF, Series A, 6.80%, 08/01/14 ................................................................... 3,955,117
6,315,000 MF, Series A, 6.85%, 08/01/24 ................................................................... 6,436,943
1,000,000 MF, Series A, 7.50%, 05/01/29 ................................................................... 1,046,930
2,495,000 MF, Series A, 6.875%, 08/01/30 .................................................................. 2,542,255
100,000 Series A, Pre-Refunded, 8.375%, 01/01/30 ........................................................ 110,689
20,000 SFHR, Series C, 8.75%, 09/01/17 ................................................................. 20,895
520,000 SFMR Program, Series A-3, 7.90%, 08/01/21 ....................................................... 545,152
1,210,000 SFMR, Series A-2, 7.70%, 02/01/23 ............................................................... 1,265,079
2,090,000 SFMR, Series C-2, 7.375%, 08/01/10 .............................................................. 2,180,936
335,000 SFMR, Series C-2, 7.85%, 02/01/21 ............................................................... 349,278
</TABLE>
The accompanying notes are an integral part of these financial statements.
56
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STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN COLORADO TAX-FREE INCOME FUND (NOTE 1)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
$ 310,000 Colorado HFA, SFMR Program, Series A-1, 8.00%, 08/01/17 ........................................... $ 326,756
Colorado Post Secondary Educational Facilities Authority Revenue,
3,250,000 University of Denver Project, Connie Lee Insured, 6.625%, 06/01/13 .............................. 3,375,645
3,000,000 University of Denver Project, Connie Lee Insured, 6.00%, 03/01/16 ............................... 2,975,220
300,000 University of Denver Project, Series B, Pre-Refunded, 9.00%, 12/01/07 ........................... 336,489
75,000 Colorado Springs Hospital Revenue, Memorial Hospital, 8.75%, 12/15/07 ............................. 81,277
Colorado Springs Utilities System Revenue,
2,000,000 Series 1986-A, Pre-Refunded, 7.30%, 11/15/20 .................................................... 2,040,100
295,000 Series 1988-A, Pre-Refunded, 8.00%, 11/15/20 .................................................... 314,172
1,090,000 Colorado State, Board Community Colleges and Occupational Educational Revenue, Red Rocks
Community College Project, AMBAC Insured, 6.00%, 11/01/19 ....................................... 1,090,000
Colorado Water Resources and Power Development Authority Revenue,
1,765,000 Clean Water Revenue, Series A, 6.15%, 09/01/11 .................................................. 1,790,010
1,000,000 Clean Water Revenue, Series A, 6.30%, 09/01/14 .................................................. 1,021,440
750,000 Small Water Resources, Series A, FGIC Insured, 6.70%, 11/01/12 .................................. 790,208
65,000 Stagecoach Project, Pre-Refunded, 8.00%, 11/01/17 ............................................... 72,482
Denver City and County Airport System Revenue,
50,000 Series 1985, 8.875%, 08/01/15 ................................................................... 50,823
4,000,000 Series 1990-A, 8.50%, 11/15/23 .................................................................. 4,317,320
7,500,000 Series A, 7.50%, 11/15/12 ....................................................................... 7,812,974
4,000,000 Series A, 7.50%, 11/15/23 ....................................................................... 4,067,840
1,000,000 Series D, 7.75%, 11/15/13 ....................................................................... 1,061,170
100,000 Denver City and County Excise Tax Revenue, BIG Insured, Pre-Refunded, 8.30%, 09/01/14 ............. 108,916
Denver City and County IDR,
1,880,000 University of Denver Project, 7.50%, 03/01/11 ................................................... 2,013,029
720,000 University of Denver Project, Pre-Refunded, 7.50%, 03/01/11 ..................................... 816,790
2,100,000 University of Denver Project, Pre-Refunded, 7.50%, 03/01/16 ..................................... 2,382,303
3,400,000 Denver City and County Revenue, Children's Hospital Association Project, FGIC Insured, 6.00%,
10/01/15......................................................................................... 3,379,940
150,000 Denver City and County Revenue, Refunding, St. Anthony's Hospital, Sisters of Charity Health Care
System, Series A, MBIA Insured, 7.75%, 05/01/14 ................................................. 160,262
360,000 Denver City and County SFMR, Series A, GNMA Secured, 8.125%, 12/01/20 ............................. 374,839
2,000,000 Denver City and County Special Facilities Airport Revenue, United Airlines Project, Series A,
6.875%, 10/01/32................................................................................. 1,891,280
2,500,000 Denver USD No. 1, GO, Pre-Refunded, 7.25%, 12/15/10 ............................................... 2,771,050
1,000,000 Donala Colorado Water and Sanitary District, Improvement Series B, 6.50%, 12/01/14 ................ 1,019,870
4,100,000 Douglas County, School District No. 1, Douglas and Elvert Counties, Improvement Series A,
MBIA Insured, 6.50%, 12/15/16 ................................................................... 4,253,832
El Paso County,
195,000 HMR, Series A, GNMA Secured, 8.00%, 03/01/21 .................................................... 204,974
140,000 HMR, Series B, GNMA Secured, 8.125%, 11/01/13 ................................................... 147,541
100,000 Revenue, Refunding, St. Francis Hospital System, Sisters of Charity Health Care System, Series A,
MBIA Insured, Pre-Refunded, 7.75%, 05/01/14 ................................................... 109,779
El Paso County, School District No. 20, GO,
20,000 Series B, 8.00%, 12/01/06 ....................................................................... 21,297
30,000 Series B, Pre-Refunded, 8.00%, 12/01/06 ......................................................... 32,285
1,500,000 Estes Park Urban Renewal Authority, Tax Increment Revenue, Pre-Refunded, 7.625%, 05/15/08 ......... 1,650,240
1,035,000 Foothill Metropolitan, Recreational and Park District Golf Course Revenue, Series A, Pre-Refunded,
8.00%, 11/15/04 ................................................................................. 1,121,702
190,000 Fort Collins IDR, Vipont Pharmaceutical, Inc. Project, Pre-Refunded, 9.25%, 08/01/13 .............. 216,682
500,000 Fort Collins PCR, Anheuser-Busch Co. Project, Series 1984, 7.375%, 12/01/14 ....................... 520,070
</TABLE>
The accompanying notes are an integral part of these financial statements.
57
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================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN COLORADO TAX-FREE INCOME FUND (NOTE 1)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
$ 250,000 Frisco Fire Protection District, Refunding & Improvement, 7.20%, 12/01/05 .......................... $ 267,255
Guam Airport Authority Revenue, Refunding,
400,000 Series A, 6.375%, 10/01/10 ....................................................................... 398,220
800,000 Series A, 6.50%, 10/01/23 ........................................................................ 792,768
1,000,000 Guam Power Authority Revenue, Series A, 6.375%, 10/01/08 ........................................... 1,003,130
Jefferson County, District Wide Sales Tax Revenue,
7,450,000 Local Improvement District, MBIA Insured, 6.30%, 06/01/22 ........................................ 7,539,847
200,000 Local Improvement District, Pre-Refunded, 8.20%, 12/01/13 ........................................ 220,952
1,000,000 Jefferson County School District No. R-001, AMBAC Insured, 6.25%, 12/15/12 ......................... 1,019,650
815,000 Jefferson County SFMR, Refunding, Series A, MBIA Insured, 8.875%, 10/01/13 ......................... 883,557
750,000 La Plata County School District No. 9-R, Durango COP, FGIC Insured, 7.40%, 11/15/07 ................ 806,933
250,000 Larimer County Health Care Facilities Revenue, Refunding, Western Health Network, Inc., BIG Insured,
7.625%, 01/01/12 ................................................................................. 268,608
735,000 Left Hand Water District, Boulder and Weld Counties Water Revenue Bonds, MBIA Insured,
Pre-Refunded, 7.40%, 11/15/09 .................................................................... 823,009
500,000 Logan County, Health Care Facilities Revenue, Western Health Network, Inc., Refunding, MBIA Insured,
5.90%, 01/01/19 .................................................................................. 490,550
835,000 Logan County, SFMR, Refunding, Series A, 8.50%, 11/01/11 ........................................... 886,770
625,000 Louisville Sewer Revenue, Refunding, FGIC Insured, Pre-Refunded, 7.60%, 12/01/06 ................... 661,069
910,000 Louisville Water District GO, Refunding, FGIC Insured, 7.20%, 12/01/09 ............................. 964,718
350,000 Mesa County Sales Tax Revenue, Refunding, MBIA Insured, 7.75%, 12/01/13 ............................ 381,374
575,000 Metropolitan of Denver Revenue, Sewer Disposal District No. 1, Series A, MBIA Insured, Pre-Refunded,
7.60%, 04/01/14 .................................................................................. 624,232
1,850,000 Montrose County COP, 6.35%, 06/15/06 ............................................................... 1,863,635
450,000 Northern Colorado Water Conservancy District Revenue, Municipal Sub-District, Series D, 7.75%,
12/01/12.......................................................................................... 477,428
2,150,000 Platte River Electric Power Authority Revenue, Series I, Pre-Refunded, 7.70%, 06/01/16 ............. 2,272,120
40,000 Pueblo County Hospital Facility Revenue, Parkview Episcopal Medical Center, Inc., MBIA Insured,
Pre-Refunded, 8.75%, 09/01/09 .................................................................... 41,638
1,000,000 Pueblo County School District No.70, Pueblo Rural, GO, 6.40%, 12/01/14 ............................. 1,030,530
1,000,000 Pueblo Urban Renewal Authority Tax Increment Revenue, Refunding, AMBAC Insured, 6.10%, 12/01/15..... 1,007,170
Puerto Rico Commonwealth, Aqueduct and Sewer Authority Revenue,
55,000 Refunding, Series 1985-A, FSA Insured, Pre-Refunded, 9.00%, 07/01/09 ............................. 69,995
490,000 Series 1988-A, 7.875%, 07/01/17 .................................................................. 533,439
1,000,000 Puerto Rico Commonwealth GO, Pre-Refunded, 7.30%, 07/01/20 ......................................... 1,126,500
1,000,000 Puerto Rico Commonwealth Highway Authority Revenue, Series G, Pre-Refunded, 8.00%, 07/01/18 ........ 1,157,380
Puerto Rico Electric Power Authority Revenue,
50,000 Series 1987-L, Pre-Refunded, 8.40%, 07/01/15 ..................................................... 54,990
155,000 Series N, 7.125%, 07/01/14 ....................................................................... 162,724
185,000 Puerto Rico HFC, SFMR, Portfolio No. 1, Series 1988-A, GNMA Secured, 7.80%, 10/15/21 ............... 193,921
600,000 Puerto Rico Industrial, Medical and Environmental Facilities, PCFA, Baxter Travenol Labs, Inc.,
8.00%, 09/01/12................................................................................... 663,876
145,000 Puerto Rico Municipal Finance Agency, Series 1988-A, 8.25%, 07/01/08 ............................... 159,297
Regional Transportation District, Sales Tax Revenue,
1,080,000 Refunding, FGIC Insured, 6.25%, 11/01/12 ......................................................... 1,108,198
100,000 Series 1988, Pre-Refunded, 8.00%, 11/01/08 ....................................................... 109,605
1,500,000 Series 1990, FGIC Insured, Pre-Refunded, 7.10%, 11/01/10 ......................................... 1,656,810
945,000 Southwestern SFMR, Refunding, Series A, 7.375%, 09/01/11 ........................................... 983,584
285,000 Summit County SFMR, Series A, 7.50%, 12/01/11 ...................................................... 298,310
2,750,000 Summit County Sports Facilities Revenue, Refunding, Keystone Resorts Project, Ralston Purina Co.,
7.875%,09/01/08 .................................................................................. 3,094,052
2,000,000 Summit County USD No. 1, GO, FGIC Insured, 6.70%, 12/01/14 ......................................... 2,112,400
7,000,000 University of Colorado, Hospital Authority Revenue, Series A, AMBAC Insured, 6.40%, 11/15/22 ....... 7,125,510
</TABLE>
The accompanying notes are an integral part of these financial statements.
58
<PAGE>
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================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN COLORADO TAX-FREE INCOME FUND (NOTE 1)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
University of Colorado Revenue, Refunding,
$1,000,000 Auxiliary Facility Systems, Boulder Campus, 7.05%, 06/01/15 ..................................... $ 1,043,260
50,000 Recreations and Parking Facilities, Pre-Refunded, 7.90%, 05/01/06 ............................... 52,772
University of Puerto Rico Revenue, Refunding,
400,000 Series J, 7.75%, 06/01/07 ....................................................................... 421,911
250,000 Series L, 7.75%, 06/01/07 ....................................................................... 263,695
2,000,000 Westminster City Sales and Use Tax Revenue, Refunding & Improvement, FGIC Insured, 7.00%, 12/01/08 2,156,140
------------
TOTAL LONG TERM INVESTMENTS (COST $181,461,151) ............................................. 190,754,771
------------
(e)SHORT TERM INVESTMENTS .6%
1,000,000 Colorado Student Obligation Bond, Student Loan Revenue, Series C, Weekly VRDN and Put, 4.05%,
03/01/00......................................................................................... 1,000,000
200,000 Puerto Rico Commonwealth, Government Development Bank, Refunding, Weekly VRDN and Put, 3.90%,
12/01/15......................................................................................... 200,000
------------
TOTAL SHORT TERM INVESTMENTS (COST $1,200,000) .............................................. 1,200,000
------------
TOTAL INVESTMENTS (COST $182,661,151) 98.6% ............................................ 191,954,771
OTHER ASSETS AND LIABILITIES, NET 1.4% ................................................. 2,609,180
------------
NET ASSETS 100.0% ...................................................................... $194,563,951
============
At February 28, 1995, the net unrealized appreciation based on the cost of investments
for income tax purposes of $182,662,039 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ................................................................. $ 9,784,272
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ................................................................. (491,540)
------------
Net unrealized appreciation ..................................................................... $ 9,292,732
============
</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.
FSA - Financial Security Assistance
GNMA - Government National Mortgage Association
GO - General Obligation
HFA - Housing Finance Agency/Authority
HFC - Housing Finance Corp.
HMR - Home Mortgage Revenue
IDR - Industrial Development Revenue
MBIA - Municipal Bond Investors Assurance Corp.
MF - Multi-Family
MFHR - Multi-Family Housing Revenue
MFR - Multi-Family Revenue
PCFA - Pollution Control Financing Authority
PCR - Pollution Control Revenue
SF - Single Family
SFHR - Single Family Housing Revenue
SFMR - Single Family Mortgage Revenue
USD - Unified School District
(e)Variable rate demand notes (VRDNs) are tax-exempt obligations which contain a
floating or variable interest rate adjustment formula and an unconditional
right of demand to receive payment of the principal balance plus accrued
interest 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.
59
<PAGE>
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================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN CONNECTICUT TAX-FREE INCOME FUND (NOTE 1)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS 96.3%
Bridgeport GO,
$ 300,000 Series A, 7.25%, 06/01/00 ......................................................................... $ 311,685
600,000 Series A, 7.625%, 01/15/09 ........................................................................ 629,124
1,375,000 Series B, 7.55%, 11/15/00 ......................................................................... 1,451,890
3,750,000 Series B, 7.75%, 11/15/10 ......................................................................... 3,971,925
425,000 Series B, State Guaranteed, 7.30%, 01/15/09 ....................................................... 453,377
750,000 Unlimited Tax, Series A, 7.30%, 03/01/99 .......................................................... 779,513
Connecticut HFA, Housing Mortgage Finance, State Program,
250,000 Series A, 7.60%, 11/15/05 ......................................................................... 259,825
270,000 Series A, 7.50%, 11/15/09 ......................................................................... 283,932
1,545,000 Series A, Sub-Series 2, 7.20%, 11/15/08 ........................................................... 1,649,519
545,000 Series B, 7.20%, 11/15/09 ......................................................................... 565,656
17,485,000 Series B, 6.75%, 11/15/23 ......................................................................... 17,881,560
995,000 Sereis B-1, 7.55%, 11/15/08 ....................................................................... 1,071,008
1,640,000 Series C, 7.625%, 11/15/17 ........................................................................ 1,676,178
500,000 Series C-1, 6.60%, 11/15/23 ....................................................................... 505,995
6,000,000 Series C-2, 6.70%, 11/15/22 ....................................................................... 6,050,160
640,000 Sub-Series B-1, 6.50%, 05/15/18 ................................................................... 645,997
500,000 Sub-Series B-2, 6.75%, 05/15/22 ................................................................... 506,590
Connecticut Higher Education Supplemental Loan Authority,
925,000 Series A, 7.00%, 11/15/05 ......................................................................... 965,182
270,000 Series A, 7.20%, 11/15/10 ......................................................................... 282,542
460,000 Series A, 7.50%, 11/15/10 ......................................................................... 479,748
5,800,000 Connecticut State Development Authority, Health Care Revenue, Masonic Charity of Connecticut,
6.50%, 08/01/20 ................................................................................... 5,956,832
750,000 Connecticut State Development Authority, PCR, New England Power Co., 7.25%, 10/15/15 ................ 796,103
2,000,000 Connecticut State Development Authority, Solid Waste Disposal Facilities Revenue, Pfizer, Inc.
Project, 7.00%, 07/01/25 .......................................................................... 2,123,740
1,000,000 Connecticut State Development Authority, Water Facility Revenue, Refunding, Bridgeport Hydraulic Co..
Project, 7.25%, 06/01/20 .......................................................................... 1,061,520
Connecticut State Health and Educational Facilities Authority Revenue,
635,000 Capital Assets, Series B, 7.00%, 01/01/00 ......................................................... 671,735
1,995,000 Capital Assets, Series C, 7.00%, 01/01/20 ......................................................... 2,116,515
5,600,000 Choate Rosemary Hall, Series A, 7.00%, 07/01/25 ................................................... 6,022,688
1,415,000 Hartford University, Series C, Pre-Refunded, 8.00%, 07/01/18 ...................................... 1,633,377
5,000,000 Hartford University, Series D, 6.80%, 07/01/22 .................................................... 4,671,650
1,250,000 Hebrew Home and Hospital, Series A, 7.00%, 08/01/30 ............................................... 1,273,950
1,000,000 Lawrence Memorial Hospital, Series B, MBIA Insured, Pre-Refunded, 7.00%, 07/01/20 ................. 1,105,170
500,000 Lutheran General Health Care System, ETM 07/01/05, 7.375%, 07/01/19 ............................... 559,640
1,000,000 New Britain Memorial Hospital, Series A, Pre-Refunded, 7.75%, 07/01/22 ............................ 1,029,870
2,905,000 New Horizons Village Project, 7.30%, 11/01/16 ..................................................... 3,119,534
1,000,000 Quinnipiac College, Series C, Pre-Refunded, 7.75%, 07/01/20 ....................................... 1,134,730
615,000 Sacred Heart University, Series A, 6.85%, 07/01/22 ................................................ 621,236
100,000 St. Mary's Hospital, Series B, 7.50%, 07/01/02 .................................................... 105,331
1,000,000 St. Mary's Hospital, Series C, Pre-Refunded, 7.375%, 07/01/20 ..................................... 997,000
275,000 St. Raphael Hospital, Series C, AMBAC Insured, Pre-Refunded, 7.50%, 07/01/14 ...................... 301,298
1,000,000 Taft School, Issue A, Pre-Refunded, 7.375%, 07/01/20 .............................................. 1,117,490
12,350,000 Yale New Haven Hospital, Series F, MBIA Insured, 7.10%, 07/01/25 .................................. 13,061,113
220,000 Connecticut State Municipal Electric Energy, Coop Power Supply, MBIA Insured, Pre-Refunded,
6.875%, 01/01/08 .................................................................................. 228,637
Connecticut State Resource Recovery Authority Revenue,
200,000 American Refunding, Series A, 7.70%, 11/15/01 ..................................................... 217,500
200,000 American Refunding, Series A, 8.10%, 11/15/15 ..................................................... 218,860
</TABLE>
The accompanying notes are an integral part of these financial statements.
60
<PAGE>
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================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN CONNECTICUT TAX-FREE INCOME FUND (NOTE 1)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
Connecticut State Resource Recovery Authority Revenue, (cont.)
$ 835,000 Bridgeport Resco, Ltd. Partnership Project, Series A, 7.625%, 01/01/09 ........................... $ 877,158
1,850,000 Connecticut System Bonds, Series B, MBIA Insured, 7.30%, 11/15/12 ................................ 1,956,838
205,000 Wallingford Recovery Project, Series A, 7.125%, 11/15/08 ......................................... 211,904
Connecticut State Special Tax Obligation Revenue, Transportation Infrastructure Purpose,
900,000 Series A, Pre-Refunded, 7.30%, 02/15/08 .......................................................... 975,312
2,000,000 Series A, Pre-Refunded, 7.20%, 02/01/09 .......................................................... 2,190,740
200,000 East Haven Utah Bank Qualified GO, 7.00%, 09/15/07 ................................................. 213,038
200,000 Griswold GO, AMBAC Insured, 7.50%, 04/01/06 ........................................................ 231,018
Guam Airport Authority Revenue,
250,000 Series 93-B, 6.60%, 10/01/10 ..................................................................... 250,548
1,300,000 Series A, 6.70%, 10/01/23 ........................................................................ 1,296,633
5,500,000 Guam Power Authority Revenue, Series A, 6.75%, 10/01/24 ............................................ 5,578,980
210,000 Montville Town GO, Pre-Refunded, 7.35%, 12/01/10 ................................................... 230,087
New Haven GO,
1,100,000 Series A, 7.00%, 03/01/96 ........................................................................ 1,116,302
2,250,000 Series A, 7.10%, 03/01/97 ........................................................................ 2,313,338
4,545,000 Series A, 7.40%, 03/01/12 ........................................................................ 4,785,249
2,000,000 Series B, 6.75%, 12/01/05 ........................................................................ 2,052,780
Plainfield GO,
150,000 Series 1988, 7.30%, 09/01/10 ..................................................................... 160,218
335,000 Series 1991, 7.25%, 09/01/05 ..................................................................... 366,891
335,000 Series 1991, 7.30%, 09/01/07 ..................................................................... 363,046
335,000 Series 1991, 7.30%, 09/01/09 ..................................................................... 357,820
100,000 Plainville GO, 7.20%, 06/15/08 ..................................................................... 106,447
1,500,000 Puerto Rico Commonwealth Aqueduct and Sewer Authority Revenue, Series 1988-A, 7.00%, 07/01/19 ...... 1,551,405
1,000,000 Puerto Rico Commonwealth Highway Authority and Transportation Revenue, Series S, Pre-Refunded,
6.625%, 07/01/18 ................................................................................. 1,108,910
1,800,000 Puerto Rico Commonwealth Highway Authority Revenue, Refunding, Series R, 6.75%, 07/01/05 ........... 1,902,780
Puerto Rico Electric Power Authority Revenue,
700,000 Series P, 7.00%, 07/01/11 ........................................................................ 745,227
2,950,000 Series P, 7.00%, 07/01/21 ........................................................................ 3,140,600
5,000,000 Series R, 6.375%, 07/01/24 ....................................................................... 5,057,650
1,250,000 Puerto Rico HFC, SFMR, Series C, GNMA Insured, 6.85%, 10/15/23 ..................................... 1,294,175
5,000,000 Puerto Rico Municipal Finance Agency, Series A, 6.50%, 07/01/19 .................................... 5,124,200
Puerto Rico PBA, Guaranteed Public Education and Health Facilities,
1,000,000 Series H, Pre-Refunded, 7.25%, 07/01/17 .......................................................... 1,088,620
700,000 Series J, Pre-Refunded, 7.25%, 07/01/17 .......................................................... 762,034
1,020,000 South Central Regional Water Authority, Water System Revenue, Refunding, Pre-Refunded, 7.125%,
08/01/12 1,074,324
1,130,000 Stafford GO, Unlimited Tax, Pre-Refunded, 7.30%, 03/01/12 .......................................... 1,267,284
6,550,000 Virgin Islands Water and Power Authority, Electric System Revenue, 7.40%, 07/01/11 ................. 6,883,330
Waterbury GO,
785,000 Pre-Refunded, 7.25%, 03/01/03 .................................................................... 878,376
785,000 Pre-Refunded, 7.25%, 03/01/04 .................................................................... 878,376
780,000 Pre-Refunded, 7.50%, 03/01/07 .................................................................... 882,702
------------
TOTAL LONG TERM INVESTMENTS (COST $143,092,122) .............................................. 149,841,265
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
61
<PAGE>
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================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN CONNECTICUT TAX-FREE INCOME FUND (NOTE 1)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
(e)SHORT TERM INVESTMENTS 1.9%
$ 1,400,000 Connecticut State Light and Power Co. Authority Revenue, Weekly VRDN and Put, 3.95%, 09/01/28 ... $ 1,400,000
1,300,000 Connecticut State Special Tax Obligation Revenue, Second Lien-Transportation, Weekly VRDN and
Put, 4.00%, 12/01/10 .......................................................................... 1,300,000
300,000 Puerto Rico Commonwealth, Government Development Bank, Refunding, Weekly VRDN and Put,
3.90%, 12/01/15 ............................................................................... 300,000
------------
TOTAL SHORT TERM INVESTMENTS (COST $3,000,000) ............................................ 3,000,000
------------
TOTAL INVESTMENTS (COST $146,092,122) 98.2% .......................................... 152,841,265
OTHER ASSETS AND LIABILITIES, NET 1.8% ............................................... 2,782,174
------------
NET ASSETS 100.0% .................................................................... $155,623,439
============
At February 28, 1995, the net unrealized appreciation based on the cost of investments
for income tax purposes of $146,117,832 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ............................................................. $ 7,047,251
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ............................................................. (323,818)
------------
Net unrealized appreciation ................................................................. $ 6,723,433
============
</TABLE>
PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
ETM - Escrow to Maturity
GNMA - Government National Mortgage Association
GO - General Obligation
HFA - Housing Finance Agency/Authority
HFC - Housing Finance Corp.
MBIA - Municipal Bond Investors Assurance Corp.
PBA - Public Building Authority
PCR - Pollution Control Revenue
SFMR - Single Family Mortgage Revenue
(e)Variable rate demand notes (VRDNs) are tax-exempt obligations which contain a
floating or variable interest rate adjustment formula and an unconditional
right of demand to receive payment of the principal balance plus accrued
interest 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.
62
<PAGE>
TAX-FREE TRUST
================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN INDIANA TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS 94.9%.....................................................................
$ 75,000 Allen County COP, Fort Wayne Memorial Coliseum, Pre-Refunded, 8.125%, 11/01/17 .................. $ 81,174
50,000 Beech Grove EDR, Westvaco Corp., 8.75%, 07/01/10 ................................................ 50,925
500,000 Boonville Junior High School Building Corp., Pre-Refunded, 7.25%, 07/15/09 ...................... 551,230
75,000 Center Grove Central Elementary School Building Corp., First Mortgage, Pre-Refunded, 7.375%,
07/01/09...................................................................................... 80,924
50,000 Chesterton Sewer Revenue, Pre-Refunded, 8.10%, 08/01/07 ......................................... 54,956
250,000 Clarke County Hospital Association, Refunding, First Mortgage, MBIA Insured, 7.50%, 09/01/07 .... 273,573
710,000 Columbus Sewage Works Revenue, MBIA Insured, 6.50%, 02/15/13 .................................... 735,972
260,000 Columbus Sewage Works Revenue, Series 1990, 7.25%, 02/15/09 ..................................... 275,041
500,000 Crawfordsville School Building Corp., First Mortgage, Pre-Refunded, 7.70%, 07/15/11 ............. 565,325
50,000 Crown Point Redevelopment District, Lake County Tax Increment, 8.10%, 02/01/07 .................. 52,633
1,750,000 Elkhart County, Hospital Authority Revenue, Goshen Hospital Association, Inc. Project, 7.35%,
07/01/12...................................................................................... 1,717,853
500,000 Elwood Middle School Building Corp., Refunding, First Mortgage, 7.30%, 01/01/08 ................. 536,760
55,000 Flat Rock-Hawcreek Elementary School Building Corp., First Mortgage, Pre-Refunded, 8.30%,
01/01/09....................................................................................... 61,268
1,000,000 Fort Wayne Hospital Authority Revenue, Parkview Memorial Hospital Project, Series A, FGIC
Insured, 6.50%, 11/15/12 ...................................................................... 1,012,830
150,000 Franklin Community Elementary School Building Corp., First Mortgage, Pre-Refunded, 7.80%,
01/01/09....................................................................................... 162,082
200,000 Franklin Township of Marion County, Multi-School Building Corp., First Mortgage, Pre-Refunded,
7.50%, 01/15/12............................................................................... 220,624
50,000 Frankton-Lapel School Building Corp., First Mortgage, Pre-Refunded, 7.90%, 01/01/09 ............. 54,136
500,000 Hamilton Heights High School Building Corp., First Mortgage, Pre-Refunded, 7.375%, 07/15/10 ..... 560,300
125,000 Hamilton Southeastern Building Corp., Consolidated School Building Corp., First Mortgage,
Pre-Refunded, 8.40%, 01/01/15 ................................................................. 139,623
3,000,000 Hammond Industrial Sewer and Solid Waste Disposal Revenue, American Maize-Products Co. Project,
Series A, 8.00%, 12/01/24 ..................................................................... 3,143,790
1,500,000 Hammond Multi-School Building Corp., Refunding, First Mortgage, Series A, 6.20%, 07/10/15 ....... 1,472,655
Hammond PCR,
55,000 Commonwealth Edison Co. of Indiana, Inc. Project, 9.125%, 06/15/10 ............................ 55,854
300,000 Stauffer Chemical Project, Guaranteed Imperial 82, 8.00%, 11/01/12 ............................ 337,233
Indiana Bond Bank, Special Program,
110,000 Series 1986-C, 8.00%, 08/01/11 ................................................................ 115,823
300,000 Series 1988-A, Pre-Refunded, 8.375%, 02/01/18 ................................................. 323,478
250,000 Series 1990-A, 7.50%, 02/01/20 ................................................................ 266,910
Indiana Health Facility Financing Authority, Hospital Revenue,
500,000 Bartholomew Indiana County Hospital, CGIC Insured, Pre-Refunded, 7.75%, 08/15/20 .............. 569,825
750,000 Community Hospitals of Indiana, MBIA Insured, 7.00%, 07/01/21 ................................. 785,954
1,250,000 Hancock Memorial Hospital Project, Series 1990, 8.30%, 08/15/20 ............................... 1,322,150
1,835,000 Jackson County Schneck Memorial Hospital, 7.50%, 02/15/22 ..................................... 1,824,357
1,280,000 Methodist Hospital, Inc., 6.75%, 09/15/09 ..................................................... 1,308,800
175,000 Refunding, Deaconess Hospital, Inc., Pre-Refunded, 7.75%, 03/01/15 ............................ 183,759
55,000 St. Anthony's Medical Center/Home, Inc., Pre-Refunded, 9.25%, 10/01/17 ........................ 61,559
1,000,000 St. Anthony's Medical Center/Home, Inc., Series A, 7.00%, 10/01/17 ............................ 1,022,110
50,000 Welborn Memorial Baptist Hospital Project, Pre-Refunded, 8.00%, 07/01/02 ...................... 54,210
Indiana Municipal Power Agency, Power Supply System Revenue, Refunding,
65,000 Series A, 5.75%, 01/01/18 ..................................................................... 59,886
1,000,000 Series A, AMBAC Insured, Pre-Refunded, 6.50%, 01/01/16 ........................................ 1,068,000
500,000 Series A, Pre-Refunded, 7.25%, 01/01/15 ....................................................... 520,500
Indiana State Educational Facilities Authority Revenue,
175,000 Anderson University Project, 8.40%, 10/01/08 .................................................. 193,627
175,000 Butler University Project No. 2, Series B, FGIC Insured, Pre-Refunded, 8.00%, 11/01/09 ........ 195,347
100,000 Refunding, Valparaiso University Project, BIG Insured, Pre-Refunded, 7.80%, 10/01/08 .......... 110,888
500,000 University of Evansville, 8.125%, 11/01/10 .................................................... 548,295
</TABLE>
The accompanying notes are an integral part of these financial statements.
63
<PAGE>
FRANKLIN TAX-FREE TRUST
================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN INDIANA TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
Indiana State HFA, SFMR,
$ 25,000 Series A, 7.875%, 01/01/17 .................................................................... $ 26,265
75,000 Series A, GNMA Secured, 8.125%, 07/01/06 ...................................................... 78,967
460,000 Series F-2, GNMA Secured, 7.75%, 07/01/22 ..................................................... 486,090
1,000,000 Indiana State Office Building Commission, Correctional Facilities Program Revenue, 6.375%,
07/01/16....................................................................................... 988,970
95,000 Indiana State Vocational Technical College Building Facilities, Student Fee, Series B, MBIA
Insured, 7.90%, 07/01/07 ...................................................................... 104,060
100,000 Indiana Transportation Finance Authority, Highway Revenue, Series A, Pre-Refunded, 8.125%,
06/01/11....................................................................................... 110,662
200,000 Indiana University Hospital Facilities Revenue, 7.30%, 01/01/03 ................................. 216,696
85,000 Indianapolis Airport Authority, Indianapolis International Airport Revenue, BIG Insured, 8.30%,
07/01/18....................................................................................... 93,508
200,000 Indianapolis Gas Utility Revenue, Series A, FGIC Insured, Pre-Refunded, 7.10%, 06/01/20 ......... 209,938
Indianapolis Local Public Bank Improvement Bond,
2,300,000 Refunding, Series D, 6.75%, 02/01/20 .......................................................... 2,334,592
1,100,000 Refunding, Series D, 6.50%, 02/01/22 .......................................................... 1,094,368
225,000 Series D, Pre-Refunded, 8.50%, 02/01/18 ....................................................... 248,735
Indianapolis Resource Recovery Revenue, Ogden Martin System, Inc.,
100,000 Series A, 7.90%, 12/01/08 ..................................................................... 105,301
150,000 Series B, 7.90%, 12/01/08 ..................................................................... 157,952
500,000 Jasper County PCR, Refunding, Collateralized, Northern Indiana Public Service Co., MBIA Insured,
7.10%, 07/01/17 ............................................................................... 528,835
300,000 Jefferson County Hospital Authority Facility Revenue, Refunding, King's Daughters' Hospital,
8.50%, 08/15/13................................................................................ 319,392
50,000 Kendallville Sewage Works Revenue, GO, Pre-Refunded, 7.60%, 07/01/07 ............................ 54,240
Kokomo Hospital Authority Revenue, Refunding, St. Joseph's Hospital and Health Center of Kokomo,
300,000 Series A, Pre-Refunded, 8.75%, 02/15/13 ....................................................... 339,372
235,000 Series B, Pre-Refunded, 8.75%, 02/15/13 ....................................................... 265,841
Lake Central Industrial Multi-School Building,
2,100,000 First Mortgage, MBIA Insured, 6.50%, 01/15/14 ................................................. 2,149,980
755,000 First Mortgage, Pre-Refunded, 7.00%, 01/15/18 ................................................. 836,412
95,000 Madison County Authority, Anderson Hospital Revenue, Refunding, Series A, BIG Insured, 8.00%,
01/01/14...................................................................................... 101,708
100,000 Manchester Community, Elementary School Building Corp., First Mortgage, Pre-Refunded, 7.80%,
01/01/12...................................................................................... 109,985
Marion County Convention and Recreational Facilities Authority, Excise Tax Revenue,
250,000 Lease Rental, Series A, AMBAC Insured, 7.00%, 06/01/21 ........................................ 264,528
500,000 Lease Rental, Series B, AMBAC Insured, Pre-Refunded, 7.00%, 06/01/21 .......................... 556,015
375,000 Marion County Hospital Authority Facility Revenue, Refunding, Methodist Hospital of Indiana,
Inc., Series A, Pre-Refunded, 7.75%, 03/01/16 ................................................. 394,140
165,000 Meister School Building Corp., Refunding, First Mortgage, 5.75%, 01/01/16 ....................... 154,719
1,000,000 Merrillville Multi-School Building Corp., First Mortgage, Pre-Refunded, 7.50%, 07/15/09 ......... 1,126,420
300,000 Monroe County, Hospital Authority Revenue, Bloomington Hospital Project, MBIA Insured, 6.70%,
05/01/12....................................................................................... 316,683
250,000 Monroe-Gregg School Building Corp., First Mortgage, Pre-Refunded, 7.30%, 01/15/11 ............... 278,042
2,000,000 Muncies Edit Building Corp., Industrial First Mortgage, Series A, AMBAC Insured, 6.60%,
12/01/17....................................................................................... 2,047,520
500,000 North Harrison High School Building Corp., First Mortgage, Pre-Refunded, 7.30%, 07/15/12 ........ 561,125
85,000 North Lawrence Community School COP, Multi-School Building Corp., Pre-Refunded, 8.10%,
01/01/10 ...................................................................................... 93,242
60,000 North Montgomery Elementary School Building Corp., COP, Pre-Refunded, 8.375%, 07/01/08 .......... 66,246
125,000 Northridge High School Additions, Building Corp., Middlebury, First Mortgage, Pre-Refunded,
8.00%, 12/30/08................................................................................ 138,106
100,000 Perry Township Multi-School Building Corp. Revenue, First Mortgage, Pre-Refunded, 7.80%,
01/01/03....................................................................................... 109,001
Peru Community School Building Corp., First Mortgage,
150,000 Series 1988, Pre-Refunded, 7.90%, 07/01/08 .................................................... 166,859
100,000 Series 1989, Pre-Refunded, 7.80%, 01/01/11 .................................................... 110,896
1,000,000 Plymouth Industry Multi-School Building Corp., First Mortgage, AMBAC Insured, 6.75%, 01/01/13 ... 1,045,780
</TABLE>
The accompanying notes are an integral part of these financial statements.
64
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================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN INDIANA TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
Princeton PCR, Refunding, Public Service Co. of Indiana Project,
$ 300,000 Series C, BIG Insured, 7.60%, 03/15/12 ........................................................ $ 317,331
250,000 Series C, MBIA Insured, 7.375%, 03/15/12 ...................................................... 269,103
205,000 South Bend Public Library, Pre-Refunded, 7.25%, 01/01/06 ........................................ 209,451
150,000 South Bend Redevelopment Authority Lease Revenue, Rental Parking Facility Project, Pre-Refunded,
7.90%, 02/01/07 ............................................................................... 161,597
225,000 Southern Hancock County Community School Corp., COP, AMBAC Insured, Pre-Refunded, 7.10%,
07/01/11....................................................................................... 246,294
500,000 Steuben County Metropolitan School District, COP, 6.90%, 01/01/08 ............................... 523,395
750,000 Sullivan Industrial PCR, Refunding, Hoosier Energy, Meron Project, 7.10%, 04/01/19 .............. 787,395
250,000 Twin Lakes School Building Improvement Corp., First Mortgage, Pre-Refunded, 7.50%, 01/15/08 ..... 274,854
200,000 University of Southern Indiana Revenue, Student Fee, Series B, Pre-Refunded, 7.70%, 10/01/09 .... 218,765
50,000 Warsaw High School Building Corp., First Mortgage, Pre-Refunded, 8.10%, 01/01/09 ................ 55,558
-----------
TOTAL LONG TERM INVESTMENTS (COST $41,943,145) ............................................ 44,187,173
-----------
(e)SHORT TERM INVESTMENTS 3.4%
200,000 Fort Wayne PCR, General Motors Corp. Project, Weekly VRDN and Put, 4.50%, 11/01/05 .............. 200,000
500,000 Indiana Secondary Market Educational Loans, Inc., Student Loan Revenue, Series B, AMBAC Insured,
Weekly VRDN and Put, 4.10%, 12/01/13 ......................................................... 500,000
400,000 Indiana State Development Finance Authority, IDR, Red Gold, Inc. Project, Series A, Weekly VRDN
and Put, 4.15%, 06/30/09 ..................................................................... 400,000
100,000 Ossian EDR, Walbro Auto Corp. Project, Weekly VRDN and Put, 4.15%, 12/01/23 ..................... 100,000
400,000 Puerto Rico Commonwealth, Government Development Bank, Refunding, Weekly VRDN and Put, 3.90%,
12/01/15...................................................................................... 400,000
-----------
TOTAL SHORT TERM INVESTMENTS (COST $1,600,000) ............................................ 1,600,000
-----------
TOTAL INVESTMENTS (COST $43,543,145) 98.3% ........................................... 45,787,173
OTHER ASSETS AND LIABILITIES, NET 1.7% ............................................... 796,284
----------
NET ASSETS 100.0% .................................................................... $46,583,457
===========
At February 28, 1995, the net unrealized appreciation based on the cost of investments
for income tax purposes of $43,543,145 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost .............................................................. $ 2,329,301
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value .............................................................. (85,273)
-----------
Net unrealized appreciation ................................................................... $ 2,244,028
===========
</TABLE>
PORTFOLIO ABBREVIATIONS:
<TABLE>
<S> <C>
AMBAC - American Municipal Bond Assurance Corp. GO - General Obligation
BIG - Bond Investors Guaranty Insurance Co. HFA - Housing Finance Agency/Authority
CGIC - Capital Guaranty Insurance Co. IDR - Industrial Development Revenue
COP - Certificate of Participation MBIA - Municipal Bond Investors Assurance Corp.
EDR - Economic Development Revenue PCR - Pollution Control Revenue
FGIC - Financial Guaranty Insurance Co. SFMR - Single Family Mortgage Revenue
GNMA - Government National Mortgage Association
</TABLE>
(e)Variable rate demand notes (VRDNs) are tax-exempt obligations which contain a
floating or variable interest rate adjustment formula and an unconditional
right of demand to receive payment of the principal balance plus accrued
interest 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.
65
<PAGE>
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================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN NEW JERSEY TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS 97.8%
$ 1,000,000 Allamuchy Town Board of Education, COP, MBIA Insured, 6.00%, 11/01/14 ......................... $ 989,670
2,000,000 Atlantic City Municipal Utilities Authority Revenue, Water System, Pre-Refunded, 7.75%,
05/01/17..................................................................................... 2,263,200
9,500,000 Atlantic County Improvement Authority, Luxury Tax Revenue, Convention Center Project, MBIA
Insured, ETM, 7.40%, 07/01/16 ............................................................... 10,715,335
Atlantic County Utilities Authority, Solid Waste Revenue,
2,000,000 Series 1992, 7.00%, 03/01/08 ................................................................ 1,953,420
6,600,000 Series 1992, 7.125%, 03/01/16 ............................................................... 6,353,688
2,000,000 Bedminister Township Board of Education, COP, 7.125%, 09/01/10 ................................ 2,178,760
Bergen County Utility Authority, Solid Waste System Revenue,
1,325,000 Series A, FGIC Insured, 6.25%, 06/15/11 ..................................................... 1,357,608
100,000 Series A, FGIC Insured, Pre-Refunded, 7.75%, 03/15/13 ....................................... 108,059
100,000 Bridgeview Manor Housing Corp. Revenue, Series A, Pre-Refunded, 8.20%, 12/01/08 ............... 110,005
5,400,000 Cape May County, IPC, Financing Authority Revenue, Refunding, Atlantic City Electric Co.,
Series A, MBIA Insured, 6.80%, 03/01/21 ..................................................... 5,957,334
2,750,000 Carteret Board of Education, COP, MBIA Insured, 6.25%, 04/15/19 ............................... 2,772,358
1,890,000 Church Street Corp., Keansburg Elderly Housing Mortgage Revenue, Refunding, 5.625%, 03/01/11 .. 1,780,739
200,000 Delaware River, Joint Toll Bridge System Commission Revenue, Series I-78, Pre-Refunded, 7.875%,
07/01/18..................................................................................... 220,746
1,000,000 Delaware River Port Authority, Pennsylvania and New Jersey River Bridges Revenue, Refunding,
AMBAC Insured, 7.375%, 01/01/07 ............................................................. 1,087,120
Essex County Improvement Authority GO, Lease Revenue,
8,000,000 AMBAC Insured, Pre-Refunded, 7.00%, 12/01/20 ................................................ 8,887,520
6,000,000 Jail and Youth Housing Projects, AMBAC Insured, 7.00%, 12/01/24 ............................. 6,426,240
2,510,000 MBIA Insured, 6.00%, 12/01/17 ............................................................... 2,482,089
3,000,000 Evesham Municipal Utilities Authority Revenue, Series B, MBIA Insured, 7.00%, 07/01/10 ........ 3,163,740
3,675,000 Evesham Township Board of Education, COP, FGIC Insured, 6.875%, 09/01/11 ...................... 3,951,103
Gloucester County Improvement Authority Revenue,
1,000,000 Justice Complex Lease Project, Pre-Refunded, 7.50%, 12/15/10 ................................ 1,108,270
275,000 Solid Waste Resource Recovery, SES Gloucester Co., Limited Partnership Project, Series B,
8.375%, 07/01/10............................................................................ 293,563
3,000,000 Gloucester County IPC, Refunding, Mobil Oil Refinance Corp. Project, 5.625%, 12/01/28 ......... 2,752,980
4,670,000 Hamilton Township Board of Education, COP, Series B, FSA Insured, 7.00%, 12/15/15 ............. 4,973,550
95,000 Hillsborough Township School District, Board of Education, COP, Lease Purchase Agreement,
MBIA Insured, Pre-Refunded, 8.00%, 08/15/08 ................................................. 101,388
6,900,000 Hoboken Union City, Weehawken Sewerage Authority Revenue, MBIA Insured, Pre-Refunded, 7.25%,
08/01/19..................................................................................... 7,616,979
1,750,000 Howell Township, GO, Refunding, FGIC Insured, 6.80%, 01/01/14 ................................. 1,854,405
100,000 Howell Township Municipal Utilities Authority Revenue, Monmouth County, BIG Insured,
Pre- Refunded, 7.375%, 01/01/14 ............................................................ 109,185
Hudson County Correctional Facility, COP,
2,550,000 BIG Insured, Pre-Refunded, 7.60%, 12/01/21 .................................................. 2,824,584
4,000,000 Hudson County, MBIA Insured, Pre-Refunded, 7.25%, 12/01/21 .................................. 4,493,000
2,000,000 Hudson County Improvement Authorities Facilities Lease Revenue, Hudson County Lease Project,
FGIC Insured, 6.00%, 12/01/25 ............................................................... 1,950,480
1,685,000 Jersey City Sewer Authority Revenue, Refunding, FGIC Insured, Pre-Refunded, 7.00%, 01/01/19 ... 1,774,794
Lacey Municipal Utilities Authority, Water Revenue,
1,225,000 MBIA Insured, 6.125%, 12/01/14 .............................................................. 1,233,514
2,500,000 MBIA Insured, 6.10%, 12/01/23 ............................................................... 2,486,275
100,000 Lumberton Township School District, COP, Fiscal Funding, New Jersey, Inc., MBIA Insured,
Pre-Refunded, 7.70%, 10/01/13 ............................................................... 110,219
Mercer County Improvement Authority Revenue,
3,050,000 Guaranted Social Services School District, Pre-Refunded, 7.20%, 12/15/12 .................... 3,328,374
2,500,000 Library Systems, Series A, 6.00%, 12/01/14 .................................................. 2,454,375
</TABLE>
The accompanying notes are an integral part of these financial statements.
66
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STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN NEW JERSEY TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
Middlesex County COP,
$ 1,500,000 MBIA Insured, 6.00%, 08/15/14 ............................................................... $ 1,501,110
2,300,000 MBIA Insured, 6.125%, 02/15/19 .............................................................. 2,315,364
2,000,000 Middlesex County Improvement Authority Revenue, Guaranteed Educational Services, Commission
Project, 6.00%, 09/15/14 .................................................................... 1,997,680
100,000 Monmouth County Improvement Authority Revenue, Wall and Keyport Projects, BIG Insured,
Pre-Refunded, 7.90%, 07/15/13 ............................................................... 110,476
2,000,000 New Brunswick Parking Authority Revenue, Series B, FGIC Insured, Pre-Refunded, 7.20%,
09/01/15..................................................................................... 2,198,780
New Jersey EDA,
4,145,000 EDR, Series N, 6.90%, 12/01/11 .............................................................. 4,409,658
465,000 EDR, Series P, 6.90%, 12/01/11 .............................................................. 494,690
575,000 First Mortgage Gross Revenue, Mega Care, Inc. Project, Pre-Refunded, 8.625%, 08/01/07 ....... 633,409
5,070,000 Heating and Cooling Revenue, Trigen-Trenton Project, Series A, 6.20%, 12/01/10 .............. 4,614,258
3,375,000 Heating and Cooling Revenue, Trigen-Trenton Project, Series B, 6.10%, 12/01/04 .............. 3,217,556
2,720,000 Heating and Cooling Revenue, Trigen-Trenton Project, Series B, 6.20%, 12/01/07 .............. 2,536,046
550,000 Jersey Central Power and Light, 7.10%, 07/01/15 ............................................. 578,991
3,000,000 Market Transition Facilities Revenue, Series A, MBIA Insured, 5.875%, 07/01/11 .............. 3,003,360
3,300,000 Natural Gas Facilities Revenue, New Jersey Natural Gas Co. Project, 8.50%, 06/01/18 ......... 3,389,331
8,200,000 Natural Gas Facilities Revenue, New Jersey Natural Gas Co. Project, Series A, 6.25%,
08/01/24................................................................................... 8,233,128
7,810,000 Natural Gas Facilities Revenue, New Jersey Natural Gas Co. Project, Series B, 7.25%,
03/01/21................................................................................... 8,212,606
1,600,000 Peddie School Project, Series A, 5.75%, 02/01/12 ............................................ 1,554,464
1,625,000 Performing Arts Center Site Revenue, 6.75%, 06/15/12 ........................................ 1,690,471
405,000 Series M, 7.90%, 12/01/08 ................................................................... 416,162
760,000 Series MM, 7.50%, 12/01/19 .................................................................. 745,636
7,440,000 Terminal GATX Corp. Project, 6.65%, 09/01/22 ................................................ 7,507,481
6,000,000 Water Facilities Revenue, Midddlesex Water Co. Project, 7.25%, 07/01/21 ..................... 6,367,800
New Jersey Health Care Facilities Financing Authority Revenue,
2,500,000 Atlantic City Medical Center, Series C, 6.80%, 07/01/11 ..................................... 2,579,650
3,380,000 Beth Israel Hospital Association Passaic, 7.80%, 07/01/04 ................................... 3,612,341
1,000,000 Beth Israel Hospital Association Passaic, Refunding, 7.875%, 07/01/07 ....................... 1,071,530
9,750,000 Cathedral Health, Series A, FHA Insured, 7.25%, 02/15/10 .................................... 10,417,388
2,020,000 Cathedral Health, Series A, FHA Insured, 7.25%, 02/15/21 .................................... 2,153,886
1,000,000 Clara Maas Medical Center, Series B, 7.30%, 07/01/09 ........................................ 1,033,980
2,435,000 Clara Maas Medical Center, Series B, 7.25%, 07/01/19 ........................................ 2,486,403
100,000 Community Memorial Hospital Association, Series C, 8.00%, 07/01/14 .......................... 106,817
5,445,000 East Orange General Hospital, Series B, 7.75%, 07/01/20 ..................................... 5,649,678
4,890,000 Elizabeth General Medical Center, Series C, 7.375%, 07/01/15 ................................ 4,786,136
3,150,000 Franciscan St. Mary's Hospital, 5.875%, 07/01/12 ............................................ 2,720,687
2,400,000 Hackensack Medical Center, FGIC Insured, 6.25%, 07/01/21 .................................... 2,420,856
4,000,000 Holy Name Hospital, Series B, AMBAC Insured, 7.00%, 07/01/08 ................................ 4,269,800
230,000 Kennedy Memorial Hospitals-University Medical Center, Inc., Series D, 7.875%, 07/01/09 ...... 244,617
4,900,000 Monmouth Medical Center, Series C, CGIC Insured, 6.25%, 07/01/16 ............................ 4,978,939
8,250,000 Monmouth Medical Center, Series C, CGIC Insured, 6.25%, 07/01/24 ............................ 8,349,165
1,800,000 Morristown Memorial Hospital, Series C, 7.125%, 07/01/08 .................................... 1,891,458
4,150,000 Newcomb Medical Center, Series A, 7.875%, 07/01/03 .......................................... 4,449,340
130,000 New Jersey Geriatric Center of Workmen's Circle, Inc., Series A, FHA Mortgage Insured,
8.00%, 02/01/28............................................................................ 140,379
8,500,000 Overlook Hospital Association, Series E, FGIC Insured, 6.70%, 07/01/13 ...................... 8,777,865
3,565,000 Pascack Valley Hospital, 6.90%, 07/01/21 .................................................... 3,509,279
10,000,000 Riverview Medical Center, 5.875, 07/01/16 ................................................... 9,697,800
100,000 St. Clare's Riverside Medical Center, Series D, BIG Insured, Pre-Refunded, 7.75%, 07/01/14 .. 108,291
2,000,000 Wayne General Hospital, Series B, 5.75%, 08/01/11 ........................................... 1,910,000
</TABLE>
The accompanying notes are an integral part of these financial statements.
67
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================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN NEW JERSEY TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
New Jersey Health Care Facilities Financing Authority Revenue, (cont.)
$ 1,000,000 Wayne General Hospital, Series B, 5.875%, 08/01/18 .......................................... $ 957,690
475,000 Zurbrugg Memorial Hospital Issue, Series C, 8.50%, 07/01/12 ................................. 494,599
1,850,000 New Jersey PBA, State Building Revenue, 7.20%, 06/15/13 ....................................... 1,977,373
New Jersey State Educational Facilities Authority Revenue,
4,000,000 Institute of Technology, Series A, MBIA Insured, 6.00%, 07/01/15 ............................ 4,002,840
2,000,000 Princeton University, Series A, 5.875%, 07/01/18 ............................................ 2,000,500
500,000 Ramapo College, Series C, BIG Insured, Pre-Refunded, 7.70%, 07/01/13 ........................ 549,224
2,000,000 Rider College, Series D, AMBAC Insured, 6.20%, 07/01/17 ..................................... 2,032,280
1,000,000 Seton Hall University Project, Series C, BIG Insured, 6.85%, 07/01/19 ....................... 1,047,230
4,400,000 Seton Hall University Project, Series D, 7.00%, 07/01/21 .................................... 4,613,840
4,780,000 Trenton State College, Series B, AMBAC Insured, 6.125%, 07/01/19 ............................ 4,812,455
7,845,000 Trenton State College, Series B, AMBAC Insured, 6.125%, 07/01/24 ............................ 7,866,337
New Jersey State Highway Authority,
5,000,000 Garden State Parkway, Senior Parkway Revenue, 6.20%, 01/01/10 ............................... 5,156,250
2,500,000 Garden State Parkway, Senior Parkway Revenue, 6.25%, 01/01/14 ............................... 2,536,900
1,540,000 Garden State Parkway, Senior Parkway Revenue, 5.75%, 01/01/19 ............................... 1,476,321
5,950,000 Garden State Parkway, Senior Parkway Revenue, Pre-Refunded, 7.25%, 01/01/16 ................. 6,518,761
New Jersey State Housing and Mortgage Finance Agency,
900,000 Home Buyer Revenue, Series B, MBIA Insured, 7.90%, 10/01/22 ................................. 947,547
5,295,000 Home Buyer Revenue, Series D, MBIA Insured, 7.70%, 10/01/29 ................................. 5,572,193
3,650,000 Home Buyer Revenue, Series F-2, MBIA Insured, 6.30%, 04/01/25 ............................... 3,635,145
5,000,000 Home Buyer Revenue, Series J, MBIA Insured, 6.20%, 10/01/25 ................................. 4,885,900
40,000 Home Mortgage Purchase Revenue, Series A, MBIA Insured, 7.875%, 10/01/17 .................... 42,277
2,230,000 MFHR, Montclarion Project, Series J, FHA Insured, 7.70%, 11/01/29 ........................... 2,331,666
450,000 MFHR, Regency Park Project, Series H, 7.70%, 11/01/30 ....................................... 468,392
12,400,000 MFHR, Section 8, Refunding, Series A, 6.95%, 11/01/13 ....................................... 12,970,151
5,000,000 Refunding, Series 1, 6.70%, 11/01/28 ........................................................ 5,095,400
4,670,000 Wastewater Treatment Trust Revenue, Series B, 7.00%, 07/01/11 ............................... 4,884,632
New Jersey State Sports and Expo Authority, State Contract,
6,800,000 Refunding, Series A, MBIA Insured, 6.25%, 07/01/20 .......................................... 6,861,267
8,000,000 Series A, MBIA Insured, 6.60%, 07/01/15 ..................................................... 8,326,240
3,250,000 Newark Board of Education, MBIA Insured, 5.875%, 12/15/14 ..................................... 3,199,268
1,000,000 North Bergen Township Municipal Utility Authority Sewer Revenue, FGIC Insured, Pre-Refunded,
7.625%, 12/15/19 ............................................................................ 1,089,940
6,640,000 North Jersey District Water Supply Commission Revenue, Wanaque South Project, Series A,
Pre-Refunded, 7.375%, 07/01/16 .............................................................. 7,001,614
100,000 Ocean Township Municipal Utilities Authority Revenue, Refunding, MBIA Insured, Pre-Refunded,
7.875%, 08/01/15 ............................................................................ 110,902
Passaic Valley Sewerage Commissioners, Sewer System,
7,400,000 Series D, AMBAC Insured, 5.80%, 12/01/18 .................................................... 7,131,602
5,000,000 Series D, AMBAC Insured, 5.875%, 12/01/22 ................................................... 4,856,350
6,500,000 Series C, AMBAC Insured, Pre-Refunded, 7.10%, 12/01/20 ...................................... 6,992,180
1,000,000 Pine Hill Borough School District COP, Fiscal Funding of New Jersey, Inc., BIG Insured,
Pre- Refunded, 7.60%, 12/30/09 .............................................................. 1,070,620
Piscataway Township School District COP,
1,000,000 MBIA Insured, Pre-Refunded, 7.50%, 06/15/09 ................................................. 1,094,990
1,975,000 MBIA Insured, Pre-Refunded, 7.00%, 12/15/10 ................................................. 2,210,993
Port Authority of New York and New Jersey,
5,000,000 Delta Airlines, Inc. Special Project, Series 1R, 6.95%, 06/01/08 ............................ 5,060,300
200,000 Consolidated 60th Series, 8.25%, 04/01/23 ................................................... 204,310
500,000 Consolidated 62th Series, 8.00%, 12/01/23 ................................................... 519,454
500,000 Consolidated 64th Series, 7.25%, 04/01/14 ................................................... 516,034
</TABLE>
The accompanying notes are an integral part of these financial statements.
68
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STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN NEW JERSEY TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
Port Authority of New York and New Jersey, (cont.)
$ 3,875,000 Consolidated 65th Series, 7.00%, 09/01/24 ................................................... $ 4,002,410
2,500,000 Consolidated 67th Series, AMBAC Insured, 6.875%, 01/01/25 ................................... 2,598,225
750,000 Consolidated 67th Series, AMBAC Insured, 6.875%, 01/01/25 ................................... 782,970
2,500,000 Consolidated 71th Series, 6.50%, 01/15/26 ................................................... 2,558,300
12,000,000 Consolidated 72th Series, 7.35%, 10/01/27 ................................................... 12,981,240
1,000,000 Consolidated 74th Series, 6.75%, 08/01/26 ................................................... 1,037,520
1,125,000 Consolidated 84th Series, 6.00%, 01/15/28 ................................................... 1,079,798
5,000,000 Consolidated 94th Series, 6.00%, 06/01/17 ................................................... 4,957,000
2,000,000 Consolidated 94th Series, 6.00%, 12/01/16 ................................................... 1,994,960
Puerto Rico Commonwealth Aqueduct and Sewer Authority Revenue,
6,500,000 Series A, 7.90%, 07/01/07 ................................................................... 7,133,035
2,000,000 Series A, 7.875%, 07/01/17 .................................................................. 2,177,300
1,945,000 Series A, 7.00%, 07/01/19 ................................................................... 2,011,655
Puerto Rico Commonwealth Highway and Transportation Authority, Highway Revenue,
275,000 Series P, Pre-Refunded, 8.125%, 07/01/13 .................................................... 307,577
8,000,000 Series Q, Pre-Refunded, 8.00%, 07/01/18 ..................................................... 9,259,040
2,360,000 Series R, 7.25%, 07/01/02 ................................................................... 2,579,834
Puerto Rico Commonwealth Infrastructure Financing Authority, Special Tax Revenue,
350,000 Series 1988-A, 7.90%, 07/01/07 .............................................................. 379,845
5,500,000 Series 1988-A, 7.75%, 07/01/08 .............................................................. 5,935,654
250,000 Series 1988-A, 7.50%, 07/01/09 .............................................................. 267,623
Puerto Rico Commonwealth Public Improvement,
5,000,000 GO, 6.45%, 07/01/17 ......................................................................... 5,116,350
100,000 GO, Series A, Pre-Refunded, 7.75%, 07/01/13 ................................................. 110,807
1,000,000 Puerto Rico Commonwealth Urban Renewal and Housing Corp., Refunding, 7.875%, 10/01/04 ......... 1,109,880
Puerto Rico Electric Power Authority, Power Revenue, Refunding,
590,000 Series 1988-M, Pre-Refunded, 8.00%, 07/01/08 ................................................ 657,655
2,355,000 Series 1989-N, 7.125%, 07/01/14 ............................................................. 2,472,350
10,535,000 Series T, 6.00%, 07/01/16 ................................................................... 10,310,815
4,500,000 Series U, 6.00%, 07/01/14 ................................................................... 4,423,815
Puerto Rico HFC Revenue,
125,000 FHA Mortgage Insured, Section 8 Assisted, 6th Portfolio, Pre-Refunded, 7.75%, 12/01/26 ...... 146,729
5,000,000 MF, Portfolio A, Series 1, 7.50%, 04/01/22 .................................................. 5,279,350
1,350,000 SFM, Portfolio 1, Series A, GNMA Secured, 7.80%, 10/15/21 ................................... 1,415,097
1,440,000 SFM, Portfolio 1, Series B, GNMA Secured, 7.65%, 10/15/22 ................................... 1,524,110
2,000,000 Puerto Rico Industrial, Medical and Environmental Facilities, Financing Authority, PCR, Baxter
Travenol Labs., Series A, 8.00%, 09/01/12 ................................................... 2,212,920
100,000 Puerto Rico Municipal Finance Agency, Series 1988-A, 8.25%, 07/01/08 .......................... 109,860
1,285,000 Puerto Rico PBA, Guaranteed Public Education and Health Facilities, Series H, Pre-Refunded,
7.25%, 07/01/17............................................................................. 1,398,876
Rutgers State University,
4,750,000 Pre-Refunded, 7.00%, 05/01/19 ............................................................... 5,179,020
4,250,000 Series A, 6.50%, 05/01/18 ................................................................... 4,412,648
1,160,000 Rutgers State University Revenues, Refunding, Series N, Pre-Refunded, 7.375%, 05/01/16 ........ 1,219,578
5,000,000 Salem County IPC, Financing Authority Revenue, Refunding, Public Services, Electric and Gas Co.,
Series D, MBIA Insured, 6.55%, 10/01/29 ....................................................... 5,138,500
1,990,000 Sayreville HDC, Mortgage Revenue, Refunding, Lakeview, Section 8, FHA Insured, 7.75%, 08/01/24 2,167,906
1,000,000 Stony Brook Regional Sewerage Authority Revenue, Series 1989-A, Pre-Refunded, 7.40%, 12/01/09.. 1,111,290
100,000 Sussex County Municipal Utilities Authority, Solid Waste Revenue, Series A, BIG Insured,
Pre-Refunded, 7.875%, 12/01/13 .............................................................. 111,695
</TABLE>
The accompanying notes are an integral part of these financial statements.
69
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STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN NEW JERSEY TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
University of Medicine and Dentistry Revenue,
$ 750,000 Series C, 7.20%, 12/01/09 ................................................................... $ 807,173
2,725,000 Series C, 7.20%, 12/01/19 ................................................................... 2,922,181
1,200,000 Warren Hills Regional School District COP, BIG Insured, Pre-Refunded, 7.375%, 12/15/09 ........ 1,308,276
1,000,000 West Morris Regional High School District COP, BIG Insured, 7.50%, 03/15/09 ................... 1,078,320
100,000 Winslow Township GO, Camden County, Refunding, AMBAC Insured, Pre-Refunded, 7.80%, 7/01/18 .... 109,618
------------
TOTAL LONG TERM INVESTMENTS (COST $500,622,331) ......................................... 522,340,183
------------
(e)SHORT TERM INVESTMENTS .6%
2,400,000 New Jersey EDR, Dow Chemical El Dorado Terminal, Series 1994-A, Refunding, Daily VRDN and Put,
3.90%, 05/01/01 ............................................................................. 2,400,000
200,000 New Jersey State Turnpike Authority Revenue, Series A, Weekly VRDN and Put, 3.75%, 01/01/18 ... 200,000
400,000 Puerto Rico Commonwealth, Government Development Bank, Refunding, Weekly VRDN and Put,
3.90%, 12/01/15 ............................................................................. 400,000
------------
TOTAL SHORT TERM INVESTMENTS (COST $3,000,000) .......................................... 3,000,000
------------
TOTAL INVESTMENTS (COST $503,622,331) 98.4% ........................................ 525,340,183
OTHER ASSETS AND LIABILITIES, NET 1.6% .............................................. 8,596,645
------------
NET ASSETS 100.0% ................................................................. $533,936,828
============
At February 28, 1995, the net unrealized appreciation based on the cost of investments
for income tax purposes of $503,622,331 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ............................................................. $ 24,561,765
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ............................................................ (2,843,913)
------------
Net unrealized appreciation ................................................................. $ 21,717,852
============
</TABLE>
PORTFOLIO ABBREVIATIONS:
<TABLE>
<S> <C>
AMBAC - American Municipal Bond Assurance Corp. GO - General Obligation
BIG - Bond Investors Guaranty Insurance Co. HDC - Housing Development Corp.
CGIC - Capital Guaranty Insurance Co. HFC - Housing Finance Corp.
COP - Certificate of Participation IPC - Industrial Pollution Control
EDA - Economic Development Authority MBIA - Municipal Bond Investors Assurance Corp.
EDR - Economic Development Revenue MF - Multi-Family
ETM - Escrow to Maturity MFHR - Multi-Family Housing Revenue
FGIC - Financial Guaranty Insurance Co. PBA - Public Building Authority
FHA - Federal Housing Agency PCR - Pollution Control Revenue
FSA - Financial Security Assistance SFM - Single Family Mortgage
</TABLE>
(e)Variable rate demand notes (VRDNs) are tax-exempt obligations which contain a
floating or variable interest rate adjustment formula and an unconditional
right of demand to receive payment of the principal balance plus accrued
interest 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.
70
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STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN OREGON TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS 98.3%
$ 750,000 Albany Sewer Revenue, Series A, Pre-Refunded, 7.00%, 02/01/12 ................................. $ 819,773
1,000,000 Albany Water Revenue, Second Lien, Pre-Refunded, 7.25%, 08/01/09 .............................. 1,085,760
2,000,000 Bay Area Health District Hospital Facility Authority, Health Facilities Revenue, Evergreen
Court Project, 7.25%, 10/01/14 .............................................................. 2,109,140
Bear Creek Valley Sanitary Authority GO,
50,000 Series 1987, 7.70%, 05/01/07 ................................................................ 53,164
100,000 Series 1988, 7.30%, 06/01/05 ................................................................ 107,164
105,000 Series 1988, 7.35%, 06/01/06 ................................................................ 112,679
115,000 Series 1988, 7.40%, 06/01/07 ................................................................ 123,401
125,000 Series 1988, 7.40%, 06/01/08 ................................................................ 134,130
1,125,000 Benton County, Oregon Hospital Facilities Authority, Good Samaritan Hospital, Corvallis, 6.25%,
10/01/09..................................................................................... 1,094,580
1,000,000 Central Lincoln Utility District Electric Revenue, Pre-Refunded, 6.75%, 01/01/11 .............. 1,079,440
City of Bend, Urban Renewal Agency Tax Revenue,
600,000 Series A, 6.85%, 09/01/06 ................................................................... 612,414
750,000 Series A, 7.00%, 09/01/11 ................................................................... 766,643
4,000,000 City of Oregon, Sewer Revenue, Series 1994, 6.875%, 10/01/19 .................................. 4,141,120
4,945,000 Clackamas County Health Facilities Authority Hospital Revenue, Refunding, Adventist Health,
Series A, MBIA Insured, 6.35%, 03/01/09 ..................................................... 5,186,168
Clackamas County, Hospital Facilities Authority Revenue,
1,250,000 Elderly Housing, 7.00%, 11/15/11 ............................................................ 1,273,250
2,990,000 GNMA Secured, Jennings Lodge Project, 7.50%, 10/20/31 ....................................... 3,241,459
1,635,000 Kaiser Permanente, Series A, 6.50%, 04/01/11 ................................................ 1,668,779
4,950,000 Kaiser Permanente, Series A, 6.25%, 04/01/21 ................................................ 4,911,935
4,250,000 Refunding, Gross Willamette Falls, 5.75%, 04/01/15 .......................................... 3,773,490
110,000 Sisters of Providence Project, 8.125%, 10/01/07 ............................................. 117,312
4,000,000 Clackamas County USD No. 115, AMBAC Insured, 6.15%, 06/01/14 .................................. 4,067,680
1,125,000 Clairmont Water District Revenue, 6.50%, 02/01/12 ............................................. 1,138,050
50,000 Coos Bay Waste Water GO, MBIA Insured, Pre-Refunded, 7.50%, 09/01/06 .......................... 53,244
Deschutes County Hospital Facilities Authority, Hospital Revenue,
390,000 St. Charles Medical Center, 7.50%, 01/01/08 ................................................. 414,776
125,000 St. Charles Medical Center, 7.60%, 01/01/13 ................................................. 133,020
1,950,000 Douglas County, Hospital Facilities Authority Revenue, Catholic Health Facilities, Series B,
MBIA Insured, 6.00%, 11/15/15 ............................................................... 1,945,203
Emerald People's Utility District, Electric System Revenue, Refunding,
20,000 Series A, AMBAC Insured, Pre-Refunded, 7.20%, 11/01/06 ...................................... 20,832
80,000 Series A, AMBAC Insured, Pre-Refunded, 7.20%, 11/01/06 ...................................... 83,339
55,000 Series A, AMBAC Insured, Pre-Refunded, 7.35%, 11/01/13 ...................................... 57,417
195,000 Series B, AMBAC Insured, 7.35%, 11/01/13 .................................................... 202,623
500,000 Series B, AMBAC Insured, Pre-Refunded, 7.30%, 11/01/11 ...................................... 548,225
Eugene Electric Utility System Revenue,
125,000 Series 1987, Pre-Refunded, 7.90%, 08/01/11 .................................................. 133,044
1,145,000 Series 1991, 6.65%, 08/01/08 ................................................................ 1,198,197
615,000 Series 1991, 6.65%, 08/01/09 ................................................................ 645,584
655,000 Series 1991, 6.65%, 08/01/10 ................................................................ 685,785
700,000 Series 1991, 6.70%, 08/01/11 ................................................................ 734,754
5,840,000 Eugene Trojan Nuclear Project Revenue, Refunding, 5.90%, 09/01/09 ............................. 5,823,005
70,000 Florence Improvement GO, Lane County, Pre-Refunded, 8.50%, 10/01/07 ........................... 76,040
355,000 Gresham Improvement GO, Advance Revenue, Refunding, Unlimited Tax, Pre-Refunded, 7.20%,
04/01/03..................................................................................... 355,557
Guam Airport Authority Revenue,
750,000 Series B, 6.60%, 10/01/10 ................................................................... 751,643
1,900,000 Series B, 6.70%, 10/01/23 ................................................................... 1,895,079
</TABLE>
The accompanying notes are an integral part of these financial statements.
71
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STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN OREGON TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
$ 825,000 Guam Power Authority, Series A, 6.30%, 10/01/12 ............................................... $ 812,056
1,000,000 Hermiston GO, AMBAC Insured, 6.00%, 08/01/15 .................................................. 1,004,910
1,280,000 Hillsboro Hospital Facility Authority, First Mortgage Revenue, Refunding, First Mortgage-
Tuality Community, Pre-Refunded, 7.60%, 10/01/12 ............................................ 1,360,179
Klamath Falls Intercommunity Hospital Revenue,
1,500,000 Merle West Medical Center Project, 7.00%, 06/01/02 .......................................... 1,607,670
2,310,000 Merle West Medical Center Project, 7.25%, 06/01/06 .......................................... 2,475,350
1,000,000 Lane County COP, Fairground Project, 7.00%, 08/01/04 .......................................... 1,052,260
11,575,000 Lane County PCR, Refunding, Weyerhaeuser Co. Project, 6.50%, 07/01/09 ......................... 11,888,683
2,425,000 Lebanon Wastewater Revenue, Refunding, 5.875%, 06/01/20 ....................................... 2,286,581
495,000 Marion County Solid Waste and Electric Revenue, Ogden Martin System, Marion, Inc. Project,
AMBAC Insured, 7.70%, 10/01/09 .............................................................. 525,428
1,000,000 Marion County Union High School District No. 7J, 6.00%, 06/01/13 .............................. 1,012,930
4,475,000 Medford Hospital Facilities Authority Revenue, Gross Rogue Valley Health Services, MBIA
Insured, 6.75%, 12/01/20 ................................................................... 4,742,068
Metropolitan Service District,
4,865,000 Convention Center GO, Series A, 6.25%, 01/01/13 ............................................. 4,956,170
115,000 Convention Center GO, Unlimited Tax, Pre-Refunded, 7.60%, 12/01/10 .......................... 123,296
80,000 Convention Center GO, Unlimited Tax, Pre-Refunded, 7.65%, 12/01/11 .......................... 85,873
85,000 Convention Center GO, Unlimited Tax, Pre-Refunded, 7.65%, 12/01/12 .......................... 91,240
2,000,000 Waste Disposal System, Revenue Bonds, Pre-Refunded, 7.30%, 01/01/11 ......................... 2,226,080
175,000 Multnomah County School District COP, Series A, Pre-Refunded, 6.90%, 08/01/09 ................. 186,109
60,000 North Bend Construction and Sewer Revenue, Advance Refunding, Coos County, 8.60%, 03/01/01 .... 61,061
Oak Lodge Water District GO,
215,000 AMBAC Insured, 7.40%, 12/01/08 .............................................................. 248,609
215,000 AMBAC Insured, 7.50%, 12/01/09 .............................................................. 239,663
Ontario Hospital Facility Authority-Catholic Health Corp., Facilities Revenue,
1,500,000 Dominican Sisters of Ontario, Inc., Holy Rosary Hospital Project, 6.10%, 11/15/17 ........... 1,441,155
1,675,000 Dominican Sisters of Ontario, Inc., Holy Rosary Hospital Project, GNMA Secured, 7.00%,
06/01/12..................................................................................... 1,722,386
1,610,000 Oregon State Bond Bank Revenue, EDR, Series 1991-B, Pre-Refunded, 6.80%, 01/01/11 ............. 1,741,923
Oregon State Department of General Services, COP,
750,000 Real Property Financing Program, Series A, AMBAC Insured, Pre-Refunded, 7.50%, 09/01/15 ..... 850,388
4,110,000 Real Property Financing Program, Series A, MBIA Insured, Pre-Refunded, 7.20%, 01/15/15 ...... 4,559,840
2,000,000 Refunding, Series D, MBIA Insured, 5.80%, 03/01/15 .......................................... 1,965,160
250,000 Series B, 5.50%, 01/15/15 ................................................................... 238,373
150,000 Series B, MBIA Insured, Pre-Refunded, 7.20%, 01/15/15 ....................................... 166,418
3,150,000 Series F, AMBAC Insured, Pre-Refunded, 7.50%, 09/01/15 ...................................... 3,571,628
750,000 Series G, AMBAC Insured, 6.25%, 09/01/15 ..................................................... 763,395
Oregon State Elderly and Disabled Housing Authority,
1,470,000 Series B, 6.10%, 08/01/17 ................................................................... 1,424,562
2,100,000 Series B, 6.25%, 08/01/23 ................................................................... 2,045,442
1,155,000 Series B, 6.375%, 08/01/24 .................................................................. 1,179,036
6,000,000 Series C, 6.50%, 08/01/22 ................................................................... 6,230,160
635,000 Oregon State Elderly Housing GO, Series A, 7.125%, 08/01/30 ................................... 678,618
Oregon State GO, Board of Higher Education,
750,000 Series 1991, 6.50%, 10/01/17 ................................................................ 773,753
60,000 Series A, Pre-Refunded, 8.125%, 10/01/17 .................................................... 64,790
300,000 Series A, Pre-Refunded, 7.50%, 05/01/18 ..................................................... 322,032
400,000 Oregon State GO, Department of Energy, Series B, 6.80%, 01/01/17 .............................. 411,272
Oregon State GO, Department of Transportation Revenue, Regional Light Rail,
2,000,000 Federal Westside Project, MBIA Insured, 6.10%, 06/01/07 ..................................... 2,085,720
2,500,000 Federal Westside Project, MBIA Insured, 6.20%, 06/01/08 ..................................... 2,617,175
1,750,000 Federal Westside Project, MBIA Insured, 6.25%, 06/01/09 ..................................... 1,812,685
</TABLE>
The accompanying notes are an integral part of these financial statements.
72
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STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN OREGON TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
$ 1,000,000 Oregon State GO, Series B, 6.875%, 12/01/13 ................................................... $ 1,055,450
5,665,000 Oregon State HFA, SFMR Program, Series 1991-A, 7.20%, 07/01/15 ................................ 5,960,486
1,445,000 Oregon State Higher Education GO, Series C, Pre-Refunded, 7.25%, 10/15/18 ..................... 1,553,404
Oregon State Housing and Community Service Department, Finance Housing Revenue,
6,710,000 Multi-Unit, Series A, 6.80%, 07/01/13 ....................................................... 6,923,781
180,000 Multi-Unit, Series C, 6.85%, 07/01/22 ....................................................... 185,137
8,500,000 SFM, Series A, 5.75%, 07/01/12 .............................................................. 8,157,365
3,250,000 SFM, Series A, 6.35%, 07/01/14 .............................................................. 3,286,205
1,500,000 SFM, Series A, 6.40%, 07/01/18 .............................................................. 1,514,250
1,905,000 SFM, Series A, 5.65%, 07/01/19 .............................................................. 1,727,625
12,000,000 SFM, Series B, 6.875%, 07/01/28 ............................................................. 12,410,880
1,750,000 SFM, Series D, 6.80%, 07/01/27 .............................................................. 1,796,638
500,000 SFM, Series E, 7.00%, 07/01/09 .............................................................. 530,870
2,970,000 SFM, Series E, 6.75%, 07/01/16 .............................................................. 3,049,329
2,000,000 SFM, Series E, 7.15%, 07/01/25 .............................................................. 2,089,700
2,810,000 SFM, Series F, 7.00%, 07/01/22 .............................................................. 2,893,345
645,000 SFM, Series G, 6.80%, 07/01/22 .............................................................. 659,100
Oregon State Housing, Educational and Cultural Facility Authority,
10,500,000 Lewis and Clark College Project, Series A, 6.125%,10/10/24 .................................. 10,520,894
2,100,000 Lewis and Clark College Project, Series A, MBIA Insured, Pre-Refunded, 7.125%, 07/01/20 ..... 2,338,181
700,000 Reed College Project, 6.75%, 07/01/11 ....................................................... 734,832
1,250,000 Reed College Project, Series A, 6.75%, 07/01/21 ............................................. 1,303,888
2,500,000 Oregon State Veteran Welfare GO, Series 73-A, 7.00%, 12/01/11 ................................. 2,647,275
750,000 Port of Astoria, GO, MBIA Insured, 6.60%, 09/01/11 ............................................ 775,485
2,200,000 Port of Morrow PCR, Idaho Power Co., Boardman Project, 7.25%, 08/01/08 ........................ 2,209,570
500,000 Port of Morrow Revenue, Refunding, Pre-Refunded, 8.00%, 12/01/11 .............................. 550,805
4,000,000 Port of Portland Special Obligation Revenue, Delta Airlines, Inc. Project, 6.20%, 09/01/22 .... 3,506,680
1,500,000 Port of St. Helens PCR, Refunding, Boise Cascade Corp. Project, 7.375%, 11/01/04 .............. 1,570,650
320,000 Port of Umpqua PCR, International Paper Co. Project, Series A, 6.60%, 03/15/05 ................ 330,451
2,000,000 Portland COP, Refunding, PBA, Series A, Pre-Refunded, 7.25%, 04/01/08 ......................... 2,159,820
195,000 Portland EDR, Public Broadcasting, Series A, 7.2%, 06/01/09 ................................... 195,507
Portland Hospital Facilities Authority Hospital Revenue,
10,500,000 Legacy Health System, Series A, AMBAC Insured, 6.70%, 05/01/21 .............................. 10,987,830
10,475,000 Legacy Health System, Series B, AMBAC Insured, 6.70%, 05/01/21 .............................. 10,961,669
1,000,000 Portland Housing Authority Revenue, Series 1990, 7.10%, 07/01/15 .............................. 1,050,600
635,000 Portland Hydroelectric Power Revenue, Bull Run Project, Series C, 7.00%, 10/01/16 ............. 635,241
Portland International Airport,
1,500,000 Series 7-A, MBIA Insured, 6.75%, 07/01/09 ................................................... 1,585,650
3,000,000 Series 7-B, MBIA Insured, 7.10%, 07/01/21 ................................................... 3,178,200
2,825,000 Portland, Oregon, Airport Way-Urban Renewal and Redevelopment Tax Increment, Sub-Series B-3,
FGIC Insured, Pre-Refunded, 7.60%, 06/01/10 ................................................. 3,138,632
170,000 Portland Parking Revenue, Pre-Refunded, 8.625%, 10/01/12 ...................................... 188,178
75,000 Portland Sewage Facilities Revenue, Refunding, Pre-Refunded, 8.35%, 04/01/04 .................. 76,775
Portland Sewer System Revenue,
5,000,000 Series 1990, Pre-Refunded, 7.125%, 03/01/10 ................................................. 5,319,500
14,100,000 Series A, 6.25%, 06/01/15 ................................................................... 14,314,320
950,000 Series A, FGIC Insured, 6.00%, 10/01/12 ..................................................... 963,053
Portland Urban Renewal and Redevelopment,
125,000 Downtown Waterfront, Series H, Pre-Refunded, 8.25%, 12/01/07 ................................ 135,976
5,555,000 Refunding, Downtown Waterfront, Series A, 6.40%, 06/01/08 ................................... 5,802,309
75,000 Puerto Rico Commonwealth Aqueduct and Sewer Authority Revenue, Refunding, Series 1985-A,
FSA Insured, Pre-Refunded, 9.00%, 07/01/09 .................................................. 95,447
4,000,000 Puerto Rico Commonwealth Highway Authority Revenue, Series Q, Pre-Refunded, 8.00%, 07/01/18 ... 4,629,520
</TABLE>
The accompanying notes are an integral part of these financial statements.
73
<PAGE>
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STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN OREGON TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
$ 40,000 Puerto Rico Commonwealth IDC, General Purpose Revenue, 8.00%, 01/01/03 ........................ $ 40,307
2,400,000 Puerto Rico Commonwealth Infrastructure Financing Authority, Special Tax Revenue,
Series 1988-A, 7.75%, 07/01/08 .............................................................. 2,590,104
Puerto Rico Commonwealth Public Improvement GO,
355,000 Pre-Refunded, 7.90%, 07/01/11 ............................................................... 381,224
250,000 Series A, Pre-Refunded, 7.75%, 07/01/06 ..................................................... 277,018
280,000 Series A, Pre-Refunded, 7.75%, 07/01/13 ..................................................... 310,260
Puerto Rico Electric Power Authority Revenue, Refunding,
190,000 Series 1987-L, Pre-Refunded, 8.40%, 07/01/15 ................................................ 208,960
600,000 Series 1988-M, Pre-Refunded, 8.00%, 07/01/08 ................................................ 668,802
2,000,000 Series 1989-O, Pre-Refunded, 7.125%, 07/01/14 ............................................... 2,146,335
Puerto Rico HFC Revenue,
395,000 FHA Mortgage Insured, Section 8 Assisted, 6th Portfolio, Pre-Refunded, 7.75%, 12/01/26 ...... 463,663
730,000 Portfolio No. 1, Series 1988-A, GNMA Secured, 7.80%, 10/15/21 ............................... 765,201
700,000 Portfolio No. 1, Series 1988-B, GNMA Secured, 7.65%, 10/15/22 ............................... 740,887
500,000 Puerto Rico Housing Bank and Finance Agency, SFMR, Homeowner's Development Program,
5th Portfolio, Pre-Refunded, 7.50%, 12/01/15 ................................................ 556,880
205,000 Puerto Rico Municipal Finance Agency, Series 1988-A, 8.25%, 07/01/08 .......................... 225,213
Puerto Rico PBA, Guaranteed Public Education and Health Facilities,
75,000 Refunding, Series F, Pre-Refunded, 8.875%, 07/01/12 ......................................... 77,688
90,000 Refunding, Series G, Pre-Refunded, 7.875%, 07/01/07 ......................................... 98,018
50,000 Redmond Improvement GO, Pre-Refunded, 7.80%, 05/01/17 ......................................... 53,024
Roseburg Urban Sanitary Authority, Improvement GO, Unlimited Tax,
60,000 Douglas County, 7.40%, 01/01/06 ............................................................. 63,321
230,000 Douglas County, 7.50%, 01/01/08 ............................................................. 243,587
1,250,000 Salem GO, Series A, 5.875%, 01/01/07 .......................................................... 1,260,388
Salem-Keizer School District No. 24J,
4,345,000 FGIC Insured, 6.00%, 06/01/13 ............................................................... 4,350,605
4,395,000 FGIC Insured, 6.00%, 06/01/14 ............................................................... 4,379,618
280,000 Springfield Improvement GO, Refunding, Pre-Refunded, 8.70%, 06/01/04 .......................... 293,818
3,265,000 Tillamook People Utilities District, 5.75%, 01/01/28 .......................................... 2,917,963
1,235,000 Tri-County, Metro Transportation District, COP, 7.50%, 12/15/02 ............................... 1,282,770
2,500,000 Tri-County, Metro Transportation District, Light Rail Extended, Series A, 6.00%, 07/01/12 ..... 2,520,875
1,375,000 Umatilla County Hospital Facility Authority, Hospital Revenue, Refunding, Good Shepherd
Community Hospital, 7.50%, 01/01/10 ......................................................... 1,414,793
5,300,000 Umatilla County USD No. 16R, Pendletron Project, AMBAC Insured, 6.00%, 07/01/14 ............... 5,355,809
2,000,000 Wasco County Hospital Facility Authority Hospital Revenue, Pre-Refunded, 7.375%, 07/01/00 ..... 2,067,380
100,000 Washington County Building GO, Pre-Refunded, 7.75%, 12/01/06 .................................. 107,329
Washington County Unified Sewerage Agency, Sewer Revenue,
50,000 Pre-Refunded, 7.90%, 07/01/07 ............................................................... 53,468
2,700,000 Pre-Refunded, 7.00%, 11/01/09 ............................................................... 2,927,150
4,000,000 Refunding, Series A, 6.20%, 10/01/10 ........................................................ 4,089,480
1,000,000 Refunding, Series A, 6.125%, 10/01/12 ....................................................... 1,019,870
7,500,000 Sub Lien-Series One, AMBAC Insured, 6.125%, 10/01/12 ........................................ 7,649,025
1,000,000 Washington County USD No. 88J, 6.10%, 06/01/12 ................................................ 1,016,620
Western Lane Hospital District, Hospital Facilities Authority Revenue, Sister/St. Joseph Peace,
4,400,000 Health and Hospital Services, MBIA Insured, 5.875%, 08/01/12 ................................ 4,350,147
6,000,000 Health and Hospital Services, MBIA Insured, 5.75%, 08/01/19 ................................. 5,786,340
2,700,000 Health and Hospital Services, MBIA Insured, Pre-Refunded, 7.125%, 08/01/17 .................. 2,972,996
5,000,000 Yamhill County USD No. 29J, 6.10%, 06/01/11 ................................................... 5,084,800
------------
TOTAL LONG TERM INVESTMENTS (COST $331,389,683) ......................................... 343,539,264
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
74
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STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN OREGON TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
(e)SHORT TERM INVESTMENTS .1%
$ 300,000 Port of Portland, PCR, Reynolds Metal, Inc. Project, Daily VRDN and Put, 3.75%, 12/01/09
(Cost $300,000) ............................................................................. $ 300,000
------------
TOTAL INVESTMENTS (COST $331,689,683) 98.4% ........................................ 343,839,264
OTHER ASSETS AND LIABILITIES, NET 1.6% ............................................. 5,618,618
------------
NET ASSETS 100.0% .................................................................. $349,457,882
============
At February 28, 1995, the net unrealized appreciation based on
the cost of investments for income tax purposes of $331,689,683 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ............................................................. $ 14,150,413
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value.............................................................. (2,000,832)
------------
Net unrealized appreciation ................................................................. $ 12,149,581
============
</TABLE>
PORTFOLIO ABBREVIATIONS:
<TABLE>
<S> <C>
AMBAC - American Municipal Bond Assurance Corp.
COP - Certificate of Participation
EDR - Economic Development Revenue
FGIC - Financial Guaranty Insurance Co.
FHA - Federal Housing Agency
FSA - Financial Security Assistance
GNMA - Government National Mortgage Association
GO - General Obligation
HFA - Housing Finance Agency/Authority
HFC - Housing Finance Corp.
IDC - Industrial Development Control
MBIA - Municipal Bond Investors Assurance Corp.
PBA - Public Building Authority
PCR - Pollution Control Revenue
SFM - Single Family Mortgage
SFMR - Single Family Mortgage Revenue
USD - Unified School District
</TABLE>
(e)Variable rate demand notes (VRDNs) are tax-exempt obligations which contain a
floating or variable interest rate adjustment formula and an unconditional
right of demand to receive payment of the principal balance plus accrued
interest 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.
75
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STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN PENNSYLVANIA TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS 98.2%
$ 4,250,000 Allegheny County Higher Education, PBA Revenue, Community College, Series A, 5.80%, 06/01/13 .. $ 4,034,270
Allegheny County Hospital Development Authority Revenue, Refunding,
500,000 Divine Providence Hospital, Series 1988-B, 8.75%, 01/01/14 .................................. 536,905
5,250,000 Southside Hospital, Pittsburg, Series 1987, 8.75%, 06/01/10 ................................. 5,499,848
1,000,000 Allegheny County IDA, Presbyterian University Hospital, Kaufmann Medical Project, Refunding,
Series A, MBIA Insured, 6.80%, 03/01/15 ..................................................... 1,048,550
3,270,000 Allegheny County RDAR, Refunding, Home Improvement, Series A, 5.90%, 02/01/11 ................. 3,155,452
Allegheny County Residential Finance Authority, SFMR,
2,495,000 GNMA Secured, 7.75%, 12/01/22 ............................................................... 2,604,406
3,915,000 Lemington Home, Series E, 7.125%, 02/01/27 .................................................. 3,985,901
80,000 Series D, FGIC Insured, 8.90%, 12/01/10 ..................................................... 83,825
1,400,000 Series D, GNMA Secured, 7.50%, 06/01/33 ..................................................... 1,451,422
1,515,000 Series H, GNMA Secured, 8.00%, 06/01/17 ..................................................... 1,573,979
2,945,000 Series J, GNMA Secured, 7.50%, 06/01/17 ..................................................... 3,037,326
1,600,000 Series M, GNMA Secured, 7.90%, 06/01/11 ..................................................... 1,679,744
835,000 Series T, GNMA Secured, 6.95%, 05/01/17 ..................................................... 862,129
1,200,000 Allegheny County Sanitary Authority, Sewer Revenue, Series A, FGIC Insured, Pre-Refunded, 7.45%,
12/01/09..................................................................................... 1,310,784
5,000,000 Beaver County Hospital Authority Revenue, Refunding, Medical Center Beaver County, Inc.,
AMBAC Insured, 6.625%, 07/01/10 ............................................................. 5,220,000
Beaver County IDA, PCR, Refunding,
4,400,000 Beaver Co., Ohio Edison/Pennsylvania Power Project, Series A, 7.15%, 09/01/21 ............... 4,500,804
6,475,000 Ohio Edison/Pennsylvania Power Project, Series A, 7.75%, 09/01/24 ........................... 6,639,983
800,000 Berks Montgomery Municipal Authority, Sewer Revenue, Pre-Refunded, 8.60%,8/01/13 .............. 843,072
9,695,000 Berks County GO, FGIC Insured, Pre-Refunded, 7.25%, 11/15/20 .................................. 10,883,219
Berks County Municipal Authority Revenue,
4,000,000 FGIC Insured, 7.00%, 05/15/18 ............................................................... 4,235,480
1,000,000 Highlands Wyomissing Project, Series 1989-A, Pre-Refunded, 7.25%, 10/01/19 .................. 1,086,550
1,400,000 Butler County Hospital Authority, Hospital Revenue, Butler Memorial Hospital, 8.00%, 07/01/16 . 1,471,596
2,000,000 Butler County IDA, PCR, Refunding, Witco Corp. Project, 5.85%, 12/01/23 ....................... 1,805,300
Cambria County Hospital Development Authority Revenue, Refunding,
3,500,000 Conemaugh Valley Memorial Hospital, Series B, Connie Lee Insured, 6.375%, 07/01/18 .......... 3,515,435
1,000,000 Conemaugh Valley Memorial Hospital, Series B, Pre-Refunded, 8.875%, 07/01/18 ................ 1,132,950
Cambria County IDA, Resource Recovery Revenue, Cambria Cogen Project,
4,000,000 Series F-1, 7.75%, 09/01/19 ................................................................. 4,172,720
2,715,000 Series F-2, 7.75%, 09/01/19 ................................................................. 2,832,234
1,200,000 Canon McMillan School District GO, AMBAC Insured, Pre-Refunded, 7.60%, 03/01/14 ............... 1,237,128
1,000,000 Charleroi Area School Authority Revenue, MBIA Insured, Pre-Refunded, 7.35%, 02/01/14 .......... 1,084,100
Chartiers Valley Industrial and Commercial Development Authority Revenue, Refunding,
1,000,000 First Mortgage, United Methodist Health Center, Series A, Pre-Refunded, 9.25%, 12/01/08 ....... 1,158,490
1,315,000 Friendship Village of South Hills Project, 9.25%, 08/15/08 .................................... 1,390,639
1,350,000 Chester County Hospital Authority Revenue, Paoli Memorial Hospital, Pre-Refunded, 7.625%,
10/01/13..................................................................................... 1,436,117
Dauphin County General Authority Revenue,
750,000 11-15 Terminal School District, Central Fulton, Mandatory Tender 06/01/06, 7.70%, 06/01/26 .. 766,178
1,250,000 AA-13 Terminal School District, Pinecrest, Mandatory Tender 06/01/09, 7.875%, 06/01/26 ...... 1,255,588
1,000,000 College Revenue, Lebanon College Project, Pre-Refunded, 8.10%, 04/01/09 ..................... 1,036,180
4,500,000 Hapsco-Western Hospital Project, Series A, MBIA Insured, 6.50%, 07/01/12 .................... 4,642,110
5,000,000 Hapsco-Western Hospital Project, Series B, MBIA Insured, 6.25%, 07/01/16 .................... 5,034,500
1,000,000 Municipal Pooled Program, Downingtown, Series A, BIG Insured, 7.75%, 01/01/06 ............... 1,065,950
1,000,000 Northeast Bradford School, 7.50%, 06/01/26 .................................................. 1,047,530
2,000,000 Delaware County Authority Revenue Bond 1990, Elwyn, Inc. Project, 8.35%, 06/01/15 ............. 2,157,860
5,000,000 Delaware County IDAR, PCR, Philadelphia Electric Co. Project, 7.375%, 04/01/21 ................ 5,239,000
</TABLE>
The accompanying notes are an integral part of these financial statements.
76
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STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN PENNSYLVANIA TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
Delaware County IDAR, Resources Recovery, Refunding,
$ 1,000,000 Series A, 7.90%, 12/01/05 ................................................................... $ 1,055,920
6,000,000 Series A, 8.10%, 12/01/13 ................................................................... 6,344,040
450,000 Delaware River Joint Toll Bridge System Commission Revenue, Series I-78, Pre-Refunded, 7.875%,
07/01/18..................................................................................... 496,679
1,000,000 Delaware River Port Authority, Pennsylvania and New Jersey River Bridges Revenue, Refunding,
AMBAC Insured, 7.375%, 01/01/07 ............................................................. 1,087,120
400,000 Dubois Hospital Authority Revenue, Refunding, Dubois Regional Medical Center Project, Series
1987-A, Pre-Refunded, 8.75%, 07/01/11 ....................................................... 434,732
1,400,000 Duquesne School District, AMBAC Insured, Pre-Refunded, 7.00%, 09/01/10 ........................ 1,511,202
250,000 Edinboro Municipal Authority Sewer Revenue, Guaranteed, Series 1987, Pre-Refunded, 8.25%,
08/01/07..................................................................................... 268,843
4,000,000 Elizabeth Forward School District GO, AMBAC Insured, Pre-Refunded, 7.25%, 01/15/10 ............ 4,374,400
7,000,000 Erie County Hospital Authority Revenue, St. Vincent Health Center Project, Series A, AMBAC
Insured, 6.375%, 07/01/22 .................................................................. 7,089,810
2,110,000 Erie County IDAR, Nursing Home-Sarah Reed Center Project, 8.625%, 07/01/14 .................... 2,204,718
3,000,000 Erie Higher Educational Building Authority, Gannon University, Series A, Pre-Refunded, 8.50%,
06/01/15...................................................................................... 3,440,730
1,850,000 Erie Western Pennsylvania Port Authority GO, 8.625%, 06/15/10 ................................. 1,980,684
1,250,000 Fayette County Hospital Authority Revenue, Refunding, Uniontown Hospital Project, 7.625%,
07/01/15..................................................................................... 1,257,538
4,275,000 Greater Johnston School District GO, MBIA Insured, 6.75%, 03/01/10 ............................ 4,509,185
2,000,000 Greensburg Salem School District GO, Westmoreland County, MBIA Insured, Pre-Refunded, 7.10%,
01/01/19..................................................................................... 2,147,680
1,310,000 Hampton Township, Municipal Authority Water Revenue, Series A, 6.85%, 05/01/12 ................ 1,335,938
4,000,000 Harrisburg Authority Water Revenue, FGIC Insured, Pre-Refunded, 7.00%, 07/15/15 ............... 4,407,800
800,000 Harrisburg RDAR, Capital Improvement, Series A, FGIC Insured, 7.875%, 11/02/16 ................ 847,952
4,000,000 Jeannette County Health Service Authority Hospital Revenue, Jeannette District Memorial
Hospital, 8.625%, 01/01/18 ................................................................. 4,359,160
1,250,000 Jeannette County Municipal Authority Sewer Revenue, 7.00%, 07/01/17 ........................... 1,305,488
1,000,000 Lancaster County Hospital Authority Revenue, Willow Valley Lakes Manor, Series B, 9.00%,
06/01/12..................................................................................... 1,038,400
1,000,000 Lancaster County Solid Waste Management Authority, Resource Recovery System Revenue, Series A,
8.50%, 12/15/10 ............................................................................. 1,050,600
2,000,000 Langhorne Manor Borough Higher Education, Health Authority Hospital Revenue, Lower Bucks
Hospital, 7.35%, 07/01/22 .................................................................. 1,770,260
5,000,000 Lawrence County IDA, PCR, Refunding, Ohio Edison/Pennsylvania Power Co., 7.15%, 03/01/17 ...... 5,140,900
2,500,000 Lebanon County, Good Samaritan Hospital Authority Revenue, Good Samaritan Hospital Project,
Refunding, 6.00%, 11/15/18 .................................................................. 2,176,274
Lehigh County General Purpose Authority Revenue,
1,000,000 Exempt Facility, FGIC Insured, Pre-Refunded, 7.25%, 01/01/10 ................................ 1,079,850
3,000,000 Good Shepherd Rehabilitation Hospital, 7.50%, 11/15/21 ...................................... 3,007,080
1,100,000 Horizon Health Systems, Inc., Pre-Refunded, 8.25%, 07/01/13 ................................. 1,189,991
1,800,000 Muhlenburg Hospital, Series A, 8.00%, 07/15/01 .............................................. 1,980,540
5,800,000 Muhlenburg Hospital, Series A, 6.60%, 07/15/22 .............................................. 5,579,658
1,900,000 Muhlenburg Hospital, Series B, 8.00%, 07/15/01. ............................................. 2,090,570
Lehigh County IDA, PCR,
5,000,000 Pennsylvania Power & Light Co. Project, Series A, MBIA Insured, 6.40%, 11/01/21 ............. 5,107,650
10,000,000 Pennsylvania Power & Light Co. Project, Series B, MBIA Insured, 6.40%, 09/01/29 ............. 10,162,400
2,185,000 Lower Providence Towership, Sewer Authority, Sewer Revenue, 6.75%, 05/01/22 ................... 2,263,507
Luzerne County IDA, Exempt Facilities Revenue,
4,750,000 Refunding, Gas and Water Co. Project, Series A, 6.05%, 01/01/19 ............................. 4,280,558
5,000,000 Refunding, Gas and Water Co. Project, Series A, AMBAC Insured, 7.00%, 12/01/17 .............. 5,329,300
1,000,000 McCandless IDA, Commercial Development, First Mortgage Revenue, Refunding, K-Mart Corp.,
Series A, 7.20%, 07/15/07 ................................................................... 1,016,860
</TABLE>
The accompanying notes are an integral part of these financial statements.
77
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STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN PENNSYLVANIA TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
Montgomery County Higher Education and Health Authority, Hospital Revenue,
$ 2,500,000 Bryn Mawr Hospital Project, Pre-Refunded, 7.375%, 12/01/19 .................................. $ 2,786,800
500,000 Bryn Mawr Hospital Project, Pre-Refunded, 9.375%, 12/01/19 .................................. 566,244
2,375,000 Holy Redeemer Hospital, Series A, AMBAC Insured, 7.625%, 02/01/20 ........................... 2,531,370
610,000 Jeanes Health System Project, Series 1987, 7.625%, 07/01/17 ................................. 616,893
10,000,000 Jeanes Health System Project, Series 1990, Pre-Refunded, 8.75%, 07/01/20 .................... 11,791,800
1,315,000 Pottstown Memorial Medical Center Project, 7.35%, 11/15/05 .................................. 1,397,990
1,750,000 St. Joseph's University, Series 1990, 6.50%, 12/15/22 ....................................... 1,781,413
5,500,000 St. Joseph's University, Series 1990, Pre-Refunded, 8.30%, 06/01/10 ......................... 6,361,300
2,530,000 Montgomery County IDAR, Refunding, PCR, Philadelphia Electric Co., Series A, 7.60%, 04/01/21 .. 2,652,300
10,000,000 Montgomery County IDAR, Resources Recovery, 7.50%, 01/01/12 ................................... 10,379,600
5,000,000 Montgomery County PCR, Philadelphia Electric Revenue, Series B, MBIA Insured, 6.70%, 12/01/21 . 5,166,000
2,305,000 Moon Township Municipal Authority, Allegheny County Water and Sewer, Series 1990, FGIC Insured,
Pre-Refunded, 7.20%, 12/01/09 ............................................................... 2,548,777
600,000 Moon Transportation Authority, Highway Improvement Revenue, 9.50%, 02/01/16 ................... 650,646
1,000,000 Neshaminy School District GO, FGIC Insured, 7.00%, 02/15/14 ................................... 1,066,760
6,600,000 North Allegheny School District GO, AMBAC Insured, Pre-Refunded, 7.60%, 05/01/13 .............. 7,354,182
600,000 North Eastern Pennsylvania Hospital Authority Revenue, Wilkes Barre General Hospital, Series B,
Pre-Refunded, 8.375%, 07/01/06 .............................................................. 656,070
North Eastern Pennsylvania Hospital and Educational Authority Revenue, Refunding,
1,000,000 Kings College Project, Series B, 6.00%, 07/15/11 ............................................ 931,910
1,000,000 Kings College Project, Series B, 6.00%, 07/15/18 ............................................ 905,840
5,000,000 Wilkes University, 6.125%, 10/01/11 ......................................................... 4,724,150
2,500,000 Wilkes University, 5.625%, 10/01/18 ......................................................... 2,133,850
400,000 North Eastern York County Sewer Authority Revenue, Series 1987, Pre-Refunded, 8.75%, 09/01/18.. 435,788
1,175,000 North Hampton Borough Municipal Authority, Water Revenue, Leigh and North Hampton Counties
Project, AMBAC Insured, Pre-Refunded, 7.00%, 09/01/14 ....................................... 1,253,126
Pennsylvania EDA,
3,000,000 MacMillian L.P. Project, 7.60%, 12/01/20 .................................................... 3,143,880
5,000,000 Resources Recovery Revenue, Colver Project, Series D, 7.125%, 12/01/15 ...................... 5,048,650
Pennsylvania HFA,
20,000,000 Refunding, Rental Housing, FNMA Insured, 5.75%, 07/01/14 .................................... 19,209,800
1,000,000 SFMR, Series 1986-K, 7.375%, 04/01/11 ....................................................... 1,028,220
2,785,000 SFMR, Series 1987-K, 7.125%, 10/01/13 ....................................................... 2,857,382
5,655,000 SFMR, Series 1987-K, 6.125%, 10/01/24 ....................................................... 5,377,622
50,000 SFMR, Series 1987-L, 7.125%, 04/01/14 ....................................................... 51,501
750,000 SFMR, Series 1987-P, 8.00%, 04/01/16 ........................................................ 782,544
2,500,000 SFMR, Series 1988-R, 8.125%, 10/01/19 ....................................................... 2,603,175
4,885,000 SFMR, Series 1988-U, 7.80%, 10/01/20 ........................................................ 5,190,606
1,965,000 SFMR, Series 1989-W, 7.80%, 10/01/20 ........................................................ 2,074,980
3,570,000 SFMR, Series 1989-Y, 7.45%, 04/01/16 ........................................................ 3,742,859
5,440,000 SFMR, Series 1990-27, 8.15%, 10/01/21 ....................................................... 5,790,336
5,715,000 SFMR, Series 1990-29, 7.375%, 10/01/16 ...................................................... 5,999,321
4,500,000 SFMR, Series 1991-30, 7.30%, 10/01/17 ....................................................... 4,714,290
5,000,000 SFMR, Series 1991-32, 7.15%, 04/01/15 ....................................................... 5,201,200
3,000,000 SFMR, Series 1992-34-A, 6.85%, 04/01/16 ..................................................... 3,077,070
6,000,000 SFMR, Series 1992-34-B, 7.00%, 04/01/24 ..................................................... 6,132,660
Pennsylvania Intergovernmental Cooperative Authority, Special Tax Revenue, Philadelphia Funding
Project,
6,400,000 FGIC Insured, 7.00%, 06/15/14 ............................................................... 6,844,096
8,190,000 FGIC Insured, 6.75%, 06/15/21 ............................................................... 8,540,041
12,565,000 Pennsylvania State Financial Authority Revenue, Refunding, 6.60%, 11/01/09 .................... 12,755,485
</TABLE>
The accompanying notes are an integral part of these financial statements.
78
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STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN PENNSYLVANIA TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
Pennsylvania State Higher Educational Facilities Authority, College and University Revenue,
$ 1,000,000 Allegheny College Project, Series B, 6.125%, 11/01/13 ....................................... $ 955,540
1,500,000 Allegheny College Project, Series B, 6.00%, 11/01/22 ........................................ 1,379,010
2,000,000 Hahnemann University Project, MBIA Insured, 7.20%, 07/01/09 ................................. 2,144,520
5,350,000 Hahnemann University Project, MBIA Insured, 7.20%, 07/01/19 ................................. 5,736,591
1,000,000 Lycoming College, Pre-Refunded, 8.375%, 10/01/18 ............................................ 1,124,670
1,000,000 Medical College of Pennsylvania, Series A, 8.375%, 03/01/11 ................................. 1,067,290
3,135,000 Medical College of Pennsylvania, Series A, 7.50%, 03/01/14 .................................. 3,226,855
2,250,000 Philadelphia College of Textiles and Science, Pre-Refunded, 7.50%, 02/01/07 ................. 2,363,085
2,350,000 Refunding, Drexel University, 6.375%, 05/01/17 .............................................. 2,296,655
1,955,000 Temple University, 7.375%, 10/01/06 ......................................................... 2,073,023
4,505,000 Temple University, 7.40%, 10/01/10 .......................................................... 4,735,836
1,000,000 Widner University, AMBAC Insured, Pre-Refunded, 7.625%, 10/01/13 ............................ 1,088,130
2,220,000 Pennsylvania State Higher Educational Facilities Authority Revenue, State System of Higher
Education, Series L, AMBAC Insured, 6.20%, 06/15/19 ........................................ 2,219,734
4,250,000 Pennsylvania State IDAR, Economic Revenue, AMBAC Insured, 6.00%, 01/01/12 ..................... 4,256,248
890,000 Pennsylvania State Pooled Finance Authority, Lease Revenue, Capital Improvement, Series B,
MBIA Insured, 8.00%, 11/01/09 ............................................................... 966,309
1,000,000 Pennsylvania State Public School, Building Authority, Revenue, Refunding, Shenandoah Valley
School District Project, AMBAC Insured, 7.375%, 09/15/10 .................................... 1,066,210
Pennsylvania State Turnpike Commission Revenue,
1,000,000 Series A, Pre-Refunded, 7.875%, 12/01/15 .................................................... 1,072,340
1,000,000 Series C, FGIC Insured, Pre-Refunded, 7.625%, 12/01/17 ...................................... 1,108,520
1,000,000 Series H, FGIC Insured, Pre-Refunded, 7.40%, 12/01/17 ....................................... 1,130,630
2,500,000 Series K, MBIA Insured, Pre-Refunded, 7.50%, 12/01/12 ....................................... 2,799,825
1,900,000 Series K, Pre-Refunded, 7.50%, 12/01/19 ..................................................... 2,127,867
2,300,000 Pennsylvania State University, Pre-Refunded, 7.75%, 03/01/11 .................................. 2,416,241
Philadelphia City GO, Refunding,
2,000,000 Series 1986, Pre-Refunded, 8.25%, 02/15/09 .................................................. 2,106,840
4,100,000 Series 1986-A, Pre-Refunded, 7.625%, 08/01/16 ............................................... 4,345,835
3,000,000 Series 1987-B, Pre-Refunded, 8.125%, 08/01/17 ............................................... 3,278,340
Philadelphia Gas Works Revenue,
8,300,000 11th Series A, Pre-Refunded, 7.875%, 07/01/17 ............................................... 9,010,646
795,000 11th Series C, AMBAC Insured, Pre-Refunded, 7.25%, 01/01/10 ................................. 845,522
1,000,000 12th Series, MBIA Insured, ETM, 7.00%, 05/15/20 ............................................. 1,108,030
1,255,000 13th Series, Pre-Refunded, 7.70%, 06/15/11 .................................................. 1,439,134
2,745,000 13th Series, Pre-Refunded, 7.70%, 06/15/11 .................................................. 3,163,722
10,100,000 14th Series, 6.375%, 07/01/26 ............................................................... 9,877,901
205,000 Pre-Refunded, AMBAC, 7.25%, 01/01/10 ........................................................ 224,596
Philadelphia Hospitals and Higher Educational Facilities Authority, Hospital Revenue,
5,225,000 Albert Einstein Medical Center, 7.30%, 10/01/08 ............................................. 5,562,953
7,755,000 Albert Einstein Medical Center, 7.625%, 04/01/11 ............................................ 8,212,778
1,000,000 Children's Seashore House, Series A, 7.00%, 08/15/17 ........................................ 986,580
2,600,000 Children's Seashore House, Series B, 7.00%, 08/15/22 ........................................ 2,556,268
100,000 Presbyterian Medical Center, AMBAC Insured, Pre-Refunded, 8.00%, 07/01/13 ................... 108,764
2,750,000 Philadelphia Municipal Authority, Gas Works Lease Revenue, 7.625%, 05/01/14 ................... 2,937,990
Philadelphia Municipal Authority Revenue, Refunding,
140,000 FGIC Insured, Pre-Refunded, 7.80%, 04/01/18 ................................................. 153,836
1,360,000 FGIC Insured, Pre-Refunded, 7.80%, 04/01/18 ................................................. 1,525,281
300,000 Series 1987, Pre-Refunded, 7.875%, 07/15/17 ................................................. 326,004
50,000 Philadelphia Parking Authority, Airport Revenue, Refunding, 7.30%, 09/01/03 ................... 50,402
185,000 Philadelphia RDA, Home Improvement Loan Revenue, Series A, FHA Mortgage Insured, 7.375%,
06/01/03..................................................................................... 188,047
</TABLE>
The accompanying notes are an integral part of these financial statements.
79
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STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN PENNSYLVANIA TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
Philadelphia RDA, Housing Revenue,
$ 295,000 Sub-Series 2-B, 8.625%, 08/01/26 ............................................................ $ 299,165
500,000 Sub-Series 3-B, 8.00%, 08/01/13 ............................................................. 550,650
5,700,000 Philadelphia Regional Port Authority Lease Revenue, MBIA Insured, Pre-Refunded, 7.15%,
08/01/20..................................................................................... 6,259,170
Philadelphia Water and Sewer Revenue,
6,975,000 Series 10, ETM 09/01/04, 7.35%, 09/01/04 .................................................... 7,836,203
600,000 Series 11, Pre-Refunded, 9.10%, 12/01/02 .................................................... 632,220
4,000,000 Series 12, Pre-Refunded, 7.25%, 07/01/14 .................................................... 4,179,080
11,000,000 Series 16, 7.50%, 08/01/10 .................................................................. 11,881,760
10,000,000 Philadelphia Water and Wastewater Revenue, Refunding, 5.75%, 06/15/13 ......................... 9,233,600
330,000 Pittsburgh Public Parking Authority Revenue, Converted Option Bond, Pre-Refunded, 7.50%,
12/01/07..................................................................................... 344,028
Pittsburgh Urban RDA, SFMR,
3,750,000 Series A, 7.15%, 10/01/27.................................................................... 3,853,500
2,500,000 Series B, GNMA Secured, 7.375%, 12/01/15 .................................................... 2,613,100
1,250,000 Pittsburgh Water and Sewer Authority, Crossover System Revenue, Refunding, FGIC Insured,
Pre-Refunded, 7.25%, 09/01/14 ............................................................... 1,382,174
Pottstown Borough Authority,
4,000,000 Sewer Revenue, 7.70%, 11/01/21 .............................................................. 4,258,120
1,000,000 Water Revenue, 7.80%, 08/01/10 .............................................................. 1,055,130
3,390,000 Schuylkill County, IDA, Resource Recovery Revenue, Refunding, Schuylkill Energy Resource, Inc.,
6.50%, 01/01/10 ............................................................................. 3,103,477
1,500,000 Schuylkill County, RDA Lease Revenue, Series A, FGIC Insured, 7.125%, 06/01/13 ................ 1,639,215
500,000 Scranton-Lackawanna Health and Welfare Authority, Health Facilities Revenue, Allied Services,
FHA Insured, Series C, Pre-Refunded, 8.125%, 01/15/28 ....................................... 555,650
750,000 Silver Spring Towership Authority, Sewer Revenue, FGIC Insured, Pre-Refunded, 6.70%, 07/15/21.. 759,308
2,715,000 Southside Area School District, AMBAC Insured, Pre-Refunded, 7.00%, 04/15/10 .................. 2,877,220
1,975,000 Temple University, System of Higher Education, Pennsylvania Hospital Revenue, Series A, FHA
Insured, Pre-Refunded, 7.25%, 08/01/16 ...................................................... 2,118,602
100,000 Union County Higher Educational Facilities Financing Authority, University Revenue, Bucknell
University, MBIA Insured, Pre-Refunded, 7.75%, 04/01/07 ..................................... 105,531
3,000,000 Union School District GO, AMBAC Insured, Pre-Refunded, 7.25%, 04/01/15 ........................ 3,211,530
100,000 University of Pittsburgh Higher Education, University Capital Project, Series 1987-A, Pre-
Refunded, 8.375%, 06/01/05 .................................................................. 109,317
1,000,000 Venango County GO, AMBAC Insured, Pre-Refunded, 7.25%, 09/15/19 ............................... 1,090,040
1,000,000 Warren County GO, MBIA Insured, Pre-Refunded, 7.20%, 07/01/16 ................................. 1,112,090
2,000,000 Washington County, Authority Lease Revenue, Municipal Facilities Pool, Capital C, Shadyside
Hospital, Series A, AMBAC Insured, Pre-Refunded, 7.375%, 12/15/09 ........................... 2,258,780
100,000 Washington County Hospital Authority Revenue, Washington Hospital, Series 1987, Pre-Refunded,
9.50%, 07/01/17 ............................................................................ 110,886
1,500,000 Westmoreland County IDAR, Refunding, Citizen's General Hospital
Project, Series A, 8.25%, 07/01/13........................................................... 1,592,580
3,000,000 Wilkes Barre Area School District, GO, FGIC Insured, 6.375%, 04/01/15 ......................... 3,074,220
750,000 Wyoming Valley Sanitary Authority, Sewer Revenue, BIG Insured, Pre-Refunded, 7.25%, 11/15/05 .. 831,578
York County Solid Waste and Refuse Authority, IDR, Resource Recovery Project,
105,000 Series B, 8.20%, 12/01/14 ................................................................... 113,658
900,000 Series C, 8.20%, 12/01/14 ................................................................... 974,214
------------
TOTAL LONG TERM INVESTMENTS (COST $549,492,198) ......................................... 576,718,192
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
80
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================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN PENNSYLVANIA TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
(e)SHORT TERM INVESTMENTS .1%
$ 500,000 Sayre County, Health Facilities Authority, VHA Capital Finance Project, Series H, AMBAC
Insured, Weekly VRDN and Put, 4.05%, 12/01/20 (Cost $500,000) ............................... $ 500,000
------------
TOTAL INVESTMENTS (COST $549,992,198) 98.3% ........................................ 577,218,192
OTHER ASSETS AND LIABILITIES, NET 1.7% ............................................. 10,147,802
------------
NET ASSETS 100.0% .................................................................. $587,365,994
============
At February 28, 1995 the net unrealized appreciation based on
the cost of investments for income tax purposes of $549,992,198 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ............................................................. $ 31,539,521
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ............................................................. (4,313,527)
------------
Net unrealized appreciation ................................................................. $ 27,225,994
============
</TABLE>
PORTFOLIO ABBREVIATIONS:
<TABLE>
<S> <C>
AMBAC - American Municipal Bond Assurance Corp.
BIG - Bond Investors Guaranty Insurance Co.
EDA - Economic Development Authority
ETM - Escrow to Maturity
FGIC - Financial Guaranty Insurance Co.
FHA - Federal Housing Agency
FNMA - Federal National Mortgage Association
GNMA - Government National Mortgage Association
GO - General Obligation
HFA - Housing Finance Agency/Authority
IDA - Industrial Development Authority /Agency
IDR - Industrial Development Revenue
IDAR - Industrial Development Authority /Agency Revenue
L.P. - Limited Partnership
MBIA - Municipal Bond Investors Assurance Corp.
PBA - Public Building Authority
PCR - Pollution Control Revenue
RDA - Redevelopment Agency
RDAR - Redevelopment Agency Revenue
SFMR - Single Family Mortgage Revenue
VHA - Volunteer Hospital of America
</TABLE>
(e)Variable rate demand notes (VRDNs) are tax-exempt obligations which contain a
floating or variable interest rate adjustment formula and an unconditional
right of demand to receive payment of the principal balance plus accrued
interest 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.
81
<PAGE>
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================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995
<TABLE>
FACE VALUE
AMOUNT FRANKLIN PUERTO RICO TAX-FREE INCOME FUND (NOTE 1)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS 97.5%
Guam Airport Authority Revenue,
$1,675,000 Series B, 6.60%, 10/01/10 .................................................................... $ 1,678,668
5,800,000 Series B, 6.70%, 10/01/23 .................................................................... 5,784,978
2,000,000 Guam Government, GO, Series A, 5.40%, 11/15/18 ................................................. 1,710,000
5,590,000 Guam Government Limited Obligation Highway, Refunding, Series A, 6.30%, 05/01/12 ............... 5,753,787
Guam Power Authority Revenue,
7,190,000 GO, 6.30%, 10/01/22 .......................................................................... 6,961,574
2,680,000 Series A, 6.75%, 10/01/24 .................................................................... 2,718,485
Puerto Rico Commonwealth Aqueduct and Sewer Authority Revenue,
4,340,000 Series 1988-A, 7.875%, 07/01/17 .............................................................. 4,724,741
3,620,000 Series 1988-A, 7.00%, 07/01/19 ............................................................... 3,744,057
Puerto Rico Commonwealth Highway and Transportation Authority Revenue,
70,000 Refunding, Series N, Pre-Refunded, 8.00%, 07/01/03 ........................................... 78,027
1,200,000 Refunding, Series V, 5.75%, 07/01/18 ......................................................... 1,128,132
870,000 Refunding, Series X, 5.50%, 07/01/19 ......................................................... 794,954
3,925,000 Series P, Pre-Refunded, 8.125%, 07/01/13 ..................................................... 4,389,956
3,010,000 Series Q, 6.00%, 07/01/20 .................................................................... 2,918,315
350,000 Series Q, Pre-Refunded, 7.75%, 07/01/10 ...................................................... 399,795
2,750,000 Series T, 6.625%, 07/01/18 ................................................................... 2,833,408
2,745,000 Puerto Rico Commonwealth IDC, General Purpose Revenue, 8.00%, 01/01/03 ......................... 2,766,082
Puerto Rico Commonwealth Infrastructure Financing Authority, Special Tax Revenue,
3,000,000 Series 1988-A, 7.90%, 07/01/07 ............................................................... 3,255,810
2,300,000 Series 1988-A, 7.75%, 07/01/08 ............................................................... 2,482,183
2,600,000 Series 1988-A, 7.50%, 07/01/09 ............................................................... 2,783,273
Puerto Rico Commonwealth Public Improvement,
250,000 GO, 6.25%, 07/01/10 .......................................................................... 254,205
3,905,000 GO, 6.40%, 07/01/11 .......................................................................... 3,996,104
2,930,000 GO, Pre-Refunded, 7.90%, 07/01/11 ............................................................ 3,146,439
1,250,000 GO, Pre-Refunded, 6.80%, 07/01/21 ............................................................ 1,399,400
1,515,000 GO, Series B, Pre-Refunded, 7.25%, 07/01/12 .................................................. 1,629,398
3,350,000 Puerto Rico Commonwealth Urban Renewal and Housing Corp., Refunding, 7.875%, 10/01/04 .......... 3,718,098
Puerto Rico Electric Power Authority Revenue,
1,445,000 Refunding, Series 1987-K, Pre-Refunded, 9.375%, 07/01/17 ..................................... 1,619,802
500,000 Refunding, Series 1987-L, Pre-Refunded, 8.375%, 07/01/07 ..................................... 549,625
2,160,000 Refunding, Series 1987-L, Pre-Refunded, 8.40%, 07/01/15 ...................................... 2,375,546
6,850,000 Refunding, Series 1988-M, Pre-Refunded, 8.00%, 07/01/08 ...................................... 7,635,490
2,430,000 Refunding, Series 1989-O, Pre-Refunded, 7.125%, 07/01/14 ..................................... 2,672,393
2,115,000 Refunding, Series 1991-P, 7.00%, 07/01/11 .................................................... 2,251,650
1,525,000 Series O, 7.125%, 07/01/14 ................................................................... 1,600,991
1,000,000 Series P, 7.00%, 07/01/21 .................................................................... 1,064,610
10,000,000 Series T, 6.375%, 07/01/24 ................................................................... 10,115,300
5,750,000 Series U, 6.00%, 07/01/14 .................................................................... 5,652,653
Puerto Rico HFC Revenue,
2,060,000 FHA Mortgage Insured, Section 8 Assisted, 6th Portfolio, Pre-Refunded, 7.75%, 12/01/26 ....... 2,418,090
3,750,000 GNMA Secured, Series C, 6.85%, 10/15/23 ...................................................... 3,882,524
420,000 MFMR, Portfolio A-1, 7.50%, 10/01/15 ......................................................... 444,683
1,750,000 MFMR, Portfolio A-1, 7.50%, 04/01/22 ......................................................... 1,847,773
390,000 MFMR, Series A, 8.25%, 06/01/11 .............................................................. 395,681
500,000 SFMR, Portfolio D-1, 6.85%, 10/15/24 ......................................................... 517,670
955,000 Puerto Rico Housing Bank and Finance Agency, SFMR, Homeownership Development Program,
5th Portfolio, Pre-Refunded, 7.50%, 12/01/15 ................................................. 1,063,641
</TABLE>
The accompanying notes are an integral part of these financial statements.
82
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================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN PUERTO RICO TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
Puerto Rico Industrial, Educational, Medical and Environmental Control Facilities, Financing
Authority, Higher Educational Revenue, Polytechnic University of Puerto Rico Project,
$1,000,000 Series A, 5.70%, 08/01/13 .................................................................... $ 887,330
1,500,000 Series A, 5.50%, 08/01/24 .................................................................... 1,249,980
3,300,000 Puerto Rico Industrial, Educational, Medical and Environmental Control Facilities, Hospital,
Auxilio Mutuo Obligation Group, Series A, 6.25%, 07/01/24 .................................... 3,346,430
Puerto Rico Municipal Finance Agency,
4,550,000 Series 1988-A, 8.25%, 07/01/08 ............................................................... 4,998,630
2,000,000 Series 1994-A, 6.50%, 07/01/19 ............................................................... 2,049,680
Puerto Rico Industrial, Medical and Environmental Facilities, PCFA Revenue,
2,250,000 1978 American Home, Series A, 5.10%, 12/01/18 ................................................ 1,941,795
2,575,000 American Cyanamid Co. Project, 8.75%, 05/01/13 ............................................... 2,642,079
4,010,000 Baxter Travenol Labs., Series A, 8.00%, 09/01/12 ............................................. 4,436,905
140,000 Higher Citiproperties, Inc., 8.75%, 12/01/00 ................................................. 148,008
3,925,000 Motorola, Inc. Project, Series A, 6.75%, 01/01/14 ............................................ 4,175,062
900,000 PepsiCo, Inc. Project, 6.25%, 11/15/13 ....................................................... 922,392
Puerto Rico PBA, Guaranteed Public Education and Health Facilities,
3,150,000 Series J, Pre-Refunded, 7.25%, 07/01/17 ...................................................... 3,429,153
800,000 Series L, Pre-Refunded, 6.875%, 07/01/21 ..................................................... 899,256
8,655,000 Puerto Rico Port Authority Revenue, Special Facilities, American Airlines, Series A, 6.30%,
06/01/23...................................................................................... 7,912,313
Puerto Rico Telephone Authority Revenue,
3,500,000 Series 1992-L, 6.125%, 01/01/22 .............................................................. 3,500,770
500,000 Series 1993-N, 5.50%, 01/01/13 ............................................................... 469,175
1,885,000 Series 1993-N, 5.50%, 01/01/22 ............................................................... 1,720,232
University of Puerto Rico, University System Revenue,
35,000 Series G, 8.00%, 06/01/07 .................................................................... 35,634
25,000 Series G, 8.00%, 06/01/09 .................................................................... 25,463
245,000 Series J, 6.50%, 06/01/13 .................................................................... 248,308
4,250,000 Series L, 6.50%, 06/01/13 .................................................................... 4,307,374
5,600,000 Virgin Island Water and Power Authority, Electric System Revenue, Series A, 7.40%, 07/01/11 .... 5,884,984
------------
TOTAL LONG TERM INVESTMENTS (COST $165,984,418) .......................................... 172,388,944
------------
SHORT TERM INVESTMENTS 1.0%
200,000 (e)Puerto Rico Commonwealth, Government Development Bank, Refunding, Weekly VRDN and Put, 3.90%,
12/01/15...................................................................................... 200,000
San Juan Public Improvement GO, Loan Government Development Bank,
1,215,000 Series 1972-A, 8.20%, 07/01/95 ............................................................... 1,227,600
345,000 Series 1974-A, 8.20%, 07/01/95 ............................................................... 348,578
------------
TOTAL SHORT TERM INVESTMENTS (COST $1,760,693) ........................................... 1,776,178
------------
TOTAL INVESTMENTS (COST $167,745,111) 98.5% ......................................... 174,165,122
OTHER ASSETS AND LIABILITIES, NET 1.5% .............................................. 2,722,379
------------
NET ASSETS 100.0% ................................................................... $176,887,501
============
At February 28, 1995, the net unrealized appreciation based on
the cost of investments for income tax purposes of $167,778,235 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost .............................................................. $ 8,443,661
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value .............................................................. (2,056,774)
------------
Net unrealized appreciation .................................................................. $ 6,386,887
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
83
<PAGE>
FRANKLIN TAX-FREE TRUST
================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
FRANKLIN PUERTO RICO TAX-FREE INCOME FUND
- --------------------------------------------------------------------------------
PORTFOLIO ABBREVIATIONS:
<TABLE>
<S> <C>
FHA - Federal Housing Agency
GNMA - Government National Mortgage Association
GO - General Obligation
HFC - Housing Finance Corp.
IDC - Industrial Development Corp.
MFMR - Multi-Family Mortgage Revenue
PBA - Public Building Authority
PCFA - Pollution Control Financing Authority
SFMR - Single Family Mortgage Revenue
</TABLE>
(e)Variable rate demand notes (VRDNs) are tax-exempt obligations which contain a
floating or variable interest rate adjustment formula and an unconditional
right of demand to receive payment of the unpaid 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.
84
<PAGE>
FRANKLIN TAX-FREE TRUST
================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN FEDERAL INTERMEDIATE-TERM TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS 96.1%
ALABAMA 1.4%
$1,000,000 Morgan County, Decatur Health Care Authority Revenue, Refunding, Connie Lee Insured, 5.80%,
03/01/04....................................................................................... $ 1,012,540
ALASKA 1.0% -----------
500,000 Alaska State Housing Finance Corp., Collateral, First Mortgage Program, 5.80%, 06/01/04 ......... 508,525
200,000 Anchorage Parking Authority Lease Revenue, Refunding, 5th Avenue Garage, 6.50%, 12/01/02 ........ 206,340
-----------
714,865
ARIZONA 3.0% -----------
2,000,000 Maricopa County COP, 5.625%, 06/01/00 ........................................................... 1,950,780
200,000 Mohave County IDA, Hospital System Revenue, Refunding, Medical Environment, Inc., Phoenix Baptist
Hospital and Medical Center, 6.00%, 07/01/00 .................................................. 201,606
80,000 Phoenix HFC, Mortgage Revenue, Project A, 6.00%, 07/01/02 ....................................... 81,843
-----------
2,234,229
-----------
CALIFORNIA 22.2%
100,000 ABAG Finance Corp., COP, Association XXVI, Series B, 6.30%, 10/01/02 ............................ 101,011
3,000,000 Bakersfield Public Financing Authority Revenue, Series A, 5.80%, 09/15/05 ....................... 2,917,200
1,500,000 California Educational Facilities Authority Revenue, College & University Financing, Refunding,
Series B, 5.90%, 06/01/03 .................................................................... 1,489,230
California Statewide CDA Revenue, Refunding, COP, Health Facilities, Barton Memorial Hospital,
200,000 Series B, 5.70%, 12/01/00 ..................................................................... 201,046
300,000 Series B, 6.40%, 12/01/05 ..................................................................... 309,831
300,000 Coalinga Public Financing Authority Revenue, Series B, 6.10%, 09/15/04 .......................... 293,649
2,600,000 Fresno Joint Powers Financing Authority, Local Agency Revenue, Refunding, Series A, 6.00%,
09/02/01....................................................................................... 2,575,248
Hesperia Public Finance Authority Revenue,
505,000 Highway and Street Improvement, Series A, 4.75%, 10/01/96 ..................................... 498,329
555,000 Highway and Street Improvement, Series A, 5.00%, 10/01/97 ..................................... 545,559
605,000 Highway and Street Improvement, Series A, 5.25%, 10/01/98 ..................................... 594,957
100,000 Los Angeles County Transportation Commission, COP, Series B, 5.90%, 07/01/00 .................... 102,460
450,000 Merced Irrigation District COP, Water Facilities Project, 6.00%, 11/01/02 ....................... 442,926
500,000 New Haven USD, COP, Refunding, 5.30%, 07/01/01 .................................................. 489,985
200,000 Paso Robles USD, COP, Measure D, Capital Projects, Phase III, 5.75%, 08/01/02 ................... 196,566
140,000 Pleasanton USD, COP, Refunding, 6.30%, 02/01/00 ................................................. 140,325
100,000 San Diego County COP, Children's Center Project, 6.00%, 10/01/02 ................................ 100,058
100,000 San Diego Port Facilities Revenue, Refunding, National Steel and Shipbuilding Co., 6.60%,
12/01/02....................................................................................... 102,662
150,000 San Francisco City and County RDA, Refunding, MBIA Insured, Series A, 6.125%, 07/01/02 .......... 150,319
200,000 San Francisco Downtown Parking Corp. Revenue, 6.25%, 04/01/04 ................................... 199,032
200,000 San Joaquin County COP, General Hospital Project, 5.90%, 09/01/03 ............................... 197,508
520,000 San Juan USD, COP, Golden River Elementary School Construction Project, 5.40%, 04/01/01 ......... 507,390
2,000,000 San Ramon Valley USD, COP, Measure A, Capital Project, Series A, 5.95%, 10/01/01 ................ 2,012,840
Snowline Joint USD, COP,
245,000 Series 1993, 5.50%, 07/01/00 .................................................................. 239,686
260,000 Series 1993, 5.60%, 07/01/01 .................................................................. 253,508
275,000 Series 1993, 5.70%, 07/01/02 .................................................................. 267,295
290,000 Series 1993, 5.80%, 07/01/03 .................................................................. 281,056
400,000 Solano County COP, Refunding, Justice Facility and Public Building Project, 5.875%, 10/01/05 .... 387,004
100,000 Southern California Rapid Transit District Revenue, Special Benefit AD A2, Series 92A, 6.00%,
09/01/02....................................................................................... 102,171
Susanville Public Financing Authority Revenue, Water Facilities,
25,000 Series A, AMBAC Insured, 5.90%, 09/01/02 ...................................................... 25,948
100,000 Series A, AMBAC Insured, 6.00%, 09/01/03 ...................................................... 103,777
</TABLE>
The accompanying notes are an integral part of these financial statements.
85
<PAGE>
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================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN FEDERAL INTERMEDIATE-TERM TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
California (cont.)
$ 500,000 Tahoe City, Public Utilities District COP, Capital Facilities Project, Series B, 6.05%,
06/01/01....................................................................................... $ 502,775
100,000 Tuolumne County COP, Multiple Facilities Project, 6.00%, 06/01/99 ............................... 99,952
-----------
16,431,303
-----------
COLORADO 7.0%
Denver City and County Airport Revenue,
3,000,000 Series A, 7.00%, 11/15/99 ..................................................................... 3,041,280
335,000 Series C, 6.25%, 11/15/00 ..................................................................... 326,846
1,500,000 Montrose County COP, 6.20%, 06/15/03 ............................................................ 1,533,870
255,000 Summit County Recreational Facilities Revenue, Refunding, Copper Mountain, Mandatory Put 10/01/99
5.90%, 04/01/17 ............................................................................... 257,642
-----------
5,159,638
-----------
DISTRICT OF COLUMBIA .8%
700,000 District of Columbia GO, Refunding, Series A, 5.875%, 06/01/05 .................................. 620,543
-----------
FLORIDA 10.6%
250,000 Alachua County, HFA, Refunding, Santa Fe Health Care Facilities Project, 6.875%, 11/15/02 ....... 260,010
3,250,000 Gateway Service District Revenue, Transportation/Roadway Service Charges, 8.50%, 05/01/04 ....... 3,359,818
1,000,000 Hillsborough County Florida IDA, University Community Hospital, MBIA Insured, 5.375%, 08/15/04 .. 990,120
Northern Palm Beach County Water Control District, Unit Development Number 31,
405,000 Program 1, 6.60%, 11/01/03 .................................................................... 408,134
320,000 Program 2, 6.60%, 11/01/03 .................................................................... 322,477
2,700,000 Palm Beach County Solid Waste IDR, Okeelanta Power Project, Series A, 6.375%, 02/15/07 .......... 2,525,472
-----------
7,866,031
-----------
GEORGIA .1 %
100,000 Fulton County Development Authority, Special Facilities Revenue, Delta Air Lines, Inc. Project,
6.85%, 11/01/07................................................................................ 97,597
-----------
ILLINOIS 1.6%
850,000 Illinois Educational Facilities Authority Revenue, Columbia College, 5.875%, 12/01/03............ 846,753
360,000 (d)Illinois Housing Development Authority Revenue, Homeowner Mortgage, Sub-Series A-1, 6.10%,
02/01/05....................................................................................... 370,480
-----------
1,217,233
-----------
INDIANA 2.8%
2,000,000 Franklin City, EDR, Refunding, Hoover Universal, Inc. Project, Johnson Controls, 6.10%, 12/01/04 1,999,760
100,000 Indianapolis Local Public Improvement Bond, Series D, 6.10%, 02/01/02 ........................... 102,420
-----------
2,102,180
-----------
IOWA .3%
200,000 Iowa State Financial Authority Hospital, Facilities Revenue, Refunding, Trinity Regional
Hospital Project, 6.50%, 07/01/00 ............................................................. 205,202
-----------
KENTUCKY .8%
100,000 Kenton County Airport Board Revenue, Special Facilities, Delta Airlines, Inc. Project A, 6.75%,
02/01/02....................................................................................... 98,694
500,000 Mt. Sterling Lease Revenue, Kentucky League Cities Funding, Series A, 5.625%, 03/01/03 .......... 487,310
-----------
586,004
------------
LOUISIANA .8%
60,000 Calcasieu Parish, Public Transportation Authority Mortgage Revenue, Refunding, Series B, 6.375%,
11/01/02....................................................................................... 62,251
300,000 Louisiana State Correctional Facilities Corp. Lease Revenue, Refunding, FSA Insured, 5.25%,
12/15/00....................................................................................... 303,096
</TABLE>
The accompanying notes are an integral part of these financial statements.
86
<PAGE>
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================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN FEDERAL INTERMEDIATE-TERM TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
LOUISIANA (CONT.)
$ 100,000 Louisiana State Offshore Terminal Authority, Deepwater Port Revenue, Refunding, First Stage,
Loop, Inc., Series B, 6.20%, 09/01/03 ........................................................ $ 103,461
100,000 Louisiana State Public Facility Authority Revenue, Student Loan, Series A-1, 6.20%, 03/01/01 .... 102,911
----------
571,719
----------
MARYLAND .4%
255,000 Baltimore EDR, Lease, Refunding, Armistead Partnership, Series A, 6.75%, 08/01/02 ............... 267,202
----------
MASSACHUSETTS 1.6%
200,000 Massachusetts State Industrial Finance Agency, Resource Recovery Revenue, Refunding, Refusetech,
Inc. Project, Series A, 5.45%, 07/01/01 ....................................................... 200,724
New England Educational Loan Corp., Massachusetts Student Loan Revenue, Refunding,
600,000 Series B, 5.00%, 06/01/98 ..................................................................... 592,038
415,000 Series B, 5.60%, 06/01/02 ..................................................................... 411,315
----------
1,204,077
----------
MINNESOTA .3%
200,000 Minneapolis CDA, Supported Development Revenue, Series 91-5A, 7.20%, 12/01/04 ................... 210,414
----------
MISSISSIPPI 1.7%
1,250,000 Mississippi State Higher Education Assistant Corp., Student Loan Revenue, Series A, 4.80%,
09/01/99....................................................................................... 1,220,950
----------
MISSOURI 1.3%
1,000,000 St. Louis Municipal Finance Corp., Leasehold Revenue, Refunding, Series A, 5.375%, 07/15/03 ..... 965,030
----------
NEBRASKA .4%
300,000 Nebraska Higher Education Loan Program, Inc. Revenue, Subject Lien, Series A-6, 6.70%, 12/01/02.. 313,557
----------
NEW JERSEY 1.6%
125,000 New Jersey EDA, Economic Growth, 2nd Revenue, Series F-1, 6.00%, 12/01/02 ....................... 126,526
1,000,000 New Jersey Health Care Facilities Financing Authority Revenue, Refunding, Monmouth Medical Center,
Series C, CGIC Insured, 5.80%, 07/01/04 ....................................................... 1,023,010
----------
1,149,536
----------
NEW YORK 5.7%
New York City GO,
515,000 Refunding, Series C, 6.50%, 08/01/04 .......................................................... 520,727
800,000 Refunding, Series D, 5.75%, 08/01/03 .......................................................... 766,552
100,000 Series B, 6.25%, 10/01/01 ..................................................................... 101,119
250,000 Series H, 7.00%, 02/01/05 ..................................................................... 259,350
2,500,000 New York City Health and Hospital Authority, Local Government Revenue, Refunding, Series A, 6.00%,
02/15/06....................................................................................... 2,310,975
100,000 New York City IDA, Civic Facilities Revenue, New York Blood Center, Inc. Project, 6.80%,
05/01/02....................................................................................... 105,356
100,000 Oneida-Herkimer Solid Waste Management Authority, Solid Waste Systems Revenue, Refunding, 6.20%,
04/01/00....................................................................................... 101,379
----------
4,165,458
----------
OKLAHOMA 2.8%
2,020,000 Jackson County Memorial Hospital Authority Revenue, Refunding, Memorial Hospital Project, 6.75%,
08/01/04....................................................................................... 1,970,550
100,000 Tulsa Public Facilities Authority, Lease Payment Revenue, Refunding, Assembly Center, 5.80%,
07/01/01....................................................................................... 99,729
----------
2,070,279
----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
87
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================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN FEDERAL INTERMEDIATE-TERM TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
PENNSYLVANIA 5.0%
$ 500,000 Allegheny County Higher Education, Building Authority Revenue, Community College, Series A,
5.50%, 06/01/05................................................................................ $ 491,135
100,000 Cambria County Hospital Development Authority, Revenue, Refunding & Improvement, Conemaugh
Valley Hospital, Series B, Connie Lee Insured, 5.90%, 07/01/03 ................................ 102,699
100,000 Langhorne Manor Borough Higher Education and Health Authority Revenue, Lower Bucks Hospital,
6.75%, 07/01/02 ............................................................................... 98,406
Lebanon County Good Samaritan Hospital Authority Revenue, Refunding,
535,000 Good Samaritan Hospital Project, 5.25%, 11/15/01 .............................................. 509,427
615,000 Good Samaritan Hospital Project, 5.35%, 11/15/02 .............................................. 582,270
575,000 Good Samaritan Hospital Project, 5.50%, 11/15/03 .............................................. 541,949
Northeastern Hospital and Educational Authority Revenue,
390,000 Kings College, 5.50%, 07/15/02 ................................................................ 378,955
410,000 Kings College, 5.60%, 07/15/03 ................................................................ 397,216
Philadelphia Gas Works Revenue, Refunding,
300,000 Series A, 5.70%, 07/01/00 ..................................................................... 302,979
300,000 Series A, 5.80%, 07/01/01 ..................................................................... 303,444
----------
3,708,480
----------
PUERTO RICO 2.1%
Puerto Rico Electric Power Authority Revenue,
100,000 Series Q, 5.90%, 07/01/01 ..................................................................... 103,014
1,345,000 Series T, 6.00%, 07/01/04 ..................................................................... 1,367,878
100,000 Puerto Rico Municipal Finance Agency, Series A, 5.30%, 07/01/00 ................................. 99,900
----------
1,570,792
----------
SOUTH DAKOTA 4.1%
1,000,000 South Dakota HDA, Homeownership Mortgage, Series B, 6.05%, 05/01/04 ............................. 1,028,900
2,000,000 South Dakota State Student Loan Finance Corp., 6.35%, 08/01/05 .................................. 2,040,220
----------
3,069,120
----------
TENNESSEE 1.0%
750,000 Metropolitan Government, Nashville & Davidson County IDBR, Refunding & Improvement, Osco
Treatment, Inc., 6.00%, 05/01/03 .............................................................. 724,643
----------
TEXAS .6%
430,000 Houston HFC, SFMR, Refunding, Series A, FSA Insured, 5.45%, 06/01/03 ............................ 426,865
----------
UTAH 2.5%
2,000,000 Davis County Solid Waste Management and Energy Recovery Revenue, Refunding, Special Service
District, 5.50%, 06/15/00 ..................................................................... 1,865,200
----------
VIRGINIA 9.5%
2,800,000 Covington-Alleghany County, Refunding, Westvaco Corp. Project, 5.85%, 09/01/04 .................. 2,869,552
1,000,000 Virginia College Building Authority, Educational Facilities Revenue, Hampton University Project,
5.375%, 04/01/03............................................................................... 988,060
Virginia State HDA, Commonwealth Mortgage,
1,695,000 Series C, Sub-Series 7, 5.60%, 01/01/03 ....................................................... 1,705,492
1,475,000 Series C, Sub-Series 7, 5.70%, 01/01/04 ....................................................... 1,485,015
----------
7,048,119
----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
88
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================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN FEDERAL INTERMEDIATE-TERM TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
WASHINGTON 3.1%
$ 600,000 Marysville Water and Sewer Revenue, Refunding, MBIA Insured, 5.75%, 12/01/05 .................... $ 608,983
Washington State Health Care Facilities Authority Revenue,
345,000 Spokane Heart Institute, Series A, 5.125%, 08/15/02 ........................................... 330,672
300,000 Spokane Heart Institute, Series A, 5.25%, 08/15/03 ............................................ 286,785
390,000 Spokane Heart Institute, Series A, 5.25%, 08/15/04 ............................................ 368,597
315,000 Refunding, Dominican Health Services, Connie Lee Insured, 5.25%, 06/01/02 ..................... 310,508
365,000 Refunding, Dominican Health Services, Connie Lee Insured, 5.35%, 06/01/03 ..................... 359,248
-----------
2,264,793
-----------
TOTAL LONG TERM INVESTMENTS (COST $71,592,480) ............................................ 71,063,599
-----------
(e)SHORT TERM INVESTMENTS 2.8%
700,000 Kansas City, Missouri, IDA, Hospital Revenue, Resh Health Services Systems, MBIA Insured, Dialy
VRDN and Put, 3.80%, 10/15/15 ................................................................. 700,000
1,300,000 New York City, Municipal Water Revenue, Daily VRDN and Put, 3.70%, 06/15/24 ..................... 1,300,000
100,000 Virginia Peninsula Port, Authority Revenue, Daily VRDN and Put, 3.75%, 12/01/05 ................. 100,000
-----------
TOTAL SHORT TERM INVESTMENTS (COST $2,100,000) ............................................ 2,100,000
-----------
TOTAL INVESTMENTS (COST $73,692,480) 98.9% ........................................... 73,163,599
OTHERS ASSETS AND LIABILITIES, NET 1.1% .............................................. 813,693
-----------
NET ASSETS 100.0% .................................................................... $73,977,292
===========
At February 28, 1995, the net unrealized depreciation based on
the cost of investments for income tax purposes of $73,692,480 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ............................................................... $ 641,896
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ............................................................... (1,170,777)
-----------
Net unrealized depreciation ................................................................... $ (528,881)
===========
</TABLE>
PORTFOLIO ABBREVIATIONS:
<TABLE>
<S> <C>
ABAG - Association of Bay Area Government HDA - Housing Development Authority/Agency
AD - Assessment District HFA - Housing Finance Agency/Authority
AMBAC - American Municipal Bond Assurance Corp. HFC - Housing Finance Corp.
CDA - Community Development Agency IDA - Industrial Development Authority /Agency
CGIC - Capital Guaranty Insurance Co. IDBR - Industrial Development Board Revenue
COP - Certificate of Participation IDR - Industrial Development Revenue
EDA - Economic Development Authority MBIA - Municipal Bond Investors Assurance Corp.
EDR - Economic Development Revenue RDA - Redevelopment Agency
FHA - Federal Housing Agency SFMR - Single Family Mortgage Revenue
FSA - Financial Security Assistance USD - Unified School District
GO - General Obligation
</TABLE>
(d)See Note 1 regarding securities purchased on a when-issued basis.
(e)Variable rate demand notes (VRDNs) are tax-exempt obligations which contain a
floating or variable interest rate adjustment formula and an unconditional
right of demand to receive payment of the principal balance plus accrued
interest 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.
89
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================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN HIGH YIELD TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS 97.4%
BONDS 95.2%
ALABAMA .6%
$ 7,055,000 Homewood Special Care Facilities Financing Authority, Hospital Revenue, Lakeshore Hospital
Project, Series B, Pre-Refunded, 8.25%, 02/01/04 ........................................ $ 7,939,344
Marshall County Health Care Authority, Hospital Revenue,
5,000,000 Guntersville, Arab Medical Center, 10.25%, 10/01/13 .................................... 5,768,050
3,300,000 Refunding, Boaz-Albertville Medical Center, 6.20%, 01/01/08............................. 3,145,526
500,000 Marshall County Hospital Board Revenue, Refunding, Boaz-Albertville Medical Center,
Pre-Refunded, 8.875%, 01/01/05 ......................................................... 543,425
2,500,000 Prichard Water Works and Sewer Board Revenue, Pre-Refunded, 9.50%, 11/15/14 ............... 2,929,450
700,000 (f)Wedowee Utilities Board, COP, Consolidated Financial Services, Inc., Pre-Refunded, 10.50%,
01/15/11................................................................................. 679,000
-----------
21,004,795
-----------
ALASKA .4%
Alaska Industrial Development and Export Revenue, Refunding,
4,000,000 American President Lines Project, 8.00%, 11/01/09 ...................................... 4,236,840
1,470,000 Revolving Fund, Series A, 6.20%, 04/01/10 .............................................. 1,437,587
5,000,000 Alaska State HFC, Mortgage Program, First Series, 5.90%, 12/01/33 ......................... 4,663,000
1,770,000 Palmer Golf Course Lease, COP, 10.25%, 07/01/08 ........................................... 1,898,821
-----------
12,236,248
-----------
ARIZONA .7%
950,000 Gila County IDA, PCR, Refunding, ASARCO, Inc. Project, 8.90%, 07/01/06 .................... 1,033,686
8,500,000 Maricopa County PCR, Refunding, Public Services, Palo Verde, Series A, 6.375%, 08/15/23 ... 7,599,595
4,000,000 Maricopa County Rural Road ID, Pre-Refunded, 8.625%, 07/01/07 ............................. 4,395,160
7,900,000 Salt River Project, Agricultural Improvement and Power District Electric System Revenue,
Series A, 6.00%, 01/01/31................................................................ 7,706,133
2,330,000 Tempe IDA, Residential Care Facilities Revenue, Volunteers of America Care Facilities,
9.00%, 06/01/18.......................................................................... 2,451,253
-----------
23,185,827
-----------
ARKANSAS .8%
2,400,000 Baxter County IDR, Refunding, Aeroquip/Trinova Corp. Project, 5.80%, 10/01/13 ............. 2,198,472
1,000,000 Conway Hospital Revenue, Refunding, Series 1990, 8.375%, 07/01/11 ......................... 1,061,070
Independence County PCR,
200,000 Mississippi Power and Light Co. Project, 9.50%, 07/01/14 ............................... 226,730
4,275,000 Mississippi Power and Light Co. Project, Series A, 9.00%, 07/01/13 ..................... 4,766,069
1,185,000 Mississippi Power and Light Co. Project, Series B, 9.00%, 07/01/13 ..................... 1,321,121
10,000,000 Refunding, Arkansas Power and Light Co. Project, 6.25%, 01/01/21 ....................... 9,748,900
750,000 Little Rock Sewer Revenue, Refunding, 5.40%, 08/01/10 ..................................... 710,174
6,925,000 Pope County PCR, Arkansas Power and Light Co. Project, 11.00%, 12/01/15 ................... 7,308,230
-----------
27,340,766
-----------
CALIFORNIA 11.5%
20,350,000 Adelanto Improvement Agency Tax Allocation, Refunding & Improvement Project, Series C,
7.75%, 12/01/29.......................................................................... 17,704,500
13,400,000 Alameda County MFHR, Refunding, Claremont House Project, Series A, 8.00%, 12/01/23 ........ 13,030,964
Antioch 1915 Act, AD No. 27, Lone Tree,
11,080,000 Series C, 7.70%, 09/02/17 .............................................................. 11,392,013
4,480,000 Series D, 7.30%, 09/02/13 .............................................................. 4,417,459
22,515,000 Arroyo Grande Hospital System COP, Vista Hospital Systems, Refunding, Series A, 9.50%,
07/01/20................................................................................. 23,180,994
2,850,000 Azusa RDA, Tax Allocation, Refunding, Merged Area Project, Series A, 6.75%, 08/01/23 ...... 2,745,405
</TABLE>
The accompanying notes are an integral part of these financial statements.
90
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STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN HIGH YIELD TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
CALIFORNIA (CONT.)
$ 4,575,000 Beaumont Public Financing Autority Revenue, Sewer Enterprise Project, Series A, 6.90%,
09/01/23................................................................................ $ 4,064,156
Benicia 1915 Act, Refunding,
205,000 Fleetside Industrial Park Assessment, 4.50%, 09/02/96 .................................. 203,229
215,000 Fleetside Industrial Park Assessment, 4.80%, 09/02/97 .................................. 211,984
225,000 Fleetside Industrial Park Assessment, 5.00%, 09/02/98 .................................. 220,705
235,000 Fleetside Industrial Park Assessment, 5.25%, 09/02/99 .................................. 229,412
250,000 Fleetside Industrial Park Assessment, 5.50%, 09/02/00 .................................. 242,978
265,000 Fleetside Industrial Park Assessment, 5.65%, 09/02/01 .................................. 256,485
275,000 Fleetside Industrial Park Assessment, 5.80%, 09/02/02 .................................. 265,144
290,000 Fleetside Industrial Park Assessment, 5.90%, 09/02/03 .................................. 278,600
310,000 Fleetside Industrial Park Assessment, 6.00%, 09/02/04 .................................. 296,825
325,000 Fleetside Industrial Park Assessment, 6.10%, 09/02/05 .................................. 310,239
345,000 Fleetside Industrial Park Assessment, 6.20%, 09/02/06 .................................. 328,409
370,000 Fleetside Industrial Park Assessment, 6.30%, 09/02/07 .................................. 351,315
390,000 Fleetside Industrial Park Assessment, 6.40%, 09/02/08 .................................. 369,455
415,000 Fleetside Industrial Park Assessment, 6.50%, 09/02/09 .................................. 392,329
440,000 Fleetside Industrial Park Assessment, 6.60%, 09/02/10 .................................. 415,193
470,000 Fleetside Industrial Park Assessment, 6.70%, 09/02/11 .................................. 442,778
305,000 Fleetside Industrial Park Assessment, 6.80%, 09/02/12 .................................. 289,777
3,000,000 California Educational Facilities Authority Revenue, Pooled College and University
Financing, Series B, 6.125%, 06/01/09 .................................................. 2,907,000
1,215,000 California Special Districts, Association Financial Corp. COP, Santa Cruz Port Authority,
Series B, 7.50%, 05/01/13............................................................... 1,184,321
California State Health Facilities Hospital Revenue, Summit Medical Center, Refunding,
5,270,000 Series A, 7.50%, 05/01/09 .............................................................. 5,022,679
2,155,000 Series A, 7.60%, 05/01/15 .............................................................. 2,056,689
6,340,000 Series B, 7.50%, 05/01/09 .............................................................. 6,042,463
3,500,000 California State Higher Education Loan Authority, Inc., Student Loan Revenue, Refunding,
Junior Lien, Series B, 9.00%, 07/03/97 ................................................. 3,578,295
Capistrano USD, CFD,
285,000 Special Tax No. 92-1, 6.60%, 09/01/05 .................................................. 262,930
280,000 Special Tax No. 92-1, 6.70%, 09/01/06 .................................................. 255,660
325,000 Special Tax No. 92-1, 6.80%, 09/01/07 .................................................. 296,917
260,000 Special Tax No. 92-1, 6.90%, 09/01/08 .................................................. 237,676
1,000,000 Special Tax No. 92-1, 7.00%, 09/01/18 .................................................. 892,280
3,780,000 Colton Community Facilities District, Special Tax No. 90-1, 9.00%, 09/01/20 ............... 3,362,953
Contra Costa County Public Financing Authority Revenue,
2,545,000 Refunding, 6.625%, 09/02/10 ............................................................ 2,291,416
3,025,000 Refunding, 6.875%, 09/02/16 ............................................................ 2,709,583
Corona COP,
9,655,000 Corona Community Hospital Project, ETM 09/01/96, 9.425%, 09/01/06 ...................... 11,957,042
8,820,000 Corona Community Hospital Project, Pre-Refunded, 9.425%, 09/01/20 ...................... 11,520,243
7,700,000 Vista Hospital Systems, Series B, Refunding, 9.00%, 01/01/01 ........................... 7,723,793
10,885,000 Vista Hospital Systems, Series B, Refunding, 9.50%, 07/01/20 ........................... 11,290,140
4,845,000 Eden Township Hospital District Health Facilities Revenue, COP, Refunding, Insured Eden
Hospital Health Services Corp., 5.85%, 07/01/18 ........................................ 4,330,606
Emeryville RDA, MFHR, Emerybay Apartments,
230,000 Series 1991, 8.75%, 12/01/02 ........................................................... 234,460
3,770,000 Series 1991, 8.75%, 12/01/21 ........................................................... 3,791,904
4,175,000 Hawthorne CRDA, Refunding, Hawthorne Plaza Project, 8.50%, 07/01/20 ....................... 4,165,523
</TABLE>
The accompanying notes are an integral part of these financial statements.
91
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================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN HIGH YIELD TAX-FREE INCOME FUND (NOTE 1)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
CALIFORNIA (CONT.)
$ 8,900,000 Hesperia Public Financing Authority Revenue, Series B, 7.375%, 10/01/23 ................... $ 8,194,230
6,000,000 Lake Elsinore 1915 Act, AD No. 93-1, Series A, 7.90%, 09/02/24 ............................ 5,905,620
100,000 (a,b,f)Long Beach IDR, Kress Rehabilitation Project, 9.75%, 12/01/16 ............................. 20,000
3,065,000 Long Beach Special Tax CFD No. 2, West Long Beach, 7.50%, 09/01/11 ........................ 3,104,293
1,530,000 Long Beach Special Tax CFD No. 3, Pine Ave., 6.25%, 09/01/07 .............................. 1,446,539
30,600,000 Los Angeles County, CFD No. 4, Special Tax Improvement, Calabassas Area B, Series A, 9.25%,
09/01/22................................................................................ 30,705,264
Los Angeles MFR, Refunding,
275,000 Series J-1A, 7.125%, 01/01/24 .......................................................... 256,000
675,000 Series J-1B, 7.125%, 01/01/24 .......................................................... 628,364
1,435,000 Series J-1C, 7.125%, 01/01/24 .......................................................... 1,335,856
1,460,000 Series J-2A, 8.50%, 01/01/24 ........................................................... 1,370,823
3,345,000 Series J-2B, 8.50%, 01/01/24 ........................................................... 3,140,687
7,120,000 Series J-2C, 8.50%, 01/01/24 ........................................................... 6,685,110
Los Angeles Regional Airports Improvement Corp., Lease Revenue,
5,000,000 Refunding, United Airlines, Inc., 6.875%, 11/15/12 ..................................... 4,891,850
2,200,000 Sub-Lease Revenue, Continental Airlines, Inc., Terminal Facilities, 9.00%, 08/01/08 .... 2,348,455
7,875,000 Sub-Lease Revenue, Continental Airlines, Inc., Terminal Facilities, 9.00%, 08/01/17 .... 8,406,405
4,445,000 Needles Public Financing Authority, Local Agency Revenue, Series A, 10.00%, 10/01/24 ...... 4,445,000
700,000 Novato 1915 Act, Golden Gate Plaza, Project No. 93-1, 6.50%, 09/02/19 ..................... 598,542
3,000,000 Orinda 1915 Act, AD No. 94-1, Oak Springs, 8.25%, 09/02/19 ................................ 2,999,910
Perris Public Financing Authority, Local Agency Revenue,
2,035,000 Series B, 7.125%, 08/15/15 ............................................................. 1,937,361
4,095,000 Series B, 7.25%, 08/15/23 .............................................................. 3,910,438
5,500,000 Richmond Joint Power Finance Authority Improvement Bond, 1915 Act, Improvement Districts
Nos. 851 and 853, Series B, 8.50%, 09/02/19 ............................................ 5,667,695
Riverside County COP, Airforce Village Project,
7,160,000 Series 1992, 8.125%, 06/15/07 .......................................................... 7,329,119
5,290,000 Series 1992, 8.125%, 06/15/12 .......................................................... 5,380,036
12,000,000 Roseville Special Tax, North Center Community Facility District, 8.60%, 11/01/17 .......... 12,059,280
Sacramento County 1915 Act, Refunding,
1,155,000 Sunrise/US Corridor Assessment, 6.10%, 09/02/01 ........................................ 1,137,536
1,275,000 Sunrise/US Corridor Assessment, 6.30%, 09/02/02 ........................................ 1,253,478
1,725,000 Sunrise/US Corridor Assessment, 6.50%, 09/02/03 ........................................ 1,660,899
1,830,000 Sunrise/US Corridor Assessment, 6.60%, 09/02/04 ........................................ 1,756,635
1,955,000 Sunrise/US Corridor Assessment, 6.70%, 09/02/05 ........................................ 1,871,404
2,085,000 Sunrise/US Corridor Assessment, 6.80%, 09/02/06 ........................................ 1,990,821
2,235,000 Sunrise/US Corridor Assessment, 6.90%, 09/02/07 ........................................ 2,129,195
2,380,000 Sunrise/US Corridor Assessment, 7.00%, 09/02/08 ........................................ 2,262,690
2,450,000 Sunrise/US Corridor Assessment, 7.00%, 09/02/09 ........................................ 2,324,215
San Bernardino County Finance Authority Revenue, Refunding, Public Improvement, AD,
1,460,000 Series A, 6.00%, 09/02/01 .............................................................. 1,392,913
1,285,000 Series A, 6.50%, 09/02/04 .............................................................. 1,212,141
2,725,000 Series A, 7.00%, 09/02/17 .............................................................. 2,484,764
15,000,000 San Francisco City and County RDA, 7.75%, 09/01/06 ........................................ 15,519,150
San Francisco Downtown Parking Corp. Revenue,
1,800,000 Series 1993, 6.55%, 04/01/12 ........................................................... 1,774,458
2,150,000 Series 1993, 6.65%, 04/01/18 ........................................................... 2,127,361
San Joaquin Hills Transportation, Corridor Agency Toll Road Revenue,
10,850,000 Sr. Lien, 6.75%, 01/01/32 .............................................................. 10,491,733
5,765,000 Sr. Lien, 5.00%, 01/01/33 .............................................................. 4,251,169
</TABLE>
The accompanying notes are an integral part of these financial statements.
92
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================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN HIGH YIELD TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
CALIFORNIA (CONT.)
$ 1,500,000 San Jose MFHR, Timberwood Apartments, Series B, 9.25%, 02/01/10 ........................... $ 1,556,010
San Ramon 1915 Act,
1,100,000 Fostoria Parkway Reassessment District No. 93-1, 6.30%, 09/02/03 ....................... 1,076,009
2,585,000 Fostoria Parkway Reassessment District No. 93-1, 6.80%, 09/02/15 ....................... 2,477,723
Santa Rosa 1915 Act, Fountaingrove Parkway,
3,340,000 Extension, 7.40%, 09/02/13 ............................................................. 3,280,648
3,450,000 Extension, 7.625%, 09/02/19 ............................................................ 3,382,553
2,000,000 South San Francisco RDA, Tax Allocation, Gateway Redevelopment Project, 7.60%, 09/01/18 ... 2,052,860
Vallejo Special Tax,
7,500,000 CFD No. 1988-1, 8.90%, 08/01/21 ........................................................ 7,734,373
12,000,000 CFD No. 1991-1, 8.80%, 10/01/21 ........................................................ 12,584,040
------------
380,306,576
------------
COLORADO 5.0%
2,485,000 Arvada Limited Sales and Use Tax Revenue, Pre-Refunded, 7.50%, 06/01/11 ................... 2,778,677
Auraria Higher Educational Center, Parking Facilities Revenue, Refunding,
1,600,000 Pre-Refunded, 7.875%, 04/01/12 ......................................................... 1,788,400
3,450,000 Pre-Refunded, 7.75%, 04/01/09 .......................................................... 3,837,263
12,800,000 Colorado Health Facilities Authority, Beneficial Living System, Inc., Series A, 10.125%,
10/01/20................................................................................ 13,229,824
Colorado HFA,
710,000 SF Program, Issue A-2, 9.375%, 08/01/02 ................................................ 746,274
630,000 SF Program, Series A-2, 9.25%, 08/01/01 ................................................ 661,387
790,000 SF Program, Series B-1, 8.70%, 08/01/01 ................................................ 823,575
805,000 SFMR, Series B-3, 9.75%, 08/01/02 ...................................................... 813,718
1,245,000 SFMR, Series C, 9.20%, 08/01/02 ........................................................ 1,299,581
1,320,000 Colorado HFA, SFMR, Series 1991-C, 9.075%, 08/01/03 ....................................... 1,378,370
Denver City and County Airport System Revenue,
870,000 Series A, 8.375%, 08/01/97 ............................................................. 878,100
5,830,000 Series A, 7.50%, 11/15/12 .............................................................. 6,073,286
5,840,000 Series A, 8.25%, 11/15/12 .............................................................. 6,250,084
11,065,000 Series A, 8.00%, 11/15/17 .............................................................. 11,313,299
31,710,000 Series A, 8.50%, 11/15/23 .............................................................. 34,225,554
30,950,000 Series A, 7.25%, 11/15/25 .............................................................. 31,592,213
145,000 Series A, 8.00%, 11/15/25 .............................................................. 152,869
500,000 Series D, 7.75%, 11/15/13 .............................................................. 530,585
4,190,000 Series D, 7.75%, 11/15/21 .............................................................. 4,322,614
Eagle County Sports Facilities Revenue, Refunding,
19,600,000 Beaver Creek Association Project, 8.00%, 08/01/09 ...................................... 20,238,176
21,600,000 Vail Association Project, 8.00%, 08/01/09 .............................................. 22,303,296
300,000 Fort Collins IDR, Vipont Pharmaceutical, Inc. Project, Pre-Refunded, 9.25%, 08/01/13 ...... 342,129
3,000,000 (g)Village Castle Rock Metropolitan District No. 4, 8.50%, 06/01/31........................... 637,500
------------
166,216,774
------------
CONNECTICUT .1%
2,905,000 Connecticut Development Authority, First Mortgage Revenue, East Hill Gladeview Health
Project 86, 9.75%, 12/15/16.............................................................. 3,168,425
------------
DISTRICT OF COLUMBIA 1.7%
District of Columbia Hospital Revenue,
10,445,000 Hadley Memorial Hospital, Series A, 9.50%, 05/01/17 .................................... 10,651,811
2,000,000 Washington Hospital Center, Series A, 7.00%, 08/15/05 .................................. 2,037,140
4,500,000 Washington Hospital Center, Series A, 7.125%, 08/15/19 ................................. 4,450,905
</TABLE>
The accompanying notes are an integral part of these financial statements.
93
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STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN HIGH YIELD TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
DISTRICT OF COLUMBIA (CONT.)
DISTRICT OF COLUMBIA HOSPITAL REVENUE, (CONT.)
$ 15,450,000 Washington Hospital Center, Series A, Pre-Refunded, 9.00%, 01/01/08 .................... $ 18,436,485
3,750,000 Washington Hospital Center, Series A, Pre-Refunded, 8.75%, 01/01/15 .................... 4,428,600
Washington DC, GO,
7,800,000 Series A, 5.875%, 06/01/05 ............................................................. 6,914,622
11,775,000 Series A, 6.00%, 06/01/07 .............................................................. 10,306,658
------------
57,226,221
------------
FLORIDA 9.0%
1,075,000 Bay County Resource Recovery Revenue, Series 1984, Pre-Refunded, 8.00%, 07/01/12 .......... 1,162,183
20,565,000 Broward County Resource Recovery Revenue, Broward Waste Energy Co., L. P., North Project,
Series 1984, 7.95%, 12/01/08 ............................................................ 22,462,944
12,500,000 Cape Coral Health Facilities Authority, Revenue, Refunding, First Mortgage, Gulf Care, Inc.
Project, 11.00%, 10/01/17................................................................ 13,878,125
Capron Trails Community Development District,
2,170,000 Series 1990, 9.375%, 12/01/01 .......................................................... 2,248,489
5,795,000 Series 1990, 9.50%, 12/01/10 ........................................................... 6,067,133
East County Water Control District, Lee County Drain,
3,595,000 Series 1991, 8.75%, 09/01/01 ........................................................... 4,094,058
10,565,000 Series 1991, 8.625%, 09/01/11 .......................................................... 12,442,612
1,640,000 Escambia County Health Facilities Authority Revenue, Refunding, Baptist Hospital, Inc.,
Series A, 8.70%, 10/01/14.............................................................. 1,811,183
2,980,000 Flagler County IDA, First Mortgage Revenue, RHA, South Florida Properties, Inc. Projects,
10.50%, 12/01/18........................................................................ 2,980,000
Florida State, Mid Bay Bridge Authority,
3,200,000 Series 1991-B, 8.50%, 10/01/08 ......................................................... 3,501,184
15,400,000 Series 1991-B, 8.50%, 10/01/22 ......................................................... 16,849,448
Indian Trace Community Development District, Refunding,
14,250,000 (d)Water Management Special Benefit, Sub-Series B, 8.25%, 05/01/05 ...................... 14,101,373
12,760,000 (d)Water Management Special Benefit, Sub-Series B, 8.25%, 05/01/11 ...................... 12,612,239
1,765,000 Lake Clarke Shores Utility System Revenue, Pre-Refunded, 8.75%, 10/01/18 .................. 2,006,399
12,000,000 Lakeland Retirement Community First Mortgage Revenue, Carpenters Home Estates Project,
9.75%, 09/01/18......................................................................... 12,772,920
6,500,000 Manatee County IDR, Manetee Hospital and Health Systems, Inc., 9.25%, 03/01/21 ............ 7,074,665
Meadow Pointe Community Development District,
7,465,000 Capital Improvement Revenue, 6.25%, 07/01/98 ........................................... 7,417,971
7,870,000 Capital Improvement Revenue, 6.875%, 07/01/99 .......................................... 7,877,634
Mount Dora County Club Community Development District,
5,605,000 Special Assessment Revenue, 6.75%, 05/01/03 ............................................ 5,334,951
5,240,000 Special Assessment Revenue, 7.75%, 05/01/13 ............................................ 4,957,197
North Springs ID, Water Management,
2,000,000 Series A, 8.20%, 05/01/24 .............................................................. 2,075,420
1,755,000 Series B, 8.30%, 05/01/24 .............................................................. 1,820,848
6,000,000 Palm Beach County Health Facility Authority Revenue, Refunding, Abbey del Ray Project,
Series 1992, 8.25%, 10/01/15 ........................................................... 6,211,980
Pelican Marsh CDA, Special Assessment Revenue,
8,540,000 Series A, 8.25%, 05/01/16 .............................................................. 8,986,215
6,180,000 Series B, 8.25%, 05/01/16 .............................................................. 6,502,905
2,480,000 Port Orange Lease Finance Corp., Recreation Facilities Lease Revenue, Pre-Refunded, 8.75%,
10/01/12................................................................................ 2,880,594
</TABLE>
The accompanying notes are an integral part of these financial statements.
94
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STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN HIGH YIELD TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
FLORIDA (CONT.)
Riverwood Community Development, Special AD,
$ 6,190,000 Series A, 6.75%, 05/01/04 .............................................................. $ 6,000,834
3,165,000 Series A, 7.75%, 05/01/14 .............................................................. 3,025,107
5,000,000 St. Lucie County Reserve, Storm Water Management, 8.25%, 05/01/14 ......................... 5,015,000
St. Lucie West Services District Revenue, Refunding,
20,720,000 Port St. Lucie, 7.875%, 05/01/20 ....................................................... 20,970,505
23,480,000 Port St. Lucie, 8.25%, 12/01/23 ........................................................ 23,609,140
Santa Rosa County Health Facilities Authority Revenue,
300,000 Gulf Breeze Hospital, Inc., 8.60%, 10/01/02 ............................................ 322,440
835,000 Gulf Breeze Hospital, Inc., Pre-Refunded, 8.70%, 10/01/14 .............................. 946,389
Tampa Capital Improvement Program Revenue,
3,085,000 Series A, 8.25%, 10/01/18 .............................................................. 3,248,197
8,900,000 Series B, 8.375%, 10/01/18 ............................................................. 9,405,609
10,000,000 Tampa Revenue, Aquarium, Inc. Project, 7.55%, 05/01/12 .................................... 10,341,200
Village Community Development, District No. 1,
5,960,000 Capital Improvement Revenue, 6.75%, 05/01/02 ........................................... 6,084,326
6,090,000 Capital Improvement Revenue, 8.40%, 05/01/12 ........................................... 6,460,028
4,215,000 Capital Improvement Revenue, 8.00%, 05/01/15 ........................................... 4,352,072
4,155,000 West Volusia Hospital Authority Revenue, Series 1986-B, Pre-Refunded, 9.375%, 09/01/16 .... 4,554,046
------------
294,465,563
------------
GEORGIA .1 %
735,000 Burke County Development Authority, PCR, Georgia Power Co., Plant Vogtle Project, 8.375%,
07/01/17................................................................................ 794,917
155,000 Fulton County Residential Care Facilities, Elderly Authority Revenue, Refunding, Lenbrook
Square Foundation, Inc. Project, Series 1987, 9.75%, 01/01/17 .......................... 160,304
1,445,000 Tift County IDAR, Beverly Enterprises, 10.125%, 09/01/10 .................................. 1,636,304
------------
2,591,525
------------
HAWAII .4%
6,500,000 Hawaii Department of Transportation Special Revenue, Continental Airlines, Inc., 9.70%,
06/01/20................................................................................ 6,909,305
5,265,000 Hawaii State Special AD No. 17, AMBAC Insured, 9.50%, 08/01/11 ............................ 5,471,546
1,315,000 Hawaiian Home Lands Department Revenue, 7.60%, 07/01/08 ................................... 1,408,457
------------
13,789,308
------------
ILLINOIS 4.3%
9,150,000 Alton Hospital Facilities Revenue, Refunding, St. Anthony's Health Center Project, 8.375%,
09/01/14................................................................................ 9,677,955
5,820,000 Aurora MFMR, Fox Valley Two-Oxford, 8.50%, 12/01/08 ....................................... 5,685,092
Chicago O'Hare Airport Special Facility,
7,830,000 Refunding, American Airlines, Inc. Project, 8.20%, 12/01/24 ............................ 8,500,091
3,820,000 United Airlines, Inc. Revenue, 8.85%, 05/01/18 ......................................... 4,195,850
13,950,000 United Airlines, Inc., Series 1984-A, 8.85%, 05/01/18 .................................. 15,322,541
Chicago Wastewater Transmission Revenue,
2,810,000 FGIC Insured, Pre-Refunded, 6.35%, 01/01/22 ............................................ 3,043,314
4,780,000 MBIA Insured, 6.375%, 01/01/24 ......................................................... 4,809,015
7,000,000 Illinois Development Financial Authority PCR, Refunding, Commonwealth Edison Co. Project,
7.25%, 06/01/11......................................................................... 7,150,850
Illinois Educational Facilities Authority Revenues,
4,330,000 Osteopathic Health Systems, 7.125%, 05/15/11 ........................................... 4,282,283
11,695,000 Osteopathic Health Systems, 7.25%, 05/15/22 ............................................ 11,435,488
</TABLE>
The accompanying notes are an integral part of these financial statements.
95
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FRANKLIN TAX-FREE TRUST
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STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN HIGH YIELD TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
ILLINOIS (CONT.)
Illinois Health Facilities Authority Revenue,
$ 3,000,000 Bensenville Home Society, Series B, 8.20%, 02/15/19 .................................... $ 3,199,620
6,500,000 Northwestern Medical Center, 6.625%, 11/15/25 .......................................... 6,639,750
3,000,000 Refunding, Westlake Community Hospital, 7.875%, 01/01/13 ............................... 3,126,090
2,000,000 Sarah Bush Lincoln Health Center, 7.25%, 05/15/12 ...................................... 2,014,340
3,000,000 Servancor, Series 1989-B, Pre-Refunded, 7.875%, 08/15/19 ............................... 3,368,430
19,440,000 Illinois Health Facilities Authority Revenue, Revolving Fund, Pooled Financing, Thorek
Hospital and Medical Center, Series H, 9.50%, 08/01/15 ................................. 20,620,202
6,500,000 Lombard, Village of, Revenue, Refunding, Beacon Hill Project, 9.30%, 02/15/18 ............. 6,659,705
17,500,000 Robbins Resources Recovery Revenue, Series B, 9.25%, 10/15/16 ............................. 18,680,375
1,375,000 Sterling First Mortgage Revenue, Hoosier Care Project, Series A, 9.75%, 08/01/19 .......... 1,434,881
------------
139,845,872
------------
INDIANA 1.0%
5,000,000 Crawfordsville Industrial EDR, Refunding, Kroger Co., 7.70%, 11/01/12 ..................... 5,274,150
3,000,000 Indiana Health Facility Authority, Hancock Memorial Hospital University Project, 8.30%,
08/15/20................................................................................. 3,173,160
1,000,000 Indiana State Educational Facilities Authority Revenue, Anderson University Project, 8.40%,
10/01/08................................................................................. 1,106,440
12,500,000 Indianapolis Local Public Improvement Bond, Series C, 6.00%, 01/10/18 ..................... 12,376,125
2,500,000 Jefferson County Hospital Authority Facility Revenue, Refunding, King's Daughters Hospital,
8.50%, 08/15/13.......................................................................... 2,661,600
Kokomo Hospital Authority Revenue, Refunding, St. Joseph's Hospital and Health Center of
Kokomo,
2,540,000 Series A, Pre-Refunded, 8.75%, 02/15/13 ................................................ 2,873,350
3,700,000 Series B, Pre-Refunded, 8.75%, 02/15/13 ................................................ 4,185,588
------------
31,650,413
------------
IOWA .3%
500,000 Clinton Hospital Facilities Revenue, Jane Lamb Health Center Project, Pre-Refunded, 8.75%,
08/01/03................................................................................ 565,030
9,135,000 Des Moines General Hospital, 10.125%, 12/01/11 ............................................ 9,137,101
------------
9,702,131
------------
KANSAS .2%
5,730,000 Prairie Village Revenue, Claridge Court Project, Series A, 8.75%, 08/15/23 ................ 5,851,877
------------
KENTUCKY 1.8%
900,000 Danville Multi-City Lease Revenue, Sewer and Drain System, Series G, MBIA Insured,
Pre-Refunded, 6.75%, 03/01/11 .......................................................... 993,384
980,000 Florence Housing Facilities Revenue, Bluegrass Retirement Housing Foundation Project, 9.50%,
07/01/17................................................................................ 977,824
3,400,000 Jefferson County, Health Facilities Revenue, Beverly Project, 10.125%, 08/01/07 ........... 3,726,298
Kenton County Airport Revenue, Special Facilities,
11,000,000 Delta Airlines, Inc. Project, 8.10%, 12/01/15 .......................................... 11,465,520
11,230,000 Delta Airlines, Inc. Project, Series A, 7.50%, 02/01/20 ................................ 11,308,273
10,525,000 Delta Airlines, Inc. Project, Series A, 7.125%, 02/01/21 ............................... 10,371,125
3,595,000 Delta Airlines, Inc. Project, Series B, 7.25%, 02/01/22 ................................ 3,596,941
1,100,000 Powderly IDR, First Mortgage Revenue, Kroger Co., Refunding, 7.375%, 09/01/06 ............. 1,152,261
Russell County , Franciscan Health System Revenue,
2,200,000 Series B, 8.10%, 07/01/01 .............................................................. 2,391,510
7,500,000 Series B, 8.10%, 07/01/15 .............................................................. 8,267,400
</TABLE>
The accompanying notes are an integral part of these financial statements.
96
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STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN HIGH YIELD TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
KENTUCKY (CONT.)
$ 1,000,000 Stanford Health Facilities Revenue, Refunding, Beverly Project, 10.375%, 11/01/09 ......... $ 1,140,070
3,350,000 Winchester Hospital Revenue, Refunding, Clark County Hospital Project, 7.75%, 04/01/13 .... 3,410,166
------------
58,800,772
------------
LOUISIANA 3.5%
3,230,000 Calcasieu Parish, SFMR, Series 1991-A, 7.75%, 06/01/12 .................................... 3,425,964
705,000 Iberville Parish Consolidated School District No. 5, GO, Unlimited Tax, Pre-Refunded, 8.00%,
10/01/06................................................................................ 784,362
35,000,000 Lake Charles Harbor and Terminal District Port Facilities Revenue, Refunding, Trunkline Co.
Project, 7.75%, 08/15/22................................................................ 37,158,450
4,850,000 Pointe Coupee Parish, PCR, Refunding, Gulf States Utilities Co. Project, 6.70%, 03/01/13 .. 4,755,716
St. Charles Parish PCR,
25,500,000 Louisiana Power and Ligth Co., Project, 8.25%, 06/01/14 ................................ 27,402,555
13,525,000 Louisiana Power and Ligth Co., Project, 8.00%, 12/01/14 ................................ 14,517,194
West Feliciana PCR,
17,200,000 Refunding, Gulf System Utilities Co. Project, 8.00%, 12/01/24 .......................... 18,242,492
8,740,000 Series B, 7.50%, 05/01/15 .............................................................. 9,091,173
------------
115,377,906
------------
MAINE .2%
5,000,000 Maine State Finance Authority Solid Waste Disposal Revenue, Boise Cascade Corp. Project,
7.90%, 06/01/15......................................................................... 5,120,350
------------
MARYLAND 1.3%
Baltimore County, PCR, Refunding, Bethlehem Steel Corp.,
2,500,000 Project A, 7.55%, 06/01/17 ............................................................. 2,529,725
5,000,000 Project B, 7.50%, 06/01/15 ............................................................. 5,040,600
Gaithersberg Hospital Facilities Revenue, Refunding, Shady Grove Adventist Hospital,
2,105,000 Nursing Home, Series 1992-A, 9.00%, 09/01/22 ........................................... 2,129,271
3,710,000 Nursing Home, Series 1992-B, 8.50%, 09/01/22 ........................................... 3,587,830
7,370,000 Series 1992-B, 8.50%, 09/01/03 ......................................................... 7,543,637
5,340,000 Series 1992-B, 8.50%, 09/01/07 ......................................................... 5,747,602
Takoma Park, Hospital Facilities Revenue, Washington Adventist Hospital Project,
7,655,000 Series B, 8.50%, 09/01/03 .............................................................. 7,840,634
6,975,000 Series B, 8.50%, 09/01/07 .............................................................. 7,488,709
------------
41,908,008
------------
MASSACHUSETTS 2.4%
2,000,000 Bay Transit Authority, General Transportation System, Series A, 7.00%, 03/01/21 ........... 2,238,760
4,500,000 Cape Cod Health Systems, Massachusetts Industry Finance Authority, BIG Insured, Pre-
Refunded, 8.50%, 11/15/20............................................................... 5,319,225
Massachusetts Municipal Wholesale, Electric Co. Power Supply System Revenue,
4,435,000 Series A, 6.75%, 07/01/11 .............................................................. 4,605,127
3,170,000 Series B, 6.75%, 07/01/17 .............................................................. 3,280,284
2,000,000 Massachusetts State Health and Educational Facilities Revenue, Framingham Union Hospital,
Pre-Refunded, 8.50%, 07/01/10 .......................................................... 2,335,380
Massachusetts State Industrial Finance Agency,
4,300,000 Bethzata Corporation, Series 1990-A, 9.00%, 05/01/20 ................................... 4,377,443
15,490,000 Semass Project, Series 1991-A, 9.00%, 07/01/15 ......................................... 17,154,555
20,590,000 Semass Project, Series 1991-B, 9.25%, 07/01/15 ......................................... 22,892,992
Massachusetts State Industrial Finance Agency, First Mortgage Revenue,
3,000,000 Berkshire Retirement Community, Lenox, Pre-Refunded, 9.875%, 07/01/18 .................. 3,313,410
2,000,000 Brookhaven at Lexington Retirement Project, Pre-Refunded, 10.25%, 01/01/18 ............. 2,324,620
</TABLE>
The accompanying notes are an integral part of these financial statements.
97
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FRANKLIN TAX-FREE TRUST
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STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN HIGH YIELD TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
MASSACHUSETTS (CONT.)
Massachusetts State Water Resources Authority,
$ 1,000,000 Series A, 6.00%, 04/01/20 .............................................................. $ 968,490
8,000,000 Series A, Pre-Refunded, 7.00%, 04/01/18 ................................................ 8,813,600
-----------
77,623,886
-----------
MICHIGAN 1.5%
6,470,000 City of Cadillac, Local Development Financial Authority, Tax Increment Revenue, Refunding,
8.50%, 03/01/10......................................................................... 6,772,214
2,750,000 Dickinson County, Memorial Hospital System Revenue, 8.125%, 11/01/24 ...................... 2,859,835
6,605,000 Michigan State Hospital, Finance Authority Revenue, Refunding, Detroit Osteopathic
Hospital, Series A, 7.50%, 11/01/10 .................................................... 6,340,470
12,000,000 Midland County EDC, PCR, Refunding, 9.50%, 07/23/09 ....................................... 12,823,920
3,500,000 Muskegon, Hospital Finance Authority, Muskegon General Hospital, 8.25%, 02/15/11 .......... 3,682,105
2,140,000 Tawas City HFA, Hospital Revenue, Tawas St. Joseph's Hospital Project, Series A, 8.50%,
03/15/12................................................................................ 2,242,998
1,900,000 Wayne County, Downriver Systems Sewer Disposal, Series A, 7.00%, 11/01/13 ................. 1,918,297
4,500,000 Wayne County, Michigan Building Authority IDA, Series F, Pre-Refunded, 8.00%, 03/01/17 .... 5,269,635
5,000,000 Wayne County, South Huron Valley Wastewater Control, Refunding, 7.875%, 05/01/02 .......... 5,507,500
Wyandotte Tax Increment Finance Authority, Central Development Area Project,
500,000 Pre-Refunded, 7.875%, 06/01/08 ......................................................... 538,330
500,000 Pre-Refunded, 7.875%, 06/01/09 ......................................................... 556,210
500,000 Pre-Refunded, 7.875%, 06/01/10 ......................................................... 556,210
-----------
49,067,724
-----------
MINNESOTA 3.7%
Burnsville Solid Waste Revenue,
665,000 Freeway Transfer, Inc. Project, 9.00%, 10/01/00 ........................................ 731,806
1,500,000 Freeway Transfer, Inc. Project, 9.00%, 04/01/10 ........................................ 1,640,700
6,675,000 Edina MFR, Refunding Mortgage, Vernon Terrace Project, 5.00%, 07/01/22 .................... 6,684,612
Minneapolis CDA, Limited Tax, Supported Development Revenue,
3,155,000 Series 2, 8.40%, 12/01/12 .............................................................. 3,350,421
600,000 Series 3-A, 8.375%, 12/01/19 ........................................................... 651,630
295,000 Minneapolis CDR, Selwyn/Lavin Project, 9.00%, 12/01/11 .................................... 298,770
1,000,000 Minnesota State Higher Educational Facilities Authority Revenue, St. Mary's College,
Series Q-3, 6.10%, 10/01/16............................................................. 948,350
170,000 Minnetonka Housing and Redevelopment Authority, Tax Increment Revenue, The Cliffs at
Ridgedale Project, Phase II, 11.00%, 02/01/02 .......................................... 173,533
1,360,000 Northfield First Mortgage Nursing Home Revenue, Minnesota Odd Fellows Home Project, 8.75%,
10/01/03................................................................................ 1,426,042
4,110,000 Robbinsdale, MFHR, Refunding, Copperfield Phase II Apartments, 9.00%, 03/01/25 ............ 4,109,014
10,000,000 South Central Multi-County Housing and RDA, Pooled Housing, 8.00%, 02/01/25 ............... 9,831,500
6,055,000 St. Cloud, IDR, Nahan Printing, 9.75%, 06/01/20 ........................................... 6,449,302
St. Paul Housing and RDA, Hospital Facility Revenue, Healtheast Project,
4,535,000 Series A, 9.75%, 11/01/17 .............................................................. 5,005,189
410,000 Series B, 9.75%, 11/01/17 .............................................................. 449,237
670,000 Series C, 9.75%, 11/01/17 .............................................................. 739,466
3,365,000 Series D, 9.75%, 11/01/17 .............................................................. 3,713,883
1,685,000 St. Paul Housing and RDA, Housing Tax, 8.625%, 09/01/07 ................................... 1,879,988
595,000 St. Paul Port Authority Commercial Development, Theole Printing Project, 9.00%, 10/01/21 .. 603,413
4,915,000 St. Paul Port Authority Energy Park, Tax Increment Revenue, Refunding, Pre-Refunded, 8.00%,
12/01/07................................................................................ 5,505,193
</TABLE>
The accompanying notes are an integral part of these financial statements.
98
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================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN HIGH YIELD TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
MINNESOTA (CONT.)
St. Paul Port Authority GO, Mears Park Center Building Project,
$ 6,285,000 Series 1989-1, 8.25%, 09/01/09 ......................................................... $ 6,690,320
9,510,000 Series 1989-1, 8.50%, 09/01/18 ......................................................... 10,226,103
St. Paul Port Authority, IDR,
1,610,000 SDA Enterprises, Series K, 10.25%, 10/01/10 ............................................ 1,614,025
40,000 Series 1979-2, 7.50%, 10/01/09 ......................................................... 36,846
1,300,000 Series 1982-N, 10.75%, 10/01/02 ........................................................ 1,301,625
4,505,000 Series 1983-C, 10.00%, 12/01/06 ........................................................ 4,516,263
3,100,000 Series 1983-C, 9.875%, 12/01/08 ........................................................ 3,080,625
2,805,000 Series 1983-U, 10.75%, 12/01/13 ........................................................ 2,812,013
485,000 Series 1984-I, 10.75%, 12/01/13 ........................................................ 486,213
1,585,000 Series 1984-L, 9.75%, 12/01/14 ......................................................... 1,557,263
1,535,000 Series 1984-N, 10.00%, 12/01/14 ........................................................ 1,538,838
1,500,000 Series 1985-J, 9.50%, 12/01/11 ......................................................... 1,443,750
1,110,000 Series 1985-L, 9.50%, 12/01/14 ......................................................... 1,068,375
1,395,000 Series 1985-S, 9.625%, 12/01/14 ........................................................ 1,353,150
975,000 Series 1985-T, 9.625%, 12/01/14 ........................................................ 945,750
1,100,000 Series 1989-F, 8.00%, 09/01/19 ......................................................... 903,375
1,330,000 Series 1991 A-I, 8.50%, 12/01/01 ....................................................... 1,233,575
4,490,000 Series 1991 A-I, 9.00%, 12/01/12 ....................................................... 4,136,413
1,370,000 Series 1991 A-II, 8.50%, 12/01/01 ...................................................... 1,270,675
4,695,000 Series 1991 A-II, 9.00%, 12/01/12 ...................................................... 4,325,269
1,045,000 Series 1991 A-III, 8.50%, 12/01/01 ..................................................... 969,238
4,560,000 Series 1991 A-III, 9.00%, 12/01/12 ..................................................... 4,200,900
1,305,000 Series 1991 A-IV, 8.50% 12/01/01 ....................................................... 1,210,388
3,580,000 Series 1991 A-IV, 9.00%, 12/01/12 ...................................................... 3,298,075
9,365,000 Washington County Housing and RDA, MFHR, Season Villas, 9.00%, 12/01/22 ................... 9,381,763
------------
123,792,879
------------
MISSISSIPPI 1.8%
Claiborne County PCR, Middle South Energy, Inc. Project,
10,680,000 Series A, 9.50%, 12/01/13 .............................................................. 12,023,010
9,750,000 Series B, 8.25%, 06/01/14 .............................................................. 10,605,563
10,000,000 Series C, 9.875%, 12/01/14 ............................................................. 11,380,300
19,975,000 Series E, 9.50%, 04/01/16 .............................................................. 21,325,510
4,250,000 Lowndes County, Golden Triangle Medical Center, 8.50%, 02/01/10 ........................... 4,516,263
720,000 Mississippi Hospital Equipment and Facilities Authority Revenue, Refunding, Mississippi
Methodist Hospital and Rehabilitation Center, Pre-Refunded, 9.375%, 05/01/12 ........... 827,330
------------
60,677,976
------------
MISSOURI 2.1%
9,000,000 Missouri Health and Educational Facilities Authority, Health Facility Marshall, IDA, John
Fitzgibbons Hospital, Series 1990, 10.00%, 05/01/20 .................................... 10,027,350
7,300,000 Missouri State Revenue, Refunding & Improvement, Heartland Health Systems Project, 8.125%,
10/01/10................................................................................ 8,062,850
200,000 Moberly IDA, Hospital Revenue, Refunding, Moberly Regional Medical Center, Inc. Project,
8.75%, 03/01/16......................................................................... 220,114
1,570,000 Newton County IDA, Health Facilities Revenue, Beverly Enterprises, 10.375%, 11/01/08 ...... 1,763,079
2,000,000 Perry Co., Perry Memorial Hospital, Series 1990, 9.125%, 06/01/11 ......................... 2,119,900
1,000,000 St. Louis County IDA, Health Facilities Revenue, Refunding & Improvement, First Mortgage,
Normandy Osteopathic Hospitals Project, 9.125%, 08/01/13 ............................... 1,053,070
</TABLE>
The accompanying notes are an integral part of these financial statements.
99
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================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN HIGH YIELD TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
MISSOURI (CONT.)
St. Louis County IDA, Refunding,
$ 8,000,000 Kiel Center, 7.625%, 12/01/09 .......................................................... $ 8,094,320
5,175,000 Kiel Center, 7.75%, 12/01/13 ........................................................... 5,262,302
6,000,000 Kiel Center, 7.875%, 12/01/24 .......................................................... 6,131,580
St. Louis Municipal Financial Corp. Leasehold Revenue, Refunding,
14,160,000 Series A, 5.85%, 07/15/09 .............................................................. 13,370,863
14,250,000 Series A, 6.00%, 07/15/13 .............................................................. 13,404,120
-----------
69,509,548
-----------
MONTANA 1.1%
635,000 Montana State Board of Housing, SFM, Senior Bonds, Series B-2, 8.90%, 10/01/00 ............ 658,425
2,500,000 Montana State Board of Investments EDR, Refunding, Bozeman Holiday Inn Project, 11.00%,
12/01/07................................................................................ 2,662,975
35,000,000 Montana State Board of Investments, Resource Recovery Revenue, Yellowstone Energy Project,
7.00%, 12/31/19......................................................................... 32,013,450
865,000 Montana State SFMR, Series 1991-A, 8.275%, 10/01/03 ....................................... 908,146
-----------
36,242,996
-----------
NEBRASKA .1%
2,100,000 Scotts Bluff County, Hospital No. 1, Hospital Revenue, 6.375%, 12/15/08 ................... 2,108,064
-----------
NEVADA 2.6%
Henderson Local Improvement,
6,985,000 District No. 2, 9.50%, 08/01/11 ........................................................ 7,341,095
45,995,000 District No. T-1, Series A, 8.50%, 08/01/13 ............................................ 43,623,038
11,000,000 District No. T-4, Series A, 8.50%, 11/01/12 ............................................ 11,182,160
2,000,000 Las Vegas Downtown RDA, Tax Increment Revenue, Fremont Street Project, Series A, 6.10%,
06/15/14................................................................................ 1,866,840
8,560,000 Las Vegas Special ID No. 505, Elkhorn Springs, 8.00%, 09/15/13 ............................ 8,140,988
Nevada Housing Division,
435,000 SF Program, Subordinated, FI/GML, Series A, 9.30%, 10/01/00 ............................ 451,491
335,000 SF Program, Subordinated, FI/GML, Series A-1, 8.75%, 10/01/04 .......................... 349,874
485,000 SF Program, Subordinated, FI/GML, Series A-2, 9.375%, 10/01/00 ......................... 504,977
715,000 SF Program, Subordinated, FI/GML, Series A-2, 8.65%, 10/01/01 .......................... 741,076
485,000 SF Program, Subordinated, FI/GML, Series A-3, 9.20%, 10/01/00 .......................... 501,267
670,000 SF Program, Subordinated, FI/GML, Series B, 9.50%, 10/01/01 ............................ 695,989
800,000 SF Program, Subordinated, FI/GML, Series B-1, 7.90%, 10/01/05 .......................... 835,456
1,015,000 SF Program, Subordinated, FI/GML, Series C-1, 7.55%, 10/01/05 .......................... 1,049,236
Nevada Housing Finance Division Subordinate,
430,000 Series 1989 B-2, 9.65%, 10/01/02 ....................................................... 450,098
485,000 Series 1990 C-1, 9.60%, 10/01/02 ....................................................... 492,110
6,310,000 White Pine County, School District Building, 6.75%, 06/01/18 .............................. 6,327,542
-----------
84,553,237
-----------
NEW HAMPSHIRE 1.9%
New Hampshire Higher Education & Health Facility Authority Revenue,
18,950,000 Hillcrest Terrace, 7.50%, 07/01/24...................................................... 17,326,933
9,865,000 Kendal at Hanover Project, 8.00%, 10/01/19 ............................................. 10,232,570
</TABLE>
The accompanying notes are an integral part of these financial statements.
100
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================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN HIGH YIELD TAX-FREE INCOME FUND (NOTE 1)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
NEW HAMPSHIRE (CONT.)
New Hampshire IDA, PCR,
$ 8,835,000 Public Service Co., Project A, 7.65%, 05/01/21 ......................................... $ 9,110,122
21,930,000 Public Service Co., Project C, 7.65%, 05/01/21 ......................................... 22,612,900
500,000 United Illuminating Co., 10.75%, 10/01/12 .............................................. 569,600
3,000,000 New Hampshire State Business Financial Authority, PCR, Refunding, Illuminating Co.,
Series A, 5.875%, 10/01/33.............................................................. 2,537,790
-----------
62,389,915
-----------
NEW JERSEY .4%
4,000,000 New Jersey EDA, EDR, Refunding, Stolt Terminals, Series 1988-A, 10.50%, 01/15/18 .......... 4,532,680
2,100,000 New Jersey Health Care Facilities Financing Authority Revenue, Lutheran Home, Series A,
8.40%, 07/01/19......................................................................... 2,159,409
8,500,000 New Jersey State Educational Facilities Authority, Refunding, Fairleigh Dickinson
University, Series C, 6.625%, 07/01/23 ................................................. 7,382,165
-----------
14,074,254
-----------
NEW MEXICO 1.7%
Farmington PCR, Refunding, Public Service of New Mexico Co.,
37,350,000 San Juan Project, Series A, 6.40%, 08/15/23 ............................................ 33,139,535
2,900,000 San Juan Project, Series X, 5.90%, 04/01/07 ............................................ 2,658,227
10,755,000 Los Alamos County, Inc., Utility System Revenue, Refunding, Series 1986-A, Pre-Refunded,
7.75%, 01/01/15......................................................................... 11,487,093
New Mexico Mortgage Finance Authority,
2,405,000 SFM Program, Refunding Series A-1, 7.90%, 07/01/04 ..................................... 2,501,416
695,000 SFM Program, Series A, FHA Insured, 8.80%, 09/01/01 .................................... 725,531
730,000 SFM Program, Series 1988-A, 9.50%, 09/01/00 ............................................ 755,527
545,000 SFM Program, Series 1988-B, 9.30%, 09/01/00 ............................................ 564,064
1,195,000 SFMR, Series 1991-A, 9.10%, 09/01/03 ................................................... 1,252,958
1,180,000 SFMR, Sub-Series 1990-A, 9.55%, 09/01/02 ............................................... 1,240,227
-----------
54,324,578
-----------
NEW YORK 10.5%
8,440,000 (a,b,f)Babylon IDA, Recycling Facilities Revenue, Babylon Recycling Center, Inc., Series A,
8.875%, 03/01/11........................................................................ 4,220,000
Babylon IDA, Resource Recovery Revenue, Inc., Ogden Martin System,
3,920,000 Babylon, Inc., 8.50%, 01/01/19 ......................................................... 4,263,470
1,000,000 Babylon, Inc., Series B, 8.50%, 01/01/19 ............................................... 1,087,620
Metropolitan Transportation Authority, Service Contract, Refunding,
3,860,000 Commuter Facilities, Series 5, 6.50%, 07/01/16 ......................................... 3,866,871
3,330,000 Commuter Facilities, Series N, 6.80%, 07/01/04 ......................................... 3,537,159
3,050,000 Commuter Facilities, Series N, 6.90%, 07/01/05 ......................................... 3,238,917
2,330,000 Transportation Facilities, Series N, 6.80%, 07/01/04 ................................... 2,474,949
2,470,000 Transportation Facilities, Series N, 6.90%, 07/01/05 ................................... 2,622,992
7,830,000 Transportation Facilities, Series N, 7.125%, 07/01/09 .................................. 8,341,456
New York City GO,
1,795,000 Refunding, Series G, 5.75%, 08/01/10 ................................................... 1,600,924
10,000,000 Series A, 7.25%, 03/15/20 .............................................................. 10,236,500
1,200,000 Series A, 6.25%, 08/01/21 .............................................................. 1,119,444
4,500,000 Series B, 7.625%, 02/01/13 ............................................................. 4,738,275
17,070,000 Series B, 7.00%, 08/15/16 .............................................................. 17,310,175
4,090,000 Series B, 7.00%, 02/01/18 .............................................................. 4,138,098
5,000,000 Series B, 7.50%, 02/01/18 .............................................................. 5,223,550
</TABLE>
The accompanying notes are an integral part of these financial statements.
101
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================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN HIGH YIELD TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
NEW YORK (CONT.)
New York City Go, (Cont.)
$ 5,000,000 Series B, 7.25%, 08/15/19 .............................................................. $ 5,176,550
5,745,000 Series B, 7.00%, 02/01/20 .............................................................. 5,812,561
4,250,000 Series C, 6.75%, 10/01/15 .............................................................. 4,217,063
4,800,000 Series C, 7.00%, 08/01/17 .............................................................. 4,858,752
11,050,000 Series C, 7.25%, 08/15/24 .............................................................. 11,207,573
1,000,000 Series C, Sub Series C-1, 7.00%, 08/01/16 .............................................. 1,012,240
4,875,000 Series C, Sub Series C-1, 7.50%, 08/01/21 .............................................. 5,101,785
3,500,000 Series D, 7.70%, 02/01/11 .............................................................. 3,709,895
5,000,000 Series D, 7.625%, 02/01/13 ............................................................. 5,264,750
9,000,000 Series D, 7.625%, 02/01/14 ............................................................. 9,476,550
5,000,000 Series D, 7.00%, 02/01/19 .............................................................. 5,058,800
5,000,000 Series D, 7.50%, 02/01/18 .............................................................. 5,223,550
525,000 Series E, 7.50%, 02/01/18 .............................................................. 548,473
4,500,000 Series F, 7.625%, 02/01/14 ............................................................. 4,738,274
400,000 Series F, 7.625%, 02/01/15 ............................................................. 421,180
8,545,000 Series F, 7.50%, 02/01/21 .............................................................. 8,927,047
840,000 Series G, 7.50%, 02/01/22 .............................................................. 877,556
5,000,000 Series H, 7.20%, 02/01/14 .............................................................. 5,124,700
12,600,000 Series H, 7.20%, 02/01/15 .............................................................. 12,914,244
12,000,000 Series H, 7.00%, 02/01/19 .............................................................. 12,141,120
2,925,000 Series H, 7.00%, 02/01/20 .............................................................. 2,959,398
350,000 Series H, 7.00%, 02/01/22 .............................................................. 354,116
7,085,000 New York City IDA, Civic Facility Revenue, Amboy Corp. Project, Series 1990, 9.625%,
06/01/15................................................................................ 7,902,609
5,900,000 New York City Municipal Water Financing Authority, Water and Sewer System Revenue,
Series A, 6.00%, 06/15/17............................................................... 5,785,717
New York State Dormitory Authority Revenue, City University System,
1,000,000 Series B, Pre-Refunded, 7.20%, 07/01/21 ................................................ 1,123,750
1,000,000 Series F, Pre-Refunded, 7.875%, 07/01/07 ............................................... 1,148,040
8,500,000 Series F, Pre- Refunded, 7.875%, 07/01/17 .............................................. 9,715,500
New York State Dormitory Authority Revenue, State University Educational Facilities,
730,000 Series A, Pre-Refunded, 7.125%, 05/15/17 ............................................... 801,226
270,000 Series B, Pre-Refunded, 7.25%, 05/15/15 ................................................ 301,614
2,070,000 Series B, Pre-Refunded, 7.25%, 05/15/15 ................................................ 2,312,375
1,000,000 New York State Environmental Facility Corp., Water Facility Revenue, Long Island Water
Corp. Project, Series 1987-A, 10.00%, 10/01/17 ......................................... 1,092,200
9,715,000 New York State HFA, Service Contract Obligation Revenue, Series A, Pre- Refunded, 7.80%,
09/15/20................................................................................ 11,161,272
New York State Local Government Assistance Corp.,
15,000,000 Series B, 7.25%, 04/01/05 .............................................................. 16,455,750
10,000,000 Series B, 7.25%, 04/01/06 .............................................................. 10,943,400
9,800,000 Series B, Pre-Refunded, 7.50%, 04/01/20 ................................................ 11,185,524
6,850,000 Series D, Pre-Refunded, 7.80%, 09/15/10 ................................................ 7,869,760
3,500,000 Series D, Pre-Refunded, 7.00%, 04/01/18 ................................................ 3,939,285
4,000,000 New York State Medical Care Facilities Finance Agency Revenue, Hospital and Nursing Home
Mortgage Insured, Series B, 6.95%, 02/15/32 ............................................ 4,167,080
2,500,000 New York State Medical Care Facilities Finance Agency Revenue, Security Hospital, Series A,
7.35%, 08/15/11......................................................................... 2,590,275
Port Authority of New York and New Jersey, Special Obligation Revenue,
10,000,000 Continental Airlines, Inc., Eastern Project, 9.00%, 12/01/10 ........................... 10,940,100
27,650,000 La Guardia Airport Project, Eastern Project, 9.125%, 12/01/15 .......................... 30,408,917
</TABLE>
The accompanying notes are an integral part of these financial statements.
102
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STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN HIGH YIELD TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
NEW YORK (CONT.)
Troy IDA, Lease Revenue,
$ 5,000,000 City of Troy, 8.00%, 03/15/12 .......................................................... $ 5,208,100
5,500,000 City of Troy, 8.00%, 03/15/22 .......................................................... 5,602,134
1,500,000 Warren and Wash Counties IDAR, Refunding, Resource Recovery, Series A, 7.90%, 12/15/07 .... 1,511,460
------------
345,312,665
------------
NORTH CAROLINA .1%
4,325,000 North Carolina Municipal Power Agency No. 1, Catawba Electric Revenue, Refunding, 6.25%,
01/01/17................................................................................ 4,218,994
------------
NORTH DAKOTA .2%
4,600,000 Mercer County PCR, Basin Electric Power Co., Series 1984-C, 7.70%, 01/01/19 ............... 4,787,036
420,000 Wahpeton IDR, Auburn Apartments Project, 11.00%, 12/01/15 ................................. 431,080
------------
5,218,116
------------
OHIO 5.3%
2,710,000 Allen County Nursing Home, First Mortgage Revenue, Volunteers of America Care Facilities
Project, 9.00%, 03/01/18................................................................ 2,845,500
13,235,000 Cleveland Airport Special Revenue, Continental Airlines, Inc. Project, 9.00%, 12/01/19 .... 13,586,919
Montgomery County Health Systems Revenue, Franciscan,
1,500,000 Series B, 8.10%, 07/01/01 .............................................................. 1,629,765
9,600,000 Series B, 8.10%, 07/01/18 .............................................................. 10,287,840
1,600,000 Series B-1, 8.10%, 07/01/01 ............................................................ 1,738,415
6,300,000 Series B-1, 8.10%, 07/01/18 ............................................................ 6,751,395
6,500,000 Series B-2, 8.10%, 07/01/18 ............................................................ 6,965,725
5,265,000 Ohio State Air Quality Authority, Toledo Edison, Series B, 8.00%, 05/15/19 ................ 5,455,540
10,500,000 Ohio State HFA, Chagrin Fall, Retirement Rental Housing Revenue, 10.375%, 04/01/09 ........ 11,714,955
Ohio State Water Development Authority,
27,700,000 PCR, Refunding, Cleveland Electric, Series A, 8.00%, 10/01/23 .......................... 28,283,639
6,200,000 Toledo Edison, Series A, 8.00%, 05/15/19 ............................................... 6,374,654
24,000,000 Perry Local School District COP, 8.15%, 07/01/99 .......................................... 24,219,360
500,000 Pike County Hospital Facilities Revenue, National Church Residences, Series 1987, 9.875%,
07/01/17............................................................................... 546,145
3,870,000 Seneca County Nursing HMR, Refunding & Improvement, Volunteers of America Care Facilities,
9.00%, 01/01/13......................................................................... 4,057,037
Toledo-Lucas County Port Authority Airport Revenue, Burlington Air Express,
8,170,000 Project 1, 7.00%, 04/01/04 ............................................................. 8,131,601
1,450,000 Series 1991-1, 9.125%, 10/15/01 ........................................................ 1,526,343
5,875,000 Series 1991-1, 9.125%, 09/15/13 ........................................................ 6,135,321
5,385,000 Series 1994-1, 7.25%, 04/01/09 ......................................................... 5,214,403
8,200,000 Series 1994-1, 7.375%, 04/01/14 ........................................................ 7,939,076
14,365,000 Series 1994-1, 7.50%, 04/01/19 ......................................................... 13,944,248
Toledo-Lucas County Port Authority Development Revenue, Northwest Ohio Bond Fund,
2,405,000 Series 1989-B, 9.00%, 11/15/08 ......................................................... 2,571,931
1,325,000 Series 1990-A, 8.625%, 05/15/10 ........................................................ 1,389,408
3,080,000 Series 1990-D, 8.25%, 05/15/20 ......................................................... 3,142,740
------------
174,451,960
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
103
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================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN HIGH YIELD TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
OKLAHOMA .7%
$ 6,335,000 Jackson County Memorial Hospital Authority Revenue, Refunding, Jackson County Memorial
Hospital Project, Pre-Refunded, 9.00%, 08/01/15 ........................................ $ 7,031,723
12,845,000 Tulsa Municipal Airport Transportation Revenue, American Airlines, Inc., 7.375%, 12/01/20.. 12,853,992
2,500,000 Washington County Medical Authority Revenue, Bartlesville, Refunding, Jane Phillips
Hospital, Series A, 8.50%, 11/01/10 .................................................... 2,666,525
-----------
22,552,240
-----------
PENNSYLVANIA 7.1%
Chartiers Valley Industrial and Commercial Development Authority Revenue, Refunding,
4,750,000 Asbury Health Center Project, 7.40%, 12/01/15 .......................................... 4,650,772
6,000,000 First Mortgage, United Methodist Health Center, Series A, 9.50%, 12/01/15 .............. 7,001,400
2,000,000 Friendship Village of South Hills Project, 9.25%, 08/15/08 ............................. 2,115,040
4,000,000 Friendship Village of South Hills Project, 9.50%, 08/15/18 ............................. 4,243,520
5,000,000 Delaware County IDAR, Refunding, Resource Recovery Project, Series A, 8.10%, 12/01/13 ..... 5,286,700
980,000 Fayette County Hospital Authority Revenue, Refunding, Uniontown Hospital Project, 7.625%,
07/01/15................................................................................ 985,909
Franklin County IDA, Health Facilities Revenue,
650,000 Fayetteville 10.375%, 07/01/11 ......................................................... 738,114
3,200,000 Fayetteville 10.375%, 07/01/11 ......................................................... 3,632,192
3,300,000 Gettysburg IDA, Health Facilities Revenue, Refunding, Encore Nursing Center, 10.375%,
07/01/11................................................................................ 3,760,680
Montgomery County Higher Education and Health Authority Hospital Revenue, United Hospital,
200,000 Series A, 8.375%, 11/01/11 ............................................................. 206,890
3,560,000 Series A, 7.50%, 11/01/12 .............................................................. 3,408,807
750,000 Series A, 7.50%, 11/01/13 .............................................................. 717,345
600,000 Series A, 7.50%, 11/01/14 .............................................................. 573,282
3,940,000 Series B, 7.50%, 11/01/14 .............................................................. 3,764,552
1,600,000 Series B, 7.50%, 11/01/15 .............................................................. 1,527,280
Montgomery County Higher Education and Health Authority Revenue,
2,025,000 First Mortgage, Holy Redeemer Long-Term Care, Series A, 8.20%, 06/01/06 ................ 2,050,677
3,500,000 First Mortgage, Holy Redeemer Long-Term Care, Series A, 8.00%, 06/01/22 ................ 3,404,940
5,000,000 St. Joseph's University, Series 1990, Pre-Refunded, 8.30%, 06/01/10 .................... 5,783,000
10,000,000 Montgomery County IDA, PCR, Series 1991, 7.50%, 01/01/12 .................................. 10,379,600
3,250,000 Northamton County IDR, Refunding, PCR, Bethlehem Steel, 7.55%, 06/01/17 ................... 3,278,794
Pennsylvania Convention Center Authority Revenue, Refunding,
7,820,000 Series A, 5.75%, 09/01/99 .............................................................. 7,728,896
5,000,000 Series A, 6.25%, 09/01/04 .............................................................. 4,929,750
16,000,000 Series A, 6.60%, 09/01/09 .............................................................. 15,394,720
20,760,000 Series A, 6.70%, 09/01/14 .............................................................. 19,848,221
13,800,000 Series A, 6.75%, 09/01/19 .............................................................. 13,135,392
1,200,000 Pennsylvania State Higher Educational Facilities Authority, College and University Revenue,
Medical College of Pennsylvania, 8.375%, 03/01/11 ...................................... 1,280,748
1,825,000 Pennsylvania State Pooled Finance Authority, Lease Revenue, Capital Improvement, Series B,
MBIA Insured, 8.00%, 11/01/09 .......................................................... 1,981,476
10,000,000 Philadelphia Financing EDA, Resource Recovery Revenue, Colver Project, Series D, 7.125%,
12/01/15................................................................................ 10,097,300
3,080,000 Philadelphia GO, Refunding, Series A, 6.00%, 05/15/05 ..................................... 2,990,680
Philadelphia Gas Works Revenue,
3,850,000 Series A, 6.375%, 07/01/14 ............................................................. 3,843,186
2,850,000 Series A, 6.375%, 07/01/26 ............................................................. 2,787,329
</TABLE>
The accompanying notes are an integral part of these financial statements.
104
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================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN HIGH YIELD TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
PENNSYLVANIA (CONT.)
Philadelphia Municipal Authority Revenue, Justice Lease,
$ 4,000,000 Sub-Series C, 8.625%, 11/15/16 ......................................................... $ 4,327,560
25,500,000 Sub-Series C, Pre-Refunded, 8.625%, 11/15/16 ........................................... 30,852,705
3,000,000 Sub-Series D, 6.25%, 07/15/13 .......................................................... 2,720,340
1,750,000 Sub-Series D, 6.30%, 07/15/17 .......................................................... 1,563,608
14,535,000 Philadelphia Water and Sewer Revenue, 10th Series, ETM 09/01/04, 7.35%, 09/01/04 .......... 16,329,636
Philadelphia Water and Sewer Revenue, 11th Series,
2,500,000 Sub-Series A, Pre-Refunded, 8.70%, 12/01/98 ............................................ 2,627,124
3,000,000 Sub-Series A, Pre-Refunded, 8.90%, 12/01/00 ............................................ 3,156,810
2,500,000 Sub-Series B, Pre-Refunded, 8.40%, 10/01/96 ............................................ 2,605,725
2,500,000 Sub-Series B, Pre-Refunded, 8.70%, 10/01/98 ............................................ 2,609,875
500,000 Sub-Series B, Pre-Refunded, 9.00%, 10/01/01 ............................................ 522,810
9,750,000 Philadelphia Water and Sewer Revenue, 16th Series, 7.00%, 08/01/18 ........................ 10,042,110
9,315,000 South Wayne County, Water and Sewer Authority Revenue, Refunding, 8.20%, 04/15/13 ......... 9,304,940
100,000 Washington County Hospital Authority Revenue, Washington Hospital, Series 1987,
Pre-Refunded, 9.50%, 07/01/17........................................................... 110,886
------------
238,301,321
------------
PUERTO RICO .1%
1,875,000 Puerto Rico Commonwealth Infrastructure Financing Authority, Special Tax Revenue, Series
1988-A, 7.75%, 07/01/08................................................................. 2,02,519
------------
RHODE ISLAND .9%
19,960,817 Depositors Economic Protection Corp., Sub-Series B, 10.00%, 07/01/07 . .................... 20,738,690
1,000,000 Rhode Island Housing and Mortgage Finance Corp., MFMR, Series B-8, 8.75%, 07/01/07 ........ 1,014,240
6,000,000 Rhode Island State Health and Educational Building Corp., Hospital Financing Revenue,
Landmark Medical Center Assessment, 5.875%, 10/01/19 ................................... 5,508,240
West Warwick GO,
2,615,000 Series A, 6.80%, 07/15/98 .............................................................. 2,624,754
915,000 Series A, 7.30%, 07/15/08 .............................................................. 943,447
------------
30,829,371
------------
SOUTH CAROLINA .1%
3,805,000 Charleston County Hospital Facilities, First Mortgage Revenue, Sandpiper Village, Inc.,
7.00%, 11/01/13......................................................................... 3,290,945
------------
SOUTH DAKOTA .2%
3,500,000 South Dakota State Health and Educational Facilities Authority Revenue, Refunding, Prairie
Lakes Health Care, 7.25%,04/01/22 ...................................................... 3,379,355
3,000,000 Watertown Hospital Facilities Revenue, Prairie Lakes Health Care System Project,
Pre-Refunded, 9.125%, 04/01/13.......................................................... 3,391,860
------------
6,771,215
------------
TENNESSEE .6%
3,140,000 Knox County Health, Educational and Housing Facilities Board, MFHR, GNMA Insured, Eastown
Village Project, 8.20%, 07/01/28 ........................................................ 3,284,627
Memphis-Shelby County Airport Authority, Special Facilities and Project Revenue,
3,250,000 Federal Express Corp., Series 1982-B, 8.30%, 09/01/12 ................................... 3,374,573
6,000,00 Federal Express Corp., Series 1984, 7.875%, 09/01/09 .................................... 6,496,380
1,770,00 Scott County IDB, IDR, Fruehauf Corp. Project, 10.75%, 01/01/09 ............................ 1,905,671
</TABLE>
The accompanying notes are an integral part of these financial statements.
105
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STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN HIGH YIELD TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
TENNESSEE (CONT.)
$ 3,000,000 Shelby County, Health and Education Housing Facility Revenue, Beverly Enterprise,
10.125%, 12/01/11....................................................................... $ 3,368,430
200,000 Tennessee HDA, Financial Mortgage, Series A, 6.90%, 07/01/25 .............................. 203,746
------------
18,633,427
------------
TEXAS 3.6%
10,000,000 Alliance Airport Authority, Special Facilities Revenue, Series 1990, 7.50%, 12/01/29 ...... 10,132,500
Brazos River Authority, PCR,
16,000,000 Houston Power & Light Co., 8.25%, 05/01/19 ............................................. 17,106,720
1,675,000 Texas Utilities Electric Co. Project, Collateralized, Series 1988-A, 9.25%, 03/01/18 ... 1,832,902
4,780,000 Coppell Special Assessment Gateway Project, 8.70%, 03/01/12 ............................... 4,923,974
5,626,000 Copperas Cove Health Facilities Development Corp., Hospital Revenue, First Mortgage,
Metroplex Health, Series B, 9.125%, 12/01/19 ........................................... 6,142,804
7,260,000 El Paso County, SFMR, Series 1991-A, 8.75%, 10/01/11 ...................................... 7,619,951
500,000 Harris County Hospital District Mortgage Revenue, Refunding, Pre-Refunded, 8.50%,
04/01/15................................................................................ 529,950
18,160,000 Harris County Toll Road, Multiple Mode, Senior Lien Revenue, Series D, Pre-Refunded, 8.30%,
08/1517................................................................................. 20,503,002
4,550,000 Matagorda County Navigation District No. 1, PCR, Collateralized, Refunding, Houston
Lighting and Power Co., Series B, 7.70%, 02/01/19 ...................................... 4,806,893
Metropolitan Health Facilities Development Corp., Hospital Revenue, Refunding & Improvement,
2,770,000 Wilson N. Jones Memorial Hospital Project, Pre-Refunded, 7.75%, 01/01/05 ............... 2,963,568
7,500,000 Wilson N. Jones Memorial Hospital Project, Pre-Refunded, 7.875%, 01/01/14 .............. 8,040,225
2,000,000 Midland County Hospital District Revenue, Series 1989, Pre-Refunded, 8.375%, 06/01/02 ..... 2,210,980
18,000,000 National Research Laboratory Commission, Financing Corp. Lease Revenue, 7.10%, 12/01/21 ... 18,253,980
250,000 Port of Corpus Christi IDC Revenue, Refunding, Valero Refining, Series A, 10.25%,
06/01/17................................................................................ 277,423
7,080,000 Rio Grande Valley Health Facilities Development Corp., First Mortgage Revenue, Refunding,
Golden Palms Retirement and Health Center, Pre-Refunded, 9.25%, 08/01/15 ............... 7,633,373
4,000,000 Texas State Water Development Board Revenue, 6.00%, 07/15/13 .............................. 4,001,880
------------
116,980,125
------------
UNITED STATES TERRITORIES .7%
2,595,000 American Samoa EDA, Executive Office Building Revenue, 10.125%, 09/01/08 .................. 2,790,222
16,200,000 Virgin Island Public Finance Authority Revenue, Refunding, Matching Fund Loan Notes,
Series A, 7.25%, 10/01/18............................................................... 16,728,444
Virgin Island Water and Power Authority,
400,000 Electric Services, Series A, 7.40%, 07/01/11 ........................................... 420,355
4,000,000 Water Power Revenue, Series B, 7.60%, 01/01/12 ......................................... 4,262,200
------------
24,201,221
------------
UTAH .6%
2,000,000 Box Elder County PCR, Nucor Corp. Project, 6.90%, 05/15/17 ................................ 2,083,900
11,800,000 Davis County Solid Waste Management Energy Recovery Revenue, Refunding, Special Services
District, 6.125%, 06/15/09 ............................................................. 10,251,604
Utah State HFA, SFM,
200,000 Series 1988-A, 9.625%, 07/01/00 ........................................................ 209,680
220,000 Series 1988-B, 9.50%, 07/01/00 ......................................................... 229,491
150,000 Series 1988-B, 9.60%, 07/01/00 ......................................................... 154,361
415,000 Series 1988-C-1, 9.375%, 07/01/00 ...................................................... 430,720
160,000 Series 1988-E, 9.50%, 07/01/00 ......................................................... 166,902
155,000 Series 1988-F, 9.60%, 07/01/00 ......................................................... 162,338
145,000 Series 1988-G-2, 9.30%, 07/01/00 ....................................................... 146,656
</TABLE>
The accompanying notes are an integral part of these financial statements.
106
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STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN HIGH YIELD TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
UTAH (CONT.)
Utah State HFA, SFM, (Cont.)
$ 190,000 Series 1989-B, 9.25%, 07/01/01 ......................................................... $ 195,231
150,000 Series 1990-A-2, 9.625%, 07/01/02 ...................................................... 154,191
220,000 Series 1990-B-2, 9.50%, 07/01/02 ....................................................... 225,632
475,000 Series 1991-A-2, 9.45%, 07/01/03 ....................................................... 491,264
490,000 Series 1991-B-2, 9.45%, 07/01/03 ....................................................... 507,429
465,000 Series 1991-C-2, 9.05%, 07/01/03 ....................................................... 487,538
905,000 Series 1991-D-2, 9.00%, 07/01/03 ....................................................... 948,730
680,000 Series 1991-E-1, 8.70%, 07/01/03 ....................................................... 712,994
815,000 Sub-Series B-2, 8.70%, 07/01/04 ........................................................ 852,351
670,000 Sub-Series D, 8.45%, 07/01/04 .......................................................... 687,862
--------------
19,098,874
--------------
VIRGINIA .1%
3,670,000 Richmond IDA, Retreat Hospital, 7.35%, 07/01/21 ........................................... 3,749,382
--------------
WASHINGTON 1.0%
2,370,000 Chelan County PUD No. 1, Columbia River Rock, First Hydro Electric System Revenue, 6.375%,
06/01/29................................................................................ 2,374,385
2,675,000 Washington State Health Care Facilities Authority Revenue, Empire Health Service, Spokane,
AMBAC Insured, 6.30%, 11/15/22 ......................................................... 2,664,247
5,000,000 Washington State Public Power Supply System Revenue, Nuclear Project No. 1, Refunding,
Series C, Pre-Refunded, 8.00%, 07/01/17 ................................................ 5,736,200
20,300,000 Washington State Public Power Supply System Revenue, Nuclear Project No. 2, Refunding,
Series A, 6.00%, 07/01/12 .............................................................. 19,455,113
1,000,000 Yakima-Tieton Irrigation District Revenue, Refunding, Pre-Refunded, 8.40%, 06/01/18 ....... 1,100,850
--------------
31,330,795
--------------
WEST VIRGINIA .5%
1,415,000 Beckley First Mortgage Revenue, Refunding, Pine Lodge Health Care Center, 10.25%,
08/01/12................................................................................ 1,472,973
5,600,000 West Virginia State Hospital Finance Authority, Hospital Revenue, Refunding, St. Francis
Hospital, Charleston, 7.75%, 08/15/13 .................................................. 5,824,000
West Virginia State Water Development Authority Revenue,
1,550,000 Loan Program II, Series A, Pre-Refunded, 8.625%, 11/01/28 .............................. 1,756,615
2,790,000 Loan Program II, Series A, Pre-Refunded, 8.125%, 11/01/29 .............................. 3,115,956
2,585,000 Solid Waste Management, Series C, 8.125%, 08/01/15 ..................................... 2,802,683
--------------
14,972,227
--------------
WISCONSIN .6%
Wisconsin State Health and Educational Facilities Authority Revenue,
1,000,000 Bethany Lutheran Home of La Crosse, 8.75%, 12/01/06 .................................... 1,019,520
6,000,000 Franciscan Health System, Inc. Project, 8.375%, 03/01/05 ............................... 6,524,760
6,000,000 Franciscan Health System, Inc. Project, 8.50%, 03/01/20 ................................ 6,487,140
5,000,000 Refunding, Felician Health Care, Series A, AMBAC Insured, 7.00%, 01/01/15 .............. 5,233,150
1,670,000 Wisconsin State Health Facilities Authority Revenue, Refunding, Franciscan Health Advisory,
7.80%, 03/01/14......................................................................... 1,714,539
--------------
20,979,109
--------------
WYOMING .1%
1,575,000 Natrona County Health Care Facility Revenue, Luthercare, Inc. Project, 9.25%, 07/15/08 .... 1,654,270
--------------
TOTAL BONDS (COST $3,020,921,420).................................................... 3,128,724,190
--------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
107
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STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN HIGH YIELD TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS (CONT.)
(c)ZERO COUPON BONDS 2.2%
San Francisco City and County RDA, Lease Revenue, George Moscone Center,
$ 3,750,000 (original accretion rate 7.00%), 07/01/09 .............................................. $ 1,457,700
4,500,000 (original accretion rate 7.00%), 07/01/10 .............................................. 1,613,430
4,500,000 (original accretion rate 7.05%), 07/01/12 .............................................. 1,399,410
4,250,000 (original accretion rate 7.05%), 07/01/13 .............................................. 1,224,595
2,250,000 (original accretion rate 7.05%), 07/01/14 .............................................. 605,723
San Joaquin Hills Transportation, Corridor Agency Toll Road Revenue, Jr. Lien,
7,400,000 (original accretion rate 8.50%), 01/01/04 .............................................. 3,609,646
8,000,000 (original accretion rate 8.75%), 01/01/05 .............................................. 3,597,200
9,000,000 (original accretion rate 8.60%), 01/01/06 .............................................. 3,730,410
9,400,000 (original accretion rate 8.60%), 01/01/07 .............................................. 3,591,552
10,400,000 (original accretion rate 8.60%), 01/01/08 .............................................. 3,662,880
21,900,000 (original accretion rate 8.75%), 01/01/09 .............................................. 6,970,113
15,000,000 (original accretion rate 8.75%), 01/01/10 .............................................. 4,394,400
30,100,000 (original accretion rate 8.50%), 01/01/12 .............................................. 7,471,422
52,700,000 (original accretion rate 9.00%), 01/01/24 .............................................. 4,642,870
45,200,000 (original accretion rate 9.00%), 01/01/25 .............................................. 3,660,296
131,900,000 (original accretion rate 9.00%), 01/01/26 .............................................. 9,817,317
139,100,000 (original accretion rate 9.00%), 01/01/27 .............................................. 9,517,222
--------------
TOTAL ZERO COUPON BONDS (COST $66,680,617)........................................... 70,966,186
--------------
TOTAL LONG TERM INVESTMENTS (COST $3,087,602,037) ................................... 3,199,690,376
--------------
SHORT TERM INVESTMENTS 1.4%
100,000 (e)Arkansas Hospital Equipment Finance Authority, Hospital Equipment Revenue, Jefferson
Hospital Association Project, Weekly VRDN and Put, 4.00%, 12/01/99 ..................... 100,000
600,000 (e)Baltimore County, Maryland, MFR, Refunding, Housing Lincoln Woods Apartments, Weekly VRDN
and Put, 4.100%, 11/01/16 . ............................................................ 600,000
189,000 Benicia, California, 1915 Act, Refunding, Fleetside Industrial Park Assessment, 4.00%,
09/02/95............................................................................... 188,448
8,605,000 District of Columbia GO, Series C, 7.50%, 06/01/95 ........................................ 8,636,064
550,000 (e)Greenboro, North Carolina, Public Improvement, Weekly VRDN and Put, 3.85%, 04/01/09 ....... 550,000
1,300,000 (e)Harris County, Texas, IDC, PCR, Exxon Project, Series 1994-A, Daily VRDN and Put, 3.90%,
03/01/24................................................................................ 1,300,000
2,400,000 (e)Irving Ranch, California, Water District Consolidated District Nos. 105, 250 and 290, Daily
VRDN and Put, 4.00%, 08/01/16 .......................................................... 2,400,000
3,000,000 (e)Jackson County, Mississippi, PCR, Refunding, Chevron USA, Inc. Project, Daily VRDN and Put,
3.70%, 12/01/16......................................................................... 3,000,000
100,000 (e)Jamestown, Kentucky, Industrial Building Revenue, Weekly VRDN and Put, 4.35%, 12/01/10 .... 100,000
100,000 (e)Kentucky State EDA, Pooled Loan Program, Series A, FGIC Insured,
Weekly VRDN and Put, 4.20%, 12/01/15.................................................... 100,000
14,300,000 Los Angeles County, California, TRAN, 4.50%, 06/30/95 ..................................... 14,306,292
100,000 (e)Louisiana HFA, Refunding, MFR, New Orleanian, Weekly VRDN and Put, 4.85%, 12/01/25 ........ 100,000
300,000 (e)Lynchburg, Virginia, IDA, Hospital Facilities, First Mortgage Revenue, VHA Mid Atlantic
Capital, Series G, Weekly VRDN and Put, 4.05%, 12/01/25 ................................ 300,000
1,700,000 (e)Medford, Oregon, Hospital Facilities Authority Revenue, Rogue Valley Health Services, Daily
VRDN and Put, 3.90%, 10/01/16 .......................................................... 1,700,000
1,500,000 (e)New York City, New York, GO, Daily VRDN and Put, 3.70%, 08/01/95 .......................... 1,500,000
3,800,000 (e)New York City, New York, Municipal Water Finance Authority, Water and Sewer Revenue,
Series G, FGIC Insured, Daily VRDN and Put, 3.70%, 06/15/24 ............................ 3,800,000
1,400,000 (e)Orangeburg County, South Carolina, Solid Waste Disposal Facilities Revenue, South Carolina
Electric and Gas Co., Daily VRDN and Put, 3.90%, 11/01/24 .............................. 1,400,000
900,000 (e)Oregon State GO, Veteran Welfere 73G, Weekly VRDN and Put, 4.05%, 12/01/18 ................ 900,000
</TABLE>
The accompanying notes are an integral part of these financial statements.
108
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STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT FRANKLIN HIGH YIELD TAX-FREE INCOME FUND (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SHORT TERM INVESTMENTS (CONT.)
$ 600,000 (e)Peninsula Ports Authority, Virginia, Refunding, Port Facilities Shell Oil Co., Series A,
Daily VRDN and Put, 3.75%, 12/01/05 .................................................... $ 600,000
2,500,000 (e)Pinal County, Arizona, IDA, PCR, Magma-Copper/Newmont Mining Corp., Daily VRDN and Put,
3.70%, 12/01/09......................................................................... 2,500,000
1,200,000 (e)Puerto Rico Commonwealth Government Development Bank, Refunding, Weekly VRDN and Put,
3.90%, 12/01/15......................................................................... 1,200,000
200,000 (e)Red River Authority, Texas, PCR, Refunding, Southwest Public Service Co., Weekly VRDN and
Put, 4.00%, 07/01/11 ................................................................... 200,000
300,000 (e)Student Loan Funding Corp., Ohio, Cincinnati Student Loan Revenue, Series 1983-A, Weekly
VRDN and Put, 4.00%, 12/29/98 .......................................................... 300,000
100,000 (e)Tennessee State, School Bond Authority, Higher Education BAN, Series A, Weekly VRDN and
Put, 4.00%, 03/01/98 ................................................................... 100,000
500,000 (e)Uinta County, Wyoming, PCR, Refunding, Chevron USA, Inc. Project, Daily VRDN and Put,
3.70%, 08/15/20......................................................................... 500,000
200,000 (e)Washington State, Public Power Supply System Revenue, Nuclear Project No. 1, Refunding,
Series 1A-2, Weekly VRDN and Put, 4.05%, 07/01/17 ...................................... 200,000
300,000 (e)West Virginia State, Hospital Finance Authority Revenue, VHA Mid-Atlantic Capital,
Series G, AMBAC Insured, Weekly VRDN and Put, 4.05%, 12/01/25 .......................... 300,000
--------------
TOTAL SHORT TERM INVESTMENTS (COST $46,851,271) ..................................... 46,880,804
--------------
TOTAL INVESTMENTS (COST $3,134,453,308) 98.8% ................................... 3,246,571,180
OTHER ASSETS AND LIABILITIES, NET 1.2% .......................................... 40,698,456
--------------
NET ASSETS 100.0% .............................................................. $3,287,269,636
==============
At February 28, 1995, the net unrealized appreciation based
on the cost of investments for income tax purposes of $3,134,461,183 was as
follows:
Aggregate gross unrealized appreciation for all investments in which there was an excess
of value over tax cost ................................................................ $ 157,200,214
Aggregate gross unrealized depreciation for all investments in which there was an excess
of tax cost over value................................................................. (45,090,217)
--------------
Net unrealized appreciation ............................................................. $ 112,109,997
==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
109
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STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, FEBRUARY 28, 1995 (CONT.)
FRANKLIN HIGH YIELD TAX-FREE INCOME FUND
- --------------------------------------------------------------------------------
PORTFOLIO ABBREVIATIONS:
<TABLE>
<S> <C> <C> <C>
1915 ACT - Improvement Bond Act of 1915 HMR - Home Mortgage Revenue
AD - Assessment District ID - Improvement District
AMBAC - American Municipal Bond Assurance Corp. IDA - Industrial Development Authority/Agency
BAN - Bond Anticipation Notes IDAR - Industrial Development Authority/Agency Revenue
BIG - Bond Investors Guaranty Insurance Co. IDB - Industrial Development Board
CDA - Community Development Agency IDC - Industrial Development Corp.
CDR - Community Development Revenue IDR - Industrial Development Revenue
CFD - Community Facilities District L.P. - Limited Partnership
CRDA - Community Redevelopment Agency MBIA - Municipal Bond Investors Assurance Corp.
COP - Certificate of Participation MFHR - Multi-Family Housing Revenue
EDA - Economic Development Authority MFMR - Multi-Family Mortgage Revenue
EDC - Economic Development Corp. MFR - Multi-Family Revenue
EDR - Economic Development Revenue PCR - Pollution Control Revenue
ETM - Escrow to Maturity PUD - Public Utility District
FGIC - Financial Guaranty Insurance Co. RDA - Redevelopment Agency
FHA - Federal Housing Authority/Agency RHA - Resource Housing of America
FI/GML - Federally Insured or Guaranteed Mortgage Loans SF - Single Family
GNMA - Government National Mortgage Association SFM - Single Family Mortgage
GO - General Obligation SFMR - Single Family Mortgage Revenue
HDA - Housing Development Authority/Agency TRAN - Tax and Revenue Anticipation Notes
HFA - Housing Finance Authority/Agency USD - Unified School District
HFC - Housing Finance Corp. VHA - Young's Town Hospital
</TABLE>
(a)Non-income producing.
(b)See Note 6 regarding defaulted securities.
(c)Zero coupon bonds. The current effective yield may vary. The original
accretion rate will remain constant.
(d)See Note 1 regarding securities purchased on a when-issued basis.
(e)Variable rate demand notes (VRDNs) are tax-exempt obligations which contain a
floating or variable interest rate adjustment formula and an unconditional
right of demand to receive payment of the principal balance plus accrued
interest 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).
(f)See Note 1 regarding securities valued by the Board of Trustees.
(g)The bond pays interest based upon the issuer's ability to pay which may be
less than the stated interest rate.
The accompanying notes are an integral part of these financial statements.
110
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FINANCIAL STATEMENTS
STATEMENTS OF ASSETS AND LIABILITIES
FEBRUARY 28, 1995
<TABLE>
<CAPTION>
FRANKLIN FRANKLIN FRANKLIN FRANKLIN FRANKLIN
ARIZONA COLORADO CONNECTICUT INDIANA NEW JERSEY
TAX-FREE TAX-FREE TAX-FREE TAX-FREE TAX-FREE
INCOME FUND INCOME FUND INCOME FUND INCOME FUND INCOME FUND
------------ ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Assets:
Investments in securities:
At identified cost................................... $679,663,827 $182,661,151 $146,092,122 $43,543,145 $503,622,331
============ ============ ============ =========== ============
At value............................................. 713,876,205 191,954,771 152,841,265 45,787,173 525,340,183
Cash.................................................. 442,010 350,482 374,601 169,531 34,802
Receivables:
Interest............................................. 9,575,864 3,426,585 2,591,741 578,758 8,571,691
Capital shares sold.................................. 1,145,539 299,196 190,645 144,283 1,001,093
Investment securities sold........................... 85,000 165,850 -- -- --
------------ ------------ ------------ ----------- ------------
Total assets..................................... 725,124,618 196,196,884 155,998,252 46,679,745 534,947,769
------------ ------------ ------------ ----------- ------------
Liabilities:
Payables:
Investment securities purchased:
Regular delivery.................................... 1,601,600 1,091,090 -- -- --
When-issued basis (Note 1).......................... 1,005,253 -- -- -- --
Distributions payable to shareholders................ 874,379 234,477 159,708 48,052 536,542
Capital shares repurchased........................... 453,446 186,987 117,688 13,031 164,921
Management fees...................................... 291,153 91,468 75,260 24,322 220,996
Distribution fees.................................... 38,273 12,000 8,912 3,182 28,303
Shareholder servicing costs.......................... 9,500 3,700 2,531 1,026 10,661
Accrued expenses and other liabilities................ 49,945 13,211 10,714 6,675 49,518
------------ ------------ ------------ ----------- ------------
Total liabilities................................ 4,323,549 1,632,933 374,813 96,288 1,010,941
------------ ------------ ------------ ----------- ------------
Net assets, at value................................... $720,801,069 $194,563,951 $155,623,439 $46,583,457 $533,936,828
============ ============ ============ =========== ============
Net assets consist of:
Undistributed net investment income................... $ 1,398,060 $ 331,254 $ 234,709 $ 57,106 $ 544,751
Unrealized appreciation on investments................ 34,212,378 9,293,620 6,749,143 2,244,028 21,717,852
Accumulated net realized loss......................... (1,450,555) (3,762,370) (6,105,286) (1,226,967) (10,520,293)
Capital shares........................................ 686,641,186 188,701,447 154,744,873 45,509,290 522,194,518
------------ ------------ ------------ ----------- ------------
Net assets, at value................................... $720,801,069 $194,563,951 $155,623,439 $46,583,457 $533,936,828
============ ============ ============ =========== ============
Shares outstanding..................................... 64,885,691 17,095,446 14,621,232 4,087,558 47,326,824
============ ============ ============ =========== ============
Net asset value per share.............................. $11.11 $11.38 $10.64 $11.40 $11.28
============ ============ ============ =========== ============
Representative computation (Franklin Arizona Tax-Free
Income Fund) of net asset value and offering price
per share:
Net asset value and redemption price per share
($720,801,069 / 64,885,691)......................... $11.11
============
Maximum offering price* (100/95.75 of $11.11)........ $11.60
============
</TABLE>
*The maximum offering price for Franklin Federal Intermediate-Term Tax-Free
Income Fund is calculated at 100/97.75 of $10.48.
The accompanying notes are an integral part of these financial statements.
111
<PAGE>
FRANKLIN TAX-FREE TRUST
================================================================================
FINANCIAL STATEMENTS (CONT.)
STATEMENTS OF ASSETS AND LIABILITIES (CONT.)
FEBRUARY 28, 1995
<TABLE>
<CAPTION>
FRANKLIN
FRANKLIN FRANKLIN FRANKLIN FEDERAL FRANKLIN
OREGON PENNSYLVANIA PUERTO RICO INTERMEDIATE- HIGH YIELD
TAX-FREE TAX-FREE TAX-FREE TERM TAX-FREE TAX-FREE
INCOME FUND INCOME FUND INCOME FUND INCOME FUND INCOME FUND
------------ ------------ ------------ ----------- --------------
<S> <C> <C> <C> <C> <C>
Assets:
Investments in securities:
At identified cost................................. $331,689,683 $549,992,198 $167,745,111 $73,692,480 $3,134,453,308
============ ============ ============ =========== ==============
At value........................................... 343,839,264 577,218,192 174,165,122 73,163,599 3,246,571,180
Cash................................................ 103,254 197,474 138,753 280,216 1,545,258
Receivables:
Interest........................................... 5,730,849 10,815,473 2,720,902 1,144,458 66,597,400
Capital shares sold................................ 435,357 736,851 263,569 89,694 7,183,517
Investment securities sold......................... -- 100,000 -- -- 1,113,757
------------ ------------ ------------ ----------- --------------
Total assets................................... 350,108,724 589,067,990 177,288,346 74,677,967 3,323,011,112
------------ ------------ ------------ ----------- --------------
Liabilities:
Payables:
Investment securities purchased:
Regular delivery.................................. -- -- -- -- 178,466
When-issued basis (Note 1)........................ -- -- -- 364,087 26,723,975
Distributions payable to shareholders.............. 346,861 751,935 222,321 78,858 3,991,287
Capital shares repurchased......................... 102,508 629,864 44,697 231,518 3,182,907
Management fees.................................... 151,862 241,141 84,110 13,956 1,253,292
Distribution fees.................................. 23,000 31,800 9,400 2,978 173,781
Shareholder servicing costs........................ 6,000 12,743 4,140 1,318 55,820
Accrued expenses and other liabilities.............. 20,611 34,513 36,177 7,960 181,948
------------ ------------ ------------ ----------- --------------
Total liabilities.............................. 650,842 1,701,996 400,845 700,675 35,741,476
------------ ------------ ------------ ----------- --------------
Net assets, at value................................. $349,457,882 $587,365,994 $176,887,501 $73,977,292 $3,287,269,636
============ ============ ============ =========== ==============
Net assets consist of:
Undistributed net investment income................. $ 998,757 $ 1,121,082 $ 151,704 $ 164,387 $ 2,525,462
Unrealized appreciation (depreciation) on
investments 12,149,581 27,225,994 6,420,011 (528,881) 112,117,872
Accumulated net realized loss....................... (5,417,338) (4,826,239) (794,685) (1,095,472) (56,400,427)
Capital shares...................................... 341,726,882 563,845,157 171,110,471 75,437,258 3,229,026,729
------------ ------------ ------------ ----------- --------------
Net assets, at value................................. $349,457,882 $587,365,994 $176,887,501 $73,977,292 $3,287,269,636
============ ============ ============ =========== ==============
Shares outstanding................................... 31,142,756 57,830,693 15,641,338 7,060,177 305,971,497
============ ============ ============ =========== ==============
Net asset value per share............................ $11.22 $10.16 $11.31 $10.48 $10.74
============ ============ ============ =========== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
112
<PAGE>
FRANKLIN TAX-FREE TRUST
================================================================================
FINANCIAL STATEMENTS (CONT.)
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED FEBRUARY 28, 1995
<TABLE>
<CAPTION>
FRANKLIN FRANKLIN FRANKLIN FRANKLIN FRANKLIN
ARIZONA COLORADO CONNECTICUT INDIANA NEW JERSEY
TAX-FREE TAX-FREE TAX-FREE TAX-FREE TAX-FREE
INCOME FUND INCOME FUND INCOME FUND INCOME FUND INCOME FUND
------------ ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Investment income:
Interest (Note 1)........................................ $ 47,977,783 $12,748,674 $10,080,430 $ 3,041,275 $ 34,618,066
------------ ----------- ----------- ----------- ------------
Expenses:
Management fees, net (Note 5)............................ 3,571,548 1,081,347 892,225 284,741 2,640,430
Distribution fees (Note 5)............................... 428,271 113,332 90,379 27,021 310,985
Shareholder servicing costs (Note 5)..................... 131,426 44,454 31,986 13,130 133,503
Reports to shareholders.................................. 125,058 42,426 29,151 14,715 122,836
Custodian fees........................................... 73,299 19,088 15,187 4,487 52,693
Registration and filing fees............................. 33,345 16,267 14,049 6,282 45,785
Professional fees........................................ 21,604 7,256 6,263 2,165 16,536
Trustees' fees and expenses.............................. 12,661 3,253 2,612 776 9,070
Other.................................................... 38,490 19,496 12,626 16,279 28,411
------------ ----------- ----------- ----------- ------------
Total expenses...................................... 4,435,702 1,346,919 1,094,478 369,596 3,360,249
------------ ----------- ----------- ----------- ------------
Net investment income (Note 8)..................... 43,542,081 11,401,755 8,985,952 2,671,679 31,257,817
------------ ----------- ----------- ----------- ------------
Realized and unrealized loss on investments:
Net realized loss........................................ (958,178) (3,447,577) (5,843,688) (1,083,250) (9,684,159)
Net unrealized depreciation ............................. (33,237,886) (6,337,878) (2,866,190) (1,368,046) (17,099,995)
------------ ----------- ----------- ----------- ------------
Net realized and unrealized loss on investments..... (34,196,064) (9,785,455) (8,709,878) (2,451,296) (26,784,154)
------------ ----------- ----------- ----------- ------------
Net increase in net assets resulting from operations...... $ 9,346,017 $ 1,616,300 $ 276,074 $ 220,383 $ 4,473,663
============ =========== =========== =========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
113
<PAGE>
FRANKLIN TAX-FREE TRUST
================================================================================
FINANCIAL STATEMENTS (CONT.)
STATEMENTS OF OPERATIONS (CONT.)
FOR THE YEAR ENDED FEBRUARY 28, 1995
<TABLE>
<CAPTION>
FRANKLIN
FRANKLIN FRANKLIN FRANKLIN FEDERAL FRANKLIN
OREGON PENNSYLVANIA PUERTO RICO INTERMEDIATE- HIGH YIELD
TAX-FREE TAX-FREE TAX-FREE TERM TAX-FREE TAX-FREE
INCOME FUND INCOME FUND INCOME FUND INCOME FUND INCOME FUND
------------ ------------ ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Investment income:
Interest (Note 1)...................................... $ 22,449,338 $ 39,766,712 $11,532,268 $ 4,206,338 $ 244,709,593
------------ ------------ ----------- ----------- -------------
Expenses:
Management fees, net (Note 5).......................... 1,831,692 2,880,051 986,561 250,402 14,863,761
Distribution fees (Note 5)............................. 210,327 343,475 100,210 38,867 1,918,113
Shareholder servicing costs (Note 5)................... 72,205 151,414 52,869 15,897 711,520
Reports to shareholders................................ 73,342 150,189 43,134 25,312 682,181
Custodian fees......................................... 34,983 58,018 16,956 7,277 321,080
Registration and filing fees........................... 26,469 47,283 30,370 44,331 331,762
Professional fees...................................... 11,301 18,380 20,400 4,388 351,926
Trustees' fees and expenses............................ 6,012 9,979 2,920 -- 56,009
Other.................................................. 22,185 42,959 9,762 16,902 151,617
------------ ------------ ----------- ----------- -------------
Total expenses.................................... 2,288,516 3,701,748 1,263,182 403,376 19,387,969
------------ ------------ ----------- ----------- -------------
Net investment income (Note 8)................... 20,160,822 36,064,964 10,269,086 3,802,962 225,321,624
------------ ------------ ----------- ----------- -------------
Realized and unrealized loss on investments:
Net realized loss...................................... (5,072,515) (4,262,862) (429,424) (1,082,205) (23,498,580)
Net unrealized depreciation............................ (11,526,013) (20,108,962) (7,065,161) (1,170,078) (130,650,901)
------------ ------------ ----------- ----------- -------------
Net realized and unrealized loss on investments... (16,598,528) (24,371,824) (7,494,585) (2,252,283) (154,149,481)
------------ ------------ ----------- ----------- -------------
Net increase in net assets resulting from operations.... $ 3,562,294 $ 11,693,140 $ 2,774,501 $ 1,550,679 $ 71,172,143
============ ============ =========== =========== =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
114
<PAGE>
FRANKLIN TAX-FREE TRUST
================================================================================
FINANCIAL STATEMENTS (CONT.)
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED FEBRUARY 28, 1995 AND 1994
<TABLE>
<CAPTION>
FRANKLIN ARIZONA FRANKLIN COLORADO
TAX-FREE INCOME FUND TAX-FREE INCOME FUND
--------------------------- ---------------------------
1995 1994 1995 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income............................................. $ 43,542,081 $ 43,060,879 $ 11,401,755 $ 10,374,456
Net realized gain (loss) from security transactions............... (958,178) 2,167,355 (3,447,577) (48,802)
Net unrealized appreciation (depreciation) on investments......... (33,237,886) (1,451,799) (6,337,878) 1,198,857
------------ ------------ ------------ ------------
Net increase in net assets resulting from operations.......... 9,346,017 43,776,435 1,616,300 11,524,511
Distributions to shareholders from undistributed net investment
income (Note 8) ................................................. (43,002,825) (43,768,763) (11,268,015) (10,448,564)
Increase (decrease) in net assets from capital share transactions
(Note 2).......................................................... (42,380,232) 89,128,757 2,057,974 41,801,490
------------ ------------ ------------ ------------
Net increase (decrease) in net assets......................... (76,037,040) 89,136,429 (7,593,741) 42,877,437
Net assets:
Beginning of year.................................................. 796,838,109 707,701,680 202,157,692 159,280,255
------------ ------------ ------------ ------------
End of year........................................................ $720,801,069 $796,838,109 $194,563,951 $202,157,692
============ ============ ============ ============
Undistributed net investment income included in net assets:
Beginning of year.................................................. $ 858,804 $ 1,566,688 $ 197,514 $ 271,622
============ ============ ============ ============
End of year........................................................ $ 1,398,060 $ 858,804 $ 331,254 $ 197,514
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
115
<PAGE>
FRANKLIN TAX-FREE TRUST
================================================================================
FINANCIAL STATEMENTS (CONT.)
STATEMENTS OF CHANGES IN NET ASSETS (CONT.)
FOR THE YEARS ENDED FEBRUARY 28, 1995 AND 1994
<TABLE>
<CAPTION>
FRANKLIN CONNECTICUT FRANKLIN INDIANA
TAX-FREE INCOME FUND TAX-FREE INCOME FUND
--------------------------- -------------------------
1995 1994 1995 1994
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income................................................ $ 8,985,952 $ 8,216,870 $ 2,671,679 $ 2,423,367
Net realized gain (loss) from security transactions.................. (5,843,688) 163,733 (1,083,250) (115,564)
Net unrealized appreciation (depreciation) on investments............ (2,866,190) 579,348 (1,368,046) 372,216
------------ ------------ ----------- -----------
Net increase in net assets resulting from operations............. 276,074 8,959,951 220,383 2,680,019
Distributions to shareholders from undistributed net investment income
(Note 8)............................................................. (8,897,480) (8,245,310) (2,657,277) (2,415,719)
Increase in net assets from capital share transactions (Note 2)....... 1,194,454 35,520,199 1,150,812 10,238,426
------------ ------------ ----------- -----------
Net increase (decrease) in net assets............................ (7,426,952) 36,234,840 (1,286,082) 10,502,726
Net assets:
Beginning of year..................................................... 163,050,391 126,815,551 47,869,539 37,366,813
------------ ------------ ----------- -----------
End of year........................................................... $155,623,439 $163,050,391 $46,583,457 $47,869,539
============ ============ =========== ===========
Undistributed net investment income included in net assets:
Beginning of year..................................................... $ 146,237 $ 174,677 $ 42,704 $ 35,056
============ ============ =========== ===========
End of year........................................................... $ 234,709 $ 146,237 $ 57,106 $ 42,704
============ ============ =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
116
<PAGE>
FRANKLIN TAX-FREE TRUST
================================================================================
FINANCIAL STATEMENTS (CONT.)
STATEMENTS OF CHANGES IN NET ASSETS (CONT.)
FOR THE YEARS ENDED FEBRUARY 28, 1995 AND 1994
<TABLE>
<CAPTION>
FRANKLIN NEW JERSEY FRANKLIN OREGON FRANKLIN PENNSYLVANIA
TAX-FREE INCOME FUND TAX-FREE INCOME FUND TAX-FREE INCOME FUND
--------------------------- --------------------------- ---------------------------
1995 1994 1995 1994 1995 1994
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income................... $ 31,257,817 $ 28,306,325 $ 20,160,822 $ 19,012,196 $ 36,064,964 $ 33,483,715
Net realized gain (loss) from security
transactions........................... (9,684,159) (816,160) (5,072,515) (54,202) (4,262,862) 502,951
Net unrealized depreciation
on investments......................... (17,099,995) (524,329) (11,526,013) (1,162,634) (20,108,962) (440,476)
------------ ------------ ------------ ------------ ------------ ------------
Net increase in net assets
resulting from operations.......... 4,473,663 26,965,836 3,562,294 17,795,360 11,693,140 33,546,190
Distributions to shareholders from
undistributed net investment income
(Note 8)................................ (30,972,890) (28,824,200) (19,631,598) (19,045,652) (35,690,544) (33,696,946)
Increase (decrease) in net assets from
capital share transactions (Note 2)..... (693,692) 129,286,136 (10,156,638) 73,214,689 (4,182,136) 109,850,819
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in net
assets............................. (27,192,919) 127,427,772 (26,225,942) 71,964,397 (28,179,540) 109,700,063
Net assets:
Beginning of year........................ 561,129,747 433,701,975 375,683,824 303,719,427 615,545,534 505,845,471
------------ ------------ ------------ ------------ ------------ ------------
End of year.............................. $533,936,828 $561,129,747 $349,457,882 $375,683,824 $587,365,994 $615,545,534
============ ============ ============ ============ ============ ============
Undistributed net investment income
included in net assets:
Beginning of year....................... $ 259,824 $ 777,699 $ 469,533 $ 502,989 $ 746,662 $ 959,579
============ ============ ============ ============ ============ ============
End of year............................. $ 544,751 $ 259,824 $ 998,757 $ 469,533 $ 1,121,082 $ 746,662
============ ============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
117
<PAGE>
FRANKLIN TAX-FREE TRUST
================================================================================
FINANCIAL STATEMENTS (CONT.)
STATEMENTS OF CHANGES IN NET ASSETS (CONT.)
FOR THE YEARS ENDED FEBRUARY 28, 1995 AND 1994
<TABLE>
<CAPTION>
FRANKLIN
FRANKLIN PUERTO RICO FEDERAL INTERMEDIATE-TERM FRANKLIN HIGH YIELD
TAX-FREE INCOME FUND TAX-FREE INCOME FUND TAX-FREE INCOME FUND
--------------------------- ------------------------- ------------------------------
1995 1994 1995 1994 1995 1994
------------ ------------ ----------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income................ $ 10,269,086 $ 9,290,717 $ 3,802,962 $ 1,828,527 $ 225,321,624 $ 209,813,446
Net realized loss from security
transactions........................ (429,424) (120,033) (1,082,205) (13,267) (23,498,580) (32,087,278)
Net unrealized appreciation
(depreciation) on investments......... (7,065,161) 213,990 (1,170,078) 395,231 (130,650,901) 76,071,675
------------ ------------ ----------- ----------- -------------- --------------
Net increase in net assets
resulting from operations....... 2,774,501 9,384,674 1,550,679 2,210,491 71,172,143 253,797,843
Distributions to shareholders from
undistributed net investment income
(Note 8)............................. (10,528,194) (9,358,331) (3,704,591) (1,800,704) (225,313,301) (213,633,875)
Increase in net assets from
capital share transactions (Note 2).. 9,605,221 30,203,734 8,528,230 58,001,366 68,877,600 589,604,213
------------ ------------ ----------- ----------- -------------- --------------
Net increase (decrease) in net
assets.......................... 1,851,528 30,230,077 6,374,318 58,411,153 (85,263,558) 629,768,181
Net assets:
Beginning of year..................... 175,035,973 144,805,896 67,602,974 9,191,821 3,372,533,194 2,742,765,013
------------ ------------ ----------- ----------- -------------- --------------
End of year........................... $176,887,501 $175,035,973 $73,977,292 $67,602,974 $3,287,269,636 $3,372,533,194
============ ============ =========== =========== ============== ==============
Undistributed net investment income
included in net assets:
Beginning of year.................... $ 410,812 $ 478,426 $ 66,016 $ 38,193 $ 2,517,139 $ 6,337,568
============ ============ =========== =========== ============== ==============
End of year.......................... $ 151,704 $ 410,812 $ 164,387 $ 66,016 $ 2,525,462 $ 2,517,139
============ ============ =========== =========== ============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
118
<PAGE>
FRANKLIN TAX-FREE TRUST
================================================================================
NOTES TO FINANCIAL STATEMENTS
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 Connecticut Tax-Free Income Fund and the Franklin Federal
Intermediate-Term Tax-Free Income Fund are non-diversified, although all other
Funds included in this report are diversified.
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
ask 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 of 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 investment income differs for financial statement and tax purposes primarily
due to differing treatments of defaulted securities -- see Note 6.
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.
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.
119
<PAGE>
FRANKLIN TAX-FREE TRUST
================================================================================
NOTES TO FINANCIAL STATEMENTS (CONT.)
2. TRUST SHARES
At February 28, 1995, there were an unlimited number of no par value shares of
beneficial interest authorized. Transactions in each of the Funds' shares for
the years ended February 28, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
FRANKLIN ARIZONA FRANKLIN COLORADO FRANKLIN CONNECTICUT
TAX-FREE INCOME FUND TAX-FREE INCOME FUND TAX-FREE INCOME FUND
------------------------- ------------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ------------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
1995
Shares sold................................... 5,646,769 $ 62,441,554 1,955,372 $ 22,063,990 1,666,535 $ 17,694,383
Shares issued in reinvestment of distributions 1,384,253 15,228,881 455,423 5,103,940 375,978 3,969,521
Shares redeemed............................... (9,414,765) (103,131,385) (2,107,989) (23,560,686) (1,845,431) (19,542,325)
Changes from exercise of exchange privilege:
Shares sold.................................... 2,264,505 24,916,493 657,508 7,362,556 557,731 5,870,205
Shares redeemed................................ (3,821,650) (41,835,775) (799,379) (8,911,826) (648,275) (6,797,330)
---------- ------------- ---------- ------------ ---------- ------------
Net increase (decrease)........................ (3,940,888) $ (42,380,232) 160,935 $ 2,057,974 106,538 $ 1,194,454
========== ============= ========== ============ ========== ============
1994
Shares sold................................... 10,731,345 $ 124,909,839 3,903,990 $ 46,699,264 3,545,800 $ 39,948,225
Shares issued in reinvestment of distributions 1,190,334 13,872,249 356,019 4,260,259 303,266 3,420,636
Shares redeemed............................... (4,697,506) (54,750,815) (1,235,128) (14,793,458) (902,414) (10,186,672)
Changes from exercise of exchange privilege:
Shares sold.................................... 1,978,191 23,073,197 872,731 10,457,740 514,425 5,790,651
Shares redeemed................................ (1,544,073) (17,975,713) (403,026) (4,822,315) (306,465) (3,452,641)
---------- ------------- ---------- ------------ ---------- ------------
Net increase................................... 7,658,291 $ 89,128,757 3,494,586 $ 41,801,490 3,154,612 $ 35,520,199
========== ============= ========== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
FRANKLIN INDIANA FRANKLIN NEW JERSEY FRANKLIN OREGON FRANKLIN PENNSYLVANIA
TAX-FREE INCOME FUND TAX-FREE INCOME FUND TAX-FREE INCOME FUND TAX-FREE INCOME FUND
----------------------- ------------------------- ------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
--------- ----------- ---------- ------------ ---------- ------------ ---------- ------------
1995
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold.......... 479,238 $ 5,481,873 5,599,603 $ 62,811,165 2,739,651 $ 30,534,821 5,893,160 $ 59,562,177
Shares issued in
reinvestment of
distributions....... 123,848 1,403,344 1,350,479 15,038,104 958,138 10,573,320 1,390,042 13,969,534
Shares redeemed...... (381,926) (4,328,500) (6,523,437) (72,511,291) (4,406,311) (48,518,404) (7,598,699) (76,334,718)
Changes from
exercise of
exchange privilege:
Shares sold........ 240,554 2,738,742 1,372,794 15,366,322 1,036,928 11,489,741 1,148,739 11,498,117
Shares redeemed.... (361,248) (4,144,647) (1,930,232) (21,397,992) (1,297,824) (14,236,116) (1,274,014) (12,877,246)
--------- ----------- ---------- ------------ ---------- ------------ ---------- ------------
Net increase
(decrease)........... 100,466 $ 1,150,812 (130,793) $ (693,692) (969,418) $(10,156,638) (440,772) $ (4,182,136)
========= =========== ========== ============ ========== ============ ========== ============
1994
Shares sold.......... 1,275,280 $15,344,871 12,844,291 $153,010,120 7,291,665 $ 85,851,067 12,436,846 $132,160,316
Shares issued in
reinvestment of
distributions....... 99,283 1,195,794 1,079,918 12,870,266 777,027 9,156,392 1,110,313 11,798,953
Shares redeemed...... (493,716) (5,902,005) (3,031,217) (36,155,593) (2,405,841) (28,382,167) (3,610,572) (38,344,857)
Changes from
exercise of
exchange privilege:
Shares sold........ 234,890 2,835,671 1,223,509 14,566,749 1,328,080 15,643,163 1,374,918 14,606,798
Shares redeemed.... (268,675) (3,235,905) (1,261,880) (15,005,406) (766,167) (9,053,766) (975,101) (10,370,391)
--------- ----------- ---------- ------------ ---------- ------------ ---------- ------------
Net increase.......... 847,062 $10,238,426 10,854,621 $129,286,136 6,224,764 $ 73,214,689 10,336,404 $109,850,819
========= =========== ========== ============ ========== ============ ========== ============
</TABLE>
120
<PAGE>
FRANKLIN TAX-FREE TRUST
================================================================================
NOTES TO FINANCIAL STATEMENTS (CONT.)
2. TRUST SHARES (CONT.)
<TABLE>
<CAPTION>
FRANKLIN FEDERAL
FRANKLIN PUERTO RICO INTERMEDIATE-TERM FRANKLIN HIGH YIELD
TAX-FREE INCOME FUND TAX-FREE INCOME FUND TAX-FREE INCOME FUND
------------------------- ------------------------ ---------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
1995
Shares sold.................................. 1,906,311 $ 21,445,195 2,003,138 $ 20,888,755 36,186,846 $ 387,896,565
Shares issued in reinvestment of
distributions 430,325 4,807,107 194,246 2,014,030 7,406,651 78,941,613
Shares redeemed.............................. (1,389,460) (15,447,536) (1,474,415) (15,261,079) (35,286,473) (374,860,989)
Changes from exercise of exchange privilege:
Shares sold................................. 562,606 6,169,049 2,030,746 21,044,664 16,990,981 180,683,638
Shares redeemed............................. (670,010) (7,368,594) (1,953,247) (20,158,140) (19,190,861) (203,783,227)
---------- ------------ ---------- ------------ ----------- -------------
Net increase.................................. 839,772 $ 9,605,221 800,468 $ 8,528,230 6,107,144 $ 68,877,600
========== ============ ========== ============ =========== =============
1994
Shares sold.................................. 3,383,748 $ 40,176,539 4,213,747 $ 45,372,770 68,715,489 $ 769,333,841
Shares issued in reinvestment of
distributions 327,573 3,890,149 89,826 972,049 5,995,877 67,208,174
Shares redeemed.............................. (1,034,636) (12,281,340) (353,985) (3,845,607) (20,804,398) (233,218,712)
Changes from exercise of exchange privilege:
Shares sold................................. 244,614 2,910,335 1,812,152 19,576,758 11,970,484 134,417,257
Shares redeemed............................. (378,581) (4,491,949) (373,747) (4,074,604) (13,198,255) (148,136,347)
---------- ------------ ---------- ------------ ----------- -------------
Net increase.................................. 2,542,718 $ 30,203,734 5,387,993 $ 58,001,366 52,679,197 $ 589,604,213
========== ============ ========== ============ =========== =============
</TABLE>
3. DISTRIBUTIONS AND CAPITAL LOSS CARRYOVERS
At February 28, 1995, for tax purposes, the Funds had accumulated net capital
loss carryovers as follows:
<TABLE>
<CAPTION>
FRANKLIN FRANKLIN FRANKLIN FRANKLIN FRANKLIN
ARIZONA COLORADO CONNECTICUT INDIANA NEW JERSEY
TAX-FREE TAX-FREE TAX-FREE TAX-FREE TAX-FREE
INCOME FUND INCOME FUND INCOME FUND INCOME FUND INCOME FUND
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Capital loss carryovers
Expiring in: 1997....................................... -- -- -- $ 3,344 --
1999....................................... -- $ 31,579 -- 24,809 --
2001....................................... $ 479,467 224,977 $ 261,598 -- --
2002....................................... -- 57,349 -- 115,564 $ 836,134
2003....................................... 958,178 3,447,577 5,817,978 1,083,250 9,684,159
---------- ---------- ---------- ---------- -----------
$1,437,645 $3,761,482 $6,079,576 $1,226,967 $10,520,293
========== ========== ========== ========== ===========
<CAPTION>
FRANKLIN FRANKLIN FRANKLIN FRANKLIN FRANKLIN
OREGON PENNSYLVANIA PUERTO RICO INTERMEDIATE- HIGH YIELD
TAX-FREE TAX-FREE TAX-FREE TERM TAX-FREE TAX-FREE
INCOME FUND INCOME FUND INCOME FUND INCOME FUND INCOME FUND
----------- ------------ ----------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Expiring in: 1996....................................... -- -- $138,864 -- --
1997....................................... -- -- 47,310 -- --
1999....................................... $ 24,807 $ 132,175 25,692 -- --
2000....................................... -- 122,364 -- -- --
2001....................................... 262,334 308,838 -- -- --
2002....................................... 54,202 -- 120,112 $ 13,267 $32,890,733
2003....................................... 5,072,515 4,262,862 429,583 1,082,205 23,501,819
---------- ---------- -------- ---------- -----------
$5,413,858 $4,826,239 $761,561 $1,095,472 $56,392,552
========== ========== ======== ========== ===========
</TABLE>
For tax purposes, the aggregate cost of securities is higher (and unrealized
appreciation is lower) than for financial reporting purposes at February 28,
1995 by $12,910 in the Franklin Arizona Tax-Free Income Fund, $888 in the
Franklin Colorado Tax-Free Income Fund, $25,710 in the Franklin Connecticut
Tax-Free Income Fund, $33,124 in the Franklin Puerto Rico Tax-Free Income Fund
and $7,875 in the Franklin High Yield Tax-Free Income Fund.
121
<PAGE>
FRANKLIN TAX-FREE TRUST
================================================================================
NOTES TO FINANCIAL STATEMENTS (CONT.)
4. PURCHASES AND SALES OF SECURITIES
Aggregate purchases and sales of securities (excluding purchases and sales of
short-term securities) for the year ended February 28, 1995, were as follows:
<TABLE>
<CAPTION>
FRANKLIN FRANKLIN FRANKLIN FRANKLIN FRANKLIN
ARIZONA COLORADO CONNECTICUT INDIANA NEW JERSEY
TAX-FREE TAX-FREE TAX-FREE TAX-FREE TAX-FREE
INCOME FUND INCOME FUND INCOME FUND INCOME FUND INCOME FUND
------------ ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Purchases............................. $136,555,948 $56,530,801 $114,350,525 $11,736,215 $169,071,330
============ =========== ============ =========== ============
Sales................................. $176,665,927 $54,323,620 $115,466,207 $11,884,317 $162,303,927
============ =========== ============ =========== ============
</TABLE>
<TABLE>
<CAPTION>
FRANKLIN
FRANKLIN FRANKLIN FRANKLIN FEDERAL FRANKLIN
OREGON PENNSYLVANIA PUERTO RICO INTERMEDIATE- HIGH YIELD
TAX-FREE TAX-FREE TAX-FREE TERM TAX-FREE TAX-FREE
INCOME FUND INCOME FUND INCOME FUND INCOME FUND INCOME FUND
------------ ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
Purchases............................. $ 92,124,147 $74,800,693 $41,806,543 $38,554,992 $546,177,899
============ =========== =========== =========== ============
Sales................................. $101,551,847 $74,381,275 $31,016,079 $26,262,643 $505,648,718
============ =========== =========== =========== ============
</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 based 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 year ended
February 28, 1995, Franklin Advisers, Inc. agreed in advance to waive $205,463
of the management fees for the Franklin Federal Intermediate-Term 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 received by Franklin/Templeton Distributors, Inc. and the amounts
which were subsequently paid to other dealers for the year ended February 28,
1995 were as follows:
<TABLE>
<CAPTION>
FRANKLIN FRANKLIN FRANKLIN FRANKLIN FRANKLIN
ARIZONA COLORADO CONNECTICUT INDIANA NEW JERSEY
TAX-FREE TAX-FREE TAX-FREE TAX-FREE TAX-FREE
INCOME FUND INCOME FUND INCOME FUND INCOME FUND INCOME FUND
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Total commissions received............................... $2,104,781 $797,125 $642,299 $200,372 $2,338,378
========== ======== ======== ======== ==========
Paid to other dealers.................................... $1,993,589 $752,357 $607,198 $189,725 $2,213,131
========== ======== ======== ======== ==========
</TABLE>
<TABLE>
<CAPTION>
FRANKLIN
FRANKLIN FRANKLIN FRANKLIN FEDERAL FRANKLIN
OREGON PENNSYLVANIA PUERTO RICO INTERMEDIATE- HIGH YIELD
TAX-FREE TAX-FREE TAX-FREE TERM TAX-FREE TAX-FREE
INCOME FUND INCOME FUND INCOME FUND INCOME FUND INCOME FUND
----------- ------------ ----------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Total commissions received............................... $1,145,080 $2,302,144 $787,985 $316,890 $13,569,789
========== ========== ======== ======== ===========
Paid to other dealers.................................... $1,081,696 $2,184,720 $748,163 $275,517 $12,839,593
========== ========== ======== ======== ===========
</TABLE>
Commissions are deducted from the gross proceeds received from the sale of the
Funds' shares, and as such are not expenses of the Funds.
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 ten Funds for the year ended
February 28, 1995 aggregated $1,358,404, of which $1,197,825, 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, which was effective for the Franklin Federal
Intermediate-Term Tax-Free Income Fund prior to March 1, 1994, and which became
effective for the other funds on May 1, 1994, the Funds will reimburse
Franklin/Templeton Distributors, Inc. in an amount up to a maximum of 0.10% per
annum of each Fund's average daily net assets for costs incurred in the
promotion, offering and marketing the Funds' shares. Fees incurred by the Funds
under the agreement aggregated $3,580,980 for the year ended February 28, 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.
122
<PAGE>
FRANKLIN TAX-FREE TRUST
================================================================================
NOTES TO FINANCIAL STATEMENTS (CONT.)
6. CREDIT RISK
Although each of the Funds, other than the Franklin Connecticut Tax-Free Income
Fund and the Franklin Federal Intermediate-Term Tax-Free Income Fund, has a
diversified investment portfolio, all of their investments are in the securities
of issuers within their respective states and U.S. territories and possessions
except for the Franklin Federal Intermediate-Term Tax-Free Income Fund and the
Franklin High Yield Tax-Free Income Fund. The Franklin Federal Intermediate-Term
Tax-Free Income Fund has investments in excess of 10% of its total net assets in
the states of California and Florida. The Franklin High Yield Tax-Free Income
Fund has investments in excess of 10% of its total net assets in the states of
California and New York. Such concentration may subject these Funds more
significantly to economic changes occurring within those states and U.S.
territories and possessions.
Although the Franklin High Yield Tax-Free Income Fund has a diversified
portfolio, the Fund has 31.7% of its portfolio invested in lower rated and
comparable quality unrated high yield securities. Investments in higher yield
securities are accompanied by a greater degree of credit risk and such lower
quality securities tend to be more sensitive to economic conditions than higher
rated securities.
The risk of loss due to default by the issuer may be significantly greater for
the holders of high yielding securities, because such securities are generally
unsecured and are often subordinated to other creditors of the issuer. At
February 28, 1995 the Franklin High Yield Tax-Free Income Fund held two
defaulted securities issued by two separate entities, with a value aggregating
$4,240,000, representing 0.13% of the Fund's net assets. For more information as
to the specific securities, see the accompanying Statement of Investments in
Securities and Net Assets.
For financial reporting purposes, it is the Fund's accounting practice to
discontinue accrual of income and provide an estimate for probable losses due to
unpaid interest income on defaulted bonds for the current reporting period.
7. SUBSEQUENT EVENT
All of the Funds within this report (except for the Franklin Indiana Tax-Free
Income Fund and the Franklin Federal Intermediate-Term Tax-Free Income Fund)
will be offering an additional class of shares effective May 1, 1995.
8. FINANCIAL HIGHLIGHTS
Selected data for each share of beneficial interest outstanding throughout the
year by Fund are as follows:
<TABLE>
<CAPTION>
PER SHARE OPERATING PERFORMANCE
----------------------------------------------------------------------------------------------------------
NET ASSET NET REALIZED DISTRIBUTIONS
VALUE AT NET & UNREALIZED TOTAL FROM FROM NET DISTRIBUTIONS NET ASSET
YEAR ENDED BEGINNING INVESTMENT GAIN (LOSS) INVESTMENT INVESTMENT FROM TOTAL VALUE AT TOTAL
FEBRUARY 28, OF YEAR INCOME ON SECURITIES OPERATIONS INCOME CAPITAL GAINS DISTRIBUTIONS END OF YEAR RETURN++
- ----------------------------------------------------------------------------------------------------------------------------------
FRANKLIN ARIZONA TAX-FREE INCOME FUND:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1991 $10.51 $.70 $ .128 $ .828 $(.768) $-- $(.768) $10.57 7.92%
1992 10.57 .67 .308 .978 (.728) -- (.728) 10.82 9.45
1993 10.82 .68 .733 1.413 (.663) -- (.663) 11.57 13.22
1994 11.57 .66 .020 .680 (.670) -- (.670) 11.58 5.76
1995 11.58 .65 (.481) .169 (.639) -- (.639) 11.11 1.63
<CAPTION>
FRANKLIN COLORADO TAX-FREE INCOME FUND:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1991 10.70 .70 .056 .756 (.756) -- (.756) 10.70 7.07
1992 10.70 .68 .361 1.041 (.741) -- (.741) 11.00 9.93
1993 11.00 .70 .845 1.545 (.695) -- (.695) 11.85 14.26
1994 11.85 .68 .100 .780 (.690) -- (.690) 11.94 6.49
1995 11.94 .67 (.568) .102 (.662) -- (.662) 11.38 1.05
<CAPTION>
FRANKLIN CONNECTICUT TAX-FREE INCOME FUND:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1991 10.36 .64 .024 .664 (.684) -- (.684) 10.34 6.39
1992 10.34 .62 .211 .831 (.681) -- (.681) 10.49 8.16
1993 10.49 .64 .664 1.304 (.634) -- (.634) 11.16 12.60
1994 11.16 .62 .080 .700 (.630) -- (.630) 11.23 6.16
1995 11.23 .62 (.597) .023 (.613) -- (.613) 10.64 .37
<CAPTION>
FRANKLIN INDIANA TAX-FREE INCOME FUND:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1991 10.77 .74 .096 .836 (.776) -- (.776) 10.83 7.78
1992 10.83 .69 .325 1.015 (.775) -- (.775) 11.07 9.53
1993 11.07 .71 .828 1.538 (.708) -- (.708) 11.90 14.10
1994 11.90 .68 .108 .788 (.678) -- (.678) 12.01 6.53
1995 12.01 .66 (.608) .052 (.662) -- (.662) 11.40 .58
<CAPTION>
RATIOS/SUPPLEMENTAL DATA
- ----------------------------------------------------------
RATIO OF NET
RATIO OF INVESTMENT
EXPENSES INCOME PORTFOLIO
NET ASSETS AT END TO AVERAGE TO AVERAGE TURNOVER
OF YEAR (IN 000'S) NET ASSETS** NET ASSETS RATE
- ----------------------------------------------------------
<S> <C> <C> <C>
$412,912 .59% 6.58% 4.13%
585,986 .56 6.37 1.56
707,702 .55 6.11 5.67
796,838 .54 5.65 14.17
720,801 .60 5.86 18.65
69,715 .74 6.54 17.72
110,085 .70 6.44 21.46
159,280 .67 6.20 5.66
202,158 .64 5.69 10.85
194,564 .70 5.94 28.83
48,035 .71 6.10 8.65
88,184 .71 6.11 28.28
126,816 .69 5.97 28.52
163,050 .65 5.54 5.54
155,623 .71 5.83 75.72
14,946 .51 6.91 24.60
23,914 .50 6.60 .03
37,367 .59 6.16 7.98
47,870 .71 5.62 16.12
46,583 .81 5.84 26.49
</TABLE>
123
<PAGE>
FRANKLIN TAX-FREE TRUST
================================================================================
NOTES TO FINANCIAL STATEMENTS (CONT.)
8. FINANCIAL HIGHLIGHTS (CONT.)
<TABLE>
<CAPTION>
PER SHARE OPERATING PERFORMANCE
----------------------------------------------------------------------------------------------------------
NET ASSET NET REALIZED DISTRIBUTIONS
VALUE AT NET & UNREALIZED TOTAL FROM FROM NET DISTRIBUTIONS NET ASSET
YEAR ENDED BEGINNING INVESTMENT GAIN (LOSS) INVESTMENT INVESTMENT FROM TOTAL VALUE AT TOTAL
FEBRUARY 28, OF YEAR INCOME ON SECURITIES OPERATIONS INCOME CAPITAL GAINS DISTRIBUTIONS END OF YEAR RETURN++
- ----------------------------------------------------------------------------------------------------------------------------------
FRANKLIN NEW JERSEY TAX-FREE INCOME FUND:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1991 $10.68 $.69 $ .238 $ .928 $(.768) $-- $(.768) $10.84 8.79%
1992 10.84 .68 .348 1.028 (.708) -- (.708) 11.16 9.65
1993 11.16 .69 .694 1.384 (.688) (.006) (.694) 11.85 12.55
1994 11.85 .67 (.016) .654 (.684) -- (.684) 11.82 5.39
1995 11.82 .66 (.55) .11 (.65) -- (.65) 11.28 1.12
<CAPTION>
FRANKLIN OREGON TAX-FREE INCOME FUND:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1991 10.59 .68 .148 .828 (.708) -- (.708) 10.71 7.87
1992 10.71 .63 .384 1.014 (.704) -- (.704) 11.02 9.61
1993 11.02 .66 .702 1.362 (.652) -- (.652) 11.73 12.52
1994 11.73 .64 (.021) .619 (.649) -- (.649) 11.70 5.15
1995 11.70 .63 (.493) .137 (.617) -- (.617) 11.22 1.36
<CAPTION>
FRANKLIN PENNSYLVANIA TAX-FREE INCOME FUND:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1991 9.65 .65 (.090) .560 (.720) -- (.720) 9.49 5.76
1992 9.49 .64 .380 1.020 (.670) -- (.670) 9.84 10.99
1993 9.84 .64 .703 1.343 (.633) -- (.633) 10.55 13.84
1994 10.55 .63 .014 .644 (.634) -- (.634) 10.56 5.99
1995 10.56 .62 (.406) .214 (.614) -- (.614) 10.16 2.22
<CAPTION>
FRANKLIN PUERTO RICO TAX-FREE INCOME FUND:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1991 10.76 .76 .040 .800 (.720) -- (.720) 10.84 7.45
1992 10.84 .69 .301 .991 (.711) -- (.711) 11.12 9.31
1993 11.12 .70 .673 1.373 (.683) -- (.683) 11.81 12.48
1994 11.81 .68 .034 .714 (.694) -- (.694) 11.83 5.95
1995 11.83 .67 (.504) .166 (.686) -- (.686) 11.31 1.60
<CAPTION>
FRANKLIN FEDERAL INTERMEDIATE-TERM TAX-FREE INCOME FUND:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1993(1) 10.00 .14 .499 .639 (.099) -- (.099) 10.54 14.77*
1994 10.54 .52 .289 .809 (.549) -- (.549) 10.80 7.82
1995 10.80 .54 (.331) .209 (.529) -- (.529) 10.48 (.20)
<CAPTION>
FRANKLIN HIGH YIELD TAX-FREE INCOME FUND:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1991 10.54 .82 (.210) .610 (.840) -- (.840) 10.31 5.71
1992 10.31 .78 .230 1.010 (.840) -- (.840) 10.48 9.97
1993 10.48 .79 .624 1.414 (.784) (.010) (.794) 11.10 13.72
1994 11.10 .76 .169 .929 (.779) -- (.779) 11.25 8.33
1995 11.25 .74 (.509) .231 (.741) -- (.741) 10.74 2.28
<CAPTION>
RATIOS/SUPPLEMENTAL DATA
- ----------------------------------------------------------
RATIO OF NET
RATIO OF INVESTMENT
EXPENSES INCOME PORTFOLIO
NET ASSETS AT END TO AVERAGE TO AVERAGE TURNOVER
OF YEAR (IN 000'S) NET ASSETS** NET ASSETS RATE
- ----------------------------------------------------------
<S> <C> <C> <C>
$ 258,514 .65% 6.40% 1.84%
332,536 .60 6.30 3.66
433,702 .59 6.06 14.12
561,130 .57 5.60 4.16
533,937 .63 5.86 31.05
123,486 .70 6.40 10.74
208,972 .65 6.09 4.65
303,719 .62 5.87 7.78
375,684 .58 5.47 9.42
349,458 .65 5.71 26.44
305,592 .62 6.82 5.23
391,301 .59 6.71 4.44
505,845 .58 6.34 5.87
615,546 .56 5.90 4.73
587,366 .63 6.15 12.91
91,601 .70 7.08 6.09
112,714 .70 6.45 15.01
144,806 .69 6.18 10.37
175,036 .66 5.77 5.10
176,888 .73 5.95 18.30
9,192 -- 5.49* 22.54
67,603 .30 4.93 28.76
73,977 .56 5.25 38.46
1,718,082 .52 7.90 70.60
2,110,055 .53 7.73 102.57
2,742,765 .54 7.45 33.46
3,372,533 .53 6.79 16.09
3,287,270 .60 6.92 15.89
</TABLE>
*Annualized
(1)For the period September 21, 1992 (effective date of registration) to
February 28, 1993.
**During the periods indicated below, Franklin Advisers, Inc., the investment
manager, agreed in advance to waive a portion of its management fees and made
payments of other expenses incurred by the Funds. Had such action not been
taken, ratios of operating expenses to average net assets would have been as
follows:
<TABLE>
<CAPTION>
RATIO OF EXPENSES
TO AVERAGE NET ASSETS
---------------------
<S> <C>
FRANKLIN CONNECTICUT TAX-FREE INCOME FUND
1991..................................................... 0.72%
FRANKLIN INDIANA TAX-FREE INCOME FUND
1991..................................................... 0.74
1992..................................................... 0.74
1993..................................................... 0.73
FRANKLIN FEDERAL INTERMEDIATE-TERM TAX-FREE INCOME FUND
19931.................................................... 1.60*
1994..................................................... 0.89
1995..................................................... 0.84
</TABLE>
++Total return measures the change in value of an investment over the periods
indicated. It is not annualized. It does not include the maximum initial sales
charge, and assumes reinvestment of dividends at net asset value for the
Franklin Federal Intermediate-Term Tax-Free Income Fund, and at the maximum
offering price for the other Funds, and of capital gains, if any, at net asset
value. Effective May 1, 1994, with the implementation of the Rule 12b-1
distribution plan, as discussed in Note 5, the Funds' existing sales charges on
reinvested dividends were estimated.
***************************************************************************
* During this fiscal year, each Fund paid distributions from *
* undistributed net investment income in the amounts shown in the *
* Statement of Changes in Net Assets. Each Fund hereby designates *
* the total amount of these distributions as exempt-interest dividends *
* under Section 852(b)(5) of the Internal Revenue Code. *
***************************************************************************
124
<PAGE>
FRANKLIN TAX-FREE TRUST
================================================================================
REPORT OF INDEPENDENT AUDITORS
To the Shareholders and Board of Trustees
of Franklin Tax-Free Trust:
We have audited the accompanying statements of assets and liabilities of the
funds comprising the Franklin Tax-Free Trust, including each Fund's statement of
investments in securities and net assets, as of February 28, 1995, and the
related statements of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the periods indicated thereon. These
financial statements and financial highlights are the responsibility of the
Trust's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
February 28, 1995 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
funds comprising the Franklin Tax-Free Trust as of February 28, 1995, the
results of their operations for the year then ended, the changes in their net
assets for each of the two years in the period then ended, and the financial
highlights for each of the periods indicated thereon, in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
San Francisco, California
April 4, 1995
125
<PAGE>
Franklin Tax-Free Trust III
APPENDIX
DESCRIPTION OF GRAPHIC MATERIAL OMITTED FROM EDGAR FILING
(PURSUANT TO ITEM 304 (a) of REGULATION S-T)
GRAPHIC MATERIAL (1)
This pie chart shows the fund's securities breakdown by quality as a percentage
of the fund's total net assets.
Portfolio Breakdown on 2/28/95
AAA 68.6%
AA 9.4%
A 8.9%
BBB 13.1%
GRAPHIC MATERIAL (2)
This bar chart shows the comparison between the fund's distribution rate of
5.59% and the taxable equivalent distribution rate of 9.95%.
GRAPHIC MATERIAL (3)
The following line graph hypothetically compares the performance of the Franklin
Arizona Tax-Free Income Fund to that of the Lehman Brothers Municipal Bond Index
and the Consumer Price Index (CPI), based on a $10,000 investment from 9/1/87
and 2/28/95.
Date Arizona Tax-Free LB Muni Index CPI
9/1/87 9,573 10,000 10,000
9/30/87 8,947 -3.69% 9,631 0.52% 10,052
10/31/87 8,994 0.35% 9,665 0.26% 10,078
11/30/87 9,364 2.61% 9,917 0.09% 10,087
12/31/87 9,545 1.45% 10,061 0.00% 10,087
1/31/88 9,928 3.56% 10,419 0.26% 10,113
2/29/88 10,053 1.06% 10,529 0.26% 10,140
3/31/88 9,851 -1.16% 10,407 0.43% 10,183
4/30/88 9,880 0.76% 10,486 0.52% 10,236
5/31/88 9,919 -0.29% 10,456 0.34% 10,271
6/30/88 10,107 1.46% 10,609 0.43% 10,315
7/31/88 10,107 0.65% 10,678 0.42% 10,359
8/31/88 10,151 0.09% 10,687 0.42% 10,402
9/30/88 10,365 1.81% 10,881 0.67% 10,472
10/31/88 10,602 1.76% 11,072 0.33% 10,506
11/30/88 10,506 -0.92% 10,970 0.08% 10,515
12/31/88 10,653 1.02% 11,082 0.17% 10,533
1/31/89 10,874 2.07% 11,311 0.50% 10,585
2/28/89 10,774 -1.14% 11,183 0.41% 10,629
3/31/89 10,748 -0.24% 11,156 0.58% 10,690
4/30/89 10,993 2.37% 11,420 0.65% 10,760
5/31/89 11,229 2.08% 11,658 0.57% 10,821
6/30/89 11,371 1.36% 11,816 0.24% 10,847
7/31/89 11,471 1.36% 11,977 0.24% 10,873
8/31/89 11,389 -0.98% 11,859 0.16% 10,891
9/30/89 11,329 -0.30% 11,824 0.32% 10,925
10/31/89 11,431 1.22% 11,968 0.48% 10,978
11/30/89 11,599 1.75% 12,178 0.24% 11,004
12/31/89 11,692 0.82% 12,277 0.16% 11,022
1/31/90 11,607 -0.47% 12,220 1.03% 11,135
2/28/90 11,745 0.89% 12,329 0.47% 11,188
3/31/90 11,750 0.03% 12,332 0.55% 11,249
4/30/90 11,686 -0.72% 12,243 0.16% 11,267
5/31/90 11,929 2.18% 12,510 0.23% 11,293
6/30/90 12,047 0.88% 12,620 0.54% 11,354
7/31/90 12,247 1.48% 12,807 0.38% 11,397
8/31/90 11,929 -1.45% 12,622 0.92% 11,502
9/30/90 11,921 0.06% 12,629 0.84% 11,599
10/31/90 12,102 1.81% 12,858 0.60% 11,668
11/30/90 12,365 2.01% 13,116 0.22% 11,694
12/31/90 12,370 0.44% 13,174 0.00% 11,694
1/31/91 12,589 1.34% 13,350 0.60% 11,764
2/28/91 12,713 0.87% 13,466 0.15% 11,782
3/31/91 12,742 0.04% 13,472 0.15% 11,799
4/30/91 12,916 1.34% 13,652 0.15% 11,817
5/31/91 13,007 0.89% 13,774 0.30% 11,853
6/30/91 12,983 -0.10% 13,760 0.29% 11,887
7/31/91 13,180 1.22% 13,928 0.15% 11,905
8/31/91 13,317 1.32% 14,112 0.29% 11,939
9/30/91 13,504 1.30% 14,295 0.44% 11,992
10/31/91 13,579 0.90% 14,424 0.15% 12,010
11/30/91 13,630 0.28% 14,464 0.29% 12,045
12/31/91 13,884 2.15% 14,775 0.07% 12,053
1/31/92 13,934 0.23% 14,809 0.15% 12,071
2/29/92 13,929 0.03% 14,814 0.36% 12,115
3/31/92 13,937 0.04% 14,820 0.51% 12,176
4/30/92 14,048 0.89% 14,952 0.14% 12,193
5/31/92 14,225 1.18% 15,128 0.14% 12,211
6/30/92 14,403 1.68% 15,382 0.36% 12,254
7/31/92 14,924 3.00% 15,844 0.21% 12,280
8/31/92 14,760 -0.98% 15,688 0.28% 12,315
9/30/92 14,875 0.65% 15,790 0.28% 12,349
10/31/92 14,709 -0.98% 15,636 0.35% 12,392
11/30/92 15,052 1.79% 15,915 0.14% 12,410
12/31/92 15,249 1.02% 16,078 -0.07% 12,401
1/31/93 15,447 1.16% 16,264 0.49% 12,462
2/28/93 15,823 3.62% 16,853 0.35% 12,505
3/31/93 15,735 -1.06% 16,674 0.35% 12,549
4/30/93 15,825 1.01% 16,843 0.28% 12,584
5/31/93 15,917 0.56% 16,937 0.14% 12,602
6/30/93 16,175 1.67% 17,220 0.14% 12,620
7/31/93 16,169 0.13% 17,242 0.00% 12,620
8/31/93 16,486 2.08% 17,601 0.28% 12,655
9/30/93 16,662 1.14% 17,802 0.21% 12,681
10/31/93 16,711 0.19% 17,836 0.41% 12,733
11/30/93 16,633 -0.88% 17,679 0.07% 12,742
12/31/93 16,954 2.11% 18,052 0.00% 12,742
1/31/94 17,120 1.14% 18,257 0.27% 12,777
2/28/94 16,766 -2.59% 17,785 0.34% 12,820
3/31/94 16,222 -4.07% 17,061 0.34% 12,864
4/30/94 16,299 0.85% 17,206 0.14% 12,882
5/31/94 16,377 0.87% 17,355 0.07% 12,891
6/30/94 16,336 -0.61% 17,250 0.34% 12,935
7/31/94 16,592 1.83% 17,565 0.27% 12,970
8/31/94 16,656 0.35% 17,627 0.40% 13,021
9/30/94 16,496 -1.47% 17,368 0.27% 13,057
10/31/94 16,260 -1.78% 17,058 0.07% 13,066
11/30/94 15,965 -1.81% 16,750 0.13% 13,083
12/31/94 16,271 2.20% 17,118 0.00% 13,083
1/31/95 16,626 2.86% 17,608 0.40% 13,135
2/28/95 17,043 2.91% 18,120 0.40% 13,188
GRAPHIC MATERIAL (4)
This pie chart shows the fund's securities breakdown by quality as a percentage
of the fund's total net assets.
AAA 58.9%
AA 6.0%
A 14.9%
BBB 20.2%
GRAPHIC MATERIAL (5)
This bar chart shows the comparison between the fund's distribution rate 5.55%
and the taxable equivalent distribution rate of 9.58%.
GRAPHIC MATERIAL (6)
The following line graph hypothetically compares the performance of the Franklin
Colorado Tax-Free Income Fund to that of the Lehman Brothers Municipal Bond
Index and the Consumer Price Index (CPI), based on a $10,000 investment from
9/1/87 to 2/28/95.
Period Ending Colorado Tax-Free LB Muni Index CPI
9/1/87 9,574 10,000 10,000
9/30/87 8,931 -3.69% 9,631 0.52% 10,052
10/31/87 8,950 0.35% 9,665 0.26% 10,078
11/30/87 9,347 2.61% 9,917 0.09% 10,087
12/31/87 9,527 1.45% 10,061 0.00% 10,087
1/31/88 9,965 3.56% 10,419 0.26% 10,113
2/29/88 10,012 1.06% 10,529 0.26% 10,140
3/31/88 9,828 -1.16% 10,407 0.43% 10,183
4/30/88 9,876 0.76% 10,486 0.52% 10,236
5/31/88 9,924 -0.29% 10,456 0.34% 10,271
6/30/88 10,109 1.46% 10,609 0.43% 10,315
7/31/88 10,168 0.65% 10,678 0.42% 10,359
8/31/88 10,221 0.09% 10,687 0.42% 10,402
9/30/88 10,433 1.81% 10,881 0.67% 10,472
10/31/88 10,657 1.76% 11,072 0.33% 10,506
11/30/88 10,590 -0.92% 10,970 0.08% 10,515
12/31/88 10,725 1.02% 11,082 0.17% 10,533
1/31/89 10,964 2.07% 11,311 0.50% 10,585
2/28/89 10,885 -1.14% 11,183 0.41% 10,629
3/31/89 10,847 -0.24% 11,156 0.58% 10,690
4/30/89 11,058 2.37% 11,420 0.65% 10,760
5/31/89 11,302 2.08% 11,658 0.57% 10,821
6/30/89 11,453 1.36% 11,816 0.24% 10,847
7/31/89 11,552 1.36% 11,977 0.24% 10,873
8/31/89 11,491 -0.98% 11,859 0.16% 10,891
9/30/89 11,430 -0.30% 11,824 0.32% 10,925
10/31/89 11,530 1.22% 11,968 0.48% 10,978
11/30/89 11,685 1.75% 12,178 0.24% 11,004
12/31/89 11,787 0.82% 12,277 0.16% 11,022
1/31/90 11,713 -0.47% 12,220 1.03% 11,135
2/28/90 11,871 0.89% 12,329 0.47% 11,188
3/31/90 11,863 0.03% 12,332 0.55% 11,249
4/30/90 11,777 -0.72% 12,243 0.16% 11,267
5/31/90 12,027 2.18% 12,510 0.23% 11,293
6/30/90 12,167 0.88% 12,620 0.54% 11,354
7/31/90 12,364 1.48% 12,807 0.38% 11,397
8/31/90 12,058 -1.45% 12,622 0.92% 11,502
9/30/90 12,050 0.06% 12,629 0.84% 11,599
10/31/90 12,204 1.81% 12,858 0.60% 11,668
11/30/90 12,487 2.01% 13,116 0.22% 11,694
12/31/90 12,467 0.44% 13,174 0.00% 11,694
1/31/91 12,636 1.34% 13,350 0.60% 11,764
2/28/91 12,746 0.87% 13,466 0.15% 11,782
3/31/91 12,797 0.04% 13,472 0.15% 11,799
4/30/91 12,981 1.34% 13,652 0.15% 11,817
5/31/91 13,093 0.89% 13,774 0.30% 11,853
6/30/91 13,098 -0.10% 13,760 0.29% 11,887
7/31/91 13,297 1.22% 13,928 0.15% 11,905
8/31/91 13,411 1.32% 14,112 0.29% 11,939
9/30/91 13,588 1.30% 14,295 0.44% 11,992
10/31/91 13,654 0.90% 14,424 0.15% 12,010
11/30/91 13,720 0.28% 14,464 0.29% 12,045
12/31/91 14,007 2.15% 14,775 0.07% 12,053
1/31/92 14,004 0.23% 14,809 0.15% 12,071
2/29/92 14,027 0.03% 14,814 0.36% 12,115
3/31/92 14,063 0.04% 14,820 0.51% 12,176
4/30/92 14,188 0.89% 14,952 0.14% 12,193
5/31/92 14,392 1.18% 15,128 0.14% 12,211
6/30/92 14,585 1.68% 15,382 0.36% 12,254
7/31/92 15,132 3.00% 15,844 0.21% 12,280
8/31/92 14,973 -0.98% 15,688 0.28% 12,315
9/30/92 15,011 0.65% 15,790 0.28% 12,349
10/31/92 14,758 -0.98% 15,636 0.35% 12,392
11/30/92 15,155 1.79% 15,915 0.14% 12,410
12/31/92 15,382 1.02% 16,078 -0.07% 12,401
1/31/93 15,555 1.16% 16,264 0.49% 12,462
2/28/93 16,081 3.62% 16,853 0.35% 12,505
3/31/93 15,984 -1.06% 16,674 0.35% 12,549
4/30/93 16,105 1.01% 16,843 0.28% 12,584
5/31/93 16,186 0.56% 16,937 0.14% 12,602
6/30/93 16,433 1.67% 17,220 0.14% 12,620
7/31/93 16,470 0.13% 17,242 0.00% 12,620
8/31/93 16,800 2.08% 17,601 0.28% 12,655
9/30/93 17,006 1.14% 17,802 0.21% 12,681
10/31/93 17,071 0.19% 17,836 0.41% 12,733
11/30/93 17,025 -0.88% 17,679 0.07% 12,742
12/31/93 17,344 2.11% 18,052 0.00% 12,742
1/31/94 17,523 1.14% 18,257 0.27% 12,777
2/28/94 17,157 -2.59% 17,785 0.34% 12,820
3/31/94 16,473 -4.07% 17,061 0.34% 12,864
4/30/94 16,509 0.85% 17,206 0.14% 12,882
5/31/94 16,618 0.87% 17,355 0.07% 12,891
6/30/94 16,508 -0.61% 17,250 0.34% 12,935
7/31/94 16,823 1.83% 17,565 0.27% 12,970
8/31/94 16,860 0.35% 17,627 0.40% 13,021
9/30/94 16,646 -1.47% 17,368 0.27% 13,057
10/31/94 16,369 -1.78% 17,058 0.07% 13,066
11/30/94 16,064 -1.81% 16,750 0.13% 13,083
12/31/94 16,402 2.20% 17,118 0.00% 13,083
1/31/95 16,908 2.86% 17,608 0.40% 13,135
2/28/95 17,341 2.91% 18,120 0.40% 13,188
GRAPHIC MATERIAL (7)
This pie chart shows the fund's securities breakdown by quality as a percentage
of the fund's total net assets.
Portfolio Breakdown on 2/28/95
AAA 28.9%
AA 24.3%
A 17.8%
BBB 24.2%
BB 4.8%
GRAPHIC MATERIAL (8)
This bar chart shows the comparison between the fund's distribution rate of
5.51% and the taxable equivalent distribution rate of 9.55%.
GRAPHIC MATERIAL (9)
The following line graph hypothetically compares the performance of the Franklin
Connecticut Tax-Free Income Fund to that of the Lehman Brothers Municipal Bond
Index and the Consumer Price Index (CPI), based on a $10,000 investment from
9/1/87 to 2/28/95.
Period Ending Connecticut Tax-Free LB Muni Index CPI
10/3/88 9,579 10,000 10,000
10/31/88 9,607 1.76% 10,176 0.33% 10,033
11/30/88 9,540 -0.92% 10,082 0.08% 10,041
12/31/88 9,646 1.02% 10,185 0.17% 10,058
1/31/89 9,837 2.07% 10,396 0.50% 10,108
2/28/89 9,786 -1.14% 10,278 0.41% 10,150
3/31/89 9,764 -0.24% 10,253 0.58% 10,209
4/30/89 9,994 2.37% 10,496 0.65% 10,275
5/31/89 10,196 2.08% 10,714 0.57% 10,334
6/30/89 10,311 1.36% 10,860 0.24% 10,358
7/31/89 10,407 1.36% 11,008 0.24% 10,383
8/31/89 10,334 -0.98% 10,900 0.16% 10,400
9/30/89 10,282 -0.30% 10,867 0.32% 10,433
10/31/89 10,349 1.22% 11,000 0.48% 10,483
11/30/89 10,507 1.75% 11,192 0.24% 10,508
12/31/89 10,605 0.82% 11,284 0.16% 10,525
1/31/90 10,531 -0.47% 11,231 1.03% 10,634
2/28/90 10,661 0.89% 11,331 0.47% 10,684
3/31/90 10,637 0.03% 11,334 0.55% 10,742
4/30/90 10,561 -0.72% 11,253 0.16% 10,760
5/31/90 10,798 2.18% 11,498 0.23% 10,784
6/30/90 10,899 0.88% 11,599 0.54% 10,843
7/31/90 11,065 1.48% 11,771 0.38% 10,884
8/31/90 10,786 -1.45% 11,600 0.92% 10,984
9/30/90 10,751 0.06% 11,607 0.84% 11,076
10/31/90 10,887 1.81% 11,817 0.60% 11,143
11/30/90 11,142 2.01% 12,055 0.22% 11,167
12/31/90 11,128 0.44% 12,108 0.00% 11,167
1/31/91 11,310 1.34% 12,270 0.60% 11,234
2/28/91 11,373 0.87% 12,377 0.15% 11,251
3/31/91 11,413 0.04% 12,382 0.15% 11,268
4/30/91 11,554 1.34% 12,548 0.15% 11,285
5/31/91 11,640 0.89% 12,659 0.30% 11,319
6/30/91 11,492 -0.10% 12,647 0.29% 11,351
7/31/91 11,657 1.22% 12,801 0.15% 11,368
8/31/91 11,801 1.32% 12,970 0.29% 11,401
9/30/91 11,968 1.30% 13,138 0.44% 11,452
10/31/91 12,045 0.90% 13,257 0.15% 11,469
11/30/91 12,099 0.28% 13,294 0.29% 11,502
12/31/91 12,327 2.15% 13,580 0.07% 11,510
1/31/92 12,335 0.23% 13,611 0.15% 11,527
2/29/92 12,317 0.03% 13,615 0.36% 11,569
3/31/92 12,333 0.04% 13,620 0.51% 11,628
4/30/92 12,420 0.89% 13,742 0.14% 11,644
5/31/92 12,603 1.18% 13,904 0.14% 11,660
6/30/92 12,751 1.68% 14,137 0.36% 11,702
7/31/92 13,164 3.00% 14,561 0.21% 11,727
8/31/92 13,000 -0.98% 14,419 0.28% 11,760
9/30/92 13,028 0.65% 14,512 0.28% 11,793
10/31/92 12,825 -0.98% 14,370 0.35% 11,834
11/30/92 13,122 1.79% 14,627 0.14% 11,851
12/31/92 13,334 1.02% 14,777 -0.07% 11,842
1/31/93 13,511 1.16% 14,948 0.49% 11,900
2/28/93 13,912 3.62% 15,489 0.35% 11,942
3/31/93 13,841 -1.06% 15,325 0.35% 11,984
4/30/93 13,944 1.01% 15,480 0.28% 12,017
5/31/93 13,999 0.56% 15,566 0.14% 12,034
6/30/93 14,243 1.67% 15,826 0.14% 12,051
7/31/93 14,247 0.13% 15,847 0.00% 12,051
8/31/93 14,557 2.08% 16,177 0.28% 12,085
9/30/93 14,728 1.14% 16,361 0.21% 12,110
10/31/93 14,767 0.19% 16,392 0.41% 12,160
11/30/93 14,704 -0.88% 16,248 0.07% 12,168
12/31/93 14,978 2.11% 16,591 0.00% 12,168
1/31/94 15,111 1.14% 16,780 0.27% 12,201
2/28/94 14,797 -2.59% 16,345 0.34% 12,243
3/31/94 14,270 -4.07% 15,680 0.34% 12,284
4/30/94 14,258 0.85% 15,813 0.14% 12,301
5/31/94 14,392 0.87% 15,951 0.07% 12,310
6/30/94 14,299 -0.61% 15,854 0.34% 12,352
7/31/94 14,556 1.83% 16,144 0.27% 12,385
8/31/94 14,585 0.35% 16,200 0.40% 12,435
9/30/94 14,410 -1.47% 15,962 0.27% 12,468
10/31/94 14,138 -1.78% 15,678 0.07% 12,477
11/30/94 13,784 -1.81% 15,394 0.13% 12,493
12/31/94 14,171 2.20% 15,733 0.00% 12,493
1/31/95 14,533 2.86% 16,183 0.40% 12,543
2/28/95 14,854 2.91% 16,654 0.40% 12,593
GRAPHIC MATERIAL (10)
This pie chart shows the fund's securities breakdown by quality as a percentage
of the fund's total net assets.
Portfolio Breakdown on 2/28/95
AAA 51.3%
AA 6.1%
A 21.3%
BBB 21.3%
GRAPHIC MATERIAL (11)
This bar chart shows the comparison between the fund's distribution rate of
5.54% and the taxable equivalent distribution rate of 9.50%.
GRAPHIC MATERIAL (12)
The following line graph hypothetically compares the performance of the Franklin
Indiana Tax-Free Income Fund to that of the Lehman Brothers Municipal Bond Index
and the Consumer Price Index (CPI), based on a $10,000 investment from 9/1/87 to
2/28/95.
Period Ending Indiana Tax-Free LB Muni Index CPI
9/1/87 9,573 10,000 10,000
9/30/87 8,985 -3.69% 9,631 0.52% 10,052
10/31/87 8,966 0.35% 9,665 0.26% 10,078
11/30/87 9,317 2.61% 9,917 0.09% 10,087
12/31/87 9,491 1.45% 10,061 0.00% 10,087
1/31/88 9,973 3.56% 10,419 0.26% 10,113
2/29/88 10,120 1.06% 10,529 0.26% 10,140
3/31/88 9,930 -1.16% 10,407 0.43% 10,183
4/30/88 9,953 0.76% 10,486 0.52% 10,236
5/31/88 9,995 -0.29% 10,456 0.34% 10,271
6/30/88 10,165 1.46% 10,609 0.43% 10,315
7/31/88 10,198 0.65% 10,678 0.42% 10,359
8/31/88 10,261 0.09% 10,687 0.42% 10,402
9/30/88 10,455 1.81% 10,881 0.67% 10,472
10/31/88 10,721 1.76% 11,072 0.33% 10,506
11/30/88 10,643 -0.92% 10,970 0.08% 10,515
12/31/88 10,769 1.02% 11,082 0.17% 10,533
1/31/89 10,967 2.07% 11,311 0.50% 10,585
2/28/89 10,908 -1.14% 11,183 0.41% 10,629
3/31/89 10,922 -0.24% 11,156 0.58% 10,690
4/30/89 11,114 2.37% 11,420 0.65% 10,760
5/31/89 11,359 2.08% 11,658 0.57% 10,821
6/30/89 11,522 1.36% 11,816 0.24% 10,847
7/31/89 11,632 1.36% 11,977 0.24% 10,873
8/31/89 11,581 -0.98% 11,859 0.16% 10,891
9/30/89 11,541 -0.30% 11,824 0.32% 10,925
10/31/89 11,653 1.22% 11,968 0.48% 10,978
11/30/89 11,820 1.75% 12,178 0.24% 11,004
12/31/89 11,966 0.82% 12,277 0.16% 11,022
1/31/90 11,892 -0.47% 12,220 1.03% 11,135
2/28/90 12,018 0.89% 12,329 0.47% 11,188
3/31/90 12,010 0.03% 12,332 0.55% 11,249
4/30/90 11,934 -0.72% 12,243 0.16% 11,267
5/31/90 12,234 2.18% 12,510 0.23% 11,293
6/30/90 12,376 0.88% 12,620 0.54% 11,354
7/31/90 12,565 1.48% 12,807 0.38% 11,397
8/31/90 12,260 -1.45% 12,622 0.92% 11,502
9/30/90 12,254 0.06% 12,629 0.84% 11,599
10/31/90 12,424 1.81% 12,858 0.60% 11,668
11/30/90 12,675 2.01% 13,116 0.22% 11,694
12/31/90 12,681 0.44% 13,174 0.00% 11,694
1/31/91 12,913 1.34% 13,350 0.60% 11,764
2/28/91 12,990 0.87% 13,466 0.15% 11,782
3/31/91 13,045 0.04% 13,472 0.15% 11,799
4/30/91 13,220 1.34% 13,652 0.15% 11,817
5/31/91 13,311 0.89% 13,774 0.30% 11,853
6/30/91 13,306 -0.10% 13,760 0.29% 11,887
7/31/91 13,496 1.22% 13,928 0.15% 11,905
8/31/91 13,639 1.32% 14,112 0.29% 11,939
9/30/91 13,832 1.30% 14,295 0.44% 11,992
10/31/91 13,901 0.90% 14,424 0.15% 12,010
11/30/91 13,970 0.28% 14,464 0.29% 12,045
12/31/91 14,230 2.15% 14,775 0.07% 12,053
1/31/92 14,249 0.23% 14,809 0.15% 12,071
2/29/92 14,249 0.03% 14,814 0.36% 12,115
3/31/92 14,288 0.04% 14,820 0.51% 12,176
4/30/92 14,417 0.89% 14,952 0.14% 12,193
5/31/92 14,690 1.18% 15,128 0.14% 12,211
6/30/92 14,874 1.68% 15,382 0.36% 12,254
7/31/92 15,387 3.00% 15,844 0.21% 12,280
8/31/92 15,216 -0.98% 15,688 0.28% 12,315
9/30/92 15,256 0.65% 15,790 0.28% 12,349
10/31/92 15,028 -0.98% 15,636 0.35% 12,392
11/30/92 15,364 1.79% 15,915 0.14% 12,410
12/31/92 15,607 1.02% 16,078 -0.07% 12,401
1/31/93 15,797 1.16% 16,264 0.49% 12,462
2/28/93 16,312 3.62% 16,853 0.35% 12,505
3/31/93 16,212 -1.06% 16,674 0.35% 12,549
4/30/93 16,373 1.01% 16,843 0.28% 12,584
5/31/93 16,452 0.56% 16,937 0.14% 12,602
6/30/93 16,726 1.67% 17,220 0.14% 12,620
7/31/93 16,722 0.13% 17,242 0.00% 12,620
8/31/93 17,040 2.08% 17,601 0.28% 12,655
9/30/93 17,248 1.14% 17,802 0.21% 12,681
10/31/93 17,325 0.19% 17,836 0.41% 12,733
11/30/93 17,290 -0.88% 17,679 0.07% 12,742
12/31/93 17,612 2.11% 18,052 0.00% 12,742
1/31/94 17,778 1.14% 18,257 0.27% 12,777
2/28/94 17,409 -2.59% 17,785 0.34% 12,820
3/31/94 16,762 -4.07% 17,061 0.34% 12,864
4/30/94 16,828 0.85% 17,206 0.14% 12,882
5/31/94 16,923 0.87% 17,355 0.07% 12,891
6/30/94 16,885 -0.61% 17,250 0.34% 12,935
7/31/94 17,159 1.83% 17,565 0.27% 12,970
8/31/94 17,196 0.35% 17,627 0.40% 13,021
9/30/94 16,980 -1.47% 17,368 0.27% 13,057
10/31/94 16,732 -1.78% 17,058 0.07% 13,066
11/30/94 16,409 -1.81% 16,750 0.13% 13,083
12/31/94 16,735 2.20% 17,118 0.00% 13,083
1/31/95 17,123 2.86% 17,608 0.40% 13,135
2/28/95 17,513 2.91% 18,120 0.40% 13,188
GRAPHIC MATERIAL (13)
This pie chart shows the fund's securities breakdown by quality as a percentage
of total net assets.
Portfolio Breakdown on 2/28/95
AAA 53.0%
AA 15.2%
A 19.9%
BBB 9.3%
BB 2.6%
GRAPHIC MATERIAL (14)
This bar chart shows the comparison between the fund's distribution rate of
5.40% and the taxable equivalent distribution rate of 9.57%.
GRAPHIC MATERIAL (15)
The following line graph hypothetically compares the performance of the Franklin
New Jersey Tax-Free Income Fund to that of the Lehman Brothers Municipal Bond
Index and the Consumer Price Index (CPI), based on a $10,000 investment from
6/1/88 to 2/28/95.
Period Ending New Jersey Tax-Free LB Muni Index CPI
6/1/88 9,578 10,000 10,000
6/30/88 9,751 1.46% 10,146 0.43% 10,043
7/31/88 9,799 0.65% 10,212 0.42% 10,085
8/31/88 9,895 0.09% 10,221 0.42% 10,128
9/30/88 10,115 1.81% 10,406 0.67% 10,195
10/31/88 10,347 1.76% 10,589 0.33% 10,229
11/30/88 10,250 -0.92% 10,492 0.08% 10,237
12/31/88 10,394 1.02% 10,599 0.17% 10,255
1/31/89 10,497 2.07% 10,818 0.50% 10,306
2/28/89 10,453 -1.14% 10,695 0.41% 10,348
3/31/89 10,448 -0.24% 10,669 0.58% 10,408
4/30/89 10,703 2.37% 10,922 0.65% 10,476
5/31/89 10,930 2.08% 11,149 0.57% 10,536
6/30/89 11,067 1.36% 11,301 0.24% 10,561
7/31/89 11,143 1.36% 11,455 0.24% 10,586
8/31/89 11,036 -0.98% 11,342 0.16% 10,603
9/30/89 10,958 -0.30% 11,308 0.32% 10,637
10/31/89 11,139 1.22% 11,446 0.48% 10,688
11/30/89 11,302 1.75% 11,647 0.24% 10,714
12/31/89 11,370 0.82% 11,742 0.16% 10,731
1/31/90 11,280 -0.47% 11,687 1.03% 10,841
2/28/90 11,413 0.89% 11,791 0.47% 10,892
3/31/90 11,397 0.03% 11,795 0.55% 10,952
4/30/90 11,316 -0.72% 11,710 0.16% 10,970
5/31/90 11,548 2.18% 11,965 0.23% 10,995
6/30/90 11,674 0.88% 12,070 0.54% 11,054
7/31/90 11,888 1.48% 12,249 0.38% 11,096
8/31/90 11,585 -1.45% 12,071 0.92% 11,198
9/30/90 11,601 0.06% 12,078 0.84% 11,293
10/31/90 11,819 1.81% 12,297 0.60% 11,360
11/30/90 12,091 2.01% 12,544 0.22% 11,385
12/31/90 12,116 0.44% 12,599 0.00% 11,385
1/31/91 12,312 1.34% 12,768 0.60% 11,454
2/28/91 12,451 0.87% 12,879 0.15% 11,471
3/31/91 12,488 0.04% 12,884 0.15% 11,488
4/30/91 12,641 1.34% 13,057 0.15% 11,505
5/31/91 12,748 0.89% 13,173 0.30% 11,540
6/30/91 12,758 -0.10% 13,160 0.29% 11,573
7/31/91 12,956 1.22% 13,321 0.15% 11,591
8/31/91 13,071 1.32% 13,497 0.29% 11,624
9/30/91 13,247 1.30% 13,672 0.44% 11,675
10/31/91 13,329 0.90% 13,795 0.15% 11,693
11/30/91 13,386 0.28% 13,834 0.29% 11,727
12/31/91 13,626 2.15% 14,131 0.07% 11,735
1/31/92 13,659 0.23% 14,164 0.15% 11,753
2/29/92 13,669 0.03% 14,168 0.36% 11,795
3/31/92 13,691 0.04% 14,174 0.51% 11,855
4/30/92 13,812 0.89% 14,300 0.14% 11,872
5/31/92 13,983 1.18% 14,468 0.14% 11,888
6/30/92 14,179 1.68% 14,711 0.36% 11,931
7/31/92 14,678 3.00% 15,153 0.21% 11,956
8/31/92 14,499 -0.98% 15,004 0.28% 11,990
9/30/92 14,510 0.65% 15,102 0.28% 12,023
10/31/92 14,342 -0.98% 14,954 0.35% 12,065
11/30/92 14,671 1.79% 15,222 0.14% 12,082
12/31/92 14,855 1.02% 15,377 -0.07% 12,074
1/31/93 14,995 1.16% 15,555 0.49% 12,133
2/28/93 15,433 3.62% 16,118 0.35% 12,175
3/31/93 15,339 -1.06% 15,947 0.35% 12,218
4/30/93 15,441 1.01% 16,108 0.28% 12,252
5/31/93 15,517 0.56% 16,199 0.14% 12,269
6/30/93 15,779 1.67% 16,469 0.14% 12,286
7/31/93 15,800 0.13% 16,491 0.00% 12,286
8/31/93 16,089 2.08% 16,834 0.28% 12,321
9/30/93 16,244 1.14% 17,026 0.21% 12,347
10/31/93 16,292 0.19% 17,058 0.41% 12,397
11/30/93 16,220 -0.88% 16,908 0.07% 12,406
12/31/93 16,486 2.11% 17,264 0.00% 12,406
1/31/94 16,632 1.14% 17,461 0.27% 12,440
2/28/94 16,296 -2.59% 17,009 0.34% 12,482
3/31/94 15,696 -4.07% 16,317 0.34% 12,524
4/30/94 15,744 0.85% 16,455 0.14% 12,542
5/31/94 15,863 0.87% 16,599 0.07% 12,551
6/30/94 15,757 -0.61% 16,497 0.34% 12,593
7/31/94 16,018 1.83% 16,799 0.27% 12,627
8/31/94 16,081 0.35% 16,858 0.40% 12,678
9/30/94 15,873 -1.47% 16,610 0.27% 12,712
10/31/94 15,591 -1.78% 16,315 0.07% 12,721
11/30/94 15,266 -1.81% 16,019 0.13% 12,737
12/31/94 15,631 2.20% 16,372 0.00% 12,737
1/31/95 16,085 2.86% 16,840 0.40% 12,788
2/28/95 16,482 2.91% 17,330 0.40% 12,840
GRAPHIC MATERIAL (16)
This pie chart shows the fund's securities breakdown by sector as a percentage
of total net assets.
Portfolio Breakdown on 2/28/95
AAA 46.0%
AA 22.8%
A 22.3%
BBB 7.4%
BB 1.5%
GRAPHIC MATERIAL (17)
This bar chart shows the comparison between the fund's distribution rate of
5.32% and the taxable equivalent distribution rate of 9.69%.
GRAPHIC MATERIAL (18)
The following line graph hypothetically compares the performance of the Franklin
Oregon Tax-Free Income Fund to that of the Lehman Brothers Municipal Bond Index
and the Consumer Price Index (CPI), based on a $10,000 investment from 9/1/87 to
2/28/95.
Period Ending Oregon Tax-Free LB Muni Index CPI
9/1/87 9,575 10,000 10,000
9/30/87 8,896 -3.69% 9,631 0.52% 10,052
10/31/87 8,906 0.35% 9,665 0.26% 10,078
11/30/87 9,217 2.61% 9,917 0.09% 10,087
12/31/87 9,368 1.45% 10,061 0.00% 10,087
1/31/88 9,792 3.56% 10,419 0.26% 10,113
2/29/88 9,894 1.06% 10,529 0.26% 10,140
3/31/88 9,721 -1.16% 10,407 0.43% 10,183
4/30/88 9,757 0.76% 10,486 0.52% 10,236
5/31/88 9,785 -0.29% 10,456 0.34% 10,271
6/30/88 9,967 1.46% 10,609 0.43% 10,315
7/31/88 9,975 0.65% 10,678 0.42% 10,359
8/31/88 10,032 0.09% 10,687 0.42% 10,402
9/30/88 10,238 1.81% 10,881 0.67% 10,472
10/31/88 10,455 1.76% 11,072 0.33% 10,506
11/30/88 10,373 -0.92% 10,970 0.08% 10,515
12/31/88 10,532 1.02% 11,082 0.17% 10,533
1/31/89 10,752 2.07% 11,311 0.50% 10,585
2/28/89 10,659 -1.14% 11,183 0.41% 10,629
3/31/89 10,626 -0.24% 11,156 0.58% 10,690
4/30/89 10,850 2.37% 11,420 0.65% 10,760
5/31/89 11,106 2.08% 11,658 0.57% 10,821
6/30/89 11,251 1.36% 11,816 0.24% 10,847
7/31/89 11,323 1.36% 11,977 0.24% 10,873
8/31/89 11,249 -0.98% 11,859 0.16% 10,891
9/30/89 11,174 -0.30% 11,824 0.32% 10,925
10/31/89 11,268 1.22% 11,968 0.48% 10,978
11/30/89 11,417 1.75% 12,178 0.24% 11,004
12/31/89 11,512 0.82% 12,277 0.16% 11,022
1/31/90 11,436 -0.47% 12,220 1.03% 11,135
2/28/90 11,554 0.89% 12,329 0.47% 11,188
3/31/90 11,553 0.03% 12,332 0.55% 11,249
4/30/90 11,442 -0.72% 12,243 0.16% 11,267
5/31/90 11,695 2.18% 12,510 0.23% 11,293
6/30/90 11,827 0.88% 12,620 0.54% 11,354
7/31/90 12,016 1.48% 12,807 0.38% 11,397
8/31/90 11,745 -1.45% 12,622 0.92% 11,502
9/30/90 11,721 0.06% 12,629 0.84% 11,599
10/31/90 11,902 1.81% 12,858 0.60% 11,668
11/30/90 12,164 2.01% 13,116 0.22% 11,694
12/31/90 12,151 0.44% 13,174 0.00% 11,694
1/31/91 12,347 1.34% 13,350 0.60% 11,764
2/28/91 12,496 0.87% 13,466 0.15% 11,782
3/31/91 12,554 0.04% 13,472 0.15% 11,799
4/30/91 12,717 1.34% 13,652 0.15% 11,817
5/31/91 12,822 0.89% 13,774 0.30% 11,853
6/30/91 12,821 -0.10% 13,760 0.29% 11,887
7/31/91 12,976 1.22% 13,928 0.15% 11,905
8/31/91 13,118 1.32% 14,112 0.29% 11,939
9/30/91 13,298 1.30% 14,295 0.44% 11,992
10/31/91 13,382 0.90% 14,424 0.15% 12,010
11/30/91 13,430 0.28% 14,464 0.29% 12,045
12/31/91 13,686 2.15% 14,775 0.07% 12,053
1/31/92 13,722 0.23% 14,809 0.15% 12,071
2/29/92 13,716 0.03% 14,814 0.36% 12,115
3/31/92 13,759 0.04% 14,820 0.51% 12,176
4/30/92 13,853 0.89% 14,952 0.14% 12,193
5/31/92 13,998 1.18% 15,128 0.14% 12,211
6/30/92 14,194 1.68% 15,382 0.36% 12,254
7/31/92 14,658 3.00% 15,844 0.21% 12,280
8/31/92 14,460 -0.98% 15,688 0.28% 12,315
9/30/92 14,492 0.65% 15,790 0.28% 12,349
10/31/92 14,305 -0.98% 15,636 0.35% 12,392
11/30/92 14,622 1.79% 15,915 0.14% 12,410
12/31/92 14,850 1.02% 16,078 -0.07% 12,401
1/31/93 15,026 1.16% 16,264 0.49% 12,462
2/28/93 15,480 3.62% 16,853 0.35% 12,505
3/31/93 15,394 -1.06% 16,674 0.35% 12,549
4/30/93 15,506 1.01% 16,843 0.28% 12,584
5/31/93 15,579 0.56% 16,937 0.14% 12,602
6/30/93 15,774 1.67% 17,220 0.14% 12,620
7/31/93 15,807 0.13% 17,242 0.00% 12,620
8/31/93 16,044 2.08% 17,601 0.28% 12,655
9/30/93 16,253 1.14% 17,802 0.21% 12,681
10/31/93 16,313 0.19% 17,836 0.41% 12,733
11/30/93 16,209 -0.88% 17,679 0.07% 12,742
12/31/93 16,472 2.11% 18,052 0.00% 12,742
1/31/94 16,625 1.14% 18,257 0.27% 12,777
2/28/94 16,307 -2.59% 17,785 0.34% 12,820
3/31/94 15,722 -4.07% 17,061 0.34% 12,864
4/30/94 15,765 0.85% 17,206 0.14% 12,882
5/31/94 15,865 0.87% 17,355 0.07% 12,891
6/30/94 15,781 -0.61% 17,250 0.34% 12,935
7/31/94 16,038 1.83% 17,565 0.27% 12,970
8/31/94 16,097 0.35% 17,627 0.40% 13,021
9/30/94 15,883 -1.47% 17,368 0.27% 13,057
10/31/94 15,582 -1.78% 17,058 0.07% 13,066
11/30/94 15,266 -1.81% 16,750 0.13% 13,083
12/31/94 15,662 2.20% 17,118 0.00% 13,083
1/31/95 16,103 2.86% 17,608 0.40% 13,135
2/28/95 16,532 2.91% 18,120 0.40% 13,188
GRAPHIC MATERIAL (19)
This pie chart shows the fund's securities breakdown by quality as a percentage
of the fund's total net assets.
Portfolio Breakdown on 2/28/95
AAA 44.3%
AA 12.3%
A 16.4%
BBB 26.6%
BB 0.4%
GRAPHIC MATERIAL (20)
This bar chart shows the comparison between the fund's distribution rate of
5.88% and the taxable equivalent rate of 10.02%.
GRAPHIC MATERIAL (21)
The following line graph hypothetically compares the performance of the Franklin
Pennsylvania Tax-Free Income Fund to that of the Lehman Brothers Municipal Bond
Index and the Consumer Price Index (CPI), based on a $10,000 investment from
12/1/86 to 2/28/95.
Period Ending Pennsylvania Tax-Free LB Muni Index CPI
12/1/86 9,579 10,000 10,000
12/31/86 9,579 -0.28% 9,972 0.09% 10,009
1/31/87 9,722 3.01% 10,272 0.63% 10,072
2/28/87 9,799 0.49% 10,322 0.36% 10,108
3/31/87 9,770 -1.06% 10,213 0.45% 10,154
4/30/87 9,072 -5.02% 9,700 0.54% 10,209
5/31/87 8,851 -0.50% 9,652 0.35% 10,244
6/30/87 9,113 2.94% 9,936 0.35% 10,280
7/31/87 9,103 1.02% 10,037 0.26% 10,307
8/31/87 9,152 0.22% 10,059 0.53% 10,362
9/30/87 8,666 -3.69% 9,688 0.52% 10,415
10/31/87 8,618 0.35% 9,722 0.26% 10,443
11/30/87 8,990 2.61% 9,976 0.09% 10,452
12/31/87 9,213 1.45% 10,120 0.00% 10,452
1/31/88 9,632 3.56% 10,480 0.26% 10,479
2/29/88 9,775 1.06% 10,592 0.26% 10,506
3/31/88 9,621 -1.16% 10,469 0.43% 10,552
4/30/88 9,673 0.76% 10,548 0.52% 10,606
5/31/88 9,694 -0.29% 10,518 0.34% 10,642
6/30/88 9,873 1.46% 10,671 0.43% 10,688
7/31/88 9,905 0.65% 10,741 0.42% 10,733
8/31/88 9,979 0.09% 10,750 0.42% 10,778
9/30/88 10,173 1.81% 10,945 0.67% 10,850
10/31/88 10,410 1.76% 11,137 0.33% 10,886
11/30/88 10,334 -0.92% 11,035 0.08% 10,895
12/31/88 10,466 1.02% 11,148 0.17% 10,913
1/31/89 10,631 2.07% 11,378 0.50% 10,968
2/28/89 10,586 -1.14% 11,249 0.41% 11,013
3/31/89 10,576 -0.24% 11,222 0.58% 11,077
4/30/89 10,833 2.37% 11,488 0.65% 11,149
5/31/89 11,070 2.08% 11,726 0.57% 11,212
6/30/89 11,207 1.36% 11,886 0.24% 11,239
7/31/89 11,287 1.36% 12,048 0.24% 11,266
8/31/89 11,229 -0.98% 11,930 0.16% 11,284
9/30/89 11,183 -0.30% 11,894 0.32% 11,320
10/31/89 11,276 1.22% 12,039 0.48% 11,375
11/30/89 11,428 1.75% 12,250 0.24% 11,402
12/31/89 11,546 0.82% 12,350 0.16% 11,420
1/31/90 11,463 -0.47% 12,292 1.03% 11,538
2/28/90 11,558 0.89% 12,401 0.47% 11,592
3/31/90 11,558 0.03% 12,405 0.55% 11,656
4/30/90 11,449 -0.72% 12,316 0.16% 11,675
5/31/90 11,716 2.18% 12,584 0.23% 11,701
6/30/90 11,802 0.88% 12,695 0.54% 11,765
7/31/90 11,987 1.48% 12,883 0.38% 11,809
8/31/90 11,652 -1.45% 12,696 0.92% 11,918
9/30/90 11,577 0.06% 12,704 0.84% 12,018
10/31/90 11,766 1.81% 12,934 0.60% 12,090
11/30/90 12,018 2.01% 13,194 0.22% 12,117
12/31/90 11,992 0.44% 13,252 0.00% 12,117
1/31/91 12,184 1.34% 13,429 0.60% 12,189
2/28/91 12,261 0.87% 13,546 0.15% 12,208
3/31/91 12,313 0.04% 13,551 0.15% 12,226
4/30/91 12,508 1.34% 13,733 0.15% 12,244
5/31/91 12,607 0.89% 13,855 0.30% 12,281
6/30/91 12,640 -0.10% 13,841 0.29% 12,317
7/31/91 12,833 1.22% 14,010 0.15% 12,335
8/31/91 12,973 1.32% 14,195 0.29% 12,371
9/30/91 13,167 1.30% 14,380 0.44% 12,425
10/31/91 13,255 0.90% 14,509 0.15% 12,444
11/30/91 13,330 0.28% 14,550 0.29% 12,480
12/31/91 13,609 2.15% 14,863 0.07% 12,489
1/31/92 13,630 0.23% 14,897 0.15% 12,508
2/29/92 13,623 0.03% 14,901 0.36% 12,553
3/31/92 13,658 0.04% 14,907 0.51% 12,617
4/30/92 13,790 0.89% 15,040 0.14% 12,634
5/31/92 13,951 1.18% 15,217 0.14% 12,652
6/30/92 14,180 1.68% 15,473 0.36% 12,698
7/31/92 14,667 3.00% 15,937 0.21% 12,724
8/31/92 14,528 -0.98% 15,781 0.28% 12,760
9/30/92 14,590 0.65% 15,884 0.28% 12,796
10/31/92 14,436 -0.98% 15,728 0.35% 12,840
11/30/92 14,743 1.79% 16,009 0.14% 12,858
12/31/92 14,922 1.02% 16,173 -0.07% 12,849
1/31/93 15,131 1.16% 16,360 0.49% 12,912
2/28/93 15,562 3.62% 16,953 0.35% 12,958
3/31/93 15,507 -1.06% 16,773 0.35% 13,003
4/30/93 15,600 1.01% 16,942 0.28% 13,039
5/31/93 15,694 0.56% 17,037 0.14% 13,058
6/30/93 15,938 1.67% 17,322 0.14% 13,076
7/31/93 15,928 0.13% 17,344 0.00% 13,076
8/31/93 16,235 2.08% 17,705 0.28% 13,112
9/30/93 16,422 1.14% 17,907 0.21% 13,140
10/31/93 16,472 0.19% 17,941 0.41% 13,194
11/30/93 16,415 -0.88% 17,783 0.07% 13,203
12/31/93 16,664 2.11% 18,158 0.00% 13,203
1/31/94 16,805 1.14% 18,365 0.27% 13,239
2/28/94 16,526 -2.59% 17,890 0.34% 13,284
3/31/94 16,056 -4.07% 17,161 0.34% 13,329
4/30/94 16,074 0.85% 17,307 0.14% 13,348
5/31/94 16,186 0.87% 17,458 0.07% 13,357
6/30/94 16,155 -0.61% 17,351 0.34% 13,402
7/31/94 16,397 1.83% 17,669 0.27% 13,438
8/31/94 16,447 0.35% 17,731 0.40% 13,492
9/30/94 16,287 -1.47% 17,470 0.27% 13,529
10/31/94 16,076 -1.78% 17,159 0.07% 13,538
11/30/94 15,786 -1.81% 16,849 0.13% 13,556
12/31/94 16,115 2.20% 17,219 0.00% 13,556
1/31/95 16,496 2.86% 17,712 0.40% 13,610
2/28/95 16,895 2.91% 18,227 0.40% 13,664
GRAPHIC MATERIAL (22)
This pie chart shows the fund's securities breakdown by quality as a percentage
of total net assets.
Portfolio Breakdown on 2/28/95
AAA 27.2%
AA 3.7%
A 39.5%
BBB 29.6%
GRAPHIC MATERIAL (23)
This bar chart shows the comparison between the fund's distribution rate of
5.79% and the taxable equivalent distribution rate of 9.59%.
GRAPHIC MATERIAL (24)
The following line graph hypothetically compares the performance of the Franklin
Puerto Rico Tax-Free Income Fund to that of the Lehman Brothers Municipal Bond
Index and the Consumer Price Index (CPI), based on a $10,000 investment from
4/3/85 to 2/28/95.
Period Ending Puerto Rico Tax-Free LB Muni Index CPI
4/3/85 9,579 10,000 10,000
4/30/85 9,588 3.66% 10,366 0.47% 10,047
5/31/85 9,693 3.47% 10,726 0.37% 10,084
6/30/85 9,799 1.05% 10,838 0.28% 10,112
7/31/85 9,789 0.20% 10,860 0.19% 10,132
8/31/85 9,895 -0.70% 10,784 0.19% 10,151
9/30/85 9,684 -1.00% 10,676 0.28% 10,179
10/31/85 9,952 3.43% 11,042 0.37% 10,217
11/30/85 10,252 3.59% 11,439 0.28% 10,246
12/31/85 10,505 0.88% 11,539 0.28% 10,274
1/31/86 10,780 5.89% 12,219 0.27% 10,302
2/28/86 11,079 3.97% 12,704 -0.27% 10,274
3/31/86 11,271 0.03% 12,708 -0.46% 10,227
4/30/86 11,143 0.08% 12,718 -0.18% 10,209
5/31/86 10,956 -1.63% 12,511 0.28% 10,237
6/30/86 11,131 0.95% 12,630 0.55% 10,293
7/31/86 11,145 0.61% 12,707 0.00% 10,293
8/31/86 11,568 4.48% 13,276 0.18% 10,312
9/30/86 11,571 0.25% 13,309 0.46% 10,359
10/31/86 11,793 1.73% 13,539 0.09% 10,369
11/30/86 11,848 1.98% 13,808 0.09% 10,378
12/31/86 11,891 -0.28% 13,769 0.09% 10,387
1/31/87 12,029 3.01% 14,183 0.63% 10,453
2/28/87 12,105 0.49% 14,253 0.36% 10,490
3/31/87 12,084 -1.06% 14,102 0.45% 10,538
4/30/87 11,590 -5.02% 13,394 0.54% 10,595
5/31/87 11,396 -0.50% 13,327 0.35% 10,632
6/30/87 11,550 2.94% 13,719 0.35% 10,669
7/31/87 11,694 1.02% 13,859 0.26% 10,697
8/31/87 11,795 0.22% 13,889 0.53% 10,753
9/30/87 11,136 -3.69% 13,377 0.52% 10,809
10/31/87 11,185 0.35% 13,423 0.26% 10,837
11/30/87 11,514 2.61% 13,774 0.09% 10,847
12/31/87 11,664 1.45% 13,973 0.00% 10,847
1/31/88 12,173 3.56% 14,471 0.26% 10,875
2/29/88 12,301 1.06% 14,624 0.26% 10,904
3/31/88 12,070 -1.16% 14,455 0.43% 10,950
4/30/88 12,142 0.76% 14,565 0.52% 11,007
5/31/88 12,191 -0.29% 14,522 0.34% 11,045
6/30/88 12,395 1.46% 14,734 0.43% 11,092
7/31/88 12,432 0.65% 14,830 0.42% 11,139
8/31/88 12,530 0.09% 14,843 0.42% 11,186
9/30/88 12,785 1.81% 15,112 0.67% 11,261
10/31/88 13,080 1.76% 15,378 0.33% 11,298
11/30/88 12,909 -0.92% 15,237 0.08% 11,307
12/31/88 13,083 1.02% 15,392 0.17% 11,326
1/31/89 13,320 2.07% 15,711 0.50% 11,383
2/28/89 13,209 -1.14% 15,532 0.41% 11,429
3/31/89 13,173 -0.24% 15,494 0.58% 11,496
4/30/89 13,490 2.37% 15,861 0.65% 11,570
5/31/89 13,771 2.08% 16,191 0.57% 11,636
6/30/89 13,951 1.36% 16,412 0.24% 11,664
7/31/89 14,093 1.36% 16,635 0.24% 11,692
8/31/89 14,016 -0.98% 16,472 0.16% 11,711
9/30/89 13,925 -0.30% 16,422 0.32% 11,748
10/31/89 14,029 1.22% 16,623 0.48% 11,805
11/30/89 14,226 1.75% 16,914 0.24% 11,833
12/31/89 14,358 0.82% 17,052 0.16% 11,852
1/31/90 14,265 -0.47% 16,972 1.03% 11,974
2/28/90 14,425 0.89% 17,123 0.47% 12,030
3/31/90 14,412 0.03% 17,128 0.55% 12,097
4/30/90 14,330 -0.72% 17,005 0.16% 12,116
5/31/90 14,629 2.18% 17,376 0.23% 12,144
6/30/90 14,766 0.88% 17,529 0.54% 12,209
7/31/90 15,000 1.48% 17,788 0.38% 12,256
8/31/90 14,709 -1.45% 17,530 0.92% 12,368
9/30/90 14,640 0.06% 17,541 0.84% 12,472
10/31/90 14,850 1.81% 17,858 0.60% 12,547
11/30/90 15,187 2.01% 18,217 0.22% 12,575
12/31/90 15,130 0.44% 18,297 0.00% 12,575
1/31/91 15,386 1.34% 18,542 0.60% 12,650
2/28/91 15,543 0.87% 18,704 0.15% 12,669
3/31/91 15,600 0.04% 18,711 0.15% 12,688
4/30/91 15,816 1.34% 18,962 0.15% 12,707
5/31/91 15,933 0.89% 19,131 0.30% 12,745
6/30/91 15,948 -0.10% 19,112 0.29% 12,782
7/31/91 16,154 1.22% 19,345 0.15% 12,802
8/31/91 16,301 1.32% 19,600 0.29% 12,839
9/30/91 16,509 1.30% 19,855 0.44% 12,895
10/31/91 16,629 0.90% 20,034 0.15% 12,914
11/30/91 16,719 0.28% 20,090 0.29% 12,952
12/31/91 16,986 2.15% 20,522 0.07% 12,961
1/31/92 17,011 0.23% 20,569 0.15% 12,980
2/29/92 17,007 0.03% 20,575 0.36% 13,027
3/31/92 17,064 0.04% 20,583 0.51% 13,094
4/30/92 17,197 0.89% 20,766 0.14% 13,112
5/31/92 17,409 1.18% 21,011 0.14% 13,130
6/30/92 17,668 1.68% 21,364 0.36% 13,178
7/31/92 18,197 3.00% 22,005 0.21% 13,205
8/31/92 18,036 -0.98% 21,790 0.28% 13,242
9/30/92 18,065 0.65% 21,931 0.28% 13,279
10/31/92 17,839 -0.98% 21,716 0.35% 13,326
11/30/92 18,219 1.79% 22,105 0.14% 13,344
12/31/92 18,504 1.02% 22,331 -0.07% 13,335
1/31/93 18,710 1.16% 22,590 0.49% 13,400
2/28/93 19,192 3.62% 23,407 0.35% 13,447
3/31/93 19,059 -1.06% 23,159 0.35% 13,494
4/30/93 19,202 1.01% 23,393 0.28% 13,532
5/31/93 19,330 0.56% 23,524 0.14% 13,551
6/30/93 19,591 1.67% 23,917 0.14% 13,570
7/31/93 19,587 0.13% 23,948 0.00% 13,570
8/31/93 19,934 2.08% 24,446 0.28% 13,608
9/30/93 20,197 1.14% 24,725 0.21% 13,637
10/31/93 20,242 0.19% 24,772 0.41% 13,693
11/30/93 20,186 -0.88% 24,554 0.07% 13,702
12/31/93 20,538 2.11% 25,072 0.00% 13,702
1/31/94 20,721 1.14% 25,358 0.27% 13,739
2/28/94 20,373 -2.59% 24,701 0.34% 13,786
3/31/94 19,659 -4.07% 23,696 0.34% 13,833
4/30/94 19,759 0.85% 23,897 0.14% 13,852
5/31/94 19,892 0.87% 24,105 0.07% 13,862
6/30/94 19,763 -0.61% 23,958 0.34% 13,909
7/31/94 20,075 1.83% 24,396 0.27% 13,946
8/31/94 20,176 0.35% 24,482 0.40% 14,002
9/30/94 19,939 -1.47% 24,122 0.27% 14,040
10/31/94 19,593 -1.78% 23,693 0.07% 14,050
11/30/94 19,213 -1.81% 23,264 0.13% 14,068
12/31/94 19,658 2.20% 23,776 0.00% 14,068
1/31/95 20,125 2.86% 24,456 0.40% 14,124
2/28/95 20,703 2.91% 25,167 0.40% 14,181
GRAPHIC MATERIAL (25)
This pie chart shows the fund's securities breakdown by quality as a percentage
of total net assets.
Portfolio Breakdown on 2/28/95
AAA 10.4%
AA 11.1%
A 29.6%
BBB 48.3%
BB 0.6%
GRAPHIC MATERIAL (26)
This bar chart shows the comparison between the fund's distribution rate of
5.04% and the taxable equivalent distribution rate of 8.34%.
GRAPHIC MATERIAL (27)
The following line graph hypothetically compares the performance of the Franklin
Federal Intermediate-Term Tax-Free Income Fund to that of the Lehman Brothers
Municipal Bond Index and the Consumer Price Index (CPI), based on a $10,000 from
10/1/92 to 2/28/95.
Period Ending Federal Inter. Tax-Free LB Muni 10 Yr Index CPI
10/1/92 9,775 10,000 10,000
10/31/92 9,736 -1.02% 9,898 0.35% 10,035
11/30/92 9,922 1.83% 10,079 0.14% 10,049
12/31/92 10,000 1.16% 10,196 -0.07% 10,042
1/31/93 10,084 1.69% 10,368 0.49% 10,091
2/28/93 10,385 3.66% 10,748 0.35% 10,127
3/31/93 10,410 -1.46% 10,591 0.35% 10,162
4/30/93 10,485 0.95% 10,692 0.28% 10,190
5/31/93 10,521 0.35% 10,729 0.14% 10,205
6/30/93 10,677 1.97% 10,940 0.14% 10,219
7/31/93 10,733 0.25% 10,968 0.00% 10,219
8/31/93 10,921 2.07% 11,195 0.28% 10,248
9/30/93 11,028 1.23% 11,332 0.21% 10,269
10/31/93 11,094 0.16% 11,351 0.41% 10,311
11/30/93 11,029 -0.82% 11,257 0.07% 10,318
12/31/93 11,269 2.13% 11,497 0.00% 10,318
1/31/94 11,397 1.23% 11,639 0.27% 10,346
2/28/94 11,194 -2.74% 11,320 0.34% 10,381
3/31/94 10,845 -3.82% 10,887 0.34% 10,417
4/30/94 10,901 1.10% 11,007 0.14% 10,431
5/31/94 10,989 0.80% 11,095 0.07% 10,439
6/30/94 10,961 -0.43% 11,047 0.34% 10,474
7/31/94 11,113 1.68% 11,233 0.27% 10,502
8/31/94 11,192 0.39% 11,277 0.40% 10,544
9/30/94 11,100 -1.35% 11,125 0.27% 10,573
10/31/94 10,955 -1.46% 10,962 0.07% 10,580
11/30/94 10,809 -1.89% 10,755 0.13% 10,594
12/31/94 10,964 1.80% 10,949 0.00% 10,594
1/31/95 11,218 2.59% 11,232 0.40% 10,636
2/28/95 11,428 2.83% 11,550 0.40% 10,679
GRAPHIC MATERIAL (28)
This pie chart shows the fund's securities breakdown by quality as a percentage
of total net assets.
Portfolio Breakdown on 2/28/95
AAA 10.5%
AA 2.5%
A 11.0%
BBB 44.3%
Below Investment Grade 31.7%
GRAPHIC MATERIAL (29)
This bar chart shows the comparison between the fund's distribution rate of
6.52% and the taxable equivalent distribution rate of 10.79%.
GRAPHIC MATERIAL (30)
The following line graph hypothetically compares the performance of the Franklin
High Yield Tax-Free Income Fund to that of the Lehman Brothers Municipal Bond
Index and the Consumer Price Index (CPI), based on a $10,000 investment from
4/1/86 to 2/28/95.
Period Ending High Yield Tax-Free LB Muni Index CPI
4/1/86 9,579 10,000 10,000
4/30/86 9,617 0.08% 10,008 -0.18% 9,982
5/31/86 9,588 -1.63% 9,845 0.28% 10,010
6/30/86 9,770 0.95% 9,938 0.55% 10,065
7/31/86 9,511 0.61% 9,999 0.00% 10,065
8/31/86 9,770 4.48% 10,447 0.18% 10,083
9/30/86 9,837 0.25% 10,473 0.46% 10,130
10/31/86 10,038 1.73% 10,654 0.09% 10,139
11/30/86 10,153 1.98% 10,865 0.09% 10,148
12/31/86 10,172 -0.28% 10,835 0.09% 10,157
1/31/87 10,327 3.01% 11,161 0.63% 10,221
2/28/87 10,386 0.49% 11,216 0.36% 10,258
3/31/87 10,328 -1.06% 11,097 0.45% 10,304
4/30/87 10,084 -5.02% 10,540 0.54% 10,359
5/31/87 10,055 -0.50% 10,487 0.35% 10,396
6/30/87 10,194 2.94% 10,795 0.35% 10,432
7/31/87 10,324 1.02% 10,905 0.26% 10,459
8/31/87 10,405 0.22% 10,929 0.53% 10,515
9/30/87 10,160 -3.69% 10,526 0.52% 10,569
10/31/87 10,161 0.35% 10,563 0.26% 10,597
11/30/87 10,451 2.61% 10,839 0.09% 10,606
12/31/87 10,629 1.45% 10,996 0.00% 10,606
1/31/88 10,944 3.56% 11,387 0.26% 10,634
2/29/88 11,019 1.06% 11,508 0.26% 10,662
3/31/88 10,934 -1.16% 11,374 0.43% 10,707
4/30/88 11,009 0.76% 11,461 0.52% 10,763
5/31/88 11,096 -0.29% 11,428 0.34% 10,800
6/30/88 11,359 1.46% 11,595 0.43% 10,846
7/31/88 11,480 0.65% 11,670 0.42% 10,892
8/31/88 11,580 0.09% 11,680 0.42% 10,937
9/30/88 11,770 1.81% 11,892 0.67% 11,011
10/31/88 11,974 1.76% 12,101 0.33% 11,047
11/30/88 11,940 -0.92% 11,990 0.08% 11,056
12/31/88 12,100 1.02% 12,112 0.17% 11,075
1/31/89 12,267 2.07% 12,363 0.50% 11,130
2/28/89 12,262 -1.14% 12,222 0.41% 11,176
3/31/89 12,279 -0.24% 12,193 0.58% 11,241
4/30/89 12,533 2.37% 12,481 0.65% 11,314
5/31/89 12,740 2.08% 12,741 0.57% 11,378
6/30/89 12,914 1.36% 12,914 0.24% 11,405
7/31/89 12,992 1.36% 13,090 0.24% 11,433
8/31/89 12,962 -0.98% 12,962 0.16% 11,451
9/30/89 12,919 -0.30% 12,923 0.32% 11,488
10/31/89 13,036 1.22% 13,081 0.48% 11,543
11/30/89 13,191 1.75% 13,309 0.24% 11,571
12/31/89 13,284 0.82% 13,419 0.16% 11,589
1/31/90 13,209 -0.47% 13,355 1.03% 11,708
2/28/90 13,386 0.89% 13,474 0.47% 11,763
3/31/90 13,373 0.03% 13,478 0.55% 11,828
4/30/90 13,270 -0.72% 13,381 0.16% 11,847
5/31/90 13,553 2.18% 13,673 0.23% 11,874
6/30/90 13,709 0.88% 13,793 0.54% 11,938
7/31/90 13,906 1.48% 13,998 0.38% 11,984
8/31/90 13,656 -1.45% 13,795 0.92% 12,094
9/30/90 13,642 0.06% 13,803 0.84% 12,196
10/31/90 13,763 1.81% 14,053 0.60% 12,269
11/30/90 13,991 2.01% 14,335 0.22% 12,296
12/31/90 13,964 0.44% 14,398 0.00% 12,296
1/31/91 14,141 1.34% 14,591 0.60% 12,370
2/28/91 14,195 0.87% 14,718 0.15% 12,388
3/31/91 14,265 0.04% 14,724 0.15% 12,407
4/30/91 14,473 1.34% 14,921 0.15% 12,425
5/31/91 14,599 0.89% 15,054 0.30% 12,463
6/30/91 14,656 -0.10% 15,039 0.29% 12,499
7/31/91 14,855 1.22% 15,222 0.15% 12,517
8/31/91 15,011 1.32% 15,423 0.29% 12,554
9/30/91 15,227 1.30% 15,624 0.44% 12,609
10/31/91 15,328 0.90% 15,765 0.15% 12,628
11/30/91 15,387 0.28% 15,809 0.29% 12,665
12/31/91 15,695 2.15% 16,149 0.07% 12,673
1/31/92 15,650 0.23% 16,186 0.15% 12,692
2/29/92 15,636 0.03% 16,191 0.36% 12,738
3/31/92 15,711 0.04% 16,197 0.51% 12,803
4/30/92 15,875 0.89% 16,341 0.14% 12,821
5/31/92 16,117 1.18% 16,534 0.14% 12,839
6/30/92 16,354 1.68% 16,812 0.36% 12,885
7/31/92 16,913 3.00% 17,316 0.21% 12,912
8/31/92 16,659 -0.98% 17,146 0.28% 12,948
9/30/92 16,682 0.65% 17,258 0.28% 12,985
10/31/92 16,456 -0.98% 17,089 0.35% 13,030
11/30/92 16,856 1.79% 17,395 0.14% 13,048
12/31/92 17,116 1.02% 17,572 -0.07% 13,039
1/31/93 17,346 1.16% 17,776 0.49% 13,103
2/28/93 17,850 3.62% 18,419 0.35% 13,149
3/31/93 17,794 -1.06% 18,224 0.35% 13,195
4/30/93 17,915 1.01% 18,408 0.28% 13,232
5/31/93 18,021 0.56% 18,511 0.14% 13,250
6/30/93 18,340 1.67% 18,820 0.14% 13,269
7/31/93 18,365 0.13% 18,845 0.00% 13,269
8/31/93 18,754 2.08% 19,237 0.28% 13,306
9/30/93 18,961 1.14% 19,456 0.21% 13,334
10/31/93 19,001 0.19% 19,493 0.41% 13,389
11/30/93 19,075 -0.88% 19,322 0.07% 13,398
12/31/93 19,387 2.11% 19,729 0.00% 13,398
1/31/94 19,599 1.14% 19,954 0.27% 13,434
2/28/94 19,383 -2.59% 19,437 0.34% 13,480
3/31/94 18,801 -4.07% 18,646 0.34% 13,526
4/30/94 18,822 0.85% 18,805 0.14% 13,545
5/31/94 18,930 0.87% 18,968 0.07% 13,554
6/30/94 18,968 -0.61% 18,853 0.34% 13,600
7/31/94 19,219 1.83% 19,198 0.27% 13,637
8/31/94 19,276 0.35% 19,265 0.40% 13,692
9/30/94 19,135 -1.47% 18,982 0.27% 13,729
10/31/94 18,938 -1.78% 18,644 0.07% 13,738
11/30/94 18,634 -1.81% 18,306 0.13% 13,756
12/31/94 18,890 2.20% 18,709 0.00% 13,756
1/31/95 19,349 2.86% 19,244 0.40% 13,811
2/28/95 19,829 2.91% 19,804 0.40% 13,866
